survey warehousing - CRWC _Warehous… · survey warehousing u46u august 29-september 11, 2016 business indiauthe magazine of the corporate world i t is no secret to anyone that in

s u r v e y

warehousing

u 46 u

august 29-sep tember 11, 2016

busi n e ss i n di a u the m aga zi n e of the cor por ate wor ld

it is no secret to anyone that in the fiercely competitive fmcg space in the coun-try, the baba ramdev-led patanjali has emerged with a bang in recent years. backed by a top-pitched patriotic fervour

coupled with the subtle consistent message of being a cut above the rest on hygiene and health parameters, patanjali’s rise in prominence and scale has indeed stumped many. so much so that baba ramdev has now begun making the claims of toppling the top of the pyramid boys in the game in the not so distant future. how-ever, for patanjali, which clocked a revenue of around R5,000 crore in the last fiscal and is plan-ning to go beyond the $1 billion sales mark in the near run, a further scaling up entails a series of churnings in its back-end supply chain management.

and those adjustments have begun within the

organisation in right earnest. about four months back, the patanjali management decided to make a decisive shift in its distribution strategy – shift-ing finished products from manufacturing cen-tres to dealers and franchise operators all across the country to a typical 3pl (third party logis-tics) model wherein it will be taking warehous-ing space on lease at different strategic locations in the country with the assistance of logistics operators. and since then, it has been occupy-ing the warehousing space at a frantic pace – 11 lakh square feet of space in the last four months spread across 20 cities and the mandate is to double this size in the next one year. but find-ing the right product mix as per its specification has been an issue. “in himachal, we were look-ing for a space size of around 50,000 square feet and had to settle for a 30,000 square feet unit since we could not find anything matching our

Bigger, yes!

big boxes

s u r v e y

warehousing

u 47 u



We had got into warehousing at the request of one specific

customer,Rubal jain Safexpress

specification. while in places around metros, it’s much easier to find quality warehouses; this is a challenge even around state capitals. You may stum-ble upon some stand-alone units but there the owners may ask for premium rentals,” says sanjeev Khanna, head – supply chain management, patanjali.

Khanna’s statement is symptomatic of that larger issue which has engulfed the warehousing sector. warehous-ing is the second most important vertical after transportation when it comes to forming a robust distribu-tion value chain in the country today. prima facie, the quantitative growth in the warehousing space has been quite commendable in the last 5-10 years. but the issue is that of quality, in reaching that high-end efficiency where the storage and distribution process truly becomes seamless. the old timers in the industry will tell you that indian big boxes (as ware-houses are commonly referred) are in a transi-tional phase – from dark, dingy, closed spaces of yesteryears where everything was manually con-ducted to modern and scientifically built units. but this transitional journey is still far off from reaching a stage of maturity. “if you refer to new warehousing units, then most of them are being made as per the new standards. but mod-ern warehousing units have still not reached a matured stage as old warehousing units are still to be replaced,” points out balbir singh Khalsa, national director – industrial, Knight & frank india.

Capacity dynamics warehousing, no doubt, has increasingly become a focus area, not only for logistics and 3pl operators but also for companies – either manufacturing specific industrial goods or con-sumer products. and this trend has acceler-ated in the last 10 years. the sudden explosion

of the e-commerce sector has been a big catalyst in the last two years since the demand now is to deliver humungous amounts of goods with a time-bound commitment – some-thing that did not exist at all till recently.

no stakeholder in the produc-tion and distribution value chain has any issue on the quantitative growth of warehousing units in the country. they have come up and mushroomed in the last 10 years at a modest speed. there also have been patches within this spell when their growth trajectory has been very high.

if earlier, godowns or ware-houses, were supposed to serve an important role in the manufactur-ing value chain; now the advent of modern retail in its varied forms has meant a decisive consumption-centric push to the business. not

surprisingly, the major warehousing clusters are mostly around big metros. “in the last five years, warehousing business has had a cagr of 18-20 per cent, front-ended heavily by a huge spurt in e-comm driven businesses,” says Vikram man-sukhani, head – 3pl services, diesl. “most of the large warehouses have come up around the metros only, as these are large consumption cen-tres. supply overtaking demand was a reality till 2014 when e-commerce hit the market, and now most of the grade a supply across metros has been consumed,” adds Jasmine singh, executive director, industrial & logistics services at cbre south asia.

