EMERGING TRENDS
| Areas | FMCG | FMCD | Retail | pharmaceuticals | Ecommerce | Manufacturing & engineering | Auto & auto-ancillary |
|---|---|---|---|---|---|---|---|
| Upgrade toward Grade A warehouses | |||||||
| Racking solutions | |||||||
| Other opportunities | Growth in supply of FSSAI-approved warehouses | Supply of warehouses near mandis to store surplus | Supply of warehouses for e-pharmacies & indigenous API producers | Streamlining return process | Supply of pre- fabricated coal stockyards Inventory based pricing for commodities using | ||
| Multi-party logistics parks | |||||||
| Growth of full-stack logistics | |||||||
| Growth in warehouse near production units | |||||||
| Growth in FC footprint | |||||||
| Growth in cold storages | |||||||
| Automation in warehouse operations | |||||||
| Automation in warehouse operations |
FMCG (organized) warehousing stock is expected to grow from ~17M sqft in FY20 to 44M sqft in FY25, growing at 2.5x
Key highlights
- FMCG warehousing space was ~17M in FY20 and is expected to reach 44M sqft by FY25
- Grade A & Grade B stocks to grow at 25% and 18% CAGR, respectively, till FY25
- Growth is expected on account of increase in consumption and increase in penetration of modern trade channel in total FMCG sales
Eight emerging opportunities for investment in FMCG warehousing across automation, shared storage spaces, full-stack solutions, & infra. development
|
SHORT-TERM (UP TO MAR ‘21) |
|---|
Full-stack solutions - 3PL/4PL
To capture higher margins for 3PLs, expected due to network centralization & varying oil prices
- Centralized warehouses reduce overall storage cost while boosting efficiency
- Variation in oil prices can affect margins for trucking industry
Expansion into tier-2 cities
To service the reverse-migrated population as WFH becomes the new normal
- Work from home (WFH) has resulted in a resource shift to smaller towns – increase in local consumption of daily requirements
FSSAI-approved warehouses
To capture growing FMCG food market
- Increasing population, purchasing power of rural masses, and brand awareness driving FMCG growth
- GxP compliant warehouses can be contracted to FCI as well
|
MEDIUM-TERM (UP TO MAR ‘22) |
|---|
Cold storage & transportation
To increase storage space
- Demand spike for frozen foods, OTC etc. during social distancing & pandemic scare
- Continuing demand of cold storage for frozen food, OTC products, fresh produce, milk, meat products etc.; growth expected to continue in the near future
Automation of warehouse operations
To reduce dependence on labor
- IoT for inventory management
- SaaS for Warehouse Management System (WMS) and Transport Management System (TMS)
- Robotics for lot placement
Technologies that aid business continuity
Data recovery services and cyber security solutions
- Grade A warehouses are often pre-fabricated and more automated. Besides robotics, software systems drive the business
|
LONG-TERM (UP TO MAR ‘25) |
|---|
Multi-party ‘logistic parks’
To provide players flexibility for storage space on pay per pallet basis
- Helps players manage inventory for seasonal demand
- Useful for storage of goods with sporadic demand
- Easy adoption in near term as collaborative practices with sharing of resources continue
Racking & vertical placement infrastructure
To optimize horizontal space requirement
- Heavy investment with longer RoI
- Portability low – poor flexibility of relocation
systems drive the business
FMCD (organized) warehousing stock is expected to grow from ~24M sqft in FY20 to ~46M sqft in FY25
Key highlights
- FMCG warehousing space was ~24M in FY20 and is expected to reach 46M sqft by FY25
- Grade A & Grade B stocks to grow at 18% and 14% CAGR, respectively, till FY25
- Growth expected on account of increase in sales of consumer durable products with increasing penetration in Tier 2/3 cities
Six emerging opportunities for investment in FMCD warehousing
|
SHORT-TERM (UP TO MAR ‘21) |
|---|
Full-stack solutions - 3PL/4PL
To capture higher margins for 3PLs, expected due to network centralization & varying oil prices
- Centralized warehouses reduce overall storage cost while boosting efficiency
- Variations in oil prices can affect margins for trucking industry
Expansion into tier-2 cities
To service the reverse-migrated population as WFH becomes the new normal
- Work from home (WFH) has resulted in a resource shift to smaller towns – increase in local consumption of daily requirements
|
MEDIUM-TERM (UP TO MAR ‘22) |
|---|
Automation of warehouse operations
To reduce dependence on labor
- IoT for inventory management
- Robotics for lot placement
- SaaS for Warehouse Management System (WMS) and Transport Management System (TMS)
|
LONG-TERM (UP TO MAR ‘25) |
|---|
Cater to new manufacturing hubs that are expected to be set up
Expected benefits from changed global attitude toward Chinese manufacturing
- Expected investments in R&D and infrastructure to enable low-cost, high-quality production as ~50% of finished goods & components, eg. LED panels, are imported
