Warehousing – An India Perspective

Traditionally, warehousing in India has been made up of small unit sizes. Most warehouses were looked upon as mere godowns. The lack of world-class infrastructure has always hindered the growth of other industries that rely on warehousing and logistics. India is now witnessing a paradigm shift in warehousing due to the growth of organized warehousing and simplification of tax structure as well as other government aids.

India covers a vast area of 3.3 million sq. km and has a coastline of 7,517 km. However, the entire land mass is not conducive for locating a warehouse due to different geographic, demographic, and economic disparities. “Proximity” of the warehouse always carries the utmost importance. According to the Jones Lang LaSalle Meghraj – CII Warehousing Survey (Nov 2010), proximity to the supply-demand hubs and quality infrastructure were ranked the most important factors for choosing a location than the availability of manpower, skilled labor, proximity to ports and warehousing space costs.

With rapid industrialization and globalization, warehousing is receiving much-needed attention. With the Central Sales Tax (CST) going away, warehouses would get consolidated at a few places in India rather than being distributed in each individual state. This means that the warehouses grow larger in size and it becomes imperative that they become more sophisticated with sophisticated infrastructure, technology and processes.

Industry players are now looking at developing centrally automated warehouses. They have realized that it is better to have few centralized inventories than small distribution centers spread across everywhere, for improved efficiency and ease of tracking. Another area in warehousing that can look at gaining momentum is order picking. Automated picking system is more efficient as it employs minimal human labor. It is flexible as well as sensitive and modular.

The Positives

Growth potential

The demand for warehousing space is expected to grow from 391 million sq. ft. in the year 2010  to about 476 million sq. ft. in the year 2013 i.e. at a rate of 6.8% compound annual growth rate (CAGR) during this time frame. According to the Planning Commission, the 11th Plan provides for expansion of warehousing to 110m MT by 2012 from 60-70m MT.

There are quite a few major logistics parks coming up around major hubs of Mumbai, Delhi, Bangalore, Chennai, Hyderabad and NCR. Specialty logistics parks are under construction catering to various industries such as agriculture, electronic hardware, automotive and aero-industry. There are also several rail-linked and multi-modal logistics parks. The central government has identified about 861 acres of land as Free Trade Warehousing Zones (FTWZs). These FTWZs are governed by the SEZ (Special Economic Zone) Act 2005 and SEZ Rules 2006 and 100% FDI has been allowed in these FTWZs.


Till recently, little importance was given to the efficiency aspect of the warehouse. However, more businesses are now realizing various purposes such as storing, retrieving and cross-docking for which warehouses can be used. They have also realized that India lacks world class infrastructure when it comes to the global stage. This has exerted high pressure on the Indian government to take suitable measures to help the infrastructure grow.

Industrialists and the government are increasingly looking at incorporating the best practices in the warehouse industry. Companies are focusing on warehouse layout and locations for improving efficiency of the warehouse, while reducing the cost. More companies, whether MNCs or SMEs are getting into automating their warehouses, which can help in reducing human inefficiencies. Companies are using not only devices such as RF readers but also devices such as pick-to-light and voice recognition technology.

Automation for warehouses

Automating a warehouse plays a critical role in improving its efficiency. More automation modules and systems have been developed over the years. Some of them are the Automated Storage and Retrieval System (ASRS), Real-time Warehouse Control Systems (RTWCS), Automated Guide Vehicles (AGVs), hand-held devices such as RF readers and pick-to-light technology, and 3PL Warehouse Management Systems (WMS).

ASRS: These constitute various computer-controlled methods for automatically storing and retrieving loads from certain storage locations. They have several advantages over the traditional forklift trucks.

AGV: An automated guided vehicle not only helps in transporting loads between shipping docks or manufacturing and storage, but also helps in storing and retrieving goods from storage locations.

Automated Handheld devices:

These play a major role when it comes to order picking, cycle counting, transfers and other data collecting activities. Most of the handheld devices perform these actions as well as record the data. This helps in reducing human errors and paperwork while increasing efficiencies.

More and more Indian companies are realizing the power and need of third party logistics (3PL). Companies are focusing on managing their supply chain mechanisms in better ways for more market penetration. With the growth in infrastructure and rising focus on core business operations, a growth in the Indian 3PL market can be visualized. The 3PL market is expected to grow at 27% CAGR within the period 2012-2014, with total revenue of nearly 5.8 billion USD by 2014.

The Challenges

Everything is however not so great when it comes to the warehousing scene in India. Although the Indian Supply Chain industry is seeing winds of change, warehousing is still the weak link. The growth potential is still limited due to several key challenges.

Slow rate of automation adoption

Till late 90s and early 2000, automation was a term virtually unheard of, except in some multi-national companies. Most of the material handling was done using manual labor. It is only with the entry of new MNCs in the late 90s and early 2000, this scenario changed. Storage and material handling equipment are receiving attention only of late. Hence, even though automation has been introduced in warehousing, the concept is still at an infant stage.

There is another problem with automation adoption. Most of the storage and material handling equipment are of high cost and can be afforded by only big players. Tools and techniques such as RFID tagging, certain tracking system and certain warehousing flow simulation tools are beyond the reach of small players. Also, warehouse automation requires a considerable investment and the benefits can be seen only after a while. Most small players do not have long term plans. They are concerned more about immediate returns on their investments.

Manual processes and skill gap

India faces another major challenge when it comes to warehousing. Since automation is not a cheap affair, most SMEs and small players rely on manual labor in warehouses. The challenge here is to bridge the skill gap. The primary reason is that a major part of the industry is unorganized and there is scarcity of industrial skills development centers in India.

Warehouse Management Systems

Warehouses that have grown beyond traditional processes have made a leap in productivity using Warehouse Management Systems (WMS). WMS applications are now increasingly being deployed at warehouses that are looking to scale the barrier created by a combination of inefficient manual processes and increasing operating costs.

WMS solutions improve productivity by automating processes and bringing-in high levels of process and inventory visibility, while providing flexibility to manage a variety of scenarios, like cross-docking.

If your warehouse is bogged down by sub-optimal inventory management, high order processing costs and low-levels of customer satisfaction, we invite you to discover PALMS.

PALMS has helped warehouses across the globe to drastically improve warehouse performance and customer satisfaction by speeding-up warehouse operations, providing real-time inventory visibility and minimizing errors.

Click here to know more, or mail us at [email protected] with your contact details. Our technical expert will get in touch with you within one working day.





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