Tuesday, November 21, 2017

Event Focus- India Warehousing Show 2017

Building up

Capacities-n-Competencies

 

India’s warehousing sector is fast expanding, and the new buildup in warehousing space is developing along two axis. First the evolution of differentiated niche services such as e-retailing where warehouses offer value added services, and development of cold chains. The other axis is warehousing technologies like WMS, RFID, AGVs, AIDC, EDI, etc leveraged to offer value added services. Consequently India has now evolved to the stage where LSPs offer niche warehousing services, finds Satish P. Chavan.

 

The two basic areas critical to logistics are transportation and warehousing. While India’s transport network is relatively well developed, it’s the warehousing segment which needs to be focused on. In the World Bank’s biennial Logistics Performance Index (LPI) (logistics cost as percentage of GDP), India’s ranking has jumped from 54 in 2014 to 35 in 2016. In 2016, India’s international supply chain efficiency was at 75 per cent of top-ranked Germany, said the report titled ‘Connecting to Compete: 2016 Trade Logistics in the Global Economy.’ This is an improvement over the 66 per cent efficiency when compared to the leader (again Germany) in 2014. fuelled off late by e-commerce, manufacturing, FMCG, and of course the traditional demand driver agriculture. According to global Consultancy ValueNotes, India’s supply deficit in warehousing is 120 mn sq ft – and is growing. Due to the lack of modernization, the industry is now facing a huge gap between demand and supply. “Our estimates reveal that a deficit of 120 million sq. ft exists in the sector. And this gap will continue to widen. This is mainly because demand for warehousing is expected to grow at a CAGR of 18 per cent in the next 5 years – thanks to the incoming investment in the retail sector and increasing import-export activity in India,” comments Namita Adavi, Research Analyst at ValueNotes.

 

The warehousing deficit is attributed mainly to the high cost of cost of real estate in India. Land is the primary resource in warehousing and the cost of land varies vastly between regions in India, leading to unequal development of warehousing across the country. Also multiple taxation at the State and Central level have further contributed to high costs of warehousing. This is the main reason why unorganized activity in the sector is flourishing. The only way to curb unorganized activity and bring down prices of warehousing is to unify the tax structure in the economy. Fortunately the long impending advent of the GST will now have a positive effect on India’s warehousing industry.

 

The rollout of the GST and InvITs is expected to fuel the growth of warehousing stock across the country in the next few years. “The warehousing, manufacturing and logistics industries will benefit the most from the implementation of GST in India and the new tax regime will also usher in an era of upgradation in the warehousing infrastructure,” assesses Ramesh Nair, CEO, JLL India. According to the real estate services firm, the total stock of Grade-A and Grade-B warehouses in the country grew about 16 per cent in 2016 over the previous year, to 111.9 million sq ft. Of this, the Grade-A stock was 32.9 million sq ft while the remaining 79 million sq ft was Grade-B. This year, JLL India expects the Grade-A and Grade-B stock to grow 18 per cent to 132.5 million sq ft.

 

 

 

Climbing up the Value Chain

In terms of niche differentiations, 3PL, e-commerce logistics, and cold chains, are the 3 biggest segments projected to have robust growth rates. The pressing need for time-sensitive delivery has reshaped the logistics industry as many traditional logistics players are now diversifying their services portfolio to make space for e-commerce logistics. according to the findings of CBRE’s latest special report, India Online Retail Driving Realty. According to CBRE’s latest special report, ‘India Online Retail Driving Realty,’ almost 25 per cent of the total warehousing/logistics space uptake across India in 2014 was by e-retail players, and the actual uptake of logistics space rose by over seven times compared to 2013. India’s online retail sector saw exponential growth, as a number of local market-specific services—such as cash on delivery (COD), multiple payment options, and EMI options—assisted in developing the growth curve of e-commerce in India.

