Published- Feb 2021
Number Of Pages -110
The logistics industry in India, considered to be the lifeline of the country, holds unprecedented importance as it connects various markets, suppliers, and customers dotted across the country and has now been firmly embedded as an integral part of the national GDP value chain.
The Indian logistics environment comprises road transport companies, railways, air freight companies, inter-modal transport providers, ports and shipping companies as well as party logistics (PL). Their performance is critically dependent on the state of infrastructure – roads, railways, ports and airports.
From supplying goods to a local store to shipping products across the globe, businesses need to determine the best way to distribute their products. Thanks to innovations of complex supply chains around the world, the process of shipping and distributing items has never been easier. Here is the breakdown of each level of PL:
1PL: 1st party logistics referred to an individual or organization, that has their own transportation/cargo to transport goods from one point to another point. (No middleman involvement in this type).
2PL: 2nd party logistics transports goods from one area to other area, either leasing the transports or transporting through supply chain like rail, road, sea, air. (Wholesale goods, heavy goods, international transportations, etc.).
3PL: 3rd party logistics includes warehousing, terminal operations, customs duties, SCM with transportation and delivery of the products to end user.
4PL: 4th party logistics controls and oversees the 3PL of the company. (Data analytics and provides respective outcomes).
5PL: 5th party logistics acquires all the operations in and out of the company, includes warehousing, data analytics, transportation, Inventory management, SCM, delivery of product, etc.
Third-Party logistics is most used among all. 3PL or Third-Party logistics is a concept where a single logistics service provider manages the entire logistics function for a company. While the Indian 3PL market is still very much in its infancy compared with other countries, it is experiencing health growth and attracting new companies eager to capitalize on the plentiful opportunities it offers.
The Indian 3PL market is expected to be driven by the growth in manufacturing, FMCG, retail and e-commerce and other industry verticals.
The Indian companies are demanding new logistics capabilities and complex solutions from 3PL service providers to help in successful management of respective supply chain processes, bring down conventional logistics costs and handle more complicated tasks.
Factors such as the introduction of tax reforms and initiatives for 3PL in India, the growth of the e-commerce sector in India, and the increase in investments for 3PL start-ups in India will offer immense growth opportunities.
With the growing senior population, increasing healthcare awareness, and launch of new products in the market, the global sales of prescription drugs are growing rapidly. Drug manufacturers are continuously introducing specific medicines for treating minor conditions which increases their sales significantly.
The growth in pharmaceutical sales will fuel the demand for healthcare logistics in India during the forecast period.
The rise of e-commerce and digital phenomenon, also called ‘The Amazon Effect’, has changed consumer expectations and buying behaviour. End-users are seeking unparalleled expectations in terms of convenience, cost, control, and choice. Omni-channel operation demands reliable, fast, and free shipping services, which has resulted in companies adopting a new business model to provide low-cost and on-demand delivery services.
The third-party logistics companies are shifting their focus from long-haul delivery to just-in-time delivery. The suppliers are also transitioning from multiple storage facilities to a single warehouse location.
To accommodate an increase in last-mile delivery, 3PL companies invest in smaller trucks and vans, which can support shorter and more frequent deliveries. In the coming years, last-mile delivery is presumed to be one of the key areas of focus for logistics companies.
Before the implementation of GST, in-house logistics were the mainstay of for supply chain operations. However now specialised storage and distribution offered by 3PL players has been gaining prominence so much so that 3PL player are taking up the largest share in warehouse demand in the last few years.
Going forward with manufacturers trying to expand their operations further, dependence on 3PL player is to increase even more. This augurs well for the warehousing industry as well.
The restored confidence in the Indian economy, with a special focus on the manufacturing sector, as well as the buoyancy of e-commerce and third-party logistics (3PL) businesses, are projected to drive demand for industrial and storage space in Pune to new heights this year.
Since the 1960s, the city has been a manufacturing powerhouse, attracting several large international firms specializing in auto and ancillary products, electronics, white goods, and some of the more recent industries such as electric vehicles (EVs) and renewables.
Over the last few years, the Pune market has been defined by good demand-supply dynamics, with vacancy levels hovering around 10%. Over the next few years, we expect the positive demand-supply dynamics to continue, making Pune one of the most appealing markets in the country for the development of industrial parks and warehouses.
Manufacturing, 3PL, and e-commerce led to peak demand in the western Indian city, demonstrating a definite comeback of the economy as well as customer attitudes. In addition, the city has seen a rise in interest from international investors and funds looking to make new investments.
GreenBase Industrial & Logistics Park, a joint venture between Hiranandani Group and US-based private equity firm Blackstone Group, has leased land to Jost India, a global leader in manufacturing components for commercial vehicles and agricultural equipment.
In a joint venture with Blackstone, the Hiranandani Group has committed to invest in the development of industrial and logistics parks in India’s major cities. The Indian logistics and storage sector is on the verge of transformation, thanks to the adoption of the Goods and Services Tax (GST) and the rise of ecommerce.
The storage and logistics segment of real estate has emerged as a relatively immune section to the shocks of the Covid19 epidemic, and it is likely to acquire even more strength as e-commerce and third-party logistics (3PL) companies increase demand. Companies are looking to tap into the advantages of scale, speed, and growth available in the Indian market.
one of the earliest and most notable partnerships was between Gati and Air India Cargo, wherein Air India was to become the sole cargo partner for Gati’s surface transportation network.
The partnership was intended to reduce the time and cost for users while allowing Gati to seamlessly integrate its cargo services with Air India’s network across India and overseas.
