New Warehousing Policy
New Warehousing Policy
New Warehousing Policy
Divya Gupta, PGDRM Jan’22-23
Importance of Warehousing in Logistics
A warehouse acts as an integral part of logistics that stores products between the point of origin and the point of consumption. Production and consumption do not take place simultaneously. There is a gap between the two, and warehousing bridges this gap by storing goods.
Role of Warehousing
Warehousing creates time utility by holding products until they are required. This function helps reduce costs and improves service, flexibility, and responsiveness. When these advantages are realized, warehouses become more valuable to both the organization and the supply chain as a whole.
Impact on Supply Chain
If a warehouse is eliminated from the supply chain, the entire logistics industry would come to a standstill. Warehouses form the spine of the supply chain by ensuring continuous availability of goods.
Growth of the Warehousing Segment
The warehousing segment has proven itself to be one of the quickest asset classes to recover from the pandemic. Its resilience highlights how critical it is to economic recovery and supply chain stability.
What is Warehousing?
TYPES OF WAREHOUSES
PUBLIC WAREHOUSES:
Government and semi-government bodies own these warehouses. They make them available to private firms for storing goods. Businesses can use them by paying rent.
BONDED WAREHOUSES:
The government licenses these warehouses to accept imported goods for storage until customs duty is paid. They are usually located near ports. Goods are kept in bonds and cannot be withdrawn until the duty is cleared.
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Functions of Warehouses
Benefits of warehouses
Warehousing Operations
RECEIVING:
Receiving begins with an advance notice about the arrival of goods. This notice helps warehouses schedule receipts and plan unloading. It ensures better coordination in the process.
PUTTING AWAY:
This step manages the second inventory of storage locations. It decides where the product will be placed before storage.
STORAGE:
The main function of a warehouse is to store goods. It also bridges the gap between production and consumption.
ORDER PICKING:
This process involves taking and collecting items in the required quantity. Warehouses complete this step before shipment to fulfill the order.
PACKING AND SHIPPING:
It is important to check that each order is complete. Warehouses must also ensure the order is accurate as per customer needs.
Comparison of warehousing markets
Indian Warehousing Sector Overview
The warehousing space per capita in India remains low compared to developed economies.
Warehousing accounts for only 15%–35% of the total logistics costs. However, it plays a significant role in ensuring the smooth functioning of supply chain networks.
The domestic warehousing market is highly fragmented. Most warehouses in India cover an area of less than 10,000 sq. ft.
Nearly 90% of the warehousing space is controlled by unorganized players. They operate small-sized warehouses with limited mechanization.
Sectoral End-Users of Warehouses
The key end-users of warehouses in India include:
3PL (Third Party Logistics)
e-Commerce
Manufacturing
FMCG
Retail
Consumer Durables
Examples of major players in warehousing segments in India
Challenges faced by Indian Warehousing Sector
LACK OF IT PENETRATION:
Warehousing often faces challenges due to manual processes. Limited real-time visibility affects inventory management, documentation, billing, and reporting.
LACK OF EXPERTISE IN WAREHOUSING TECHNOLOGIES:
Most Indian warehousing players use inefficient methods to store, handle, and monitor goods.
PROCESS INEFFICIENCIES:
Warehouses often operate without standardized processes and procedures.
UNAVAILABILITY OF SKILLED WORKFORCE:
The industry lacks trained personnel to operate advanced material handling and warehouse management systems.
LAND AVAILABILITY ISSUES:
Procuring land for warehousing is difficult due to rising real estate prices in and around major cities.
Indian Warehouse Market
E-Commerce and Warehousing Market
E-Commerce in numbers
The e-commerce sector has been the biggest driver of warehousing across developed markets. In the UK, online sales rose from 19.2% in 2019 to 33.4% in May 2020. This sharp rise highlights the dominance and scalability of the online marketplace, even in a mature economy
India’s e-commerce market had only a 4.7% penetration in 2019. This shows the sector is still at an early stage but ready for its next phase of rapid growth.
The e-commerce sector’s share in total transactions has increased from 18% in FY17 to 31% in FY21. Global players like Amazon and Walmart-backed Flipkart have been the key drivers of this growth.
According to Knight Frank Research, the e-commerce sector is expected to be the largest consumer of warehousing space in India, with demand projected to rise by 165% during FY 2022–2026 compared to the previous five-year period (FY 2017–2021).
Trends to watch for
New Warehousing Policy
What is the Policy?
To reduce transportation and logistics costs, the government is formulating a national warehousing policy that will focus on developing dedicated warehousing zones through public–private partnerships. These planned zones are a part of broader reforms in the transport sector, which handles the bulk of goods movement across India.
Who will frame the policy?
How?
Objectives of the Policy
Economic impact of the policy
Logistics cost living
India’s logistics costs account for 13–14% of GDP, which is significantly higher than 10–11% for other BRIC nations and 8–9% for developed economies. A large share of this cost stems from the lack of efficient intermodal and multimodal transport systems, coupled with inadequate road infrastructure. Additionally, warehousing expenses remain elevated due to limited capacity, the absence of standardization, and insufficient adoption of IT-driven processes.
This high logistics burden reduces the competitiveness of Indian goods in global markets. Bringing logistics costs down from the current 14% of GDP to single-digit levels would not only enhance efficiency but also make exports more competitive worldwide.
ESTABLISHMENT OF MULTI-MODAL LOGISTICS PARKS
In May 2017, the Union Government announced plans to develop a network of 35 Multi-Modal Logistics Parks (MMLPs) under the Bharatmala programme. These parks are designed to enhance intermodal connectivity by integrating dedicated railway lines and highway access with airports, seaports, or inland waterway terminals. The initiative aims to create a seamless transport ecosystem that reduces costs, improves efficiency, and strengthens India’s logistics backbone.
Multi-Modal Logistics Parks (MMLPs) can significantly strengthen connectivity with warehousing zones, leading to improved efficiency, faster movement of goods, and reduced overall logistics costs.
Economic impact of the policy
Way forward
Growth of Warehousing in the Industrial Space
Warehousing in the industrial sector is expected to grow due to several factors. These include the Make in India initiative, rising global demand, organized retail, manufacturing expansion, e-commerce growth, and increasing international trade.
Agricultural Warehousing and Cold Storage Demand
In agriculture, government measures to curb post-harvest losses are creating demand for cold storage facilities across the country. Along with agriculture, the pharmaceutical industry is also driving significant storage demand.
Policy Impact on Efficiency and Costs
Government policy aims to improve efficiency in the warehousing sector. If implemented effectively, it can lower the cost structure. However, challenges such as limited IT penetration and operational inefficiencies still need to be addressed.
Future of the Warehousing Industry
The warehousing industry must continue to evolve to sustain market pressures and rising competition. Companies that adapt quickly will remain competitive in this changing environment.
India as an investment destination: The sector attracted investments of more than $1.5 billion in 2021, making it the second-highest after the office sector. According to a report by Savills India, investors are expected to maintain strong interest in 2022 as well. The policy will attract more foreign direct investment and, in turn, boost trade.
Disclaimer
This report has been prepared by students of the Global Risk Management Institute for research, classroom discussions, and general information purposes only. The students and GRMI have taken care in collecting data and preparing the content. However, they do not guarantee its accuracy or completeness and disclaim all implied warranties to the maximum extent permitted by law. References to the collected information have been provided where necessary.
GRMI and its students accept no responsibility or liability for any loss or damage of any kind that may occur to any person as a result of acting, or not acting, based on the statements, facts, figures, opinions, or beliefs contained in this report. This report does not constitute advice of any kind.
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