Strategic Analysis of 3PL Markets in the Chinese FMCG Sector: Industry Research

Strategic Analysis of 3PL Markets in the Chinese FMCG Sector

Published Date: November 2006

Published By: Frost & Sullivan

Page Count: 138

Order Code: R1-5175

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This research service provides a detailed insight into the evolution of the 3PL market in the Chinese FMCG sector. It also contains extensive analysis of end user logistics practices and 3PL usage as well as future needs and preferences. The research provides a comprehensive competitive analysis of 3PL service providers in China and their focus on the FMCG sector. Market Revenue forecasts for the total market as well as individual market segments are provided. In addition, the research provides strategic recommendations and potential opportunity areas for 3PL service providers.

Research Overview

The Frost & Sullivan research service titled Strategic Analysis of 3PL Markets in the Chinese FMCG Sector provides an overview of the 3PL market in the Chinese FMCG sector, analysis of the various segments of FMCG and their logistical needs, along with an analysis of key market drivers, restraints and trends that are impacting the 3PL market in the FMCG sector. In this research service, Frost & Sullivan's expert analysts thoroughly examine the logistics practices and 3PL usage trends of following segments in FMCG sector: multinational companies, domestic major companies, domestic regional companies, and unorganized companies. Also an in-depth competitive analysis of the 3PL service providers to this sector is presented.

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:

By Service Provider:

International 3PL
Domestic Major 3PL
Domestic Small 3PL

By Customer Constellations:

Multinational FMCG Companies
Domestic Major FMCG Companies
Domestic Regional Companies
Unorganized Companies
Personal Care Product Companies
Household Care Product Companies
Packaged Food & Beverages Companies
Wines and Spirits Companies
Tobacco Product Companies
Other Daily Use Product Companies

Market Overview

Increasing Realization of the Benefits of 3PL among FMCG Companies

While the fast moving consumer goods (FMCG) sector in China is the third largest industry sector in the country, China’s vast geographic size and regional variations in consumer habits and infrastructure conditions make it a challenge for FMCG companies to efficiently manage their supply chains. Logistics are, therefore, critical for ensuring a nationwide presence, and the realization of the benefits of third party logistics (3PL) has been fast increasing among all the domestic FMCG companies, resulting in the faster growth of adoption of 3PL services in all major logistics functions. This apart, the modern retailing sector in China is seeing phenomenal growth and as most of this is in retailing of FMCG products, there is a huge growth in logistics activity between the FMCG manufacturers and the modern retail chains. Since all these chains prefer to use organized and professional logistics service providers, the growth of this sector is expected to drive future usage of 3PL services to a significantly higher level.

Nevertheless, infrastructure limitations and varying levels of logistics support facilities across provinces are significant restraints on the market’s growth. In China, there is a wide level of difference in the logistics infrastructure in place between the highly developed eastern provinces and the underdeveloped western and central provinces. "While 3PL providers are currently profiting from their focus on the eastern provinces, which possess good infrastructure, the same level of growth may not be possible once these eastern regional markets are saturated," notes Srinath Manda, the analyst of this research service. "In order to negate this challenge, 3PL providers will need to collectively initiate efforts toward development of infrastructure in the underdeveloped regions."

Government’s Focus on the Logistics industry and Infrastructure Development Drives 3PL Market Growth

Adding dynamism to the Chinese 3PL market is the high priority accorded to the logistics sector by the Government in the last few years. In order to develop a more integrated network of highways, railways, airports and ports, more than 80.0 percent of the Government investment has been directed toward transportation. The country is planning 34 highways with a total length of 85,000 kilometers in 30 years, and in addition to the above, logistics parks and distribution centers are also being planned. These are proposed to come up in cities like Guangzhou, Shenzhen Beijing, Shanghai, Tianjin, Wuhan, Chongqing, and Dalian, and will include facilities such as freight management, warehousing, and inter-modal services. There is also a plan to computerize these parks and link them throughout the nation.

Overall, 3PL market in the Chinese FMCG sector is still in the early stages and hence offers extensive potential for future growth. The average level of 3PL users in the entire Chinese FMCG sector is estimated to be about 34.0 percent, but this figure varies from as high as 65.0 percent among multinational FMCG companies to just 5.0 percent among domestic unorganized FMCG companies. "Frost & Sullivan’s research finds the highest level of potential for 3PL services penetration in the Chinese FMCG sector’s transportation function, since it forms the largest logistics function for the sector," says Srinath Manda, the analyst. "Although the present level of 3PL usage is low in this function, future growth of the 3PL market is expected to be driven largely by the penetration into transportation services."

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