This Frost & Sullivan research service titled Strategic Analysis of 3PL Markets in the Indonesian FMCG Sector provides analysis of the logistics practices among the FMCG companies in Indonesia and provides detailed analysis usage level of 3PL services in various logistics functions by these companies and the reasons for using 3PL. It also provides details of drivers, restraints, challenges, and trends impacting the market.

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The following technologies are covered in this research:

• Radio frequency identification (RFID) based inventory tracking systems
• Satellite-based vehicle tracking systems (GPS)

The Indonesian FMCG Sector Provides Immense Opportunities for the Growth of 3PL Market

Since 1990s, the Indonesian FMCG sector has been witnessing a few fundamental shifts, with basic products market stagnating, growing intensity and complexity of competition, evolution and impact of technology on businesses, international and environmental issues coming to the forefront. "Hence, FMCG companies need a very strong distribution network supported by a very well laid out supply chain that is controlled through efficient logistics, considering such diversities and complexities of the Indonesian market, to expand their presence, revenues, and profits," explains the analyst of this research service. "Increasing competitive pressures are leading to the outsourcing of these functions to specialist professional logistics service companies or 3PLs."

More than half of the Indonesian FMCG companies bear a positive attitude toward 3PL providers, encouraging industry participants. Multinational companies and major local companies have already employed 3PL services. Moreover, significant growth in Indonesia’s economy and the expanding automotive market are also driving the 3PL market.

3PL Providers Need To Tackle Increasing Cost in Managing Logistics Functions

The FMCG sector is largely dominated by the domestic manufacturers and there is intense competition among all the industry participants to increase their presence across the country presenting several growth opportunities to 3PL providers. However, the rising cost of managing logistics functions or processes, especially due to the increase in oil prices, is weighing down logistics companies and the growing competitive pressures are resulting in reduction of prices.

3PL providers should openly formulate the cost-based pricing with clients. With the necessary support from the Government to promote local 3PL companies, smaller trucking companies can develop and bring themselves to a level where they can compete with multinationals that are more reliable and capable. Entering into joint ventures with larger domestic 3PL participants can also aid in expanding market revenues. "In addition, participants can focus on their core competencies and outsource all non-core activities to professionals with expertise in these business functions," says the analyst. "Manufacturing companies that take advantage of the resources of such professionals with proven domain expertise can not only enjoy higher efficiency, but also achieve cost reduction in the long run."