but before it begins to sound as if the ware-housing sector in india is a pure private play, here’s a reality check. in a cumulative sense, the warehousing sector in the country is dominated by public sector enterprises like the food cor-poration of india (fci) and central warehous-ing corporation (cwc; see chart). but their food grain-centric character remains intact leaving the field wide open for the private sector to align with manufacturing and general consumption needs in a fast growing economy. but even in the public space, consistent capacity addition has been a regular feature. “in the past five years, we have added over nine lakh metric tonnes capac-ity,” harpreet singh, md, cwc, told Business India. according to former railway board chair-man K.c. Jena, public sector units have been in the forefront of scaling up their storage capac-ity. “a company like concor has significantly added to its cold chain capacity to scale up its perishable solutions,” he observes. another

2014 (e) 2019 (P) Manufacturing 631 939 8 307 61Consumption 76 115 9 39 8exim** 211 386 13 174 35Total Warehousing 919 1439 9 520 104

Total warehousing space requirement

CAGr (%)* Total Annual

Additional space required from

2014-19

Demand for warehousing space in india (mn.sq.ft.)

(E): Estimated, (P): Projected * Compounded Annual Growth Rate ** The entire area of the Inland Container Depot (ICD)/ Container Freight Station (CFS) is considered including covered and uncovered portion of land

Current status of warehousing Capacity in india

(storage sapacity in million MTs)

Food Corporation of India (FCI)32.05

Central Warehousing Corporation (CWC)

10.07 state Warehousing

Corporations (sWCs)21.29

state Civil supplies11.3

Cooperative sector15.07

Private sector18.97

Total108.75

In the last five years,

warehousing business has

had a CAGR of 18-20 per cent,

VikRam mansukhani,

DiEsl

s u r v e y

warehousing

u 48 u



significant case is that of central railside ware-housing company (crwc), a fully-owned sub-sidiary of cwc, which was formed in 2007 to make use of unused railway terminals as vibrant cargo transit units. “we were formed with the mandate of creating 22 terminals. out of that, 18 are already in operations. we are covering all metros plus locations like hyderabad, pune, lucknow, ghaziabad, Kandla, Vadnera, nasik, etc. our latest addition is Jogeshwari which was opened last year. we have so far created a capac-ity of 3,29,000 metric tonnes primarily used as a transit point for commodities like cement and fertiliser which come in bags,” explains K.u. thankachen, md, crwc. the warehousing units set up by crwc are typically 750 metres along the railway track with a width of around 15 metres.

but most of the current action is visible in the non-foodgrain, non-basic commodities sec-tion and here the driver is private. but this space also needs massive scaling up, both quantitative and qualitative, to ensure a strong supply chain (with warehousing as a vital cog in the process) in an economy still besieged by very high logis-tics costs. as much as 13 per cent to the gdp, which in more matured economies like the us and several countries in europe is in the single digit range of 7-9 per cent.

And betteraccording to Vineet agarwal, md, tci (one of the leading players in the fray), the actual pro-cess of going beyond the basic godown structure had taken off in the late 1990s. “prior to mod-ern warehousing, what was prevailing in the country was a typical c&f (carrying & forward-ing) model wherein companies were keeping their goods in small godowns run by local oper-ators. but in the late 1990s clients started asking to move from the c&f model to the 3pl model. mncs like unilever were in the forefront of this. other fmcg and consumer durable giants too

is it really the single largest project as is referred by many?It is certainly one of the largest infrastruc-ture projects currently underway in the world in terms of size and extent. We are developing an industrial corridor which will be 1,504 km long. In terms of influ-ence area, you can take 200 km on both sides of the stretch. so that makes it one of the largest projects in terms of geo-graphical spread. And then it is going to have 24 investment regions to be devel-oped in 25 years. On a cumulative basis,

it would need an investment of $100 billion. All of it put together makes it a gigantic project. it was mooted about nine years ago and then the actual work began four years ago. going by general reportage, one gets the feeling you are currently focussing on devel-oping four zones in the first stage. My question to you is: when are we are going to see first signposts of opening of this project?you are right. The company was formed nine years ago. But it took actual organ-isational shape in 2011. since then we have done detailed master plans of eight investment zones. We have got

environmental clearance of the zones we intend to develop in the first phase. Besides that we have done DPr of two Mass rapid Transit system (MrTs) proj-ects. They will be financed by JICA. Then we have two greenfield airports along the stretch. One of them would be at Dhorela, Gujarat, and we have already done its DPr. By year end, we hope to find a developer. They will be interna-tional airports but they will be devel-oped in a manner that they become aerotroplis’. so you will be completing the first phase by 2019…The first phase covers eight investment regions. Out of eight, we have managed

