How the 3PL service providers can propel efficiencies in the FMCG sector

With the spike in the pandemic-led changes, the behavior patterns of the Indian consumers have largely metamorphosed. The key FMCG brands have witnessed a higher penetration into the rural and semi-urban parts of India, marking a paradigm shift in the growth story of the Indian FMCG sector. According to the Indian Brand Equity Foundation data, the Indian FMCG market is expected to grow at a CAGR of 14.9% to reach US$ 220 billion by 2025, from US$ 110 billion in 2020. In April-June 2021, the domestic FMCG market saw an increase of 36.9% YoY. Furthermore, according to a Nielsen study, the rural FMCG consumption increased 58.2% YoY in September 2021 which was 2x more than the urban consumption (27.7%).  

With the sector’s growth and penetration perspective in mind, leveraging the 3PL services could be a game changer for the FMCG brands. Having said this, the FMCG brands still have a long way to go before they can comprehend and leverage the immense potential that an effective 3PL service provider can bring to them. 3PL companies can offer a range of services right from streamlining procurement, distribution, and reverse logistics, to ensuring smoother supply chain networks across both the rural and urban markets. It is interesting to see how 3PL service providers are emerging as significant entities in the bigger growth and success picture of FMCG brands not just in India but across the globe.

Let’s dive into the benefits that a 3PL service provider could bring to an FMCG brand:

1. Attain flexibility and scalability: One of the key benefits offered by 3PL service providers is their ability to absorb or deal with volume increases or fluctuations than an in-house operation. They bank upon the scalability of their network to deal with any abrupt changes in the FMCG ecosystem, which can be explored and leveraged by the brands for their benefits. From location-specific focused approaches to designing solutions for capturing new markets and customer base, 3PL service providers offer the FMCG brands the much-needed bandwidth to explore, spread, and establish themselves among new consumers.

1. Optimizing costs: FMCG is an industry that is highly cost-sensitive. Even the smallest of variations can cascade to an impact on the bottom line. With outsourcing services to a 3PL service provider who is nothing short of an expert; logistics, storage and transportation costs are optimized to a great extent thus allowing brands to focus only on core competencies. Besides this, 3PL service providers also offer expert insights and cost-effective solutions that are customized to meet the supply chain needs, basis current and future plans for the company.

1. Leverage technology: 3PL companies offer 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 help increase sales and market share for FMCG brands. This is a unique advantage that 3PL service providers bring to the table being the experts with core competencies in supply chain.

1. Value added services: Additionally, several 3PL service providers offer a plethora of value added services, customized to cater to the specific demands of each sector/product. From assembly, packaging, re-distribution, kitting, sampling and even documentation and ensuring smooth movement of cargo, they take care of everything. Moreover, in case of long haul, they also provide multi-national transport to their clients. Apart from these, with the rise of e-commerce; inventory mapping, reverse logistics, and just-in-time deliveries have also become important criteria for consumer loyalty and 3PL service providers ensure that they offer these as value added services to retain their clients. While completing the D2H deliveries, they become the face of the FMCG brand.

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%, 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 warehousing, inventory management, shipping and last-mile delivery, there is still a huge scope for growth which is now being propelled by tech driven logistic enablers. With a clear emphasis on streamlining operations and driving efficiency, 3PL service providers are now actively working towards creating customized solutions while leveraging AI, emerging tech and a deep domain customer understanding to provide value to their FMCG clients. This surge of such tech enabled and value driven 3PL partners are set to drive the growth of the FMCG sector and revolutionize this sector like never before!