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India and Warehousing

India-and-Warehousing

Warehousing operations primarily signify the storage and stockpiling of inbound or outbound goods that are usually transported to their defined locations.The warehousing and storage industry is composed of organizations or establishments that monitor and control the functioning of warehouses and storage facilities for the general goods and merchandise, refrigerated goods and other products which are stored in a warehouse.

The current scenario has seen the warehousing operations evolve from just providing storage for goods to providing additional amenities and value-added services like packing, sorting, blending, processing and shipping which further enhance the prospective client base of the warehousing industry. 

Warehousing industry in India :

The warehousing sector of India is highly disintegrated. The maximum number of Indian warehouses possesses an area that is less than 10.000 feet. More than 90% of the warehouses in India are under the direct supervision of unorganized authorities. These warehouses tend to be smaller in size with the limited scope of mechanizations of essential warehousing operations. Fragmented warehousing footprint leads to higher average inventory holding which is detrimental to the warehousing industry in general and results in extreme cases of storage and handling loss led by lower levels of mechanization.

Warehouses have formed one of the most essential elements of the Indian logistics industry. The evolution of organized retail sectors has seen the rapid growth of warehouses into crucial storage facilities for stockpiling perishable items. The Indian Government has been thoroughly instrumental in introducing newer initiatives that promote the growth of warehouses in the country.

Different measures such as the introduction of the Warehousing Act of 2007, allowing investments to pour extravagantly in the establishment of logistics parks, introduction of Free Trade Warehouse Zones (FTWZs) along with the commencement of the Goods and Services Tax (GST) have all positively induced the growth of the warehousing industry in general. Predicting the tremendous scope of growth of the warehousing sector, both domestic and international private establishments have ventured with an objective to bring some much-needed balance in the cost and effectiveness of the warehousing operations.

The present concentration of warehouses in India :

Near about 60% of the modern and technologically well-equipped warehousing facilities in India are concentrated in six of the top metropolitan cities namely Ahmedabad, Bengaluru, Chennai, Mumbai, NVR and Pune; apart from which, Hyderabad and Kolkata bag noteworthy mentions in possessing major warehousing capacity.

The main reason for this is the presence of a prominent industrial belt in these regions. The high rate of concentration of industrial activities and the existence of a substantial amount of urban population around these parts of the country are the main factors that are causing a boom in the warehousing industry. Other factors like the presence of superior quality of infrastructure and good access of skilled labor are deemed beneficial for this expansion of the warehousing industry. 

Major Segments of Indian warehousing Industry :

The major portions of the Indian warehousing industry are dominated by the following :

 

  • Industrial and Retail, which covers almost 55% of the domestic warehousing industry
  • Agricultural, which amounts to almost 15% of the warehousing industry in India
  • Cold Storage, which encompasses almost 16% of the industry and 
  • CFS/ICD, which amounts to almost 14% of the entire warehousing industry.

 

Apart from the Agricultural warehousing sector, 75% of which is supervised by Government bodies, the rest of the warehousing industry is majorly controlled by the private sector organizations. The chief purpose of the Government controlled warehouses is to ensure food security and the storage of essential food crops.

Potential of the warehousing industrial boom in India :

The growth in the warehousing industry in India can be demonstrated by a single example. Ecommerce Moghul Amazon recorded a momentous increase in storage capacity in 2018, which was 1.5 times that of the previous year. The presence of 50 Fulfilment Centres of Amazon across 13 states, spanning a net volume of about 20 million cubic feet testifies to the surge in warehousing needs. While large corporations like Amazon are continuously expanding their storage facilities, logistics giants like DHL and FedEx are trying to put up with the demand by adding to their existing warehouse capacities. 

An important trend which is presently on the rise is the growing demand for warehouses and logistics space in tier two cities like Coimbatore, Lucknow, Guwahati, Jaipur, and Ludhiana. There is an ever-increasing list of developers who are keen to invest in this high-yield asset and are competing neck to neck with global investors.

Major concerns and impediments for the warehousing industry in India :

The factor which has proved to be a cause of concern to the growth of the warehousing industry in India is the inefficiency of logistics. The logistics cost as a percentage of GDP stands at around 10% for BRIC countries, compared to 9.5% for the US and 8% for Germany. But in the case of India, the highly inefficient logistics services amount to at least 13-14% of the GDP. 

Though with the rapid evolution of the industry, it has been predicted that there will be a huge rise in a string of third-party logistics companies which will absorb millions of square feet of space and lend that out to consumer goods, retail, e-commerce and manufacturing giants.

Prospect of Warehousing Industry in India:

The year of 2018 that has gone by has witnessed a 22% year-on-year growth in the entire stock of Grade A and Grade B warehousing space in the top right cities at 169 million sq feet, compared to the 138 million sq feet that were recorded during the previous year.

The 24% increase in the share of total platform level investments in India proves that the warehousing industry is experiencing a windfall and will retain a strong growth rate in 2019 and in the years to come.

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