Coen Van Der Maarel, Managing Director, India, Sri Lanka and Maldives, Kuehne+Nagel in an interaction with the Industry Outlook team, shared the roadmap to establish automation of the 3PL Supply Chain in India.
The Global Third-Party Logistics (3PL) market is expected to reach more than USD 1.75 trillion by 2026. How do you anticipate the growth of this segment in India? What are the factors driving this growth?
There has been a growing awareness among companies about the benefits that 3PL providers can offer. Supply chain management through a 3PL provider allows the company access to an established resource network and the industry expertise of 3PL partners. Clients will also benefit from optimal cargo turnover, distribution efficiency, superior inventory management, reduced inventory and overall cost economies.
Using a 3PL provider also removes the need for in-house logistics management, warehousing, and other related human resources and costs – which can be an effective logistics solution for smaller companies. By working with a 3PL provider, companies will be able to transform their supply chain, increase efficiency and ensure customer satisfaction.
Particularly in India, there is a heavy push to invest in infrastructure and renewable energy in the coming years, to meet sustainability goals and improve the adoption of green logistics. This presents a large opportunity for growth within the 3PL industry.
Companies with overseas operations also benefit from working with international 3PLs, to maintain consistency of global operations and systems, and compliance to their global standards. Kuehne+Nagel goes a step further in offering 4PL services, a higher level of supply chain management for the customer, giving clients a control tower view of their transactions, suppliers and collaborators, to optimize their supply chain.
One of the major challenges in implementing automation in the supply chain is change management, because business processes and workflows need to be rewritten with the implementation of automation. How do you propose to solve this problem in the Indian context?
With the rate of technological advancement today, as well as the evolution of customer demands, automation and digitization of the supply chain is unavoidable if companies and countries even, are to remain competitive. The automation of supply chains is more than just
replacing outdated technology or machines, but rather reshaping how a company operates its supply chain management strategies – and it can be challenging (both financially and operationally) for companies with legacy systems or manual processes in place, and need to be overhauled in entirety.
3PLs, or 4PLs like Kuehne+Nagel, take a lot of these challenges away from the customer, as we are able to provide an integrated ecosystem that allows full visibility and control of every point on your supply chain. In this way, the benefits of supply chain automation can be reaped with limited disruption, and provide a new competitive advantage.
Benefits that 3PLs can offer by automating the supply chain include:
• Improved profitability through capital reduction, reduced transport spends and cost-to serve
• Data integrity through consistency checks, automated processing and collaborative workflows
• Improved reliability and performance with real-time tracking and proactive management
• End-to-end visibility with predictive ETAs, actionable information and enhanced reporting
• Increased resilience through risk management and real-time problem solving
• Improved decision-making thanks to predictive analytics
Particularly in countries with a slower return period for automation, it’s critical to work closely with local suppliers to further develop automation of systems and processes, with a key focus on improving the quality of our supply chain services.
With changes or fluctuations in demands, there is a direct impact on the design of automated systems. Therefore, it is very important to design an automation system considering the future demand of operation. What are key points to consider, while approaching automation of the supply chain? How should SMEs approach automation?
In the design of automated systems, or any sort of technology, it is necessary to design for future uses and challenges. In developing our services and products, we constantly try to envision future challenges, demands, and benefits and ensure the offering is agile and nimble enough to incorporate these changes as it develops.
For example, for eCommerce operations where there can be volatile changes in order profiles and volumes, inbuilt flexibility is critical. Another example would be Kuehne+Nagel’s control tower system integrating various sources of data and standardizing their format, enabling easy distribution within the client’s systems and ensuring that their customers receive a consistent experience.
Ultimately, the goal is to build a system that is fully integrated, accessible and intuitive, to support customers in the optimal management of their supply chain right now, and years into the future.
How do you see the future of the 3PL segment in India?
With the increase in e-commerce volumes, there is a demand for faster, more efficient shipping, as well as high inventory turnover and warehousing demands, not just in India but around the world. Additionally, there has also been an increase in volume in the pharmaceutical industry and renewable energy related services in recent years – and we expect continued growth in these sectors.
This has resulted in greater demand for 3PL providers to support these complex supply chains, especially with recent supply chain disruptions and other pandemic-related issues. 3PLs are also expanding their scope of services to provide customers with more solutions. These factors point to strong growth potential for the logistics and 3PL industry in India.