Third Party Logistics Market to Grow at a CAGR of 7.4% to reach US$ 1329.4 Million from 2020 to 2027

The Third Party Logistics market was valued at US$ 899.4 Million in 2019 and is projected to reach US$ 1329.4 Million by 2027; it is expected to grow at a CAGR of 7.4% from 2020 to 2027.

Third party logistics is moving towards increased information base and large-scale operations owing to maximize operational efficiency and improve profitability. There is an improvement in the strategic nature of relationships between shippers and third-party logistics providers. Globally, 3PL firms are increasing their employee strength, organization skills, broadening their service offerings, investing in new technology, and expanding their geographical reach in order to deliver data driven solutions.

Moreover, 3PL firms are also implementing several software based solutions in their operations in order to reduce the inefficiency and costs with saving time for operations. Moreover, the implementation of speech recognition software in warehouse management system communications will support order turn-round and inventory records with reducing employee-training requirements. Along with this, acceptance of cloud-based technology in 3PL companies will respond demands by recognizing the need for customer access which is expected to better meet the seasonal trends efficiently. 3PL are the companies delivering single or multiple logistics services to a manufacturing company. Though 3PL firms do not hold the ownership of the product for distribution, however they are bound to accomplish the requested logistics activities of the purchasing company. 3PL is a significant part of today’s supply chain for small and large businesses. These firms provide services such as international & domestic transportation, inventory management, warehousing, distribution, order fulfillment, and freight consolidation. By outsourcing 3PL services, manufacturing companies are able to focus on product development, sales, and other core operations. 3PL offers immediate knowledge & expertise in the field, track on international logistics, and create cost savings. Increase in demand for shipping cost reduction & more focus on timely delivery management, reduction on company’s assets & permitting focus on core business, and advantage in managing seasonal variations are projected to drive the market for third party logistics during the forecast period. However, lesser control of manufacturers on logistic service and delivery process may adversely impact the market for third party logistics in near future. Moreover, the factor such as increase in adoption and growth of e-commerce in retail sector is projected to generate remarkable growth opportunity to the industry players.

Asia-Pacific dominated the third party logistics market in 2019, In 2018, Asia-Pacific dominated the global third party logistics market with more than one-third of the market share surpassing Europe with France and Japan being the leading countries in this region. This growth in demand for 3PL in this region is attributed to robust economic growth along with growing retail enactment owing to the rising disposable income. Moreover, foreign manufacturers select Asian countries as their production locations due to the availability of cheaper labor.

The factors such as continual urbanization, strong economic growth, and growth in middle-class population supported the growth in domestic consumption of fast-moving consumer goods for everyday consumption, personal automobiles, household items, and luxury items. This in turn increases the retail sales and makes Asia-Pacific the leading market for logistics service consumer. The services offered by 3PL firms add substantial value to the manufacturing companies. These firms help different companies to reduce weak points that outcomes in loss of revenue or profits and further help to assure maximal profitability. 3PL companies specialize in several logistics operations which offers network analysis, mode network optimization, warehousing, management of vendor compliance, and other logistic operations. In contrast with this, it is challenging for the core companies to gain such logistic expertise such as inventory management & storage, contract packaging, assembly needs, or shipping etc. in every business division.

Lucrative Regions for Third Party Logistics Market

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Market Insights

Rise in demand for reducing overall operational cost and focus on managing timely delivery

Logistics is the core area of the third party logistics (3PL) firms and their proficiency in this areas is always superior to that of the core companies. 3PL firms have the expertise to keep IT systems updated and deliver the logistic services more time & cost effectively along with this they own the ability to meet the technical requirements. Moreover, 3PL firms also help to reduce inventory cost and can strategize to reduce a company’s overall shipping & delivery costs as well. The core companies may not have that time or expertise to keep logistic services and systems updated. The company often face challenges meeting timely delivery of products during high business growth. Outsourcing logistic function from a third party is helpful for core companies as these firms manage and maintain warehouse, transportation, and other operations with more efficiently with expertise.

Mode of Transport-Based Market Insights

On the basis of mode of transport, the global third party logistics market is segmented into roadways, railways, waterways, and airways. Transportation is one of the most important service comprised in the 3PL operations. Efficient transportation is physically moving supplies in relatively safe manner on right time, in right condition, and in a cost effective manner. The role of transport is the movement of goods from the point of manufacturer or storage to the point of use or the distribution points to end use. The selection criteria of mode of transport is depends on the physical characteristics of goods and supplies. In certain situations, environmental factors such as destruction of roads and railways may have a considerable impact on the mode of selection. The factors considered in mode of selection would be speed which the mode exhibits, flexibility that the mode offers, and comparative unit cost.

Service-Based Market Insights

On the basis of service, the global third party logistics market is categorized into international transportation, warehousing, domestic transportation, inventory management, and others. Third party logistics (3PL) includes the storage and movement of goods to the different locations from point of origin supplier to intermediate and finally to end users. 3PL mainly focuses on the transportation of goods by different modes and warehousing. 3PL companies serve to extensive range of industries by providing innovative solutions and provide high value for their customers. The highly used outsourced services include warehousing, transportation, freight forwarding, and customs brokerage, along with several value-added services such as packaging, cross-docking, and shipment consolidation.

End User -Based Market Insights

On the basis of end user, the global third party logistics market is categorized into automotive, healthcare, retail, consumer goods, and others. Companies mainly outsource the functions of third party logistics (3PL) to achieve operational efficiencies, reduce overall cost, and focus on core competencies in manufacturing. The business requires increased local and regional market expertise in order to manage warehousing & transportation to expand business globally. Thus, 3PL service providers has the expertise in warehousing, distribution, and international transportation management delivers economies with operational backbone.

Strategic Insights

Product development is the commonly adopted strategy by companies to expand their product portfolio. Deutsche Post AG, KUEHNE + NAGEL INTERNATIONAL AG, NIPPON EXPRESS CO., LTD., DB Schenker, and C.H. Robinson Worldwide, Inc. are among the key players implementing strategies to enlarge the customer base and gain significant share in the global Third Party Logistics market, which in turn permits them to maintain their brand name. A few of the recent key developments are:

• In 2020, DB Schenker expanded its activities near cargo centre at Luxembourg Airport. It is one of the largest airport in Europe. This new 7,000 m² logistics centre help the company to link its European and global network. The new distribution centre is expected to generate more than 100 jobs..
• In 2019, Nippon Express USA, Inc. established a new office in n Lexington, Kentucky. With the opening of the new office, the company is aiming to build a logistics network primarily targeting automobile companies and to provide its customers with optimal transport services.

Third Party Logistics Market Segmentation:

By Mode of Transport

• Roadways
• Railways
• Waterways
• Airways

By Service

• International Transportation
• Warehousing
• Domestic Transportation
• Inventory Management
• Others

By End User

• Automotive
• Healthcare
• Retail
• Consumer Goods
• Others

Company Profiles

• Deutsche Post AG
• KUEHNE + NAGEL INTERNATIONAL AG
• NIPPON EXPRESS CO., LTD.
• DB Schenker
• C.H. Robinson Worldwide, Inc.
• DSV A/S
• XPO LOGISTICS, INC.
• SINOTRANS CO., LTD.
• GEODIS
• UPS Supply Chain Solutions