Indian Third Party Logistics Market on a Healthy Growth Curve

Bangalore, Nov 21 (UNI) Third Party Logistics (3PL) in India is expected to grow into a 3.56 billion US Dollar market by 2012 from 890.3 million Dollar in 2005, according to a sector analysis by consultant Frost and Sullivan.

Increasing preferences of companies to outsource their logistics functions to 3PL service providers was fuelling demand, with foreign companies setting shop in the country not considering logistics as a viable option for investment and outsource their logistics operations.

Frost and Sullivan Research Associate Deepak Mohan said in a release here today that companies entering the country might not be conversant with the complex business and tariff laws and so they require a 3PL service provider with a grasp on such aspects.

The overall 3PL market was still at a nascent stage in India with sectors such as automotive and IT hardware and electronics having greater acceptance of 3PL, with the concept of end-to-end outsourcing becoming increasingly popular due to its advantages.

However, sectors such as pharmaceuticals and fast moving consumer goods (FMCG) have a relatively low penetration of 3PL services due to strained profit margins.

Mr Mohan observed that there was an increasing trend towards outsourcing of logistics operations of a company to professional 3PL service providers. ''This is a positive trend for the 3PL service providers and it is taking place because companies have realised the importance of concentrating on their core competencies, leaving logistics to the experts,'' he said.

The repealing of the present sales tax system and the adoption of a uniform national VAT system were likely to reorganise the existing decentralised distribution models into more centralised zones.

''This could result in considerable growth of a number of large zonal warehousing hubs managed by 3PLs, facilitating efficient distribution of goods,'' he added.

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