The third party logistics (3PL) is the method of outsourcing operations of warehouse management, inventory operations, and shipping services across the globe. These services also augment the order fulfillment operations, transportation, freight forwarding, picking, and packing. The third party logistics (3PL) focuses on entire supply chain management operations, from the package pickup to the delivery of the products. The increasing trend of utilization of these services due to the emergence of distribution outsourcing drives the market growth.
The third party logistics (3PL) market is expected to register USD 856.7 billion revenue generation in the year 2019, with a compound annual growth rate (CAGR) of 7.4%.
Every market has a certain degree of demand fluctuations and the manufacturers need to cope up with the fluctuations. Third Party Logistics (3PL) services provide effective inventory management and product warehousing. These solutions offered by these companies enable manufacturing companies to regulate their manufacturing operations without getting concerned about the proper storage of the manufactured products. Third Party Logistics also works to maintain a supply of the products of the company across the various regions in the market which helps the company to increase its product availability across the markets.
The Third Party Logistics offer Distribution, Shipping, and warehousing of the products of manufacturers. Significant improvement in the overall supply chain management is anticipated to bolster the use of Third Party Logistics during the forecast years
Many companies wish to enter into untapped markets to improve their performance and sales footprints across multiple regions. Although, limitations such as unavailability of established shipping and delivery solutions and the need of warehouse infrastructure and inventory storage restrict these companies to operate across multiple regions. Third party logistics service provides the manufacturers all these services and helps them to improve their business in various potential regions.
The companies can increase their market penetration and product availability without making substantial investments in warehouse establishment and strengthening their distribution chain. Thus, third party logistics (3PL) stands very useful for organizations that are trying to improve their sales footprints across the globe. The tier 2 and tier 3 players are expected to contribute significantly as these companies do not possess the strong distribution channel and warehouse infrastructure outside their regional market. Third party logistics services stand as the optimum solution for these companies to initiate operations in the potential regions.
Third Party Logistics operators pick up the packages from the manufacturing facilities and initiate shipping and inventory management operations of these products as per the requirements of the products at different regions. Although, manufacturers tend to lose control of the supply chain management of their products. The interactions of an unknown third party supplier with the products of the company may restrict certain manufacturers to from using third party logistics services.
The manufacturer also faces difficulties in tracking the process of delivery, further reducing the hold and control on the in-transit shipments. Additionally, during quality assurance and testing, companies usually identify anomalies and need to alter the manufactured products to eliminate the problems. The companies operating their own delivery process can perform this task efficiently while the manufacturers operating with third party logistics face difficulties.
The ground transport segment is estimated to account for a significant share in the global market. Additionally, the development of ground logistics infrastructure and government efforts to develop safety standards for the vehicles used for shipping applications and construction of roads and infrastructure drives the segment growth.
The manufacturing sector, on the other hand, holds the largest market share on account of the increasing globalization and sales of the products across national borders. The manufacturing sector also follows a complex supply chain process, which makes procurement, supply, and distribution of a meticulous job. Third party logistics offers specialized delivery and management services.
North America dominates the third party logistics (3PL) market, owing to the rising partnership and collaboration activities between third party logistic providers. Out of total logistics operations, about 12.4% is carried out using third party logistics (3PL) service providers. Moreover, the revenue generated from the U.S. imarket was around USD 212.8 billion in 2018. The increasing prominence of contract carriage service in the U.S. and the presence of prominent players, such as UPS Supply Chain Solutions Inc., and XPO Logistics, Inc., drives the market growth.
Asia-Pacific is expected to witness the fastest growth in the third party logistics (3PL) market. China is anticipated to emerge as a significant contributor in the third party logistics market in the Asia Pacific region. Robust export activities of the manufacturers operating in China are anticipated to drive the growth of the market in the region. The use of third party logistics for cross-border trade by is anticipated to significantly contribute for the development of the market.
The maritime transport development initiatives by the government of India are anticipated to boost the market growth. As per the government initiative, India is aiming to surplus the capacity of its 18 major ports by 25% to increase and augment maritime shipments. Similarly, the Vietnam government is making decisive steps in making noteworthy developments in the marine transport network.
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