Warehousing has become an integral cog in the supply chain and logistics machine as it constitutes 25 percent of the total logistics cost. With the increasing need for meeting the demand with supply in the most efficient manner, it is gaining more prominence. In a time when fast delivery has become as important as any other aspect in logistics, a distributed approach is coming in vogue as compared to a centralized one. The increasing momentum of manufacturing in the country and the shift towards ecommerce are some of the major factors fuelling this market growth. Be it the storage of raw material or finished products, warehousing is witnessing a high demand in the fields of food processing, pharmaceuticals, and automobiles. Other factors contributing to its growth are the increase in exports and the change in tax regulations in the country.
According to a report by Research and Markets, the warehousing market in India is expected to become worth Rs 2821.10 Bn by 2024, growing at a CAGR of more than 13 percent. Out of all the segments into which the market is categorized, agricultural warehousing is believed to grow at the fastest rate in terms of revenue during the period. In another research done by IMARC Group, the warehousing market in India comes out as a promising one with chances of showing moderate growth till 2025.
With a total warehousing capacity of 160 mn tonnes, India has allowed only 30 percent of the capacity to be managed by the private sector. The remaining and the major part of it is taken care of by FCI (Food Corporation of India), CWC (Central Warehousing Corporation), SWC (State Warehousing Corporation), state agencies and the co-operative sector.
Rising Demand for Warehousing
If we look at the sectors that are witnessing the highest demand for warehousing, they are third party logistics, fast moving consumer goods, and retail in addition to ecommerce and manufacturing. Within these segments, third party logistics and ecommerce are the frontrunners in terms of adoption of organized warehousing spaces.
However, with all the brouhaha over the rapid adoption of warehousing services, there are some systemic challenges that continue to impede the market’s growth. There is a lack of infrastructure in the form of road conditions, connectivity, traffic density, and sea port capacities that together work as a repulsive force to the growth of this market. Moreover, the manufacturers who were resorting to just-in-time system for inventory management were in for a surprise as lockdown resulting from the Covid-19 pandemic strangled the manufacturing chains across the world.
“We may not witness investor activity in warehousing in the near term due to the Covid-19 related uncertainties. However, as the dust of the pandemic starts settling, investors would return to the warehousing sector with renewed vigor in anticipation of the potential for renewed growth as these emerging trends start to unfold,” says Nibodh Shetty, Consultant–Research, Knight Frank India.
The way forward now is to bring about warehouse automation which can help businesses gain operational efficiency. At the same time, development of infrastructure and enablement of last mile connectivity must also go hand in hand.