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Warehouses Must Accelerate Structural & Functional Overhaul To Cater Demand For new-age Operational Efficiency

As warehousing sector is gearing up for the tech and optimisation-led transformation, every stakeholder in the sector must come together to bridge those critical gaps so that sector can cater to the evolving demand and play a vital role in the economic growth.

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As India’s e-commerce retail logistics market is looking at an exponential growth – a compound annual growth rate of 36% in the next five years, the boom has gradually started transforming the warehousing segment in India. The industry focus is now shifting to developing efficient warehouses capable of reducing the logistics operations by 15-20%, as cost-effectiveness is the foundation of the new growth wave. An efficiently managed warehouse is capable of improving customer satisfaction and operational proficiency. 

In fact, the stage is already set for the warehousing transformation to pick up speed. The introduction of GST has already simplified taxation for the warehousing players by eliminating the cascading effect of various taxes. Moreover, in Budget 2020-21, the government has made its intent clear on expanding warehousing network across the country beyond some strategic warehousing hubs located near cities and manufacturing hubs. The budget proposal on the government offering viability-gap funding for setting up warehouses on PPP model so that efficient warehouses can be built at the block or taluka level through a village-level storage program in line with warehouse development and regulatory authority (WDRA) norms will surely expand the warehousing spectrum. 

Having said that, setting up a Grade-A warehouse involves huge capital investment.  The capital-intensive process of developing an effective warehouse infrastructure and management system includes implementation of the best global practices like automatic data collection through RFID technology, smart digitized sorting and tracking process, warehouse optimization strategy and proper EHS (environment health and safety) management system with proper audits and compliance. In addition, the warehousing companies must invest in employee training and skill enhancement. 

A highly optimisable warehouse has to be space-efficient. As warehousing rentals are always increasing due to the surge in real-estate and construction overheads, utilisation of every cubic of vertical space has become extremely crucial. As a result, warehousing operators are maximising the use of each available square feet space by setting up full height rackings on 80%-85% of the floor area of the warehouse by minimizing the aisles width for the material handling equipment (MHE) movement without compromising the operating efficiency.

The warehousing companies are also going for larger heights in the range of 12 metre -15 metre in pre-engineered buildings. All organized warehousing players now prefer to construct Grade-A warehouses which are typically 12-14 metre clear height buildings with wide column spacing and erect seam buildings. The facilities are equipped with fire-fighting systems as per NBC/ FM norms, sewage plant with treated water for flushing and landscaping, mechanised loading capabilities using dock-levellers, conveyors, stackers, ventilation systems with six air exchanges etc. The wide roads leading to the facilities must facilitate smooth movement of for 40-feet containers.

Apart from carrying out structural overhaul, to further enhance operational efficiency, the warehousing operators are putting in extra efforts in analysing storage profile of the clients in terms of capacity building and utilization. The re-strategizing of the present operational framework like rack configuration, slotting/pick philosophy, inventory management (receiving, putaway, replenishment), packing and shipping goes a long way to boost both cost-efficiency and utilization of warehousing space.

As smaller warehouses are becoming redundant thanks to GST, the warehouse operators are now encouraging their clients to consolidate their space into bigger warehouses to leverage the economies of scale. The space consolidation helps companies reduce man-power requirement and inventory management requirements which consequently leads to significant savings on real estate overheads.

At the same time, the warehousing players need to address low penetration of IT and inefficient communication infrastructure. Limited real-time visibility because of manual inventory management, warehousing management, documentation, billing and reporting typically dents the operational sustainability of a large number of warehousing players.

Hence, investing in technology becomes essential for all warehousing companies. However, technology-enabled warehouse management system (WMS) and radio-frequency identification (RFID) are significantly expensive, making them unaffordable for a majority of the logistics and warehousing players. This has deterred the growth of the warehousing technology market. There is an urgent need to warehousing companies to invest in technologies, automated data collection and identification applications, other IT-driven solutions to keep a track of movement inside warehouses.

To accelerate a broad-based growth of Grade-A warehouses, the government should announce tax rebate to the warehousing companies apart from facilitating better credit facility and offering low-interest rates to them. As warehousing sector is gearing up for the tech and optimisation-led transformation, every stakeholder in the sector must come together to bridge those critical gaps so that sector can cater to the evolving demand and play a vital role in the economic growth.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Ankur Minda

The author is General Manager (Land and Leasing), Allcargo Logistics

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