Demand for streamlined supply chains in sectors like auto, pharma, hi-tech, retail sectors is seeing a strong growth for logistics service providers in general and third party logistics (3PL) players in particular.

Cashing on this trend, industry veterans are trying to be entrepreneurs in this space. The area is attracting second-generation entrepreneurs as well. As per KPMG’s latest report, the expansion in India’s GDP translates directly into growth in the transportation and logistics sector, there being a 2x relationship between growth rates of GDP and the transportation and logistics sector.

“On an average, companies in India presently outsource an estimated 52 per cent of their overall transportation and logistics activities. However, many more companies are increasingly leaning towards outsourcing and 3PL models as they seek to optimise costs and focus on their core businesses. This rising trend is helping consolidation and scale development in the highly fragmented transportation and logistics industry” said Manish Saigal, executive director and head of transportation and logistics, at independent advisory, KPMG.

Uday Palsule, who has worked with a leading logistics company, has started his own venture, Spear Logistics, a few years back along with his partner Gautam Debla, who is also a professional in the same field.

“You need a lot of expertise in terms of how to handle the inventory for your client because the goods are worth a couple of crores and you need to receive, record all the data and then disburse as per the client’s specifications. You can’t do that if you don’t have industry expertise” Palsule said.

In fact, the sector that is dominated by global players like DHL, Bluedart, also have home grown companies like Crossroads Logistics and Sigma, who are doing fairly large business.

Also the 3PL, in the Indian logistics services, is at a nascent stage. As per the KPMG study, compared to their global counterparts, Indian customers are yet to witness end-to-end management of transportation and logistics services by the third-party service providers. For instance, Japan leads the key economies in terms of 3PL contribution to overall logistics industry.

Entry of large players is also opening gates for start-ups. “Companies like Future group or Mahindra Logistics have forayed into their own supply-chain business. But sooner or later they will need the help of 3PL service providers because they would not be able to manage everything on their own” Palsule said. The challenge becomes all the more evident for entrepreneurs who want to start this business because of global players like DHL getting into the Indian market in a big way.

Laura Parkin, CEO and co-founder of National Entrepreneurship Network (NEN) feels that most first-generation entrepreneurs would not have the exposure, experience and contacts to start a logistics firm.