The $100 billion Delhi-Mumbai Industrial Corridor project is billed as the biggest infrastructure project ever undertaken in this country to give a serious rejig to the manufacturing sector. According to alkesh sharma, CEO & MD of DMICDC in conversation with ritwik sinha, the project also envisages some epic-scale units on the storage side

‘The biggest multi-modal logistics hubs’

The company is presently

operating 15 million square

feet throughout the country,

akash bansal Om Logistics

s u r v e y

warehousing

u 49 u



joined the chorus soon as they realised that c&f operators do not have the wherewithal to scale up as per their specifications,” he recalls. tci today has nearly 11 million square feet of ware-housing space spread across the country.

safexpress’ md, rubal Jain agrees that the demand for modern warehousing units was trig-gered by the manufacturing majors. “we had got into warehousing at the request of one spe-cific customer during the initial spell of our jour-ney (the company is nearly 20 years old now) and then we realised its potential. it was integrating very well with our express distribution business.

we got into it big time in the late 1990s and grad-ually we got into building our own state-of-the-art logistics parks,” he says. the company today has 29 logistics parks in the country and is a front league player in the space with a cumulative capac-ity of around 12 million square feet. the company has invested R600 crore in building state-of-the-art logistics parks in the last 10 years.

on the organised private side in the ware-housing business, there are clearly three sets of players. the first league is those of original lsps, players like tci, safexpress, om logistics, etc, who have existed for a long time with trans-portation expertise in their dna but later added warehousing as an efficient value addition to their services portfolio. “om has been creating a land bank since the 1980s and that has put it in a strong position today. in the recent past, we have been adding two to three large size units every year,” says akash bansal, head (logistics), om logistics. he adds that the company is pres-ently operating 15 million square feet through-out the country. om is particularly aligned to the automotive and telecom businesses. much diversified logistics players like allcargo and global major dhl supply chain too belong to this league with complete supply chain solu-tions. “we have 700,000 of sq ft of logistics parks operating out of panvel, mumbai, with all

to take possession of land in four. We have already formed sPvs for these regions and development of basic infra-structure has already begun. We will be in a position to start allotting land to potential investors from september this year. Infrastructure development in most of these places will be done by 2018. how much of land you need to acquire for the first phase?Gujarat has a major share in this phase and they have already transferred 12,500 acres of land. In Maharastra, the total land size is around 10,000 acres. We have already started working on 2,500 acres. We need further 1,100 hectares in Madhya Pradesh and 750 hectares in Greater Noida. These are smaller nodes. In these stretches, the work has already started and we have good contractors taking care of the development. it is an imperative point – what DMiC provisions have been made in terms of supporting the allied industries of manufacturing? it will certainly need very efficient transit

and storage facilities?you are right. We have planned two huge multi-modal logistics hubs for this. One would be in Dadri which will be spread across 1,500 acres. And another unit would be set up in Haryana and its size would be around 1,000 acres. The Hary-ana government is presently negotiating for the land acquisition of this unit and it will happen soon. We expect these two projects to take off before the year end.While creating DMIC, one of our major considerations is to address the concerns of the manufacturing players and even the exporters that relates to the logis-tics cost. The logistics cost in India is one of the highest in the world and to bring it down is also one of the key objectives of the DMIC project. What do you need to respond to this? you need an effi-cient transportation system which DMIC will facilitate. you need enough storage space for all kinds of goods including perishables and you need a proper track-ing system. you have to ensure that the movement to desired destinations hap-pens in the least possible time. When all of these work in conjunction, you

can dilute multiple handling of consign-ments and this brings down the cost. The multi-modal logistics hubs which we are creating will be biggest this country has seen so far. Normally, the best of logis-tics parks are laid out in 100-200 acre land parcels but ours will be much larger than that. Apart from these, we are also mooting another logistics hub in sanad, Gujarat. will there be any alignment between DMiC and Dedicated Freight Corridor (DFC) projects. DFC is again a very ambitious proj-ect with very similar objectives – to facilitate easy movement of goods and bring down the logistics cost. We will be complementing each other. DFC will ensure dedicated freight move-ment which will bring down the trans-portation time significantly. For instance, the journey time between Delhi and Mumbai will come down to 18 hours. Our industrial and logistics hubs on the northern and western stretches will feed consignments to DFC.

