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India is expected to witness a proliferation multi-storied and multi-level warehousing spaces.

- Ram Chandnani, Managing Director, Advisory & Transaction Services, CBRE India

With an expertise of more than 25 years in Industry and Logistics sector, CBRE has been consistent in providing business solutions and outcomes powered by robust data analytics and a deep understanding of emerging technologies, production processes and global business practices. CBRE delivers scalable solutions for clients across supply chain logistics, manufacturing, assembly, distribution and warehouse facilities, research and development, and land assignments. In the Industrial & Logistics sector, CBRE has offered its services to more than 425 clients across 90 plus cities. Ram Chandnani, Managing Director, Advisory & Transaction Services, CBRE India elaborates the trends in the logistics and SCM industry. Excerpts from the interview…

How do you assess the transformation of the Indian logistics ecosystem with the emergence of Logistics 4.0 and what are the factors driving this transformation? 

Warehousing is in the midst of a tech-driven revolution as companies race to identify and adopt emerging technologies that cut costs, optimize operations and improve overall supply chain efficiency. There are multiple factors driving this transformation.

-  The effects of Covid-19 and its disruptions have accelerated the adoption of tech in the I&L industry, with most occupiers considering it as an unprecedented opportunity to prepare for a more digital future.

-  Supply chain fragility during Covid-19 has encouraged I&L occupiers to explore digital tech solutions

-  'Home delivery' service has come into its own, against the backdrop of the Covid-19 pandemic. Going forward, the fear of infection will accelerate the adoption of e-commerce as consumers restrict mobility until there is a vaccine in place.

-  In addition the central government, several states are now taking measures to formulate their own policies for the sector

What do you think the investment scenario for the past couple of years and what do you expect the trends in investment in the coming years?

With the increase in demand for quality warehousing space, the industrial and logistic segment has attracted huge investments in the recent years, backed by several government reforms. In 2019, the I&L sector witnessed an investment of more than USD 200 million, that majorly included high-volume deals of USD 50-100 million each and the trend is expected to continue:

-  Flexible Warehouse Spaces: Due to construction delays and the intent to cater to 'immediate' demand, several occupiers are looking to transact short-term lease contracts, and thereby preferring to invest in flexible warehouse spaces. Additionally, supply constraints would also provide occupiers the flexibility to sub-let 'white' spaces in their warehouses.

-  Supply Chain Infrastructure: Occupiers are likely to invest in strengthening the supply chain to mitigate risks by increasingly looking at:

-  Nearshoring - Higher 'essential' demand led to occupiers focusing on locating closer to demand centers, increasing their response time

-  Expanding distribution / sourcing networks to de-risk single source reliance

-  Diversifying transport networks and increasing reliance on multi-modal transport to negate inter-state restrictions

-  Fulfilment Centers: The pandemic underscored the fragility of Just-In-Time (JIT) production and long-established lean practices. As a result, some occupiers could adopt the inventory model by investing in fulfilment centers, thereby increasing their storage capabilities for months' over weeks' worth of goods.

How do you assess the emergence of supply chain as an epicentre of digital enterprise and what are the key technology requirements? 

Historically, supply chain disruptions have arisen either due to production / trade restrictions (supply side) or by variance in consumer sentiments (demand side). Most of the times, these disruptions have been confined to individual industries or markets, with supportive conditions enabling a relatively quick rebound from any short-term shocks. However, the Covid-19 pandemic was all-encompassing; it caused a simultaneous disruption in both global supply and demand within the span of a few months - uncovering serious flaws in supply chains and raising questions over the viability of long-accepted linear supply chain practices.

While linear supply chains concentrated on cost, speed, reliability and connectivity, the new supply chain ecosystem that has emerged from the pandemic is expected to lay equal emphasis on resilience, near-shoring capability, sustainability and agility. As a result, most occupiers are now putting in place a 'modern' supply chain ecosystem that enables timely and transparent data flow among stakeholders, with a greater focus on establishing fulfilment centres.

Going forward, a digitally enabled supply chain ecosystem is likely to come at the forefront that integrates end-to-end tech solutions, thereby ensuring higher transparency and efficiency. Tech would pervade all stages of the lifecycle of a warehouse, thereby improving the quality of upcoming supply. Further, the use of fleet management software for live tracking of goods and automated pallet storage has been growing quickly. Occupiers from e-commerce and 3PL sectors have already begun to automate their facilities - a trend that is expected to gain momentum in the coming years. The widespread deployment of IoT is expected to create 'smarter' warehouses that would significantly improve supply chain efficiencies. Developers too, would continue to improve the marketability of their products: helping occupiers install relevant tech across the supply chain would augment demand and retain long-term tenants.

