The current scenario of warehousing has seen it develop as an indispensable part of the rapidly growing supply chain and logistics industry. Though warehousing operations essentially refer to the storage and stockpiling of inbound and outbound goods before they are transported to their desired locations; presently they have quite evolved and are providing additional value-added services like packing, sorting, blending, processing and shipping. These additional amenities furnished by the warehousing industry are attracting a more potent prospective client base.
Current state of the warehousing industry in India :
- The warehousing industry in India is extremely fragmented with the maximum number of the Indian warehouses possessing an area of fewer than 10,000 feet. More than 90% of the Indian warehouses are under the control of unorganised bodies and are generally smaller in size with limited options of automation of necessary warehousing operations.
- Disintegrated warehousing footprint leads to increased average inventory holding which in turn results in extreme cases of storage and handling loss led by lower levels of mechanization in the warehousing industry. This is highly detrimental to the warehousing operations and the industry in general.
- The inefficiency of the logistics industry is a major concern that is blocking the growth of the warehouse industry in India. Compared to the 8% of the national GDP than Germany spends in its logistics industry and 9.5% that the US spends, India averages at around 13-14% of GDP on its logistics requirements.
Steps were taken to propel warehousing industry growth :
The Indian Government has been thoroughly instrumental in introducing newer initiatives that promote the growth of warehouses in the country.
Different measures have been introduced for the proliferation of the warehousing sector in general which can be enumerated below.
- Introduction of the Warehousing Act of 2007
- Allowing investments to pour extravagantly in the establishment of logistic parks
- Introduction of Free Trade Warehouse Zones (FTWZs)
- The commencement of the Goods and Services Tax (GST)
All of the above-mentioned factors have positively propelled 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. It has also been predicted that third-party logistics companies will also play a major role by expanding to millions of square feet of warehouse space and lend those to consumer goods, retail, manufacturing and e-commerce companies.
Current concentration of warehousing sector in India :
Almost 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.
Indian warehousing segments :
The significant 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 establishments. The most important purpose of the Government controlled warehouses is to ensure food security and the storage of essential food crops.
An emerging trend of the warehousing industry in India :
A crucial trend which has currently emerged is the pressing demand for warehouses and logistics space in tier two cities like Coimbatore, Lucknow, Guwahati, Jaipur, and Ludhiana.
Large corporations like e-commerce giants Amazon and logistics companies like FedEx and DHL are trying to put up with the sudden surge in warehousing demand by going on an expansion spree.
Warehousing sector development in India :
The year of 2018that has gone by, has observed a 22% year-on-year growth in the entire stock of Grade A and Grade B warehousing space in the top eight cities at 169 million sq feet in comparison to 138 million sq feet that was recorded during the year of 2017. Absorption exhibited an unparalleled growth rate of 60%. The 20 million sq feet that were recorded in 2017 increased to 32 million sq feet in 2018. The significant amount of growth emphasized the excessive demand which had by far outgrown supply and as a result, the vacancies dropped below 10%.
The 24% increase in the share of total platform level investments in India proves that the warehousing and industrial segment will retain strong momentum in 2019 and in the immediate future.
Potential of the Indian warehousing sector in 2020 :
It has been predicted that the Indian logistics and warehousing industry is going to grow to a huge, 215 billion dollars worth by 2020. The annual demand of about 32 million sq feet of warehousing space has by far outgrown the supply of 31 million sq feet of space, as witnessed for the first time ever in the last four years. By the end of 2019, the absorption of warehouse space will reach an all-time high of about 38 million sq feet.
Various sectors such as 3PL/logistics, engineering, auto and ancillary, retail, telecom, e-commerce, and white goods have seen the biggest windfall. Hence these sectors have provided an immense drive to boost up the warehousing industrial expansion at an unprecedented rate.
The growth rate of the warehousing sector of India is predicted to continue till an immediate future and the rapid growth in this segment is going to attract big money investors which will simultaneously augment the economy of the country.