We have about 400,000 sq ft warehousing space across

India, aDaRsh hEgDE

Allcargo Logistics

s u r v e y

warehousing

u 52 u



required design and safety compliances. simi-larly for food, retail and e-comm storage where hygiene and cleanliness is of paramount impor-tance, we have about 400,000 sq ft warehous-ing space across india,” informs adarsh hegde – joint managing director, allcargo logistics. dhl supply chain’s md Vikas anand says: “we now have nine mcs’ (multi-client sites) com-pleted and operational across india which have been built to world class standards with state-of-the-art features customised to suit specific requirements of customers. these mcs facili-ties can consolidate, store shipments and re-dis-tribute them to several distribution channels in the country.” the dhl group had committed an investment of €100 million four years ago to scale up capacity in india.

the second set are players who have stemmed as the branch of a large business conglomerate (mostly in the last 10 years), firstly to support the captive business of the group and then to also generate business from outside. future sup-ply chain, mahindra logistics, diesl (a tata group company originally, it was bought over by tVs logistics last year), etc, belong to this league. mahindra logistics, for instance, has been very closely aligned to the group’s expansion in the automobile space. says pirojshaw sarkari, ceo, mahindra logistics: “we have invested in big box warehouses (ranging from 2-5 lakh sq ft) and cross docks at strategic locations for our cur-rent customers and network business to trans-port products from a supplier or manufacturing plant directly to the customer or retail chain with marginal-to-no handling or storage time.”

and then there are operators who do not have

complete supply chain expertise but backed by institutional financing are showing signs of upping the ante. indospace, jointly managed by everstone capital and realterm capital (a leading industrial real estate investment firm in the us), is a case in point. in a short span of six years, it has created nearly 9 million square feet of space through its five logistics parks. “six years back, we realised that there is a serious gap in quality supply of ware-housing and manufacturing real estate i.e. logis-tics parks. and we found ourselves in a position to help bridge this supply-demand gap. that, too, on a lease model, which swiftly helps clients convert capex into opex and not undertake the headache of procuring land and developing their own spaces,” explains rajesh Jaggi, ceo of indospace and man-aging partner – everstone real estate. according to Khalsa of Knight & frank india, more such play-ers will be entering soon. “other new players like embassy, assets, salarpuria, tVs, casa grande and other new developers are in advanced stages to enter this space. basically there is demand for new developers having huge funds in the market for modernised warehousing.”

and there is another group of players who fall outside of any organised ambit – the local stand-alone players – especially at the fringe of india’s leading metros. “there are villages around dwarka in west delhi where local residents in possession of small land parcels have opened make shift units and are doing well. they may not follow any rules but nobody is complain-ing. such a pattern is witnessed in all leading consumption centres in the country,” informs divya prabhat, founder director, novus supply chain solutions.

TCI today

has nearly

11 million

square feet of

warehousing

space spread

across the

country,

VinEEt

agaRwal ,TCI

s u r v e y

warehousing

u 54 u



warehousing, after transportation, is the second most important vertical of any logistics operation account-

ing for as much as 30 per cent of the total cost. but companies which draw their bread and but-ter from supply chain operations and even those promoted by big conglomerates are not in the habit of treating it as a separate vertical. “for us, it is part of an integrated supply chain process wherein we offer end-to-end supply chain solu-tions to our customers,” asserts Jain of safex-press. “if any customer approaches us just for warehousing requirements, we are likely to turn him down. it makes sense for us only when they avail our bundled offering – transportation plus warehousing,” emphasises bansal of om logis-tics in a similar vein.

