By Nikhil Agarwal, President, CJ Darcl Logistics Limited
The Indian logistics industry has been evolving and undergoing a major transformation, primarily driven by technological and infrastructural developments. This has altered the supply chain, making it resilient and adaptable to short-term and long-term disruptions. The implementation of the National Logistics Policy and the PM Gati Shakti National Master Plan (PMGS-NMP) has been the cornerstone during this phase. These policies aim at increasing efficiency and simplifying logistics processes while integrating technology. In addition, technology innovations such as the Unified Logistics Interface Platform have completely changed logistics procedures, improved transparency and streamlined supply chain operations.
The logistics industry has witnessed significant growth, driven by rising demand from industries such as e-commerce, fast-moving consumer goods (FMCG), retail, chemicals, pharmaceuticals and industrial goods. The industry’s pivot towards logistics players follows the implementation of goods and services tax (GST) and e-way bills, which have acted as a catalyst for efficiency. Furthermore, major initiatives such as the National Logistics Policy and the dedicated freight corridor are changing the sector and establishing India as a significant transit centre with superior geographical advantages.
The PMGS-NMP adds another layer by encouraging a coordinated approach to multimodal connectivity, infrastructure planning and development by harnessing technology. From introducing best-in-class tech innovations to driving green initiatives, this is where third-party logistics (3PL) and fourth-party logistics (4PL) service providers have been accelerating the transformation of the Indian logistics sector. Among 3PL and 4PL services, India is evolving to become an emerging market in the warehousing sector, attracting significant investments in the past two years from global and private equity players.
3PL dynamics: Supply chain optimisation
3PL has emerged as an integral facet of the supply chain, specialising in services such as transportation, warehousing, inventory management and supply chain management. This enables firms to focus on their core strengths, while leveraging the experience, technology and extensive networks of 3PL partners. The Indian 3PL market size is estimated at $37.31 billion in 2023 and is expected to reach $53.02 billion by 2028, growing at a compound annual growth rate of 7.28 per cent during the forecast period (2023-28). However, the market is relatively fragmented, with a large number of domestic and international players competing for business.
Emerging market trends in 3PL industry
As e-commerce continues its meteoric rise, propelled by shifting consumer behaviour and robust government initiatives, the 3PL market in India stands poised for a substantial expansion. Recent tax reforms and the surge in online shopping preferences have catalysed this evolution, particularly benefiting sectors such as FMCG, manufacturing, retail and e-commerce. These industries, seeking specialised logistics support for intricate supply chain management, are increasingly outsourcing to 3PL providers to enhance operational efficiencies and curtail conventional costs. Warehousing, buoyed by GST reforms, emerges as a pivotal business segment, as large enterprises concentrate on core activities, entrusting logistics to adept 3PL players.
Moreover, the industry is undergoing a paradigm shift with the integration of software-as-a-service (SaaS) logistics, a technological innovation that is empowering businesses with streamlined operations, heightened productivity and automated logistics systems, spanning order management to final delivery. This scalable solution ensures adaptability to growing operational demands, aligning seamlessly with the surging requirements of an ever-expanding e-commerce landscape. Complementing this, the strategic application of data analytics emerges as a linchpin, enabling businesses to optimise inventory control through insightful analysis of historical sales and demand.
Charting the future: 4PL is central to logistics evolution
In the evolution of supply chain management, the shift from 3PL to 4PL drives a strategic evolution that businesses are adopting. While traditional 3PLs have been instrumental in handling specific functions within the supply chain, the growing complexity of global supply networks has necessitated a more holistic approach. 4PLs, acting as orchestrators, offer a comprehensive solution by managing the entire supply chain ecosystem. Sellers are drawn to 4PL providers due to the promise of hassle-free supply chain solutions, underpinned by key benefits.
4PL providers bring expertise and specialisation to the forefront, navigating intricate global supply networks and implementing best practices. With a single point of contact for all supply chain operations, communication is streamlined, reducing bottlenecks and minimising the risk of miscommunication with the integration of advanced technology among various logistics providers. Scalability and flexibility are critical in the face of fluctuating demand. 4PL providers offer dynamic solutions that can adapt to changing business needs, along with focusing on core activities such as product development and customer service.
While the shift from 3PL to 4PL presents clear benefits, it is not without its challenges. However, success stories abound and companies have witnessed significant operational cost reductions and improved delivery times. As the supply chain landscape continues to evolve, the strategic development towards 4PL represents an opportunity for sellers to enhance efficiency, gain valuable insights and emerge as leaders in their industries.
Advancement of EVs in logistics
The adoption of electric vehicles (EVs) in the logistics business is a growing trend, bringing potential growth and challenges for both 3PL and 4PL providers, as the awareness of green logistics grows. A wide range of software systems have emerged in recent years that have helped 3PL and 4PL companies boost their operational efficiency through increased automation. In particular, fleet electrification offers 3PL companies an optimal opportunity to achieve sustained cost savings and reach sustainability goals. The use of EVs is being encouraged by governments all over the world and logistics companies are playing a crucial part in this innovative move towards sustainable transportation. As the government is planning to incentivise logistics players to encourage the use of EVs, logistics companies may play a critical role in facilitating this transformation.
The current limited range of EVs is due to the necessity for charging station infrastructure, which still needs to be expanded, besides the need for sourcing renewable energy; these are all issues that must be addressed. While there are challenges, 3PL and 4PL providers can assist in solving these problems by leveraging technology to improve visibility and optimise processes, as well as by providing end-to-end supply chain management solutions.
Logistics providers can also adopt EVs for short-haul distances to reduce carbon emissions and to strengthen India’s ambition to achieve the target of completing 30 per cent EV sales by 2030. The rapid growth of the e-mobility sector in the country is further propelled by government initiatives, including encouraging policies such as Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles, along with other measures to boost investor confidence. The burgeoning number of start-ups in the EV sector underscores the enthusiasm and momentum in this domain.
Future of logistics in India
There have been significant advancements in 3PL and 4PL due to the adoption of advanced technologies. This has empowered companies to gain insights, real-time visibility, traceability and efficiency across the supply chain. Additionally, there is a growing focus on sustainability, with 3PL and 4PL providers likely to develop eco-friendly supply chain solutions and promote the concept of a circular economy, emphasising the adoption of EVs. As the logistics industry undergoes digital transformations and business model changes, 3PL and 4PL providers are innovating solutions to manage omnichannel logistics, improve profitability and enhance sustainability. 3PL and 4PL providers are also working towards enhancing their supply chain operations by smartly integrating different transportation methods, leading to improved overall efficiency and higher customer satisfaction.
Logistics companies are now looking forward to integrating the road-rail, road-coastal or road-rail-coastal model, while planning cargo delivery. Government investments in enhancing train-port-road integration are key factors that will fortify the Indian rail freight industry. Emphasising the benefits of transitioning from road to rail, this approach promises reduced emissions, alleviated congestion on roads and effective utilisation of various transportation modes. This approach also offers flexibility to adapt to shifts in demand, contributing to a more sustainable and responsible approach to logistics and supply chain operations. Therefore, the future of logistics will be characterised by the integration of advanced technologies and sustainable practices, ensuring that companies remain viable, adaptive and thriving in the long term.
Finally, in India’s logistics landscape, the collaboration of 3PL and 4PL is crucial in bringing creative solutions to streamline operations, reduce expenses and improve overall efficiency. As the Indian economy grows, so does the demand for efficient logistics services, creating numerous chances for providers to benefit from the expanding market.
