We are building the necessary infrastructure in our logistic parks to support a digitized world.

Anshul Singhal

- Managing Director, Welspun One Logistics Parks

What according to you are the challenges and opportunities for the warehousing and logistics sectors, especially in the back drop of the recent Covid pandemic?

There was a slight setback initially due to the Covid-19 pandemic and the resultant lockdowns, but this sector bounced back faster and swifter only to become one of the most resilient asset classes in India. Warehousing and logistics also began to get recognised as an “essential services" sector, leading the way to add to the country's GDP.

The pandemic made us look at things unconventionally, buying patterns and customer behaviour changed drastically which in turn accelerated the scope and pace of online shopping. Trust in e-commerce has increased it's in the warehousing demand, from 14% in FY18 to 23% in FY20. Some trends from China suggest that there was a 20% sustained demand even after the lockdown was lifted, with us battling the second wave, we sure expect this surge to continue in India as well. Driven by the fast pace of digitisation in India, the e-commerce market is one of the fastest-growing sectors today. It is estimated to grow at more than 40% compound annual growth for the next 5 years, with a gross merchandise value of online shipments growing from USD 32 billion in FY2020 to USD 180 billion in FY2025. Online grocery players have definitely been one of the biggest beneficiaries of the digital shift, witnessing an incremental growth of almost 20 times over 5 years. With the focus primarily gravitating towards hyperlocal deliveries not just in metros, but also in tier 2 and 3 cities; pushed the needle towards Grade-A warehousing that offers compliance, safety, hygiene and enable automation while maintaining gold standards in daily operations, storage and last-mile delivery.

Since the implementation of GST, specialized service for storage and distribution of goods offered by third-party logistics (3PL) has gained prominence. 3PL is the highest as well as one of the fastest-growing segments in the warehousing space, contributing nearly 35% of total net absorption in 2020. With the uncertainty gathered by the current crisis and ambitions to explore new markets, the dependence on 3PL will only increase. When it comes to cold chain demand, since grocery players have switched to e-commerce, there is an increased need along with the burgeoning e-pharma cold chain needs as well.

A major challenge however will always be to find suitable land parcels, especially in Tier 1 cities, given the limited availability of land. Furthermore, some states still classify warehousing as a commercial activity adding to the costing. Another major hindrance is land valuations and consequently the willingness of companies to pay higher rentals. Additionally, a challenge that comes with in-city warehousing, is finding even shaped land parcels with high throughput in densely populated catchments.

What is your take on the rising need for in-city warehouses to ensure last mile delivery?

In India, traditionally companies have focused on land just outside the top few cities in order to store inventory and transport them to key consumption centres. However, the advent of many online-only brands and the recent introduction of omnichannel retail by the existing players has led to the emergence of new consumption centres in Tier 2 and 3 cities. The lockdown restrictions and the general fear of stepping out gave a massive boost to online shopping in these cities. The pandemic also led to a major chunk of the workforce shifting base to their native towns and villages - and now that there's more buying power across cities, people expect the same shopping experience that they would have got in the Metros.

As per a recent ICICI Securities report, e-commerce growth in tier 2 and tier 3 cities in India is outpacing that of tier 1 cities. Myntra's EORS in June last year witnessed an 86% increase in shoppers from Tier 2 and 3 locations and out of their 7L first-time shoppers, 56% were from Tier 2 cities and beyond. For an e-commerce firm, an increase in demand also means dealing with an increased number of SKU's while factoring in a room for expansion, which further complicates supply chain operations. Such pre-requisites can only be fulfilled by the virtue of organized and modern warehouses, instead of age-old boxes or retail spaces, thus creating a demand for newer hubs.

How important has adoption of technology been in the warehousing space, especially in the backdrop of Covid pandemic?

Warehouses are getting smarter as time goes on. Today, warehouse smart warehouse technology is streamlining warehouse operations, making it more cost-effective and less impactful on the environment. The pandemic and social distancing norms have further thrust the use of automation and robotics.

Smart warehouses are soon becoming an obvious choice as they seamlessly integrate technology with operations. Globally, interconnected technologies like voice guidance, robotics, RFID, IoT, blockchain or AI are used; as this not only reduces the occurrence of human error but also enables better inventory management. We in India, however, are at the cusp of adopting these smart warehousing measures. With increased consumption growth, demand for lower delivery times and higher labour costs, this trend is gaining prominence in the country.

Warehouses are also responsible for restocking returned items. It is believed that about 20% of online consumers end up making returns. This is where reverse logistics come into play. Once returned items are dropped off at a warehouse, technology restores them to inventory. Without a doubt, smart technology is helping companies meet the demands of customers who experience buyer's remorse.

More and more customers and warehouse operators are realizing the value of vertical warehouses and utilizing cubic feet capacity beyond the traditional square feet, which is leading to more heavy-duty racking, shelving, and goods to person automation inside the warehouse. Additionally, automation in the transporting of products from one place to another is an important factor of consideration, as technological systems with almost negligible human intervention can help build supply chains that are capable of swift and seamless order fulfilment.

In recent times, majority of the demand is from players seeking quality and technology compliant spaces; to satiate this demand as well as seize the growth opportunities offered, this sector has witnessed a massive institutional investment of over INR 254 Bn since 2017, and as per media articles this is expected to touch INR 495 Bn by 2021.

Going by the customer demands, in the future, warehouse managers and technicians would simply like to monitor the operational status from their homes, using laptops or tablets, make adjustments as needed, and occasionally respond to more serious situations by riding out to the facility.

At Welspun One, in our recently announced 110-acre Grade-A Logistics Park at Bhiwandi, we will be integrating advanced features like park management and maintenance on a tech-enabled platform, IoT driven traffic management system to minimize travel distance and trucks with RIFD tags to predetermine directions and docking. We are building the necessary infrastructure to support a digitized world - the park will rely on software, sensors and digital interfaces to streamline compliances.

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