The rising e-commerce industry, growing trading activities due to globalisation, the increase in focus of manufacturers and retailers on their core business, the need to minimise overhead costs and the need for flexibility and scalability based on business needs drive the Global third-party logistics (3PL) market to grow at a CAGR of 7.1% between 2020 and 2027.
According to a recent report by Valuates Reports, the global opportunity analysis and industry forecast, 2020–2027, published under Transportation & Logistics category, the global 3PL market was valued at $ 1,027.71 billion in 2019 and is projected to reach $1,789.94 billion by 2027.
The Global 3PL Market is segmented by mode of transportation (railways, roadways, waterways, and airways), service type (dedicated contract carriage), domestic transportation management, international transportation management, warehousing & distribution, and others) and industry (technological, automotive, retailing, elements, food & groceries, healthcare, and others).
The 3PL market is also expected to witness significant growth due to the development of the e-commerce industry and an increase in reverse logistics operations.
Influencing Trends
According to Valuates Report, the growing need to save money is expected to propel the 3PL market. Third-party logistics companies specialise in logistics and thus have a larger supply chain network. They have exclusive relationships in the logistics industry and thus have more negotiating power. They can also assist in providing clients with larger volume discounts. All of this can help the players save money on overhead.
The retailers and manufacturers can save money on infrastructure investments by partnering with a 3PL supply chain management firm, which can provide transportation, warehouse space, staff, and tracking technology, among other things.
An increase in globalisation has resulted in various trade-related activities. As a result, manufacturers and retailers struggle to keep track of these activities in a timely manner. 3PL companies assist these manufacturers in keeping track and controlling these activities. This, in turn, is expected to drive the growth of the 3PL market. Furthermore, the growth of the 3PL market is fueled by the development of the overseas market, the research company said.
Some of the key market players include DB Schenker, DHL International, FedEx, KUEHNE+NAGEL, Maersk, Nippon Express, Panalpina World Transport, Union Pacific Railroad, United Parcel Service and H. Robinson Worldwide.
Market Share Analysis
The Airways segment is projected as the most lucrative based on transportation mode. The Dedicated Contract Carriage segment is projected as the most lucrative segment based on service type. Dedicated logistics services have enabled medium-sized businesses to enter the 3PL market, allowing retailers to expand their operations and offerings into semi-urban areas. In addition, 3PL gives retailers the freedom to create new products, expand their capabilities, and expand their regional presence.
The LAMEA region segment is projected as the most lucrative segment based on region.
Outsourcing
Outsourcing logistics allows businesses to focus on their core competencies rather than managing non-core but critical functions. Without deploying internal resources, companies can benefit from logistical expertise. This feature is expected to propel the 3PL market forward.
Another benefit of third-party logistics in supply chain management is that it gives businesses the flexibility and scalability to use supply and distribution resources as needed. As a result, there are no redundant investments or underutilised resources when sales are down, and businesses can scale up when demand spikes. This factor is expected to help the 3PL market grow even faster.
The 3PL service providers are in charge of some of the most critical aspects of the business, including customs management, distribution, and order fulfilment. Their error is expected to harm the manufacturer's reputation and customer relationships. If a 3PL service provider fails to deliver an order on time, the manufacturing company's creditworthiness suffers, and consumers' trust in the company suffers as a result. This factor is expected to limit the global 3PL market's growth, the research firm added.
Courtesy: Valuates Reports. NB: Photo is representational; courtesy: DB Schenker.