but for those offering warehousing as their core business, the good news is: the rental sce-nario has been positive in recent years. according to Jasmine singh of cbre south asia, “there has been a steady increase of 8-10 per cent per annum across key markets, with grade a assets fetching more than 15 per cent per annum.” a report, released earlier by cbre, mapping the develop-ments in 2015 sets out an enhanced demand cycle. for instance, during h2 2015, more than 3.6 million sq ft of modern warehousing space

was leased which was a modest increase of 5 per cent compared to the corresponding period the previous year. foreign 3pl operators such as fedex, tippmann group, dhl and domestic & global e-commerce companies such as big basket, urban ladder and snapdeal were the leading flag-bearers of this fresh demand. among the cities, delhi/ncr and chennai led the race (23 per cent each) followed by bangalore at 21 per cent. some of the notable transactions include – 330,000 sq ft leased by urban ladder at bidadi industrial area in bangalore, 138,000 sq ft lease by suzuki motor corporation at farukh nagar, nh-8 at gurgaon and flipkart’s lease of 250,000 sq ft and 350,000 sq ft at medchal in hyderabad and binola.

about 60 per cent of new warehousing capac-ity creation has been developed around india’s metro centres in the last 10 years resulting in big bang emergence of dedicated warehousing clusters like bhiwandi and panvel near mum-bai; chakan, wagholi- lonikand near pune; patudi near delhi/ncr, etc. nothing surprising, the operators are fiercely fighting to keep their customer base intact by sweetening their offer-ings. “over the last few years, there has been a gradual shift from a fixed commercial model to variable commercial model. it is a win-win sit-uation for both – the customer and the service provider where the customer is charged on an as-use basis, addressing various factors like – short period rentals, scale up-scale down possibil-ity and seasonal adjustments in space & man-power,” sarkari of mahindra logistics points out. “a lot of value additions are offered these

a new vertical The big changes

Indospace state of the art logistics park

We now have nine MCS’

completed and operational across India, Vikas ananD DHL Supply

Chain

s u r v e y

warehousing

u 56 u



days at the warehousing level. it’s like a buy-one-get-one-free kind of pattern. so you have kitting activities, bar-coding of apparel and e-commerce products, etc, being offered to the customers,” concurs agarwal of tci.

How modern are the new units? the warehousing pie has undoubtedly got big-ger but the moot question now is have they really become better? equally important is to under-stand the attributes that define a quality, mod-ern warehouse. responds Jain of safexpress: “a modern warehouse is a concrete brick and mor-tar structure designed and laid out in an efficient way which allows easy movement of trucks with vehicles being docked at the height of the plat-form and with engineered floors which should be utilised without any issue for 25-30 years taking the weight of 6-8 metric tonnes. furthermore, it should have the ability to scale up vertically; there should be proper handling of equipment and sufficient space for them. that means creat-ing warehouses without columns in the middle. then, of course, you have to ensure right safety standards, access to natural light, air circulation, wi-fi, etc.”

no doubt, such units are no longer a rarity in the country, but they have also not become com-mon in every demand zone. a report released by an industry chamber early this year had pointed out that about 80 per cent of handling and warehousing facilities are not mechanised and traditional manual methods are widely used.

furthermore, the warehouses which are mecha-nised have just forklifts or hydraulic hand pallet trucks. according to singh of cbre, “most devel-opers are keen to build only the shells/pebs along with common infrastructure as required by the clients. automation, racking, material handling equipments and inventory management systems like wms/ims, etc, are client specific which the tenants get on their own or ask their manage-ment partners like 3pls to invest in.” warehouse management system (wms) – considered to be the most vital piece while moving towards an automated regime – is not a regular feature with indian warehousing units. “automation of ware-houses is yet to gain momentum in india. the-oretically, the players are convinced that it is a must but most of them are not ready to take the plunge as yet,” points out sunnil dabral, coun-try head, schaffer – the global giant in the auto-mated solutions.

“we have seen some improvement in the quality of warehouses offered to us in recent years. but the story hasn’t even reached the half way mark to full warehousing modernisation. at best, we have semi-automated units,” opines Jagadeesh Kunchey, head – supply chain of busi-ness conglomerate itc, which requires about 4.5 million square ft warehousing space for the stor-age and distribution of its products annually. “i don’t think more than 8-10 per cent of ware-housing units in the country deserve to be qual-ified as modern. it is a huge gap which needs to be filled,” adds Khanna of patanjali.

