The Global Contract Logistics Market is estimated at US$203.9 billion in 2017 and is expected to reach US$298.8 billion by 2025. Geographically, Asia-Pacific currently dominates the market. Currently, more than one-third of the market share is captured by Asia Pacific region owing to the presence of a strong manufacturing base as well as flourishing e-commerce industry. China is leading the contract logistics market in the Asia Pacific; however, emerging economies such as Malaysia, Vietnam, South Korea, and Indonesia are witnessing remarkable growth in their logistics sector.
Asia-Pacific is the fastest emerging region owing to the economic development and dynamic business environment. Currently, Asia-Pacific is leading the global contract logistics market overtaking Europe. The growth in this region is attributed to the rising retail enactment, strong economic growth, and increase in disposable income.
Moreover, the increase in urbanization and growth in middle-class population have supported the domestic consumption of fast-moving consumer goods, household items, and luxury items. As a result, an increase in retail sales in Asia-Pacific is augmenting the growth of contract logistics market in the region. Rapid growth in the e-commerce sector and rise in foreign direct investment is also attracting numerous non-asset entrants and existing players in this region and further drive the contract logistics market.
Need for an efficient supply chain system for the manufacturing sector is driving the contract logistics market
The manufacturers of various products face stiff competition with their competitors on account of costs, quality, service, and time-to-market. Also, manufacturers have faced monumental challenges concerning maintaining a perfect balance between the demand and supply of the product in the diverse geographies.
Manufacturing industries thus tend to focus more towards their core competencies of manufacturing and outsource the rest to other stakeholders in the value chain.
The need for an efficient supply chain system for the manufacturing sector seemed to be imminent as contract logistics players focus on several aspects of supply chain management and provide advanced and assured management of goods from the production line until the consumer and reverse, the role of contract logistics becomes much more critical.
The services offered by logistics firms add substantial value to the manufacturing companies. These firms help different companies to reduce weak points that outcomes in loss of revenue or profits and further help to assure maximal profitability.
Contract logistic companies specialize in several logistics operations which offer network analysis, mode network optimization, warehousing, management of vendor compliance, and other logistics operations. In contrast with this, it is challenging for the manufacturing companies to gain such logistic expertise in every business division. Thus, choosing a contract logistics firm, the company is opting for experts in logistics.
This enables the company to devote their time and resources on areas of core competency and actual business instead of using it on managing logistic operations. Along with this, the company doesn’t need to spend on building their warehouse facility, to hire additional labor, and installing several new technologies by opting for contract logistics which reduces the company’s cost significantly.
Swift growth of manufacturing industry and their focus laid on core competencies, burgeoning needs for achieving cost efficiency, task optimizations & technological integrations pertaining to supply chain activities, and benefits in managing seasonal variations of products are projected to drive the market for contract logistics market during the forecast period. However, regional diversities and the complex nature of the supply chain may negatively impact the market for contract logistics in the near future.
