26 May 2019

Table of Contents for Warehousing and Warehousing Equipment

Warehousing and Warehousing Equipment

Restoring the dominance



The 21st century spick & span warehousing complexes, which boast of all the modern amenities which were unforeseen few years back. Be it the Government’s thrust or the companies’ push towards modern warehousing, the landscape has completely transformed over the years and we are set to witness another transformation reports ROHAN AMBIKE.




India is set to witness investments close to Rs 50,000 crore for in creation of warehousing facilities across the country between 2018 and 2020. Different categories of warehousing are expected to create around 20,000 jobs to during these three years at different levels of specification and specialization, showed a JLL India report. This investment comes on the back of the fact that nearly Rs 10,000 crore was invested in 2017.




Based on JLL, India Analysis of 6 Hours Distribution Potential and Composite Logistics Score Index estimating the potential of various locations as strong warehousing nodes in the future, aside of the metropolitan and tier 1 locations Surat, Kanpur, Lucknow, Ranchi, Madurai, Coimbatore, Ludhaina, Ambala, Tiruchirapalli, Nasik, Madurai and Jaipur have emerged as the the top favorable for the major warehousing spoke locations in the country. Over a period of time warehousing industry in India has evolved from just brick and mortar shelters for the purpose of storing goods to highly sophisticated stockrooms, where, thanks to advanced tracking mechanism, each consignment can be tracked on a real time basis at the click of a button. Without these state-of-the-art facilities it would have been a Herculean task for companies to ship and deliver consignments to the designated consignee, and the rise of the e-tail in India would have remained but a fairy tale.




Not just e-tail, in any industry segment, which deals with physical goods, warehouses play a vital role in the entire value chain from raw material to customer delight. Specifically in the manufacturing sector, with lean manufacturing becoming the order of the day, a significant part of the functions from scheduling to labelling and packaging are being outsourced to third party logistics providers. But naturally the warehousing industry is gearing up, with the help of technology, to meet these new requirements.




Factors Affecting Growth


In keeping with the demand, warehousing related sectors such as real estate and construction costs also have seen an upward trend, hence warehouses are now looking at optimum utilization of space per square feet along with options of more economical yet sturdier structures. Here comes the evolution of warehouses into cargo hubs. Cargo hubs are multi-client storage units where logistics operators shift from single company warehouses to multi-client and multi-product models.




This is also advantageous in the GST scenario. The highly-defragmented warehousing industry in India stands to benefit further from the GST by levelling the playing field for both organized and unorganized players. Besides, GST will reduce and consolidate warehousing into strategic locations and thereby aid in logistical cost efficiency; it would also lead to better inventory control and help in forecasting demands accurately; it would lead to large-scale technology implementation which is not feasible in smaller, scattered warehouses; thus leading to sophisticated, organized and efficient warehousing industry.




The cost of logistics in India stands at 14 per cent of GDP, which is much higher than the logistics cost in most developed nations. This impacts India’s trade competitiveness in the domestic and global market. To address this challenge, the government is planning to take steps that will reduce logistics cost to less than 10 per cent of GDP by 2022.




The reduced percentage will benefit the manufacturers and augment the trade sector, which is increasingly turning towards third-party logistics providers for support, thanks to the rising demands and technological advancements in the manufacturing industry. The warehousing industry is being served by a huge untapped potential in this way.




The potential for warehousing in India is immense, according to market experts, who estimate investments to the tune of Rs. 45,000 crore per annum if it is to meet the industry requirements across all manufacturing verticals. This step calls for huge technological as well as manpower initiatives.






 Fast Facts

  • The global warehousing and storage market was estimated to be around $475 billion as of 2017.
  • The global warehousing and storage made up around 8% of the overall transportation services market in 2017.
  • The warehousing and storage market was the fifth largest market in the global transportation services market in 2017.
  • Warehouse Management System Market was valued at $1.32 Billion in 2016.
  •  It is projected to reach $3.23 Billion by 2023, at a CAGR of 14.1% between 2017 and 2023.







Technology Impact


In terms of technological advancements, warehousing in India currently witnesses automatic identification and data capture or AIDC technology that helps in consignment tracking and seamless cargo distribution. While old methods like barcode readers are still at play, new processes like Quick Response or QR Code are also readily being used to encode data into digital data and thereby accelerate the shipment flow among the beneficiaries.




