Japanese outsourcing market set to surge

The third party logistics (3PL) market in Japan is still in the development stage and hence offers extensive potential for growth in future, says a new analysis released by Frost & Sullivan titled Strategic analysis of third party logistics (3PL) markets in Japan.

The report adds that there is a growing importance to provide costeffective distribution in Japan, just in time deliveries and lowering the overall logistics cost. Hence the need for 3PL is gaining momentum and is expected to continue in the future.

The new analysis reveals that the market earned revenues of $47.26 billion in 2006 and is likely to reach $74.70 billion in 2013.

"Support from the Japanese government such as deployment of IT systems, easing of rules on new entries and fares in the logistics sector is likely to further spur growth in market," says Frost & Sullivan research analyst Aarthi Nandakumar.

She adds that government policies have been favouring the logistics industry since 2001 when there were structural reforms proposed to the logistics industry as a whole.

The main focus was on improving the distribution system to make it more efficient and effective. Nandakumar says that logistics users have also become more demanding in terms of cost, efficiency and service as the logistics industry in Japan improved.

"Most logistics users demand for customised solutions to be provided by their logistics service providers," she adds.

She cautions that the conservative nature of Japanese companies, which prefer to have control over their logistics activities and not open to outsourcing, is likely to limit growth of 3PL

in the country.

Nandakumar says most international 3PL providers in Japan offer high-end logistics solutions with strengths in international freight forwarding and value added services while local 3PL providers dominate the market in providing transportation, warehousing services across the country.

She adds that international 3PL service providers should realign themselves to suit the local needs and demands of Japan.

"Instead of adopting the same approach as in other countries, the 3PL service providers should first make a thorough investigation of the local conditions, expectations, costs involved and procedures in doing their business. It would then be better to develop a totally customised solution in order to consolidate their position in the market," she says.

The report has been released by the the automotive and transportation growth partnership service, and it provides an overview of the 3PL market in Japan with an analysis of key market drivers, restraints and trends that are impacting the market.

The service examines functions in third-party logistics like transportation, warehousing, freight forwarding and value-added services, as also analysis and overview of logistics in end-user sectors such as automotive, hi-tech electronics, pharmaceutical and retail.