“The statistics of this report are proof of the increase in infrastructure development within India along with industry-specific aspects, such as the depth of internet penetration, and the development of core infrastructure such as highways and new warehousing facilities. This is now being supported further by the new Government. While such macro level changes will benefit e-retailing, the momentum reported in the segment over the past couple of years also calls for a detailed regulatory framework to drive it forward,” cites Anshuman Magazine, CMD, CBRE, South Asia Pvt. Ltd.

A recent development in the warehousing space is the JV between Asia’s leading sustainable urban development and business space solutions provider Ascendas-Singbridge Group and Firstspace Realty to deliver state-of-the-art logistics and industrial facilities across major warehousing and manufacturing hubs in India. The JV is focused on tapping into high-growth industrial verticals such as third party logistics, e-commerce, automobiles, FMCG, modern retail, and manufacturing in India. Miguel Ko, CEO, Ascendas-Singbridge Group, says, “We have been in India for over two decades, developing iconic business and IT Parks. We are a trusted brand with renowned operational capabilities and loyal client base. Entering the industrial and logistics sector is a natural progression, and we expect to meet the growing demand for quality manufacturing and logistics space. We have assembled an entrepreneurial team to lead the way, who will be supported by our experienced India and global operations.”

Aloke Bhuniya, CEO, Ascendas-Firstspace adds, “We are excited about opportunities in the industrial and logistics infrastructure space, which are expected to increase exponentially due to structural changes in market place, growth of consumption and increase in share of manufacturing in India’s GDP. The sector, which is still evolving, will see consolidation and improvements in quality, transparency and corporate governance due to flows of institutional capital into the sector.”  The JV will invest in development of logistics and factory spaces in Mumbai, National Capital Region (NCR), Pune, Chennai, Bangalore and Ahmedabad, and top warehousing and manufacturing hubs in India. Over the next 5-6 years, it aims to develop close to 15 million sq ft of space, and will be managed by Ascendas-Firstspace.

 

The other axis along which differentiation and value addition is occurring in warehousing is types of warehousing, which range from; bonded warehouses, in Free Trade Zones (FTZ) and Special Economic Zones (SEZ), logistics distribution parks, Container Freight Stations (CFS), etc.

 

Based on the rise of Quick Service Restaurants (QSR) market in India, cold chain market is also witnessing remarkable growth. The increased foreign trade has led to the CFS/ICD segment of warehousing industry to record impressive growth rates in the recent years and is expected to continue the same for the forthcoming years.

 

According to ‘The India Logistics and Warehousing Report’ released by global property consultancy Knight Frank, India’s warehousing requirement is expected to grow at an annual average rate of 9 per cent to 1,439 million sq. ft in 2019, from 919 million sq. ft in 2014. on Monday said the government’s renewed focus on incentivizing the manufacturing sector is key to the growth of warehousing, adding that the logistics market will reap the benefits of this growth in coming years.

 

The additional demand for warehousing space per year will be around 104 million sq ft till 2015 and will entail investments of about Rs.15,000-16,000 crore every year, the agency estimated. The investments will go towards land acquisition and cost of construction.

 

“Investment in warehouse can provide an opportunity of realizing returns in the range of 12 per cent -20 per cent per annum to investors willing to explore this sector,” the report said

 

PEB DOMINATES WAREHOUSING
The very nature of warehousing makes Pre Engineered Buildings (PEB) the most preferred route to construct warehouses. Demand for modern sophisticated warehouses is rising last few years attracting private equity to invest in warehouse infrastructure. Most warehouses are standard box type buildings as the design and other infrastructure for any warehouse depends on the storage requirements. Trends in technology along with innovations are further giving impetus to the PEB technology in the warehousing segment.
Currently over 80 per cent warehouses are being built with PEB which has taken over the conventional mode of construction mainly because of its various advantages such as cost savings, faster return on investment, quicker delivery, faster installation, single source responsibility, low maintenance, flexibility in expansion, earthquake resistance capability, superior quality, etc. which have become vital for any type of warehouse construction.
Need for large scale warehousing or dedicated logistics parks is fast catching up in India as it is mostly fragmented and unorganised industry dominated by many small players. This will enable companies to have larger warehouses supplying the distributors in the region, thereby enabling them to invest in better warehousing infrastructure and technology which will lead to increasing demand for PEB.

