Study reveals widening scope for ‘Third Party Logistics’

Research for Transport and Logistics :

Only some companies are realising gains by outsourcing their logistics operations to create efficiency in their businesses with most reluctant to do so despite globally proven advantages due to perceived risks, a new study has revealed.

The third party logistics (3PL) market in Sri Lanka is fragmented and dominated by a few major local players. The top five players in the market, based on scope of activity and warehouse footprint, are DHL, Hayleys Advantis 3PL Plus, JK logistics, EFL and Global Park.

Supply chains are the backbone of international trade and commerce and logistics powers the supply chain, says Gayani de Alwis, who conducted the study which was presented at the R4TLI - Research for Transport and Logistics – conference on research for transport and logistics industry.

It was organised by the Sri Lanka Society for Transport and Logistics with the Chartered Institute of Logistics and Transport Sri Lanka.

The study found there were opportunities for Third Party Logistics businesses with only a few of the leading players providing ‘full scope’ 3PL services and having the capability to manage all industry requirements.

Emerging opportunities identified by companies covered in the study, both logistics providers and users, included integrated supply chain service offerings, collaborative transport, multi user facilities and using R&D and technology as a differentiator.

The study said the 3PL market in Sri Lanka is yet to achieve maturity with few major players who have developed specialised service offerings over the years and achieved market leadership.

“The market is highly fragmented and the majority is still providing limited scope 3PL services to customers,” it said. “A lack of understanding of the potential benefits of 3PL operations exists among users in general.”

In 2014 Sri Lanka’s logistics cost to GDP was 10.6% compared with 8.3% in the United States.

“By managing logistics professionally efficiencies can be derived to drive economic growth,” according to the study done by de Alwis.

Gayani de Alwis is also the Vice President of Institute of Supply and Materials Management, Co-founder and Chairperson of WiLAT Sri Lanka and the former Director, Supply Chain at Unilever Sri Lanka.

“A country’s logistics-friendliness is an indication as to how connected the country is to achieve competitiveness.” Globally, integrated logistics is emerging as the new norm of the industry, where a single service provider provides end-to-end logistics services not only within the country, but also through international networks. “This enhances the efficiency and productivity of logistics as a function as a whole and directly contributes to savings all around,” said the study. “However, in Sri Lanka, most organisations are still not ready to outsource their operations to one lead logistics provider due to perceived risks arising from fear of collaboration.” Among the challenges revealed by the survey were cost focus, low margins, lack of professionalism, skill gaps, fear of collaboration, lack of clear industry standards and legislation, high attrition rate, an unorganised transport sector, suboptimal cold chain logistics and readiness to adopt technology and innovation.

Chairman of the Joint Organising Committee, R4TLI, Professor Amal Kumarage said, “The inauguration of the R4TLI - Research for Transport and Logistics Industry came from a growing understanding of the gulf that exists between the practice and research of transport and logistics in many developing countries including Sri Lanka.”

“Sri Lanka’s poor choice of investment in logistics infrastructure, lack of cutting edge research or development does not auger well for its ambitions to become a logistics hub,” he said.