Emerging trends in Indian warehousing

Abstract

The warehousing industry in India today is a fragmented industry in the initial stages of development. Most business is sourced by unorganised players. Growth in this industry is primarily driven by key client industries such as the Fast Moving Consumer Goods (FMCG), Retail, Pharmaceutical and Automobile industries. At the same time, the cost of inputs such as power and real estate constrain the industry’s competitiveness. The industry currently has very few niche operators, with most players serving clients across industries with moderate levels of specialisation. Long term relationships between clients and service providers constitute the most significant entry barrier. The market is price sensitive, though not transactional. At an operational level, warehouse operations are usually labour intensive with low automation levels. Wastage and shrinkage levels are high due to poor storage and handling practices, particularly in the unorganised sector. The lack of uniformity in the taxation structure is a significant impediment to centralisation of operations and the associated growth in scale and expertise. Poor transportation networks further aggravate the problem. The industry currently does not require very high skill among workforce, and hence does not face a significant labour crunch. Labour shortage however impacts infrastructure development in the country and hence has an indirect effect on warehousing too. The decline in Central Sales Tax (CST) levies and the proposal to implement the uniform Goods and Services Tax (GST) are fiscal moves that will give consolidation moves a fillip. Similarly the proposal to introduce a regulatory authority to set industry-wide standards is a welcome move too. Increased government focus on infrastructure by way of budgetary allocations and public-private partnerships are beneficial to the industry too. Consolidation of supply chain operations puts warehouse service providers in the advantaged position of being able to serve as integrators of multiple services including transportation, freight forwarding and import clearance. This report also analyses trends in some key client industries such as retail and predicts their impact on the warehousing space. Best practices that we identified by way of primary and secondary research have been laid down. We conclude with an analysis of the logistics industry in China as a potential means of forecasting trends for the Indian industry.