 

 

Cold Chain Deficit

A report published by the Food and Agriculture Organisation (FAO), says that agriculture produce to the tune of Rs.58,000 crore – or 40 per cent of the total produce–is wasted every year in India. Meat accounts for just 4 per cent of the food wastage but contributes 20 per cent in the economic cost of the wastage. Wastage of vegetables and fruits is 70 per cent of the total produce, but it translated into only 40 per cent of the economic losses.

According to a report by Emerson Climate Technologies India, the world’s second largest producer of fruits and vegetables, is throwing away fresh produce worth Rs.133 billion every year because of the country’s lack of adequate cold storage facilities and refrigerated transport. The report estimates the value of fruits, vegetables and grains wastage in India at Rs.440 billion annually. Fruits and vegetables account for the largest portion of that wastage. Eighteen per cent of India’s fruit and vegetable production – valued at Rs.133 billion – is wasted annually, according to data from the Central Institute of Post-Harvest Engineering and Technology (CIPHET). In response to India’s cold chain infrastructure needs, Emerson Climate Technologies has now established its first Cold Chain & Distribution Centre in Chakan to increase awareness of technology solutions and services available to the industry.

Another report by YES Bank titled ‘Cold Chain Opportunities in India,’ published in 2014, the market share in cold chain was divided into 88-90 per cent with cold stores, and 10-12 per cent with refrigerated transport. This report also referred to the earlier assessment of 61 million metric tons required in form of cold storage and projected the need to create another 30.98 million tons nationwide in storage capacity. It observed a shift in trend for use of multipurpose cold storages and end-to-end services. The report also analysed that the top 5 producing states alone suffered a capacity deficit of 23.5 million tons in cold stores.

As per a survey by IIM Kolkata, only 10 per cent foods get cold storage facility in India. All these facts underline the imperatives of developing temperature controlled warehousing across India’s agricultural belt. There are approximately 5,381 total cold chain storages in India with 95 per cent total storage capacity under private players. India’s current capacity can store less than 11 per cent of what is produced and can be stored. The cold storage capacity is expected to grow at 13 per cent annually on a sustained basis over next 4 years, with the organised market growing at a faster pace of 20 per cent. The proposed financial outlay for cold chain infrastructure and food parks. Is pegged at $335 million and  $650 million respectively. Over 50 to 70 per cent capital is grant on projects.

According to the report ‘India Cold Chain Market Forecast & Opportunities, 2017,’ published by Consultancy ReportLinker, the cold chain market in India is anticipated to grow at a CAGR of 28.7 per cent during 2012-2017, which will make the market reach $11.6 Billion by 2017. The Indian cold chain market is highly fragmented in which about 3500+ players are present. It is anticipated that cold chain market in India will get more organized with the entry of large private players in this arena. Another forecast by TechNavio has forecast the Cold Chain Logistics market in India to grow at a CAGR of 27 per cent over the period 2014-2019.

 

GST TO BOOST WAREHOUSING

The rollout of the goods and services tax and real estate investment trusts is expected to fuel the growth of warehousing stock across the country in the next few years. Anshul Singhal, CEO, Embassy Industrial Parks (EIP), stated that, “GST will ensure that India for the first time will be exposed to consolidated large space central warehousing parks instead of the current scattered poor quality standalone spaces.”
Revealing his company’s plans to build about 20 million sq ft of logistics parks over the next five years at a total investment of abou Rs.6,450 crore, he further stated that, “GST will ensure that India for the first time will be exposed to consolidated large space central warehousing parks instead of the current scattered poor quality standalone spaces.”

