Japan has recently recovered from the collapse of the ‘bubble economy’ and the manufacturing and service sectors have been growing steadily since then. The service providers in Japan need to clearly understand the fluctuations in the economy and the ever-changing manufacturing trends to stay competitive. Moreover, the nature of Japanese logistics is entirely different from most other countries.

The need is for small lots in high frequencies. "Service providers should tackle the challenge of providing cost effective distribution across the nation to suit each customer’s specific needs and demands," according to the analyst of the study. "International service providers need to adapt themselves to these unique business conditions in Japan to emerge as successful participants in the industry."

There has been an increase in multinational operations in Japan after the liberalization of regulations, and consequently, logistics activities have increased. The operation of multinationals ensures a steady flow of imports and exports across the nation. Hence, freight forwarding activity has increased in the recent years, thereby increasing the 3PL penetration, and thereby providing opportunities for international service providers.

Government Policies Combined with Growth in Logistics to Drive 3PL Markets

Government policies have been favoring the Japanese logistics industry since 2001, when there were structural reforms proposed to the industry as a whole. The focus was on improving the distribution system and on making it more efficient and effective. The policy also favors IT deployment and provides for decreasing regulations on new entries and fares. The policy review of 2003 mainly supported the 3PL business and encouraged the service providers to expand their service portfolio. The new Kitakyushu airport is clear evidence for the government support in improving infrastructure in Japan. It is the first distribution hub that has land, sea and air transport infrastructure at a single point. Such efforts help increase the international competitiveness of Japanese logistics systems.

With the improvements in the logistics industry, increasing investments and favorable policies, the expectation of customers has also risen in Japan. They have become more demanding in terms of cost, efficiency, and service levels. "This trend is expected to fuel the 3PL growth since the service providers already have or are likely to develop the expertise of offering advanced services in order to achieve the dual goals of efficiency and service levels," explains the analyst. "The Japanese customers have become aware of the benefits of 3PL and expect a more customized version of services to be offered to them."