How FMCG sector can leverage 3PL services to optimize operations

The Indian consumer behavior patterns have largely transformed over the past few years, with accelerated changes brought on by the pandemic. While technology remained the key disruptor, the rise of modern retail, and higher penetration of key FMCG brands into the rural and semi-urban parts of India, marked a shift in the Indian FMCG sector growth story. The Indian FMCG market is expected to grow at a CAGR of 14.9 percent to reach US$ 220 billion by 2025, from US$ 110 billion in 2020. Additionally, according to a Nielsen study, in September 2021, rural consumption of FMCG increased 58.2 percent YoY, which is 2x more than the urban consumption (27.7 percent). A large part of this growth can be attributed to ease of access, changing consumer behavior patterns, rise in ecommerce and overall digital literacy.

Having said this, there is still a long way to go before FMCG brands can still fully fathom and leverage the immense potential that an effective 3PL service provider can bring to the brand. From streamlining procurement, distribution, reverse logistics and smoother supply chain networks across the rural and urban markets, 3PL service providers are also emerging as prominent partners and stakeholders in the overall growth and success of FMCG brands, across the globe.

Listed here are some key benefits that FMCG players can enjoy with the right 3PL service provider:

1. Optimizing costs
FMCG is a highly cost-sensitive industry and the smallest of variations in operations can go a long way in impacting the bottom line. With a 3PL service partner, logistics, storage and transportation costs are largely optimized as these are outsourced to experts, thus allowing brands to focus resources on core competencies. In addition to this, 3PL service providers offer expert insights and customized solutions to meet the supply chain needs, based on current and future plans for the company, at a much more affordable cost.

2. Leverage technology
As industry experts with core competency in supply chains, 3PL service providers offer the unique advantage of tech enabled solutions for FMCG brands, which may range from specialized temperature controlled supply chains to data driven solutions for inventory and sales fulfillment management, stock update and geography wise performance management updates – key insights that could go a long way in increasing sales and market share for FMCG brands

3. Build agility and scalability
One of the key features offered by 3PL service providers is the agility and scalability of their network, which can be explored and leverage by FMCG brands, based on the growth curve. From area specific focused campaigns to exploring new markets and customer base, 3PL service providers offer FMCG brands the bandwidth to explore and establish themselves among new consumers, at a reasonable cost and without long term investment.

4. Value added services
In addition to the above benefits, several 3PL service providers offer an array of value added services, customized to meet the specific demands of each sector/ product. From assembly, packaging, re-distribution, kitting, sampling and even documentation and smooth movement of cargo, in case of long haul, they also provide multi-national transport. Apart from these, with the rise of e-commerce, reverse logistics, inventory mapping and just-in-time deliveries have also become an important aspect for consumer loyalty and 3PL service providers ensure they become the face of the brand when they complete the D2H deliveries.

The way forward:
According to a UK-based market research firm Technavio, the 3PL market in India is expected to grow at a CAGR of 8 percent, and is set to be valued at US $10.74 billion, from 2021-2025. While most of these 3PL service providers offer end-to-end logistics solutions, including inventory management, warehousing, shipping and last-mile delivery, there is still a wide scope for growth which is now being driven by tech driven logistic enablers. With a clear focus on streamlining operations and driving efficiency, 3PL service providers are now actively working towards creating customized solutions that leverage AI, emerging tech and a deep domain customer understanding, to provide value to their FMCG clients. This rise of such tech enabled and value driven logistic partners are set to drive the growth of the FMCG sector, like never before!

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Indian Transport & Logistics News