Third Party Logistics (3PL) Market Is Growing Fast To Focus On Core Business Competencies: Hexa Research

The "3PL market" has been segregated into five services, namely Dedicated Contract Carriage (DCC), Domestic Transportation Management (DTM), International Transportation Management (ITM), warehousing & distribution, and software.

Increasing outsourcing of logistic operations by firms in order to concentrate on their core business competencies is expected to drive the market over the forecast period. 3PL service providers help reduce CAPEX, manage inventory, offer market opportunities, moderate risk, and support firms in business actions. Inventory management, warehousing, cross docking, freight forwarding and transportation are the activities outsourced to a logistics service provider; these providers assist to understand a firms future challenges and needs by leveraging their proficiency in supply chain operation, while exhibiting flexibility and agility.

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Globalization has led to many organizations to outsource their logistics function owing to increasing infeasibility to manage global supply chain process on their own. Advent of Big Data and availability of industry-centric 3PL services are estimated to provide positive avenues to market growth over the next five years. Growing occasions of outsourcing by wholesalers and retailers due to less internal control to handle logistic challenges is anticipated to boost the 3PL market over the forecast period. Increased implementation of Omni-Channeled distribution policies by retailers leads to the growing popularity of online retailing.

Retailers depending on traditional mortar and brick channel have developed their distribution systems to handle consumer demand. Using their proficiency, 3PL service providers help their retail partners to locate and deliver products quickly to the customer, irrespective of the channel. 3PL vendors endeavor to decrease their lead times to attain consumer satisfaction. Several healthcare and automotive organizations have cancelled their agreement with existing internal logistics providers and adopting 3PLs for decreasing distribution costs is expected to fuel the market growth over the forecast period.

Service Insight

The Third Party Logistics market has been segmented into five services such as, Domestic Transportation Management (DTM), Dedicated Contract Carriage (DCC), warehousing & distribution, software and International Transportation Management (ITM).

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DCC involves trailers, supplying trucks, drivers, tractors and managing many elements concerned in a supply chain. Dedicated Contract Carriage is a high rising segment of the distribution industry and trucking industry. Major companies such as Target, Wal-Mart and Kroger use DCC for increasing truck capacity and decreasing costs. DTM includes transportation management services in combination with freight brokerage which are used for shipments to be reached in a particular hub or point. ITM is alike to DTM; the only dissimilarity is that ITM deals with international shipments. Distribution and warehousing comprise distribution center process or long-term contract warehousing and many value-adds. Refrigerated grocery and pharmaceutical applications are the major factors which impact growth for value-added warehousing services.

Regional Insights

North America and Europe market is expected to grow at a significant rate owing to technology advancement in logistics. The Third Party Logistics market in Europe is estimated to grow significantly due to increasing automotive industries. Asia-Pacific is expected to grow significantly owing increasing growth scenario for distribution facilities and warehousing in countries such as China, India, Indonesia, Thailand, and Singapore. Increase outsourcing of logistic operations by firms is the major factor which is expected to drive the market growth in Asia Pacific region.

Competitive Insights

The key market and niche players include UPS Supply Chain SolutionsJ.B. Hunt, Kuehne + Nagel, C.H. Robinson Worldwide, FedEx and DHL. Market participants enter into mergers & acquisitions to sustain in the market. FedEx have made partnership with Nagel and Kuehne for improving their supply operations.

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