Third party logistics (3PL) providers in Asia are a key part of the supply chain for businesses. 3PLs can be a valuable resource for companies looking to enhance their supply chain and logistics. Often, 3PLs offer a wide range of services, from warehousing and inventory management to order fulfillment and international freight forwarding. In this article, we will explore the third-party logistics market in Asia, what trends are shaping it, and why it is important.
Asia is a very dynamic market with increasing trade and investments. The growth of e-commerce and m-commerce companies in the region is also driving the demand for third party logistics services. China and India are the two largest markets for the third-party logistics industry in Asia, and the companies operating in these regions are expected to see a strong increase in demand for their services.
The development of trade routes connecting Asia to the US and Europe, as well as the globalization of supply chains in general, has prompted companies to work more closely with the logistics providers in the Asia region.
The Asia-Pacific region is increasingly becoming a manufacturing hub, especially in countries such as China and India. The economies of these nations are growing rapidly, with the Asian Development Bank predicting that Asia’s GDP will grow to US$10 trillion by 2030. China’s GDP has grown by double digits in the past decade, and the Asian Development Bank expects this trend to continue.
The rapid pace of economic growth is driven by rising consumer spending, and an increasing middle-class consumer base. This growing middle-class consumer base has given rise to a high demand for products in the Asian market, which is a key driver for the growth of the 3PL industry in the region.
Additionally, strong cross-border eCommerce is taking place in Asia. For example, in China, online retail sales grew by 34% year over year from January to March 2021. E-commerce giants like Alibaba and JD.com are rapidly expanding their presence in this space and competing against traditional brick-and-mortar retailers.
In fact, Asia continues to be the largest retail market in the world, and a significant portion of the revenue generated here comes from the e-commerce sector. In 2017, total retail sales in China were RMB5,274.5 billion (around $720 billion). In the same year, retail e-commerce sales in China were RMB2,908.8 billion ($406 billion).
The growth of e-commerce is fueling growth in Asian economies such as Singapore and China, which are increasingly drawing in companies from developed markets in the West. This is largely due to the opportunities in the region, with e-commerce accounting for about 40% of global retail sales and growing quickly. As the supply chain for these industries is often fragmented and lacks depth, companies are seeking out third-party logistics providers in Asia.
Manufacturers in Asia also face the challenge of competition from overseas. It is relatively inexpensive to manufacture goods overseas, and some manufacturers in Asia have found it difficult to compete against the prices of Chinese manufacturers.
As companies shift their production chains to more decentralized locations, moving away from the industrial hubs of Asia, the importance of an effective and efficient supply chain for business has become increasingly crucial. This is where the third party logistics market plays an important role. 3PLs are now a key part of supply chains and contribute to the overall efficiency of a supply chain. Supply chains, therefore, are focused on the logistics of a product as well as of the associated services required to deliver that product to the intended destination.
While the 3PL model remains unchanged across Asia, the region is seeing more changes in the industry. One such change is the increased integration of 3PLs into corporate supply chains.
The Asia-Pacific region is increasingly becoming a key driver of the global economy. In 2020, Asia accounted for about 41.8 percent of global trade, up from 21.1 percent in 2013, according to the United Nations Conference on Trade and Development. In addition, with the rapid growth of ecommerce, which accounted for about 37.6% percent of global retail sales in 2020, Asia is the second largest ecommerce region globally. This provides an opportunity for both 3PLs and the consumer to further strengthen their connections to the ecommerce economy.