Third-party logistics in Sri Lanka: A Driving Force for Economic Growth

Global Logistics Market – A snapshot

In today’s fast-paced business landscape, companies are always on the lookout for ways to optimize their operations and reduce costs. As a result, many businesses are outsourcing their logistics needs to third-party logistics (3PL) companies and focusing on their core business operations. Countries contributing to the global supply chain have come to realize that an efficient and resilient logistics system is the foundation of a thriving economy. Over time, the third-party logistics (3PL) industry has experienced growth and evolution, driven by technological advancements, and increasing demand. Hence, this growth is reflected in the global logistics market value, which was recorded at USD 962 billion in 2020 and is projected to reach USD 1.75 trillion by 2026.

Sri Lanka – An emerging logistics hub

Sri Lanka, strategically located at the intersection of major shipping routes to South Asia, Europe, the Far East and America, has the potential to be a hub for logistics in Asia. Further, the country’s location, close proximity to emerging markets and developed seaports in Colombo and Hambantota extends the possibilities of countless opportunities. Despite this potential, the 3PL market in Sri Lanka is still in its growth stage, with a handful of local players and international players. However, it is safe to say that a few major local 3PL service providers are currently dominating the market due to their market knowledge and tailored 3PL service offerings. Also, the 3PL industry provides full-time direct employment to approximately 40,000 to 50,000 people in Sri Lanka. The Sri Lankan Government and the Board of Investment Authority are keen to further expand the 3PL sector in Sri Lanka, promoting the country as a multimodal logistics hub that provides integrated logistics services to local and international clients. Experts predict that the logistics sector in Sri Lanka has the potential to contribute between 8% – 10% of the nation’s GDP, but currently, the 3PL market in Sri Lanka only accounts for 2.5% of the overall GDP (approximately USD 2Bn). As inflation continues in the country, Sri Lanka’s logistics cost-to-GDP is increasing, clearly indicating the importance of an efficient logistics system. According to the World Bank’s Logistics Performance Indicator ranking (LPI) for 2020, which provides insights regarding the gaps as well as opportunities in the current logistics industry, Sri Lanka ranks 94th out of 160 countries with a score of 2.6 out of 5.  Thus, to advance its position in the global value chain, Sri Lanka must look out for the ways to lower the country’s trade expenses and enhance its overall infrastructure and efficiency.

The 3PL market in Sri Lanka – Challenges & Opportunities

Looking into the local market, although major firms have outsourced their logistics services, many organizations are still hesitant to do this transformation, due to fear of cost, fear of collaboration & loss of control, perceived risk and concerns regarding 3PLs’ understanding of their business area, etc. However, these fears are largely unwarranted, as 3PL providers often have extensive experience and a deep understanding of their clients’ operations. In addition to this, the challenges posed by COVID-19 pandemic have led many companies to reevaluate the risks of handling logistics in-house and the advantages of working with 3PL providers.

3PL companies in Sri Lanka are also investing in new opportunities and technologies, positioning themselves as key players in the local and global market. Hence it is widely expected that this sector will rise to its full capacity, contributing more and more to national exports, creating more employment opportunities, and making a significant contribution to the nation’s GDP. Whether you are a small business or a large corporation, outsourcing logistics to a third-party service provider is a smart and effective way to manage your operations and stay ahead of the competition.

In conclusion, the 3PL market in Sri Lanka has a lot of potential and is poised for growth, but it also faces challenges that need to be addressed. By overcoming these challenges and leveraging its strategic position, Sri Lanka has the opportunity to become a major player in the logistics industry, driving economic growth and providing numerous benefits to businesses.

EFL 3PL, one of the most comprehensive 3PL companies in Sri Lanka strives to contribute to the nation’s growth by providing across multiple verticals with an efficient and high-quality logistics management system.