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Home > Business/Finance > Diversified Services > Shipping & Logistics
Strategic Analysis of the Third Party Logistics Markets in India
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Research Overview
This Frost & Sullivan research service entitled Strategic Analysis of the Third Party Logistics Markets in Indiaexamines major drivers, restraints, and challenges impacting the market and also provides revenue forecasts and end-user analyses. A detailed overview of the competitive scenario highlights the key opportunities that 3PL service providers can exploit. In this research service, Frost & Sullivan's expert analysts thoroughly examine the following logistics functions: transportation, warehousing, freight forwarding, and MIS and other value-added services.
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
- Supply chain
- Transportation
- Warehousing
- Freight forwarding
- MIS/other value-added logistics operations
Technologies
The following technologies are covered in this research:
- Enterprise resource planning (ERP)
- Global positioning system (GPS)
- Supply chain management
Market Overview
Trend of Outsourcing Logistics Gains Ground in Select Sectors in India
Valued at $890.3 million in 2005, the third party logistics (3PL) market in India is projected to grow at a compound annual growth rate (CAGR) of 21.9 percent from 2005 to 2012, reaching $3,556.7 million by the end of this period. Rapid growth in the Indian manufacturing sector is creating an increasing need for seamless logistics solutions. While the Indian 3PL market is still very much in its infancy compared to those in other countries, it is experiencing healthy growth and attracting new companies eager to capitalize on the plentiful opportunities it offers.
Currently, the trend of outsourcing the entire logistics function to a 3PL service provider is visible only in a few sectors in India. In the automotive sector, for instance, end-to-end outsourcing is becoming increasingly popular as companies realize the benefits of focusing on core competencies and delegating the logistics to 3PL service providers. Just-in-time delivery (JIT) to the assembly line is another emerging concept that is gaining acceptance in this sector. "The penetration of 3PL services is particularly high in the automotive sector," remarks the analyst of this research service. "Even companies that have traditionally adopted a conservative business outlook have started outsourcing logistics to 3PL service providers." The IT hardware and electronics sectors are also witnessing a rise in this trend, while those for fast moving consumer goods (FMCG) and pharmaceuticals have relatively low penetration rates.
Healthy Growth Forecast for Indian 3PL Market
The challenges facing the emerging 3PL market in India are many, the most significant of which is the domination of the unorganized sector. Service providers in the unorganized segment benefit from lower overhead costs and consequently, are able to offer customers extremely competitive rates. This is a major challenge for the organized segment, for both multinational and domestic 3PLs. Moreover, low entry barriers to the market could lead to intense competition, while complex tax laws and infrastructure bottlenecks could further add to participants’ difficulties.
"Despite these challenges, the growth prospects in the 3PL market are strong and the market is set for robust growth," says the analyst. "The increasing tendency to outsource is likely to drive growth in the immediate future, while the expected improvement in tax systems and infrastructure will boost the market in the long term." The most significant growth is expected to come from the warehousing function largely due to the implementation of value-added tax, a uniform tax regime across the country. In the transportation function, service providers can look forward to opportunities in the growth of express transport due to improvements in infrastructure and client requirements for time-bound services. Other promising logistics functions include freight forwarding and MIS and other value-added services.
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