Other IT solutions include Real Time Location Systems and Radio Frequency Identification or RFID for automated data collection and stock identification that warehouse operators use for ease in operations. These Warehouse Management Systems or WMS and such other IT driven solutions go a long way in upgrading the warehousing industry. Today, WMS includes integration with automatic material handling equipment, cross-docking, yard management, labour management, billing and invoicing, etc.



Automation is the next step the evolution of warehousing in India. For example, Amazon uses automation to improve customer experience by measuring operational efficiency. In New Delhi where one of the Amazon fulfillment centers is located, the company-warehousing infrastructure operates a 1.2 km long conveyor belt that is equipped with colour-based automatic sorting. These kinds of automation and other robotic enhancements are the future of warehousing in the country and the key toward standardization.




Efficiency is the buzzword in the warehousing sector, however, it is also noteworthy that efficiency and employment are not always the best of friends. The impact of technology in the logistics sector is profound and it has the ability to make certain skills redundant, force the aggregation of certain skills while eliminating certain low-end jobs.




Technologies like Real Time Locating Systems and Radio-Frequency Identification (RFID) have become essential for a wide range of automated data collection and identification applications that helps warehouse operator to keep a track of goods coming in or going out their perimeter. Adoption of Warehouse Management System (WMS) and other IT-driven solutions are becoming effective in increasing the competitiveness of the warehousing industry. WMS helps warehouse operators to track inventory, orders and provides data about the products stored and can also be transmitted back to the manufacturers.




As real-estate and construction costs are rising, it has become important for warehouse operators to maximise utilisation of each available square feet of space and also to build more economical structures. That’s the reason why alternative construction systems like pre-engineered steel buildings are becoming more and more popular.




The size of individual warehouses is also growing and they are now becoming cargo hubs to store goods for multiple clients. The other benefit of multi-client sites is that all goods inside a warehouse are managed by one contract manager. It allows various users of a warehouse to leverage their resources, as a lean period for one user could be the peak period for another and therefore these sites are a favourite with large corporate houses.




Latest Trends


The Indian economy has been consistently growing at 8.4 percent since 1991(7.7per cent in 2018 and expected to grow at 8.2 per cent in 2018-19 ) which is only next to France ( India stands at 7th rank). Our Population is about 1.31 billion growing at 1.3 percent which is likely to be 1.7 billion later this century. Our Life expectancy has gone up from 69 years from 27 at the time of independence. This means what, that people will have needs and they needs to be supplied. Hence more and more organized warehousing is needed.




It is predicted that over 85per cent of all businesses will be digital within the next five years. As such, warehouse operators and logistics firms need to react quickly by implementing the latest technical innovations. Not only will this ensure that companies will be thoroughly future-proofed, but supply chains will be operating at peak efficiency – great for customers and businesses alike.




Like most other industries, warehousing and logistics is currently confronting major change in India; and this change brings opportunity. Logistics firms are facing an era of unprecedented change as digitization takes the front and customer expectations evolve. A huge percentage of warehouses plan to expand their technology investments in future. From efficient transport management system to data analytics, cloud computing, Internet-of-Things and enterprise mobility solutions, 2018 has seen much more in the logistics industry.




The year 2019 is going to be the year where technological advancements will take logistics & supply chain industry to the next level.2020 will leave behind paper records and focus will be around technology. All third party logistics companies will go for mobile technology.  All this to provide faster and reliable delivery services. Consumers are demanding, faster logistics with more options. It has become essential for the service providers to use innovations to utilize maximum space, manpower, warehouses, vehicles etc. with control on wastage & fuel charges.




Key Players On The Anvil


The ongoing policy changes including 100 per cent FDI in warehouses, food storage facilities under the automatic route (where manufacturers can sell their products online directly), declaration of certain free trade warehousing zones or FTWZs, and strengthening of the e-commerce logistics platform, possible implementation of the goods and services tax (GST) has drawn attention from the foreign PE investment sector. Institutional players are expecting an internal rate of return (IRR) of about 16-20 per cent from a warehouse development project.




Private equity funds including IL&FS (Tara India Fund III), Fidelity International, Milestone Capital Advisors, Standard Chartered Private Equity, Everstone Capital and Kohlberg Kravis Roberts (KKR) are eyeing the sector with interest.




