The Indian logistics and supply chain sector has been at the cornerstone of the economic growth and development of India. With the rise in transport infrastructure and the surge in international businesses, logistics and supply chain has also undergone a series of innovations to meet the new demands of the modern, tech-driven economy. One such area is the rise of 3rd party logistic service providers or 3PL players. Apart from a range of logistic services offered, warehousing by 3PL players has particularly been a game-changer.
The COVID pandemic and the resultant surge in the need for specialised warehousing for the medical and pharmaceuticals sector as well as for F&B and others, has further boosted the growth of 3PL Warehousing solutions. And there are solid reasons for this surge, as brands and businesses can now enjoy:
- Access to state of the art storage facilities, including specialised storage environments
- Reduction in overhead costs and infrastructure investments otherwise incurred when owning a storage space
- Access to expertise and experience in all things logistics
- Freedom to focus on core competencies
- Flexibility and scalability to use warehousing and supply chain resources based on current needs
- Value-added services like kitting, packaging, labelling, repacking etc.
In addition to the above benefits, it is interesting to note the future scope of growth and trends that are set to drive the 3PL warehousing sector.
Scope of Indian 3PL Market
The Indian 3PL market is expanding at a breakneck pace. In February 2020, the size of India’s 3PL market was at just over $8 bn. By 2025, it is poised to grow to $10.74 bn at a CAGR of 8%, backed by the Indian e-commerce boom, an influx of domestic and foreign investment in the sector, and the introduction of tax reforms and pro-3PL government initiatives. The GoI aims to reduce logistics’ weightage in India’s GDP cost from 14% to 9% by the end of the year and has introduced policy reforms in the form of NLP and other policies like e-way bills, fast-tag, e-invoicing, GPS-based toll collection, etc. which would further strengthen the 3PL industry and maximise its efficiency.
With the increasing penetration of technology and rapidly evolving infrastructure, India is eyeing strong possibilities of catapulting itself out of the category of developing nation. And if the Indian 3PL sector matches global growth trends, then the country and its businesses would be well poised to make the most of this opportunity.
Indian 3PL Warehousing trends to look out for in 2022
Here’s an overview of 4 trends that are poised to shape the 3PL warehousing industry.
Smart Tech will take over warehouse management
3PL market leaders have started automating every function and process to bring down costs, improve efficiency and ensure optimum allocation of human resources to the most important tasks. Warehouse management also falls under this purview. Logistics conglomerates have already introduced AI and IoT powered solutions and robotics for picking and packaging orders. Drone-based deliveries are set to become commonplace in the coming decade, thanks to both tech innovation and relaxed government rules. AI and ML are already put to the task of identifying and eliminating warehousing inefficiencies. This trend will continue in the near future and streamline the operation and management of 3PL warehouses
Fulfilment as a Service, driven by e-retail, will necessitate the rapid rise of on-demand warehousing
The Indian e-commerce sector doubled in size from 2014 to 2019. Post-pandemic, it is expected to continue on that trajectory. With virtually no barriers for merchants and limited product differentiation, fulfilment will be the key differentiator. The reliance on this function has birthed the idea of Fulfilment as a Service (FaaS) – a model where online retailers utilise a fulfilment partner’s resources on-demand. As the competition in the e-commerce sphere intensifies, FaaS is expected to grow in popularity and bring on-demand warehousing to the forefront.
Faster last-mile deliveries and the need for dark stores
With the advent of 30 mins and 10 mins deliveries in the last mile segment, there has been a heightened demand for dedicated storage facilities and dark stores, which will play a crucial role in enhancing the brand experience and customer delight, thereby propelling warehousing and specialised storage to a whole new level of significance in the supply chain hierarchy.
International trade and 3PL Warehousing
The Export/import industry is the biggest tour-de-force behind India’s warehousing industry. With India’s share in global trade expected to double before the end of this decade, this industry will continue to power the warehousing market. Closer to home, agriculture and manufacturing sectors will continue driving 3PL warehousing demand, thanks to FDI and policy reforms. But the real push for 3PL warehousing will come from newer industries such as e-commerce, IT, telecommunications and healthcare. Lastly, expect to see massive investments toward warehousing infrastructure such as free trade warehousing zones (FTWZs) and logistic parks.
3PL warehousing opened up a multitude of business growth and market expansion opportunities for Indian businesses. And if its performance in the pandemic is any indicator, then it is poised to go from strength to strength, uplifting small businesses, legacy enterprises, and the nation along with it.
This article has been authored by Hector Patel, Executive Director, and Board Member at Jeena & Co.