E-commerce boom fuels rise of 3PL in India

E-commerce boom fuels rise of 3PL in India

Submitted by alvin on Thu, 2016-12-08 10:24 Logistics industry runs on a process that begins right from the point of stockpiling the raw materials to taking the finished goods to the customer. Till now, the concept of trucking and logistics has been fragmented and under-developed in India because of the risk and insecurity factor analogous to the industry. In spite of being a small player in the market, India spends around 14.4�f its GDP on logistics and transportation whereas other developing countries are still spending less than 8�Not only this, Indian logistics market is expected to grow at a CAGR (Compound Annual Growth Rate) of 12.17�y 2020, driven by the growth in the manufacturing, retail, FMCG and e-commerce sectors.One of the major reasons for expansion is the tremendous growth in the e-commerce sector. E-Commerce, also known as e-retail sector, has evolved and benefited due to spectacular improvements in technology and the boom in internet access. This in turn triggered the emergence of various logistics models based out of outsourcing or third-party logistic services.  The demand for organised, reliable and secure trucking and logistics services has also accelerated to cater to the intensified need. This is what has given birth to numerous tech logistic start-ups with new concepts and business models.Logistic is an integral part for e-commerce and works as the backbone to this sector. Recently, many of the e-commerce giants have tied-up or outsourced 3PL (third-party logistics) to fulfill the demand. Starting from warehousing to distributing the product to local retailers, 3PL provides a full package to online retailers. It provides security and on-time delivery with effective cost management to the e-commerce vendors.Logistics companies basically have three different business models: self-owned fleets, market place and hybrid models. In the 'Self-owned Fleets Model', the fleets or trucks are directly owned and operated by the company. From picking up, warehousing to security of products, all aspects are taken care of by the company itself.'Market Place Fleets Model' incorporates outsourcing of the fleets while taking care of rest of the responsibilities. The last business model is the 'Hybrid Model', which is also the latest one. This is a mixture of above mentioned two business models. Logistic companies, working on this model, take all liability and responsibility but fleets are both self-owned as well as outsourced from the market place.All the three business models ensure the security of the products and delivery of the same within the timelines which didn’t exist few years back. This has made the e-commerce sector to have faith in logistics more than ever.According to a report by Morgan Stanley, the e-commerce sector in India is expected to grow to $119 billion by 2020 with a total of 320 million shoppers. Analysing the demand, many of the prime movers in logistics have even created a new segment called "E-Commerce Logistics Service Provider". The introduction of GST (Goods and Services Tax) by the new government will be a milestone for the logistics industry, as it will let the logistic companies customise or improvise their services day by day. Services such as insurance, last mile delivery, warehousing, cash handling will be integrated as per the requirements.It is not just the private sector, but government behemoths such as Indian Railways are also looking for tie-ups with e-commerce companies to become their 3PL partners. As logistics requires additional manpower, management, time, it is very difficult for e-commerce industries to manage another vertical of logistics altogether. Hence, these services are outsourced or handed over to 3rd party logistic providers.Outsourcing or 3PL simultaneously creates a number of job and business opportunities in the market. Drivers, employees, warehousing, market-place etc are few of the areas where refurbished logistics business is creating opportunities.The logistics industry is vital to the e-commerce industry. With more advancements and innovations such as tech logistics, this industry can go a long way.Author:Sumit Sharma(The author is co-founder of GoBOLT, a tech-logistics company based out of New Delhi. He can be reached at sumit.sharma@gobolt.co.in)