The logistics segment in India has undergone a major transition over the past few years. Industry players are increasingly integrating technology and digital innovation to streamline operations and achieve sustainability. On the delivery front, real-time tracking of shipments, route optimisation and radio frequency identification are gaining traction. Innovative software is also being used to monitor and track the entire supply chain operations, enabling real-time availability of data and facilitating quick decision-making. These changes have been instrumental in building a resilient supply chain across the country, resulting in increased output, faster delivery, enhanced customer satisfaction and reduced costs and errors.
3PL, 4PL and reverse logistics
With the technical know-how and specialisation in undertaking operations, including warehousing, inventory management and deliveries, third-party logistics (3PL) players serve as an extension to the company’s logistics department. A few benefits of undertaking 3PL operations for companies include reduced logistics costs, optimised deliveries, avoidance of seasonal fluctuations in storage requirements, enhanced focus on core operations and scalability options. In 2023, the market size of 3PL stood at around $37 billion and it is projected to grow at a CAGR of around 7.5 per cent for the next six years, to reach around $57 billion by 2029. Also, during January-June 2024, 3PL stood as the second highest industry based on transaction volumes, followed by the manufacturing sector. Around 30 per cent of the warehouse transaction volumes, during this period, were attributed to 3PL. Meanwhile, the growing complexity of supply chain operations and the need for real-time insights in decision-making is driving the adoption of fourth-party logistics (4PL), enabling comprehensive supply chain management. 4PL service providers undertake the entire supply chain operations of a company, including 3PL, resource management, technology and strategies, and hence act as a single point of contact for all supply chain requirements. A gradual shift from 3PL to 4PL operations, though currently marginal, has resulted in increased efficiency, cost savings, flexibility, etc. The key players providing 3PL/4PL services include Blue Dart Express, FedEx, Mahindra Logistics, Allcargo Logistics, TVS Supply Chain Solutions, Delhivery, Future Supply Chain, Ekart and DTDC.
3PL/4PL players are undertaking innovations to enhance last-mile delivery operations, while advanced technologies such as drones are also making an entry into the segment. For example, in June 2024, Blue Dart launched drone deliveries in collaboration with Skye Air Mobility, with the aim to move towards cleaner and more efficient delivery solutions. Following this, the Visual Line of Sight and Beyond Visual Line of Sight trials were also conducted. With the initial focus on the e-commerce sector, it also aims to revolutionise last-mile deliveries by offering same-day delivery. Further, in July 2024, DTDC announced a partnership with Skye Air Mobility to introduce last-mile drone-based deliveries. Moreover, advanced technologies such as artificial intelligence (AI) and machine learning are playing a key role in the decarbonisation of the sector. Mahindra Logistics and Sangti Solutions have partnered to integrate emission analytics into supply chain operations, aiming to reduce carbon emissions and Scope 3 climate pollution. The fully automated system will be implemented through a SaaS platform, accessible via web and mobile devices. Additionally, in line with the country’s net zero targets, industry players are integrating electric vehicles (EVs) for transportation and last-mile deliveries. Magenta Mobility and Switch Mobility have signed a memorandum of understanding (MoU) under which Magenta Mobility will procure 500 Switch leV4 units over the next two years.
Further, a rise in e-commerce and online delivery platforms, with numerous options, has increased customer sentiments towards product satisfaction and led to increased focus on reverse logistics. 3PL aids in this movement and helps in streamlining operations. Effective reverse logistics management can help build customer trust and save costs. To ensure this, suppliers must monitor returns, track trends and perform additional quality checks before despatch. In an effort to reduce waste and promote the concept of a circular economy, Ekart launched its “Refinish Service” in June 2024 to address challenges in returns management within the fashion and lifestyle segment, with refinish centres located in major cities such as Gurugram, Mumbai and Bengaluru. The service aims to refurbish over 90 per cent of the returned inventory, helping brands mitigate losses.
Advent of express logistics
Express logistics meet the need for speedy, reliable delivery of high-value and time-sensitive goods. In 2023, the market size of India’s express logistics sector stood at around Rs 324 billion. It is projected to grow at a CAGR of 14 per cent for the next six years, to reach around Rs 711 billion by 2029. Express logistics can be segmented, based on the mode of transportation, which includes surface and air, with surface express accounting for the largest share of around 70 per cent. During 2023, the market size of surface express segment stood at Rs 221 billion. Currently, the industry remains highly fragmented, with over 1,000 active players, including about 20 large firms, numerous mid-sized regional companies and various start-ups. The key players that account for a share of around 60 per cent of the surface express industry include Gati-Kintetsu Express Private Limited, Safexpress, Blue Dart, TCI-Express (TCIE) and DHL Express. Emerging companies, which started operations after 2010, include Delhivery, Rivigo, Xpressbees and E-com Express.
Most players in the surface express transport segment outsource local deliveries and pick-ups to 3PL providers. The middle-mile hub-to-hub movement is typically handled by trucks contracted on long-term agreements with these companies. However, in some cases, even middle-mile transportation is fully outsourced. Many large players operate their own network of branches and hubs, with systemised operations and a strong reliance on technology. Other players have expanded through a franchise model, partnering with existing companies. In the air express segment, hubs are generally located near airports. While a few large players maintain their own freighter fleets, smaller players mostly rely on belly cargo for transporting materials.
Express logistics players, aiming to streamline operations, are investing heavily in advanced technologies. TCIE has announced plans to invest Rs 5 billion in developing sorting centres, implementing automation and strengthening technical capabilities. TCIE intends to automate its sorting centres in Ahmedabad and Kolkata by December 2026, while its sorting centres in Gurugram and Pune have already been automated. Additionally, in March 2024, DHL Express launched an automatic sorting hub in New Delhi, with a capacity to sort 2,000 pieces per hour. Moreover, DHL has announced plans to invest around Rs 40 billion to expand its warehousing capacity, workforce and sustainability initiatives, with a goal of converting its entire intra-city fleet to green transport by 2025.
The road ahead
The continued growth of e-commerce and the increasing demand for deliveries and last-mile solutions are expected to further drive the expansion of the 3PL, 4PL, reverse logistics and express logistics sectors in India. With the increasing use of data analytics, AI, drone technology, etc., to support last-mile delivery, businesses are set to cut costs and achieve higher customer satisfaction. On the sustainability front, the adoption of EVs is expected to gain significant momentum over the coming years, driven by individual freight decarbonisation targets set by companies and the growing procurement of EVs for operations. However, challenges remain, including inadequate inter modal connectivity, high fragmentation (with numerous small players lacking standardised processes and integration) and infrastructural constraints that hinder efforts to implement green logistics. The government is expected to assist industry players in addressing these challenges through policy initiatives such as the Open Network for Digital Commerce and the Unified Logistics Interface Platform. These initiatives can help democratise e-commerce by enabling a decentralised network, where various buyer and seller apps can interact seamlessly through standardised protocols. Furthermore, initiatives such as Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME-2) can promote the adoption of EVs and contribute to making fleets greener.
