Fifth Party Logistics (5PL): The Indian Perspective

The logistics and supply chain industry has become increasingly complex, demanding specialists and experts to look after the operations with more focus. Companies across the globe are now looking to outsource logistics management to Fifth Party Logistics (5PL) companies, so they can meet the consumer’s demand while also focusing on building their brand. While the model is gaining popularity, it remains rather less adopted in India. Through this feature, we try and understand the Indian perspective on the adoption of the budding 5PL model.

As businesses go digital and global, it has become imperative to take an approach to supply chain management that can effectively help deal with the increasing pressure they are finding themselves under. Coming as a resort is a new model – the fifth-party logistics (5PL) which helps handle all the logistical needs of a business.

But before the emergence of 5PL, when businesses were simpler, existed the 1PL, 2PL,3PL, and more recently 4PL models.

In recent times, 5PL is budding as an innovative solution as businesses grow rapidly, and meeting consumer demand and needs becomes onerous.

As per reports, the global 5PL solution market is expected to be valued at USD 9.21 billion in 2025 and is likely to reach USD 17.30 billion in 2035, registering a CAGR of 6.5%. Divided into regions like Europe, North America, Asia Pacific, Middle East & Africa, and South Africa, the market is driven by demand coming in from Europe on the back of an increasing number of free trade agreements. With a large number of such FTAs, Europe is gaining dominance in the 5PL market as they get more opportunities to sell products to other developed and developing nations, not only giving a boost to the volume of shipments but also driving demand for 5PL.

As per reports, following Europe is Asia Pacific which is driving up the demand for 5PL Logistics
on the back of increased manufacturing productions for electronics, automotive, and semiconductor components.

Although Asia Pacific seems to be just behind Europe, driving up the demand for 5PL, the
expansion of the sector is still restrained in India, with only a handful of players entering the
sector.

Sunil Nair, CEO, Snowman Logistics which recently commenced the 5PL service model in India says, “Yes, the 5PL is massive and rapidly expanding. But, because the concept is new, many companies are yet to understand the potential it brings and experience the benefits.”

A developing nation like India is still hesitant to the adoption of the 5PL as a traditional organization making a shift, and outsourcing the entire supply chain and logistics capabilities is challenging.

Dr Anil Chinnabhandar, Sr. VP – Retail and Supply Chain Management, Landmark Group highlights, “India is a very conservative society, we have our cultural mindsets while we are trying to chip in our piece of business with others. A lot of people here want to keep their businesses very close to their chest. Unless you are very transparent with your 5PL service provider you can’t get the maximum advantage of the service. You need to let your provider travel the path end-to-end, then only you can extract the benefits of this model.”

Speaking on the same lines Mr Nair says, “Outsourcing is still not considered efficient in a nation such as India.”

Moreover, 5PL solutions require a high initial investment and higher operational costs, making
many hesitant about their adoption. The growth of this budding model is also hampered by several government regulations in the logistics and transportation sector.

However, Nair says, “Any initiatives by the Government in the logistics and manufacturing sectors should indirectly help 5PL initiatives.”

He adds further “I believe the time has come when the benefits of outsourcing are clear, and 5PL is becoming more relevant than ever, especially in India. Change may be difficult for a mature organization that has already established all departments with a large number of people, but for start-ups, small organizations, or multinational brands expanding into India, using 5PL should be the best option.”

Dr Chinnabhandar expressing similar views says, “Though 5PL will happen in India, I feel it’s a while before it emerges as a winning formula. It will take time to believe each other and build a trusting relationship.”

As India is becoming home to n number of start-ups and businesses are rapidly going digital and global, 5PL growth seems to be inevitable.

What will drive the growth?

In the coming years, the 5PL model is set to grow exponentially as the e-commerce industry continues to witness growth. E-commerce businesses now look to keep up with efficient inventory management, order fulfillment, and seamless delivery operations, which will require them to outsource operations so they can meet all the needs and yet build a brand. This will bring 5PL to the forefront.


This is an abridged version of the Feature story published in the March edition of Logistics Insider magazine. To read the complete story, click here.

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