Warehousing – The next boom sector in investment and employment, R R Padmanabhan, MBA, BL, FCILT. Director Exim Academy, Chennai

Warehousing – The next boom sector in investment and employment

    - R R Padmanabhan, MBA, BL, FCILT. Director Exim Academy, Chennai.

I ordered a football for my grandson through Amazon. I was promised delivery within 4 days. The same order anywhere in Europe would have been fulfilled within 6 hours! That is the logistics efficiency in India. In India, it is estimated the overall logistics cost is about 14% of GDP, which is quite substantial whereas in advanced countries it is less than 8%. That is why, you have a product like football ordered online within 6 hours in Europe. 

The Logistics value chain consists of three parts, transportation, warehousing and administration. Unless all three parts work in tandem, efficiency in logistics is not possible. The prevalent online shopping pattern denotes that there has been change in people’s buying habits. Many would like to shop at the convenience of their homes. The presence of variety, discounts and returns policy has all contributed to the growth of this buying habit. In fact, one of my grocer friends lamented that there has been a drop in sales by almost about 20%. This drop in sales in physical shopping can be attributed to the online shopping habit by consumers. 

While this is major consumer behavior, what else led to burst in warehousing activity? There are major events that ushered this trend. First and foremost, it is the Government of India’s Make in India program, followed by the effective implementation of Goods and Service Tax that effectively reduced the transit time between cities and conferring of infrastructure status to warehousing sector. 

These three had pull factor is attracting investments in warehousing sector.




Sectoral Perspectives 

The following sectors drive the feverish pace of investments in warehousing. They are Contract (third party) logistics, E Commerce, Automotive Logistics and FMCG Logistics. Needless to say, these warehouses require both skilled and semi skilled workforce. It is the policy of warehousing companies to look for human resources from the local area where they are situated. This kind of locals first policy has multiple benefits like making a difference to the lives of people in and around warehouses, smooth land acquisition and peaceful coexistence with the local population. 

Companies driving the boom 

What are the companies that lead this boom? Amazon, with its 50 fulfilment centres across 13 states of India leads the pack followed by Flip kart, e-bay, DHL, Future group, Fed Ex and HUL. Investment of Rs.45000 crore have gone in to this sector. That is staggering figure for a nascent industry. The sector includes cold storage spaces too. An industry report says that the demand for warehousing space would be about 344 million square feet in the year 2022. This is double the space presently available now at 169 million square feet. Of course, warehouses these days are not mere godowns but well oiled and efficient with advanced think technology, robotics and advanced fire fighting system. 

Warehousing Corridors 

There has been a pattern in the development of warehousing corridors. All of them are situated in the industrial corridors like Delhi-Mumbai Industrial Corridor (DMIC), Chennai-Bengaluru Industrial Corridor (CBIC), Bengaluru-Mumbai Economic Corridor (BMEC), Vizag- Chennai Industrial Corridor (VCIC) and Amritsar-Kolkata Industrial Corridor (AKIC). 





Job Opportunities 

Growth of warehouses also means increase in jobs. As stated elsewhere, warehousing has both skilled and semi skilled labor requirement. These companies prefer locals to man their semi skilled labor requirements. Team lease, a premier consultancy organization estimates that logistics sector on the whole would create 14 million jobs in 2022, up from the present 11 million. Of these warehouse sector would add 1,20,000 jobs.

R R Padmanabhan, MBA, BL, FCILT. 
Director - Exim Academy, 
Chennai





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