The growth in warehousing in India is primarily being driven by the following factors:
- Growing manufacturing activity
- Rising domestic consumption
- Increasing international trade
- Emergence of organised retail in the country
- Increasing private and foreign investments in infrastructure
- Easing of government regulations
- The existing provider landscape is largely compromised and hence unable to create the desired integrated scaled proposition due to several factors, as listed:
- Lack of alignment of capacity with cargo flows
- Lack/Absence of the appropriate scale and quality of warehousing infrastructure and services required to enable value-based pricing
- Low capital and operating efficiencies (i.e., lower utilization and poor throughput/unit space)
- Limited capacity (and ability) for handling multi-modal interfaces
- Limited value addition specific to the user industry, which stems from a weak understanding of the user’s supply chain
- Inappropriate level of automation
- Inappropriate measurement of “total” logistics costs by end users, creating an illusion that value can only be driven by cutting piecemeal logistics (warehousing, transport, handling) costs
India’s warehousing industry
The size of the Indian warehousing industry (across commodities and modes) is pegged at about INR560 billion (excluding inventory carrying costs, which amount to another ~INR4,340 billion). The industry is growing at over 10% annually.
Warehousing forms a crucial link in the overall logistics value chain. It accounts for ~5% of the Indian logistics market (excluding inventory carrying costs, which amount to another ~30%).
Multiple business models exist within the warehousing industry. The key segments can be represented as:
- Industrial/Retail warehousing: accounts for ~55% of the total market
- CFS/ICD: ~14% share
- Agri warehousing: 15% share
- Cold stores: ~16% share
The warehousing industry in India, valued at Rs 745 billion in FY 2013, has been growing at 15% for the last three years. The industry will grow to about INR 1,440 billion by 2017. Growth will be driven by government policy initiatives and greater private sector participation. The unorganized sector will continue to dominate, currently accounting for 92% of the industry, according to a report.
Supply chain management in India has been lagging behind its peers across the globe. Over the last three years, warehousing has grown at a pace of 15%. The warehousing industry in India was valued at Rs 745 billion for FY 2013. Of this, the unorganized sector still holds the dominant share of 92%. Going forward, the industry will grow to about Rd 1,440 billion by 2017.
Factors such as the introduction of GST (Goods and Service Tax), the adoption of the PPP model (Public Private Partnership) and the National Policy on Storage and Handling will contribute to the growth of organized warehousing in India. The GST, for example, is expected to be rolled out in the 2014 fiscal. The primary objective of the tax is to remove the cascading effect of ad hoc central and state level taxes. In the case of warehousing, the implementation of GST will reduce the price difference by making all regional tax liabilities the same; and this is likely to lead to a homogenous growth of the industry