Global private equity firm Warburg Pincus had entered into a joint venture with Embassy Group to invest Rs.650 crore for setting up warehouses across major cities in the country. While Warburg Pincus-backed logistics firm Continental Warehousing Corporation (Nhava Seva) Ltd is planning an initial public offering (IPO) to raise as much as Rs.1,000 crore, according to two persons aware of the development. The flagship company of Chennai-based NDR Group, owns and operates cargo-handling facilities such as container freight stations (CFSs) and multimodal cargo handling terminals (MMTs) and private freight stations.




While the trucking giant, Transport Corporation of India is entering into the cold chain logistics business to tap into rapidly growing demand for refrigerated cargo services in the country. The company had also opened a 250,000-square-foot temperature-controlled warehouse and distribution center at Gurgaon and announced plans to develop a chain of cold storage facilities across the country over the next five years.




Allcargo Logistics, the parent of global non-vessel-operating common carrier ECU Line, plans to more than double annual revenue to $2 billion in the next five years as it continues to diversify its service offerings and expand operations globally. Together with the NVOCC business, Allcargo owns a large amount of land across India, on which it operates container freight stations. In addition, it provides domestic coastal and short-sea shipping services on owned and chartered vessels.




Forthcoming Global Trends


As countries strive to remain agile in an increasingly competitive setup, these are some of the global trends affecting the global warehousing industry.



In spite of the nascent stage of the warehousing industry in India, the country will have to factor in these trends while designing the warehousing function to stay nimble and productive.



• Standardised Warehousing Facility: Intuitive design in warehousing infrastructure, adoption of industry leading, uniform storage practices are critical in ensuring reduction in losses, faster movement of goods & price stabilisation.



• Single window approach: Warehousing companies, especially across the retail sector are increasingly aiming towards providing a single, unified & real-time customer experience across all channels forcing the way for inventory optimisation and timely fulfillment of orders.



• Advent of Big data analytics: This can significantly improve demand planning and inventory optimisation by creating lean and balanced supply chains with sophisticated inventory systems. These tools will maximise workflow, increase efficiencies, and directly impact revenue by optimising warehouse inventory and floor space utilisation.



• Mobile continues to dominate: Warehouse management continues to move away from conventional tools to tablets and smartphones. Also operators are using barcode scanners, RFID readers and other types of handheld devices to better streamline the shipping and inventory process.



•  Labor looms as a challenge and cost-cutting target: Being able to track productivity and forecast where labor is going to be needed and how it is going to perform is going to be a critical need.



•  Real time Delivery tracking: With e-commerce assuming increasing scope, there is a growing need for tracking chain of custody that flows with the product in real time, rather than just what is in the plant.



• Collaborative set-up: End-clients are now expecting to partner with their vendors to integrate all systems to function as a unified single service touch point for the customer. This “collaborative orientation” will drive more people toward Platform as a Service (PaaS) offerings, where they have pieces of a platform rather than dealing with systems as separate entities.



• Improved Protocol for Product Recalls: With the advent of online sales, enhanced protocols regarding product recall procedures and compliance with audit requirements requires the upkeep of accurate databases.



• Unique Warehouse Management Systems for Multichannel Solutions: An efficient warehouse management system (WMS) application has become vital for warehouses to stay on track with their inventory and help stores improve their overall product delivery times.

















Warehousing Challenges


Inventory accuracy


When manufacturers don’t have full visibility to their inventory, they face the problems of either running out of stock at the wrong time or carrying too much stock and thus decreasing cash flow while increasing expenses to warehouse extra materials.




Inventory location


Lack of inventory oversight can cause a buildup of inefficiencies within the warehouse that slows operations and increases costs. Without adequate insight into location, pickers take longer to find the items to ship, which slows the loading process and creates a backup in labor allocation and dock-door scheduling.




Space utilization


It’s not about how much space you have; it’s about optimizing that space to avoid unnecessary labor. Keep fast-moving and high-selling inventory near the front of the facility so lift truck drivers aren’t constantly traveling to the farthest reaches of the warehouse.



Redundant processes


Barcode technology, experts suggests, can reduce or eliminate the problem of a pick ticket or other documentation having to pass through multiple hands -- e.g., a picker, a checker, a stager, a loader, etc.




Picking optimization


For warehouses that still have manual processes in place, there tends to be no common route taken to pick items for shipment, which adds unnecessary time to the process. With system-directed pick/putaway, the routing can be automated, which will reduce wear and tear on equipment and the workforce.