Most of

the large

warehouses

have come

up around

the metros,

jasminE singh

CBRE

s u r v e y

warehousing

u 58 u



but with the decks being finally cleared for gst, the expectation is that the logistics business in general and warehousing ser-

vices in particular are going to witness sweep-ing changes in the future. this coupled with a growing economy will act as double dynamo to spruce up the vital supply chain modalities. gst, in fact, has been eagerly awaited by the supply chain players and there has been a wider per-ception in the industry that many of them have been holding back their investments in new warehousing units in the last five years in antic-ipation. consolidation is a foregone conclusion which will pave the way for large-scale ware-houses and elimination of many small units. “You can’t imagine how it could change the scene. today a manufacturer in chennai send-ing his goods to northern states is compelled to set up a sales tax registered warehouse in every state. but with gst, he will have the leeway to work with a centralised warehouse in the region from where he can push on supply to other states. plus, the pain of innumerable pieces of

documentation will be gone,” explains bansal. gst will definitely usher in a move towards larger and co-shared warehouses. Value-added services like kitting, repackaging, gift packag-ing or refurbishing within warehouses will be more of a norm than exception in these larger units. balaji V., ceo, avvashya cci, pinpoints the regions where most of the action would be

Before i ask what you intend to do as an entrepreneur, let me ask you this: has the journey of indian warehousing from inefficient godowns to modern units reached to a matured stage?The evolution of warehousing, from godowns to modern units or fully auto-mated distribution centres (DCs), in India has definitely been rolling out for

quite some time. But it has evolved at a very slow and steady pace. The change has clearly been not transformational. But right now, everything is coming together. Warehousing segment could well be at an inflection point where big-ticket transformation may fall in place. Decks have been cleared for GsT which I would call the biggest reform which has been pushed in the recent times. Companies, especially in the consumer goods side, have been waiting for it to give a rejig to their supply chains which among other things also mean switch-ing over to big boxes. I expect in the next five to seven years would be the

biggest transformational era for supply chain and there would be huge consoli-dation in warehousing to gain efficiency. I would just cite an example of what we had done in the Future supply Chain. For Big Bazar’s distribution, we used to have 16 locations at one point of time. But then we shifted everything to the mother warehouse in Nagpur which is one of the largest DCs and that was quite a success-ful and beneficial move. GsT will facili-tate more such initiatives.

with your previous company, you had set up a pan-india ware-housing network. and now as an

‘We will pursue warehousing first strategy’ anshuman singh, former top executive, Future Supply Chain (the logistics unit of Kishore Biyani-led Future group) raised eyebrows recently when he raised $125 million from global private equity fund Warburg Pincus to start a new venture - Stellar Value Chain Solutions. This is clearly the largest funding to a supply chain start-up in India and according to Singh, the operational differentiator of his new venture would be in big boxes centric offerings. Excerpts from an exclusive interview with ritwik sinha

gst The real game changer

We have

invested

in big box

warehouses and

cross docks,

PiRojshaR

saRkaRi

Mahindra

Logistics

s u r v e y

warehousing

u 59 u



visible after gst becomes a reality. “gst would allow companies to expand their existing ware-houses, develop new warehouses or indeed shut down several existing setups. some of the most impacted regions will include mumbai-guja-rat-rajasthan-ncr corridor in the northwest, chennai-bangalore stretch in the south and nagpur region in the central part, particularly

due to upcoming manufacturing setups and the planned delhi-mumbai industrial corridor (dmic) in this region.”

the tilt towards large boxes is good news for players in the automation space too. “bringing in adequate automation in a large unit is inevitable. You can’t run them efficiently just on the basis of manual power,” points out dabral of schaefer. and there seems to be a larger agreement on this point – even public sector enterprises echo this. “as you are aware, cwc was set-up in 1957 and the infrastructure created by cwc is very old and, therefore, it has been decided to upgrade 140 centres currently. out of these, 42 centres have been upgraded by June, 2016. another 51 cen-tres will be upgraded by march 2017 and 37 cen-tres by december 2017. the balance 10 centres by march 2018,” specifies harpreet singh. crwc, on its part, has begun pilot tests with installation of wms in its units and according to thankachen, this exercise will be pushed aggressively.

