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managing the entire logistics functions of a company, had originated in the developed economies of Europe and America, to relieve industries from huge logistics costs apart from the hassles of dealing with multiple in-coherent logistics service providers. It proved to be immensely successful in improving logistics efficiency of majority of industries and quickly gained popularity, spreading across the globe. In the process, several professional logistics service providers offering that kind of services have emerged to be leading 3PL providers with operations in multiple continents. In the initial stages, 3PL providers offered only basic logistics services such as warehousing and transportation. But with growing logistics needs of organizations to remain competitive in globalized economies, 3PL providers have evolved to offer several other value added services ranging from packaging to supply chain planning. Advent and Growth of 3PL Industry in India 3PL industry’s origin in India can be traced back to mid 1990s. The industry was pioneered by global logistics majors as a part of extending these services to the Indian subsidiaries of multinational companies in automobile, electronics and FMCG sectors. Indian subsidiaries of multinational companies in these sectors took cue from their parent companies and began to outsource a share of their logistics functions to these specialist service providers. Though insignificant in the first few years, Indian 3PL industry is experiencing a rapid growth after year 2000. The number of participants in this industry had grown to be more than 400 by year 2005. The Indian 3PL industry can be divided into three distinct tiers - National Major 3PL companies with nationwide presence, Regional 3PL companies with strong presence in one or two regions, and Small Remote 3PL companies.
Expansion of manufacturing facilities by most of these companies indicates huge potential for 3PL services in this industry. is expected to grow at a compound annual growth rate of 21. Other sectors that have shown substantial contribution to 3PL market and significant growth potential include the information . estimated at about US$890. with multinational companies in all industries being the predominant users of these services. The multinational companies that are already using 3PL in basic logistic functions might graduate to outsourcing value-added advanced services such as customer support. inbound logistics. A lot of multinational automobile makers. which are likely to be outsourced to 3PL in increasing share. the small and medium companies could just begin to use 3PL services for their basic logistic functions. The Indian 3PL market. the large numbers of small to medium companies in all the industries are gearing up to use 3PL services in their logistic functions. Realizing the significant cost reductions and several other benefits gained by these companies. and have been major users of 3PL services. is the auto industry. resulting in a tremendous potential market for the 3PL market in India.3PL Market in India – Poised for a Remarkable Growth The 3PL market in India is still in a relatively nascent stage. a high level of growth is estimated for the Indian 3PL market in the next 5-7 years. and Ford. Nevertheless. Whereas. have set up manufacturing bases in India.556. domestic major companies in leading industry sectors have also begun to follow the footsteps of their multinational counterparts. the domestic major companies might increase their 3PL usage in the basic logistic functions and occasionally experiment with the value-added advanced services.7 million in 2012. The opportunities for growth of 3PL usage could be varied among different types of companies.3 billion in 2005. However.9 percent to reach US$3. On the contrary. Honda. considering that the most important logistics functions for Indian industries still are transportation and warehousing. Frost & Sullivan’s research identified that the largest end-user industry for 3PL services as of 2005. and reverse logistics. like Suzuki. starting with outsourcing their basic logistics functions.
3PL service companies interested in serving a particular company would have to offer multiple solutions to fulfill the nationwide logistics needs of that company. However. several factors are driving the growth of Indian 3PL market. India has a diverse geographic scenario coupled with a diverse consumer habit scenario in each of its 25 states. Infrastructure limitations in India. lack of sufficient warehousing and specialized storage facilities beyond major cities of the country result in 3PL service providers to restrain from offering warehousing services across the country. A Few Challenges to be addressed for Maintaining the Momentum Geographic diversity of India needing varied logistics expertise for each region is a major challenge to be addressed by 3PL service providers. deep-rooted corruption and high bureaucratic control are some other hassles faced by 3PL service providers in providing the best of logistics solutions for their clients. Building own warehousing facilities in strategic geographic locations that would serve as hubs for specific regions. which limit the scope of logistics services package are another concern for 3PL service providers. The congested roadways and ports resulting in significant delay in movement of goods. and retail sectors. despite the existence of challenges. hence resulting in their failure to become the complete logistics service providers for clients. Logistics operation in each state requires a suitable model that facilitates the effective storage and transportation of goods mostly sold in that state. Similarly. Fast Moving Consumer Goods (FMCG). making it very difficult for adopting a uniform logistics model. affect the performance of 3PL service providers. could address this problem. . The complicated tax structure.technology (IT) hardware and electronics.
and integrated Supply Chain Management systems. Since building such large warehouses requires huge investments. This is expected to enable 3PL service providers in offering more cost-effective services to clients. Others are expected to follow them soon. thereby increasing the 3PL usage by all industries. The wide-spread information technology awareness and expertise in India is also expected to help 3PL companies in offering several value added services using IT such as Fleet Management Systems.Some Factors that are Driving Indian Logistics towards 3PL Value Added Tax (VAT). The government has invested US $17 billion to upgrade highway networks. as trains are faster and have lower costs per unit distance traveled. thereby adding momentum to 3PL market growth. The opening up of the Indian economy to foreign investments is expected to attract more companies into the country. The government of India’s increased focus on improving logistics infrastructure is expected to have a huge positive impact on 3PL market. with the implementation of two major projects. thereby creating opportunities for cheaper and faster movement of goods. Warehouse Management Systems. namely the Golden Quadrilateral network and the North-South-East-West (NSEW) Corridor. Transportation by rail is definitely cheaper than by road. the government has opened up rail freight operations to private players. Apart from these factors. Introduced partially in 2005. the increasing list of multinational companies starting operations in India is expected to fuel the growth of 3PL market. most Indian companies are likely to outsource the warehousing function. to achieve best efficiency in logistics. Flextronics. creating immense potential market for 3PL service providers. Entry of giants like BMW. the Indian Government’s proposed uniform tax regime. a full implementation of this regime is expected to necessitate having centralized large warehouses in regional hub cities. Apart from this. is expected to drive Indian industries towards using more 3PL services. and Wal-Mart are expected to contribute to considerable growth of 3PL usage in their respective industry sectors. Leading companies in major industries have already started planning for the new scenario and the required warehousing capacity to be outsourced. . in a remarkable infrastructure related decision.
FUNCTIONS OF WAREHOUSE Providing Transit Warehouse Space for LCL Consolidation Provided Space for Air Cargo Provided Space for Bonded Warehouse Multi-stacking of high value cargo Separate bay for personal effects X-ray equipment Weighing Machine ACTIVITIES IN WAREHOUSE: Palletisation Consolidation Aggregation LCL Consolidation Stuffing / De-stuffing Delivery of Cargo Shutout of Cargo Re-working of Cargo Fumigation .
Several factors including government’s support are instrumental in this growth. spearheading the growth of logistics market. the general trend is highly positive. Though certain challenges remain to be addressed. . the onus is now on 3PL service companies to offer quality services at affordable pricing. surely 3PL is the way forward for Indian Logistics Market. Loading / Unloading of Cargo BENEFITS OF BONDED WAREHOUSE: Facility to import cargo Duty payment deferred Enables buyer to clear in lots Re-export is possible without payment of customs duty Conclusion The Indian 3PL market is set to grow tremendously in the next 5-7 years. For now. With scenario highly favorable for them. and delivering consistent results to maintain the momentum.
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