Warehousing equipment market


Rising demand for sophisticated automated systems coupled with the ever-increasing labor costs is anticipated to contribute to the material handling equipment market growth over the forecast timeline. The use of traditional human techniques leading to reduced productivity and increased time consumption has stressed the need for companies to manufacture high-performance material handling systems. In addition, the demand for automated pick & place robots is on the rise since these systems can be controlled remotely, offering features such as precise operational capability, contributing to the material handling equipment market demand.




 The incorporation of advanced technologies into the equipment that ensures enhanced throughput is a key factor influencing the material handling equipment market growth. The integration of technologies, such as IoT, big data, cloud, and robotics, into these systems is encouraging their adoption across several industry verticals. The implementation of big data in material handling equipment is aggregating supply chain data and is driving improvements across several businesses whereas the incorporation of IoT into these systems is enabling the real time monitoring and tracking of products.




High investment and maintenance costs associated with these systems are expected to hinder the material handling equipment market growth. There are high operational costs associated with the use of industrial trucks to ensure their smooth operations. The emerging trend of renting equipment than buying enables consumers to reduce the overall project expenditure is anticipated to hamper the industry growth.




In material handling equipment market, automated storage and retrieval system (AS/RS) is gaining popularity and is expected to reach over USD 49 billion by 2024 as it facilitates several tasks such as the real-time inventory control, order picking accuracy, and safer operations. These systems enable fast load transfers at high speeds. Industries are increasingly using AS/RS over the manual order picking process to reduce labor costs and ensure efficient order fulfillment. Furthermore, AS/RS regularly positions and transports the essential inventory to a conveyor, manual outfeed, or an operator station and enables maintaining the real-time product tracking & identification.




Storage equipment majorly includes shelves, pallets or racks onto which resources may be stacked in an arranged manner to await consumption or transportation. These systems provide increased storage capacity, improved inventory control system, and reduced labor costs. Increasing number of companies building new warehouses and upgrading the existing ones demanding these systems is expected to support the material handling equipment market growth.




The material handling equipment market is witnessing growth globally with the growing demand in the e-commerce sector valued at over USD 14 billion in 2017. The integration of RFID tags and sensors into the equipment is facilitating error-free procedures and faster movement of materials. Material handling solutions provide flexible and scalable solutions to increase order accuracy, optimize productivity, and improve the order cycle times. The need for flexible distribution operations in warehouses has led organizations to implement automation in material handling applications to speed up the operations and meet the growing demands. Furthermore, the growing utilization of these systems in the durable manufacturing sector for several operations, such as storage, transportation of goods, picking, and placing of the object, is contributing to the industry demand.




Asia Pacific material handling equipment market is expected to witness growth at over 6.5% CAGR. The growth can be attributed to the flourishing manufacturing sector in countries including China, Taiwan and India. Several government initiatives, such as Made in China 2025 and Make in India, are supporting the growth of the manufacturing sector in these regions. Increasing number of manufacturers is implementing robotic technologies to combat the rising labor costs and improve the productivity.




Rapid industrialization, huge government investments, and strong growth in the foreign trade in India demand the availability of enhanced logistic and warehouses services, fueling the material handling equipment market growth. Rapid industrialization in the country coupled with huge government investments for infrastructure development will aid the industry growth.




 The Europe material handling equipment market estimated to be over USD 25 billion is anticipated to grow owing to several countries in the region gaining economic stability after the crisis, thereby supporting the industrial growth. Stringent government regulations pertaining to operator safety are compelling companies to utilize material handling systems for handling hazardous materials. The Health and Safety Framework Directive ensures a high degree of protection for workers.




Way Ahead


The warehousing industry in India is still at the beginning stages and has huge tracks to cover in terms of equalling the global standard. In the scenario of halting technology penetration and advancements, the country has an access to huge manpower and abundant labour but efficient training mechanisms and skill development are not at par with the rate of industry evolution needs. The state of the industry at present is fragmented with absent standardization and dismal investment in IT infrastructure.




The government of India has established a Free Trade Warehousing Zone (FTWZ) to develop the warehousing infrastructure, facilitate the import and export of services with free currency trade transactions. The government aims to increase organized warehousing activity and an economic boost through FTWZ. The Warehousing (Development and Regulation) Act, 2007 introduced The Warehouse Development Authority (WDRA) to make provisions for the development and regulation of warehouses in the country. And in particular, the WDRA is set to develop and protect the agriculture produce sector through adequate warehousing benefits which have little appreciation in the current growth of the warehousing sector in India.