for well-established logistics service provid-ers, gst ensures an expansion of their services profile. “the real impact of gst will be felt after two to three years. consolidation will definitely happen. for instance, a company running 20-25 units may bring it down to 10-12 large units. but once these big spaces come in, complexities will arise in terms of management. You will need the

entrepreneur, you will have to do it again. Do you think, this time it will be much easier given the gsT support?It will definitely be far easier. As I said, GsT will create a positive environment, the government is stable, and the economic growth pattern is favourable. Companies in general have realised that they need to spruce up their supply chain and for this they need large logistics parks with very large processing capabilities. What does it require? It requires capital investment inside the big boxes in terms of material handling equipment, racking, shelving, technology, automation, conveyor sys-tem, sortage and storage systems and a whole lot of advanced software appli-cations. And then you need to adopt global benchmarks in warehousing man-agement. A half-a-million sq ft modern warehouse can give 50 times more out-put than a 50,000 sq ft godown if we could integrate all the required pieces. Big boxes is the idea whose time has come in this country now.

Your new venture, what all it would

be doing on warehousing front?We are clear in our mind: we will build high-end modern DCs across the coun-try. I have set a target of 20 million sq ft of modern DCs in the next three-four years which could go up to 30 million sq ft in the next five years. It will all depend on how customers adopt it. These units will be based on GsT strategy, linked with modern transportation systems and logistics parks where I will provide modern warehousing, cold chain stores, fulfilment centres for e-commerce com-panies, etc. Our focus will be on an inte-grated value chain.

so when you say 20-30 million sq ft space in a cumulative sense, how many units you are talking about in a broader sense?This kind of space capacity will be built across 21 cities in the country. These cit-ies are either major consumption centres or production centres. each unit will be between half-a-million to 2 million sq ft depending upon the demand in a spe-cific location.

so are you promising the biggest DCs which this country has seen?That is the intent.

will they be greenfield units?They will be a combination of greenfield, build to suit and existing units. We our-selves will not be investing in land and building. Our aim is to change the life of our customers and not to become an infra player. We will purely remain a sup-ply chain player from the services side. We will join hands with developers to build those large warehouses. We will invest in the facilities inside the big box.

Most of the supply chain players in the country talk about transporta-tion first and then warehousing as part of the larger integrated design. what will be your strategy?In our case, it will reverse. For us, ware-housing will be the fulcrum of our oper-ations even as transportation will be a vital component of our larger integrated value chain. But we will pursue ware-housing first strategy.

We realised

there is a

serious gap

in quality

supply of

warehousing,

RajEsh jaggi,

IndoSpace

s u r v e y

warehousing

u 62 u



inDusTrial parks

the new catalyst Post GST, industrial parks will become a happening segment

the growing demand for large scale ware-houses in the country could well find a new cushion apart from big ticket designs of

established logistics service providers (lsps). there are trappings to suggest that industrial parks, the dedicated manufacturing zones with adequate provision for storage and other supply chain activ-ities, will become a happening segment in the coming years post gst. the lack of clarity on the path-breaking law in the past is believed to have forced developers to lie low. but now with gst round the corner, their offerings are expected to find more willing takers from the manufacturing and distribution sides who know the pragmatism of an integrated play, which is the usp of an indus-trial park.

considering the size of the indian economy, the gap is glaring when it comes to industrial real

estate – the base turf for advanced offerings either in manufacturing or distribution or a mix of both. “indian industrial real estate stock is 170 mm sf compared to 17,000+ mm sf in the us and 7,500+ mm sf in china. when compared to respective gdps, the gdp to industrial stock mismatch in india is telling,” explains rajesh Jaggi of indo-space. but this mismatch is likely to be bridged in a gradual manner with the arrival of a slew of play-ers on the scene who often have the institutional funding back up. “we are witnessing the height-ened interest of international financial and devel-opment institutions, global institutional investors and developers to participate in this accelerating opportunity. the indian developer community, which has long been fixated on the traditional real estate asset classes, viz. residential, office, hotel and retail, have now opened its mind and wallet to