XpressBees got acquired by e-commerce leader Reliance Industries Limited, in a strategic move to further enhance its supply chain capabilities. XpressBees was already the largest customer of Reliance JioMart and it is hoped that this partnership will results in further cost-cut and optimized transport solutions for the online grocery platform.
Shadowfax also unveiled a tie up with TCS to provide better optimization solutions for its customers. With this collaboration, Shadowfax is looking to tap into the technological expertise of TCS and improve its efficiencies. This is in line with Shadowfax’s mission to create the most cost-effective network of courier infrastructure.
Delhivery has also been making strategic partnerships to strengthen its offerings. Delhivery made advancements to its digital platform by partnering with Shiprocket for automated shipments. Both companies are looking to tap into the huge business potential of digital commerce in India
Blackbuck signed a strategic Memorandum of Understanding (MOU) with Transporters’ Association of India to ensure the safe transportation of goods across India. According to the MOU, Blackbuck will extend its technological solutions to the association, allowing it to optimize its offerings even further.
The partnership also intends to bridge the gap between demand and supply of trucks and bring transparency to the freight transport sector.
Large 3PL service companies provide all the services like Domestic Transport management, International Transport management, Value-added warehousing and distribution.
3PL in India is segmented into Industry Verticals and End-User.
Industry Verticals: comprises of FMCG industry, Manufacturing industry, Pharmaceuticals industry, Agriculture & Goods industry, Oil & Gas Industry and White Goods sector.
End-User: Some 3PL service providers are specially for B2B or B2C.
The government has echoed its firm commitment to modernizing the functionalities of Indian logistics with a key concentration on infrastructure development. With a view to increase the efficiencies of the supply chain and enhance the connectivity to support logistics players to reach the under-explored markets in the country.
Measures and policy interventions like Goods and Services Tax, (GST), relaxed FDI regulations and granting of infra status has boosted the core competencies of the Indian logistics industry.
GST was a game-changer and has laid the foundation for the logistics companies, which are currently forced to set up small warehouses across multiple cities, to set up large multi-modal logistics parks along with industrial centres which can function as freight and distribution hubs.
The maritime industry is a vital element of a growing economy like India. SAGAR (Security and Growth for All in the Region) and Sagarmala are two policies initiated by Government of India, aimed toward boosting the domestic maritime industry while influencing in engaging outreach with other coasts of Indian Ocean region.
Sagarmala is a determined national initiative aimed at bringing change in India’s logistics performance by cracking the full potential of India’s coastline and waterways.
As part of the stimulus package aimed in improving the economy, the Government of India had introduced the Atmanirbhar Bharat Abhiyan package, which included measures towards improving the state of the warehouses in the Agri-space. Soon after the government launched a Rs. 1trillion agriculture infrastructure fund to aid in post-harvest management and marketing of agricultural produce, in turn helping improve farm-gate prices. The scheme is to provide better warehousing and cold storage facilities for farmers.
The pandemic has impacted the supply chain operations. The crisis placed an unprecedented strain on transportation and logistics resources. The shippers are facing uncertainty in the movement of goods owing to the mandated lockdown in India.
The logistics networks are being disrupted due to the supply/demand imbalance and lack of capacity for the long-haul and last-mile fulfilment services. The limited staff and reduced working time are further limiting the logistics activities. Drivers were also dependant on the roadside food joints and dhabas, which have shut down. The problems have compounded with no workers to load and unload goods from the trucks, and only essential movement of people and commodities are being permitted by the authorities.
The Outbreak has a domino effect on the Domestic Transport Management and International Transport management services. There has been an imbalance in incoming and outgoing freights in the infected areas, which in turn increasing lead time. Service providers face numerous problems such as disruption of transportation due to the boundary closure and increased demand for warehouse facilities to store the existing goods that can no longer be sold due to lockdown.
COVID-19 has adversely impacted all industry verticals sue to which the transportation and logistics sectors have also been severely impacted. The logistics sector is facing an uncertain in demand environment and increased cost pressures in short term. The sector is also facing challenges of availability in manpower and motor vehicles.
In the medium term, reduced demand will be witnessed due to reduced production and trade across all sectors. This is likely to put downward price pressure on transportation, warehousing, freight forwarding and related activities. In the long-term, the sector is expected to recover and grow with renewed vigour due to pent up demand and shift of manufacturing from across borders to India.
The road transportation is majorly affected by the current health crisis. There has been a significant drop in the truckload volumes, resulting in limiting the movement of heavy-duty and medium-duty trucks. Ocean freight operations are under control with limited capacity and a slight drop in the trade volume.
The market is relatively fragmented with a large number of players and upcoming start-ups. These includes Adani Enterprises, Mahindra Logistics, Future Supply Chain, etc., as its key players for economic growth. India is evolving to be an emerging market in the warehousing sector attracting significant investments in the past 2 years from global and private equity players.
As many countries looking India as a hotspot for establishing their market, international players like FM Logistics (French company) has announced the investment of USD 30million, in September 2019 for development of 31-acre multi-client logistics facility in Haryana.
In February 2020, Groupe ADP announced the purchase of 49% stake in GMR Airports – a unit of India’s GMR Infrastructure (GIL), for an amount of Rs 107.8 billion.
DP World and National Investment Infrastructure Fund (NIIF) invested an amount of USD 400 million to acquire Continental Warehousing Corp (Nhava Seva), one of the largest companies in the logistics sector in India.
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