Emergence of Third Party Logistics in India

Third Party Logistics in India

  • Third Party Logistics as the name suggests is outsourcing the logistics & Supply Chain activities to a different agency/channel/company. Globally as well as in India the earlier trend in the companies was to manage the entire supply chain on their own and through their dedicated resources. But as the time passes on companies have started outsourcing logistics and supply chain function (which is a non-core activity for them) to 3 PL service providers & players and they have started focusing more on the core area into which they are.
  • Third party logistics (3PL) is rapidly obtaining significance all over the world as increasing number of organisations are unable to manage their logistics operations efficiently on their own. As a result of which they are outsourcing their Supply Chain/Logistics functions  to  3rd Party Logistics service providers. Looking at the Indian scenario, 3PL market is growing at a very fast pace with different national and multinational organizations are trying to establish themselves in this sector.

 

  • This article talks about three major issues –
  1. Current extent of usage of 3PL services,
  2. Major reasons for outsourcing
  3. Impact of using 3PL services on business objectives.

By using 3Pl services rather outsourcing, organizations are able to focus on their core business operations. It also helps them to achieve cost reduction and improve customer satisfaction. It is expected that usage of 3PL services is going to increase gradually (80 %) in the future.

Introduction

  • Third-party logistics (3PL) is defined as outsourcing the warehousing, transportation and other logistics related operations to a 3rd Party Logistics service provider that were previously performed in-house.
  • Third Party Logistics is the concept of a single professional logistics service provider managing the complete logistics functions of a company, came into existence from US developed economies, to free industries from huge logistics cost. 3PL proved to be extremely successful in improving logistics efficiency of majority of organizations and quickly gained popularity, spreading all over the world.

A large number of organizations are outsourcing their logistics operations due to different reasons; few of them are listed below:

  • Logistics may not come under the core activities of a corporation. So, lack of efficiency may occur if it is viewed as a secondary activity. By outsourcing logistics, organizations can concentrate and focus on their core competencies.
  • Logistics outsourcing can also decrease costs of operations as the 3PL providers can be benefitted by the economies of scale and by virtue of running operations and providing utilities on shared cost basis which otherwise may not be available to industries or corporations.
  • By outsourcing logistics functions to a 3 PL service provider, corporations can decrease their asset, and deploy the capital released for other beneficial usage.
  • Logistics outsourcing causes better cycle time and delivery performance which leads to increase in customer satisfaction.
  • Now a days the 3PL providers are offering a number of value-added services like import/export management, reverse logistics, custom clearance, post sales support, freight forwarding, distribution and so on. Organizations can outsource all these activities, and focus on their core business operations.
  • In modern scenario specially in E – COM business as the growth in electronic retailing is taking place at rapid rate so is the tendencies of using the 3 PL service providers. In current scenario many firms do not have own distribution system hence they rely heavily on the 3PL service providers for timely/Safe dispatch and delivery of the merchandise at the customer’s end.

…………………To be continued

Divya Prabhat

Supply Chain & Logistics Consultant

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