What do you think the strategic imperatives for a healthy growth of the Indian logistics ecosystem, including policy and reforms?

The Indian logistics ecosystem has significantly grown over the past few years due to technology, policy reforms and infrastructural changes giving the sector a speedy acceleration.

-  Tech Compliance - Occupiers are accelerating adoption of technology in all facets of the supply chain including fleet management. They are also fast-tracking investments for automating warehouse and industrial units. Going forward, implementation of tech for more efficient inventory management and increasing flexibility across the supply chain.

-  Continued Impetus on Policy - The government is likely to implement the Draft National E-commerce Industrial and Logistics Policies within 2020. The National E-commerce Policy is expected to promote expansion / consolidation of e-commerce operations, thereby boosting the overall I&L demand, also augmenting DC demand.  The Draft National Logistics Policy is likely to enhance warehouse connectivity, generate more jobs, upskill the current workforce, which would go a long way in improving supply chain efficiencies and warehouse management.

-  Sustained Emphasis on Infrastructure Development - Growth in consumption, organized retail, regulatory interventions, private investments in logistics and other infrastructure developments such as Dedicated Freight Corridor (DFC) are expected to further formalise the I&L sector. The government's Make in India initiative has given a major push to the development of industrial corridors along key trade routes - Delhi-Mumbai, Amritsar-Kolkata, Bangalore-Mumbai, Chennai-Bangalore, and Visakhapatnam-Chennai. Further, the listing of more than 6,500 projects under the INR 111 crore National Infrastructure Pipeline (including 154 logistics projects) will further boost this sector.

-  Quality Assets to Drive Growth - Quality projects, well-connected assets, especially those developed by prominent players, are expected to see traction in demand. In addition, emphasis on improving efficiencies in last-mile delivery is expected to drive demand for assets located closer to the city.

What is the bearing of emerging trends like omnichannel logistics platforms, mobile apps, rise of subscription services, and increased automation for constant communication on the logistics space? 

Emerging trends in the logistics space due to the increasing dependence on technology and e-commerce has led to the transformation of supply chain. This trend is expected to grow with more consumers moving into the digital space as the current crisis has accelerated e-commerce adoption rates for both essential and non-essential items, specifically after Covid-19.

A fast delivery process or same-day delivery is becoming the new standard in the logistics sector. Last mile and smaller warehouses will emerge in core cities to ensure the delivery of goods to buyers within a few hours. Further, automation will fasten and smoothen the logistics process within multi-level spaces and robotics and AI will enhance it with zero defects to achieve high level of productivity.

Government policies such as the National Logistics Policy and the National E-commerce Policy further promoted investment in the sector, leading to a tremendous requirement of warehousing and logistics creating business opportunities. Additionally, huge investments to enhance infrastructure connectivity of rail, road, seaways and airways have acted as a catalyst in the growth of the sector. With occupiers continuing to prefer quality spaces, we expect that long-term investors are likely to continue partnering with leading developers to release tech-enhanced supply.

What is the transformative impact of automation and digitalization on warehousing segment? Is there a trend towards multi-level warehousing?

Tech would continue to pervade all stages of the lifecycle of a warehouse, thereby improving the quality of upcoming supply. Further, the use of fleet management software for live tracking of goods and automated pallet storage is growing quickly, as is the number of start-ups aimed at bridging the current tech gap. Occupiers from e-commerce and 3PL sectors have already begun to automate their facilities - a trend that is expected to gain momentum in the coming years. The widespread deployment of IoT is expected to create 'smarter' warehouses that would significantly improve supply chain efficiencies. Developers too, would continue to improve the marketability of their products: helping occupiers install relevant tech across the supply chain would augment demand and retain long-term tenants.

In the long term, due to increasing land costs as well as growing use of technologies such as automation for storing, unloading and packaging of goods, India is expected to witness a proliferation multi-storied and multi-level warehousing spaces. Moreover, most of these warehouses would be in core locations as demand for 'last mile' warehouses will increase, and same-day delivery will become the new standard for the logistics market.

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