right players to manage them,” explains tci’s agarwal. and with gst unlocking a plethora of opportunities, the serious stakeholders are also talking of a right mix of qualitative and quan-titative growth. Knight frank projects that total warehousing space (including those for exim cargo) in the country will go up from around 900 million square feet in 2014 to over 1,400 million square feet by 2019. and serious stake-holders seem to be ready for it. tci confirms adding 0.5-1 million sq ft of warehousing space, safexpress is working on four more logistics parks units, dhl supply chain confirms that it is contemplating more mcs’, om will be adding more greenfield units especially in gujarat, etc. and “given india’s robust growth, the expand-ing demand for industrial real estate, coupled with the government’s make in india push plus the e-commerce sector expansion, indospace is looking to increase its industrial and logistic

parks from around 27 million sq ft (operational, under development and planned) to 50 mil-lion sq ft (operational, under development and planned) in the next five years, with a planned investment of upto $ 1 billion over the same period, to take total investment to $1.75 billion,” says Jaggi of indo-space.

from the public sector side, harpreet singh of cwc confirms an average addition of at least 1.5 lakh metric tonnes every year till 2020 and its crwc is targeting to unveil four more rail terminals in the next two years. but the real big-ticket intention is expressed by alkesh sharma, ceo and md, delhi-mumbai industrial corridor (see interview), that india’s largest infra project has provided for two epic-scale logistics parks. clearly, the story of big boxes in the country is poised to get more interesting.

u r i t w i K s i n h a

[email protected]

GST would

allow

companies

to expand

their existing

warehouses,

balaji V.

aVVashya CCI

s u r v e y

warehousing

u 63 u



enter into the warehousing segment,” points out balbir singh Khalsa of Knight frank india.

but it is not only warehouses which are on the radar of the new league of developers. they are rather indulging in a larger play by bringing in manufacturing and storage under one roof. take for example, the 200 acre renaissance industrial smart city which has partially opened its doors for the industry users. located on padhga-Kalyan road, the facility typically functions on indus-trial clusterisation model – something that has contributed significantly to china’s manufac-turing might in the last couple of decades. “in china, we have seen how mobile cities or elec-tronic cities have come up which have added strength to their economy. they primarily func-tion on the model of creating clusters for different industry segments and delivering them the most robust ecosystem which includes all facilities on the supply chain side. this is what we are try-ing to do here,” says mayur suchak, md, magus consulting, which has developed the first inte-grated industrial area (iia) in the mumbai met-ropolitan region (mmr). the industrial park has seven dedicated clusters supporting businesses like machine tools, textile, e-commerce (ama-zon has already established a fulfillment centre here), plastic, printing and engineering. renais-sance industrial smart city has received substan-tial funding support from edelweiss (to the tune of R400 crore), and it has planned further hori-zontal expansion of the project as it gears up to get completely ready in the next five years. “we have plans to add about 200 acres more in this project. and with the core strategy of creating an expansive integrated platform for manufacturing and supply chain, this complex will eventually

provision for about 100 acres of modern ware-housing,” adds suchak.

bhumi world industrial park, located in bhi-wandi near mumbai (a noted warehousing clus-ter in the country) is another case in point. the park spread across a sprawling 100 acres (to be fully ready by march 2018) had begun its opera-tional innings in 2012 with its core usp of supporting small and medium enterprises. “the response to our unit has been tremendous. about 600 units are already operational in our park, out of which 100 units belong to the foreign entities from coun-tries like spain, switzerland, malaysia, etc. every unit holder in the park has his own storage space for raw materials and fin-ished goods,” informs prakash patel, cmd, bhumi world. the unit has provisioned for as many as 11 industrial clusters including garment, printing, plastic, furniture, engineering, food, pharma, etc.

elsewhere in the country, other companies too are coming forward with their larger designs of establishing industrial parks with the inte-grated supply chain facilities. embassy, assets, salarpuria, tVs, casa grande and mascot are the leading names which have drawn the atten-tion of market observers. “in the next five years, we expect more pe-backed developers to hit this space and average ticket size of the parks will increase manifold,” says rami Kauhal, md, consulting and valuation services at cbre south asia. u

Patel: in support of SMEs

Suchak: wants to do what China has done

Documents

survey warehousing - CRWC _Warehous… · survey warehousing u46u august 29-september 11, 2016 business indiauthe magazine of the corporate world i t is no secret to anyone that in