EY - India’s warehousing industry: an overview

India’s warehousing industry: an overview

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Apart from conventional storing services, warehouses in India now provide value-added services like consolidation and breaking up of cargo, packaging, labelling, bar coding, reverse logistics, etc.

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

Introduction

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

Current warehouse industry size with sub segments in FY13

EY - Current warehouse industry size with sub segments in FY13

Source: EY Analysis, Crisil Report on Warehousing