How warehousing can spur economy

Traditionally, warehouses have been looked upon as an asset heavy model which gave importance to creation of space alone without any emphasis on efficient handling, scientific processes and its management.

Of late, we are seeing importance being given to systems and processes which are making agri-logistics independent of infrastructure and agnostic to geographic location.

Agriculture sector in India, accounts for about 16 per cent of the GDP in spite of employing more than 50 per cent of the country’s workforce. Despite agriculture losing its share in GDP, it is still the largest economic sector.

Agriculture has begun to regain its sheen, with the government and private entities taking interest in empowering the sector. However, the agriculture supply chain in India suffers from inefficiencies leading to heavy losses of commodities due to lack of proper storage and transportation facilities. It is estimated that about 20 per cent of the foodgrains (including grains, fruits and vegetables, spices, etc) are lost annually because of poor storage facilities. There is a huge gap in the quantity of agricultural produce and the available scientific management.

The huge gap between the demand and supply of logistics services, which have been left unattended due to the unorganised nature of the market, has opened up many opportunities for players.

Total warehousing space requirement in India is expected to grow at a compounded annual growth rate of nine per cent from 919 million sq ft in 2014 to 1,439 million sq ft by 2019, according to Knight and Frank Report. Manufacturing will continue to remain one of the biggest demand drivers of the warehousing sector with an annual requirement of 61 million sq ft of incremental space between 2014 and 2019.

The losses in commodities are mainly attributed to infrastructure. However, lack of knowledge of managing and maintaining premises with inefficient scientific processes are the key reasons for the losses. The emphasis is falsely placed on creation of infrastructure rather than adopting innovative methods of scientific storage for managing warehouses.

However, increasing competition and introduction of global best practices by certain companies are forcing Indian businesses to rethink on the importance of warehousing processes and the resultant benefits of managing an efficient supply chain.

Supply chain management is all about flow, be it of goods from the producer to the consumer or from the consumer to the producer.

Warehouses play a critical role in this process and were conventionally set up as inventory buffer points along with the supply chain so that any irregularities within this chain could be ironed out.

However, the need to reduce the service response time and contain inventory cost has necessitated the progression of warehouses from storage points to distribution centres. Additionally, the advent of technology has made it possible to operate warehouses more efficiently and achieve greater integration with the rest of the supply chain modules.

Regulatory barriers have constrained the investments in development of storage and processing facilities; hampered the development of successful institutions; and led to deterioration of the condition of agricultural producers to be globally competitive.

Information Technology (IT) and its use in organisations and across the supply chain has become a determinant of competitive advantage for many corporations.

Warehouses have been going through various challenges such as – supply chains are becoming more integrated and shorter, globalised operation, customers are more demanding and rapidly changing technology. In a market dominated by unorganised players, the use of technology has been neglected by the logistics and warehousing industry.

Most logistics and warehousing companies use outdated technology and systems which are incapable of meeting current and projected requirements. Technology is set to be the key enabler of growth for this sector. India has just awakened to the tremendous potential of technology-driven innovation in this burgeoning sector.

The writer is the CEO, SLCM Group. The company is involved in agri-logistics. Views are personal.

COMMENT NOW