3PL needs more attention to hit the $16 Billion mark by 2025

The third-party logistics (3PL) industry in India has witnessed significant growth over the past decade, driven by the rapid expansion of e-commerce, the entry of multinational corporations, and the increasing need for efficient supply chain solutions. The sector is expected to reach a market size of $16 billion by 2025, reflecting a compound annual growth rate (CAGR) of over 8%. This growth is fuelled by advancements in technology, such as Automated Storage and Retrieval Systems (ASRS) and Warehouse Management Systems (WMS), which enhance operational efficiency.

In an insightful conversation with Marksmen Daily Correspondent Neeraj Tiwari, Yogesh Rajgor, a third-party logistics (3PL) expert with over 20 years of experience, shares his perspectives on the evolution, challenges, and future trends of the 3PL industry in India. The interview covers various aspects from regulatory impacts to technological advancements, providing a comprehensive overview of the sector’s dynamics.

How has the third-party logistics (3PL) industry evolved in India over the past decade?

The use of 3PL services started around 2002-03. Initially, warehouses, commonly referred to as godowns, were managed by company employees and labour contractors. The primary goal at that time was to navigate labour compliance and laws. Over the years, with the rise of e-commerce and the entry of multinational corporations, the focus of 3PL providers shifted to improving customer service, better inventory management and control, achieving cost savings, and adopting a professional approach towards Environment, Health, and Safety (EHS).

What are the primary challenges faced by third-party logistics providers operating in India’s market?

Yogesh Rajgor: The challenges faced by 3PL providers in India include:

• The quality of warehouses
• Availability of trained manpower
• Stringent labour and mathadi laws
• Poor infrastructure in warehousing and roads
• Compromises on EHS, licenses, and compliance due to cost concerns

How do government regulations and policies impact the 3PL industry in India, and what changes are anticipated in the near future?

Government regulations such as labour laws, mathadi laws, and corruption in license policies have had a significant impact on the 3PL industry. However, the new National Logistics Policy, which includes infrastructure development, new logistic parks, and freight corridors, aims to enhance India’s overall logistics framework.

In what ways is technology revolutionising the logistics landscape in India, and how are 3PL companies leveraging technological advancements to streamline operations?

The unpredictability of consumer demand and supply has necessitated technological advancements. Modern warehouses are now incorporating Automated Storage and Retrieval Systems (ASRS), Warehouse Management Systems (WMS), and vertical storage solutions to enhance competitiveness and operational efficiency.

How does the rise of e-commerce and omnichannel retailing impact the demand for 3PL services in India, and how are companies adapting to meet evolving customer expectations?

The supply chain landscape has become very dynamic with the rise of e-commerce. Companies now offer delivery within three hours, and services like Zomato and Swiggy promise delivery within 15-20 minutes. With high customer expectations, thin profit margins, and critical logistics costs, companies are rapidly adapting to remain competitive.

What opportunities do emerging sectors like pharmaceuticals, FMCG, and automotive present for the growth of the 3PL industry in India, and what strategies are being employed to capitalise on these opportunities?

Emerging sectors such as pharmaceuticals, FMCG, and automotive offer significant growth opportunities for the 3PL industry. Strategies being employed include robust fleet management, data-driven decision making, increased efficiency through AI, and leveraging dedicated freight corridors and new highways. Additionally, the new National Logistics Policy is expected to reduce logistics costs from 13% to 9% of GDP, making the supply chain in the next decade both challenging and exciting.