LONDON--(BUSINESS WIRE)--Technavio analysts expect the contract logistics market in Philippines for the period 2015-2019 to exceed USD 1,411 million, growing at a CAGR of over 12%, according to their latest report.
Contract logistics is a process through which companies outsource their logistics and distribution functions. Often, third-party logistics (3PL) providers go beyond logistics and provide value-added services such as inventory management, cross-docking, door-to-door delivery, and packaging of products. They also provide strategic and operational value to many shippers across the globe.
The contract logistics market in the Philippines is expected to grow at a steady rate during the forecast period because of the high demand for electronic and hardware products and rising demand for outsourcing logistics services.
According to Sharan Raj, lead analyst at Technavio for logistics research, “Some of the upcoming trends such as growth in international trade volume and increase in e-commerce activities are likely to increase the shipments of logistics providers in the Philippines market during the forecast period.”
Technavio’s lead transportation and logistics market research analysts have identified the following three factors that will drive the contract logistics market in Philippines:
- Increase in demand for electronic products
- Growth in e-commerce industry
- Cost advantage of outsourcing logistics services
Increase in demand for electronic products
Contract logistics market in Philippines has witnessed high demand in the shipment of electronic products during the forecast period. This is because of the increase in demand for the electronic products in the consumer and e-commerce industry.
Electronics manufacturers in the Philippines market have witnessed high demand from the middle- and low-income category of consumers for low-price branded products such as tablets and smartphones, whereas multinational manufacturers in the Philippines market are investing in value-added services such as credit card facilities, flexible payment, and home delivery in order to boost their sales and revenue.
Therefore, the shifting of manufacturers toward developed cities such as Cebu and Davao and rising demand for low-cost branded products from low and middle-class consumers is expected to increase shipments of electronics products in the Philippines market during the forecast period.
Growth in e-commerce industry
The growth in the logistics market in the Philippines is driven by the increase in online retail sales owing to Internet penetration rates of consumers. The e-commerce market in the Philippines is expected to grow at a CAGR of over 101% during the forecast period. The B2C segment accounted for a major share in the global e-commerce market in 2013.
“Online retail sales are expected to increase during the forecast period driven by the increase in online discount sites such as Lazada, Cashcada, Groupon, and Zola, which will lead to an increase in shipment of products in the Philippines market,” says Sharan.
Cost advantage of outsourcing logistics services
Building a logistics infrastructure is a capital-intensive process, and the investment is blocked for a long time. Therefore, companies outsource their logistics services to reduce operational costs. Outsourcing logistics and other SCM-related services of operations to logistics providers allows companies to improve the efficiency of their businesses by focusing on their core competencies.
In addition, shippers achieve huge savings by avoiding expenses related to warehousing, vehicles, and machinery. Logistics providers also offer value addition to the supply chain management (SCM) needs of shippers by customizing services as per their requirements. Hence, the shipper can partly outsource the logistics needs and carry out the remaining functions in-house.
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