Third-party logistics (3PL) is a broad set of services that includes warehousing, distribution, and transportation. 3PL plays an important role in the supply chain by facilitating the timely delivery of products to customers.
With the global logistics market size reaching US$5.2 Trillion in 2020 and forecast to reach US$ 6.9 trillion by 2026[1], it’s no wonder that 3PL has become such a booming industry!
Understanding 3PL from a Business Stand Point
Businesses adopt 3PL to reach long-term solutions and achieve the mission and maintain the vision, 3PL allows companies to outsource their logistics processes to a third-party business.
Outsourcing logistics enables businesses to accomplish more by focusing on other aspects of their business. What needs to be seen is where Pakistan stands in the warehousing/3PL industry.
Pakistan’s Place in the Global Industry
Third-party logistics is a thriving industry and Pakistan has to establish itself as one of its main players. Currently the country does not have many warehouses or facilities for third party services, because there are too few ports that can handle a large amount of imports; however, this isn’t stopping the industry from growing.
As one of the fastest growing economies in Asia[2], Pakistan is a key player in the global third-party logistics industry. With a population exceeding 210 million, and a GDP growth rate that has been averaging 5% per year over the last five years[3], Pakistan has become an important hub for freight forwarding and 3PL providers, with many expanding to offer other services such as warehousing, international freight transportation, customs clearance and more.
The transport and logistics sector has a profound and enduring effect on the economic growth of Pakistan with the transport sector contributing 22.3% of the services sector’s GDP and approximately 6% of the country’s total employment in 2019[4].
With the 23rd largest road network in the world[5] and one of the fastest growing aviation sectors in Asia, Pakistan is a key player in global third-party logistics. However, a major question that needs to be addressed here is, how can 3PL be improved in Pakistan.
Technology Set to Disrupt 3PL in Pakistan
Pakistan’s 3PL industry is a booming business that has the potential to grow even more. But one of the main factors in its success is how it employs technology. Technology has taken over the world. You can’t go anywhere without seeing it or hearing about how important it is in our lives. It’s also no surprise that technology has found its way into logistics and 3PL.
The first way that technology can help improve the Pakistani economy is by improving Pakistan’s transportation infrastructure. This will make it easier for goods to be shipped from one place to another, and also decrease waste in terms of transporting products unnecessarily or waiting too long before a shipment can move on.
The second way that technology could help improve the Pakistani economy is by improving communication between companies and their providers. Being able to communicate easily with suppliers means that a company will be more informed about what they are ordering, when it will arrive, and so on. This helps them plan ahead for upcoming orders better as well since they have an idea of how long it might take for something to ship or reach its destination.
This third way that technology could help improve Pakistani’s economy is through automation in terms of physical labour like loading products onto trucks and unloading those same products at their destination point (like a warehouse). Technology can assist laborers on these tasks which would reduce human error while working physically demanding jobs- this leads to higher quality service being given to clients from the truck.
A relatively new entrant Wahyd Logistics is looking to make the most out of this technological gap in the Pakistani market. They are in this unique position where they have in-depth knowledge of both logistics and technology and know-how to create a synergy here. Wahyd Logistics offers trucking and logistics services via a mobile app as well as a web-based platform so that organizations of all sizes may focus on their core businesses, without having to worry about their logistics and transportation. They are also planning to step into the 3PL/warehousing in the near future.
Pakistan Versus Global Market Warehouse Trends
The global warehousing and storage market attained a value of USD 428 billion in 2020. It is further expected to grow in the forecast period of 2021-2026 at a CAGR of 4.5% to reach about USD 557 billion by 2026[6].
As the world economy continues to grow, many countries are starting to see a surge in demand for warehousing space. Pakistan also has seen a large increase in demand over the last decade, especially from global retailers.
Till the recent past, the contribution of warehousing to the logistics sector was marginal, largely because this crucial sub-sector had been ignored by policy makers and logistics companies. However, with the rise in demand, the tide is turning and warehousing is now one of the key concerns of economists and lawmakers in the country.
Pakistan’s vision 2025 is highly focused on the national transportation infrastructure to build an efficient and integrated transportation and logistics system[7].
With the world getting smaller, Pakistani companies are increasingly competing for international customers and Pakistan has emerged as an attractive location to store goods given its proximity to major markets such as India and China.
CPEC and OBOR: Shaping the Future of Pakistan’s Transportation Sector
CPEC is definitely a game-changer for Pakistan’s logistics and warehousing industry.
The investment in and distribution of infrastructure between all major cities will allow Pakistani businesses to compete with other global markets, attracting foreign investments that can support exports.
With such a serious focus on trade under OBOR (One Belt One Road) plan, it has become crucial for Pakistan to have industrial parks and special economic zones (SEZs) along the CPEC route, so they are ready to thrive as well.
As global market warehousing expands, Pakistan focuses on establishing industrial parks and developing special economic zones (SEZs) along with CPEC.
In this plan, 9 special economic zones have been established along the CPEC route and foreign companies can invest in logistic centres and warehouses in Pakistan.
It is estimated that 100,000[8] additional trucks will be needed to transport construction materials to build these industrial parks and SEZs. Once the trade route is fully operational, trade is set to flourish. This will in turn augment the logistics and transportation sector of Pakistan.
[1] https://www.imarcgroup.com/global-logistics-market#:~:text=According%20to%20the%20latest%20report,US%24%205.2%20Trillion%20in%202020.
[2] http://cpec.gov.pk/news/4
[3] https://www.macrotrends.net/countries/PAK/pakistan/gdp-growth-rate
[4] https://www.phoneworld.com.pk/wahyd-logistics-integrates-technology-into-pakistans-logistics-sector/
[5] https://en.wikipedia.org/wiki/List_of_countries_by_road_network_size
[6] https://www.expertmarketresearch.com/reports/warehousing-and-storage-market#:~:text=Global%20Warehousing%20and%20Storage%20Market%20Outlook,USD%20557%20billion%20by%202026.
[7] https://www.pc.gov.pk/uploads/vision2025/Pakistan-Vision-2025.pdf
[8] https://aurora.dawn.com/news/1143412