 

LEVERAGING SMART TECHNOLOGY
E-commerce and online retailing has brought about seminal changes in storage and warehousing. Most of the changes pertain to automation of order fulfillment and managing inventory. Ecommerce has changed the whole warehousing system over the years in the most influencing way. In everything from warehouse locations to delivery routes to storefront vacancies, the placeless, virtual act of shopping online is having a very real effect on the physical world. The footprint of retail is shifting away from the retail store and towards the warehouse. For large retailers, some storefronts may remain useful as showrooms, but a growing portion of their business is conducted between warehouses and mailboxes. From a logistical perspective, goods are increasingly being delivered by the parcel rather than by the truckload.
Apart from Warehouse Management Systems (WMS), Radio Frequency Identification (RFID), Automatic Identification and Data Capture (AIDC) some of the solutions in the pipeline include geo-tagging of orders, bins and deliveries linked with RFID (Radio Frequency Identification) and automated forecasting of the demand and replenishment.
EDI (Electronic Data Interchange), robotics and wearables are other emerging trends. E-commerce giant, Amazon, which has committed an investment of $5 billion in the Indian market, is investing in automated warehouses across India. It recently set up seven new warehouses (Fulfilment Centres or FCs) to cater exclusively to its large appliances and furniture category. Amazon is among the first few companies, who experimented with robotics in their warehouses. Its Kiva robot continues to amaze with its picking and packing process capabilities at large warehouses. The robot brought a change in perception and made robotics and automation, the buzzwords in the warehousing sector. Amazon has recently patented a technology to have physical warehouses hovering in the sky assisted with drones to take care of last mile delivery. A significant development is Ark Robot, a product of iFuture Robotics, launched lest year. It is an autonomous mobile robot that can navigate to any location in a known environment. It can lift pallets and crates holding products, and transport these to any location. The robot can also perform automatic storage and retrieval tasks in large warehouses. A single installation can consist from 10 to a few hundred robots. These robots are intelligent and can talk to each other. According to reports, Ark Robot has already won a few of the top 10 big e-commerce customers, and the company is in talks with more companies.
With a gradual shift of mind in the Indian warehousing industry from traditional ways of handling goods to shifting gear to robotics, huge potentials in the robotics market have opened in India, giving way to new budding robot makers to collaborations among big companies.
GreyOrange, a multinational robotics firm recently announced its collaboration with Godrej Storage Solutions, wherein Godrej will exclusively market and distribute GreyOrange’s Pick-Put-To-Light (PPTL) solution to the supply chain and logistics industry in India.

 

IWS SHOWCASES THE LATEST
The 7th Edition of India Warehousing Show (IWS), India’s major trade fair for the warehousing, logistic, supply chain and allied Industries, will be held end of this month. The three day event will showcase advanced technologies, and provide networking opportunities and valuable contacts in the sector. The show will also host Conferences addressing major challenges and issues in the logistics sector. A robust international presence and displays including latest trends and innovations make this show the highlight of the business calendar for the entire Supply Chain industry in India.
Product Launches
Falcon Autotech Pvt. Ltd.
, launching 4 new sortation technologies.
Ssi Schaefer introducing LogiMat.
Sidharth Group introduces the High Speed Shutter.
SmartRentalz for rental equipment.
Godrej Efacec introduces order fulfillment and end of line automation solutions.
Armstrong Machine Builders launching high speed pallet lift.
Hi- Tech Robotics Systemz launching Automated Guided Vehicles and Warehousing Solutions.

 

 

FUTURE PROSPECTS

The Indian logistics market has witnessed buoyant growth and is expected to grow at a CAGR of 12 per cent by 2020 driven by the growth in the manufacturing, retail, FMCG and e-commerce sectors. The current logistics industry is worth over $300 billion. This growth is also based on the implementation of GST which will enable logistics companies to setup larger warehouses as per the region’s requirement and then easily transport from these warehouses to the different manufacturing plants, retail outlets, wholesale outlets, etc.




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