Ushering in to the Era of third-party logistics in India

India’s third-party logistics (3PL) sector has grown considerably over the past few years in which the pandemic played an important role by fast-tracking the technological process. E-commerce businesses flourished during this time with the help of third-party logistics players by bringing down their last-mile delivery response time. With the expansion of various brands on ecommerce marketplaces like Amazon, Flipkart, Snapdeal as well as direct to consumer, companies have realized how 3PLs can play a vital role in writing their success stories. Now, most E-commerce brands are outsourcing their logistics to be able to focus more on their core businesses and customer experience and hand-over efficient supply chain management to professional partners.

What is Third-party logistics?

Basically, third-party logistics players provide services ranging from Warehouse facility, Inventory Management, Shipping, Last-mile logistics, Reverse logistics, Cold Storage as well as Freight Shipping. 3PL companies undertake complete or partial supply chain management contracts and even offer individual services along the chain. They manage, organize, and oversee the supply chain to execute the orders efficiently.

Growth of 3PL

There’s no doubt that Third-party logistics have gained further prominence due to new-age D2C brands. Companies, big and small, by teaming up with a 3PL service provider, can fulfil their logistics and E-commerce operations and increase revenue and sales. It is now essential for this sector to become organized and technology-driven to build a strong supply chain system. A recent report revealed that the 3PL industry in the country is about to recruit over 40 million people—the biggest job creator over the next couple of years.

A report by Technavio Research revealed that India’s 3PL sector is expected to grow by US$10.74 billion in 2021-’25 at a CAGR of 8%, while market reports say the 3PL market in the country is all set to expand at a CAGR of 8.36% by the end of the current year.

Digitization, rapidly changing business scenarios and the growing health sector are also increasing the demand for 3PL companies in India. Big companies are moving to 3PL expertise for handling hassle-free operations. Third-party providers can change the way product businesses are conducted by facilitating cost reduction.

The Last-mile Lifeline

Last-mile delivery has again come to the fore as the latest addition to the supply chain. However it is not a completely new concept. Earlier, major logistics players such as FedEx, DHL provided the last-mile service in certain categories but in the recent years new-age players like Borzo, Dunzo, Shadowfax have taken precedence to fulfil only the final leg in the chain. As the name suggests Last-mile logistics refers to the last leg of the delivery i.e from the distribution hub to the final customer.

The rage of Quick commerce has furthered the impetus of ‘time-led’ deliveries. Since the recent hype of 10-minutes phenomena is slowly taking a back-seat, the usual 20-45 minutes accurate deliveries are back in action.

Accurate last-mile deliveries for business are the backbone of their supply chain because it is the final aspect of a customer’s experience with the business. New age players are solely focusing on the final leg which targets B2B and B2C segments via ecommerce, hyper-local and food deliveries. India can start witnessing intense competition in this segment as major logistics players have also started acquiring last mile delivery companies to tap the market potential across markets.

Technology to help 3PL grow

Technology will change the way the 3PL industry operates across the nation. With the evolving digital trends, focus on Artificial Intelligence (AI), Machine Learning, Robotics, Behavioral and predictive analytics and route-planning will enhance efficiency, accuracy and experience of the supply chain process.

For on-road deliveries, extremely accurate Real time route-diversion will enable detection of congested and narrow routes and quickly suggest alternate directions to reach the final destination.

Final thoughts

The government, with a focus on infrastructure development, has rolled out major projects to increase supply chain efficiency and improve connectivity to help logistics players reach unexplored markets in India. Recently announced Multi-modal logistics corridor and Logistics policy will enable players to expand to rural markets and tap Tier II and Tier III cities as well.

With India’s large geography and rising demand, third-party logistics will strengthen and penetrate even more.

This article has been authored by Eugene Panfilov, General Manager, Borzo, India.

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