- Factories moving out of China to reduce supply chain risks
Multi-party ‘logistic parks’
To provide players flexibility for storage space on pay per pallet basis
- Helps manage inventory for volatile demand
- Can be used for strategizing supply network for new products
- Popularized by centralization & aggregation of storage spaces post GST
Racking & vertical placement infrastructure
To optimize horizontal space requirement
- Heavy investment with longer RoI
- Portability low – poor flexibility of relocation
Organized retail warehousing stock is expected to grow from ~60M sqft in FY20 to ~205M sqft in FY25, about 3.5x growth
Key highlights
- Retail warehousing space was ~60M in FY20 and is expected to reach ~205M sqft by FY25
- Grade A & Grade B stocks to grow at 29% and 24% CAGR, respectively, till FY25
- Growth expected on account of increase in retail sales with rising sales of essential and non-essential products, and integration of retail stores with internet companies
Six emerging opportunities for investment in retail warehousing across infrastructure development, centralization, automation, & artificial Intelligence
|
SHORT-TERM(UP TO MAR ‘21) TO MEDIUM-TERM(UP TO MAR ‘22) |
|---|
Expansion into tier-2 cities (Short-term)
To service the reverse-migrated population as WFH becomes the new normal
- Work from home (WFH) has resulted in a resource shift to smaller towns – increase in local consumption of daily requirements
Technologies that aid business continuity
Data recovery services and cyber security solutions
- Grade A warehouses are often pre-fabricated and more automated. Besides robotics, software systems drive the business
|
LONG-TERM (UP TO MAR ‘25) |
|---|
Warehousing hubs near manufacturing hub and ports
New hubs are expected to be set up benefitting from the changed global attitude toward Chinese manufacturing and government’s policy to reduce dependence on imports- Helps retailers/manufacturers in maintaining centralized inventory
Artificial Intelligence
To manage inventory and reduce dependency on labor- Reduction in dependency on manual labor and increased efficiency
- SaaS for Warehouse Management System (WMS) and Transport Management System (TMS)
- Time saving in loading/unloading and moving cargo around the warehouse
Multi-party ‘logistic parks
To provide players flexibility for storage space on pay per pallet basis
- Helps players manage inventory for volatile demand
- Can be used for strategizing supply network for new products
- Popularized by centralization of storage spaces post GST
Racking & vertical placement infrastructure
To optimize horizontal space requirement- Heavy investment with longer RoI
- Portability low – poor flexibility of relocation
|
SHORT-TERM(UP TO MAR ‘21) TO MEDIUM-TERM(UP TO MAR ‘22) |
|---|
Expansion into tier-2 cities (Short-term)
To service the reverse-migrated population as WFH becomes the new normal
- Work from home (WFH) has resulted in a resource shift to smaller towns – increase in local consumption of daily requirements
Technologies that aid business continuity
Data recovery services and cyber security solutions
- Grade A warehouses are often pre-fabricated and more automated. Besides robotics, software systems drive the business
|
LONG-TERM (UP TO MAR ‘25) |
|---|
Warehousing hubs near manufacturing hub and ports
New hubs are expected to be set up benefitting from the changed global attitude toward Chinese manufacturing and government’s policy to reduce dependence on imports- Helps retailers/manufacturers in maintaining centralized inventory
Artificial Intelligence
To manage inventory and reduce dependency on labor- Reduction in dependency on manual labor and increased efficiency
- SaaS for Warehouse Management System (WMS) and Transport Management System (TMS)
- Time saving in loading/unloading and moving cargo around the warehouse
Multi-party ‘logistic parks
To provide players flexibility for storage space on pay per pallet basis- Helps players manage inventory for volatile demand
- Can be used for strategizing supply network for new products
- Popularized by centralization of storage spaces post GST
Racking & vertical placement infrastructure
To optimize horizontal space requirement- Heavy investment with longer RoI
- Portability low – poor flexibility of relocation
Organized pharma warehousing stock is expected to grow from ~15M sqft in FY20 to ~22M sqft in FY25
Key highlights
- Pharma warehousing space was ~15M in FY20 and is expected to reach ~22M sqft by FY25
- Grade A & Grade B stocks to grow at 13% and 10% CAGR, respectively, till FY25
- Growth is expected on account of storage requirements of COVID vaccine and other pharma products
Eight key opportunities for investment in pharma distributi
|
SHORT-TERM (UP TO MAR ‘21) |
|---|
Full-stack logistics for API
production – To provide distribution network for upcoming segment
- Guaranteed growth segment with favorable regulatory policies (100% FDI allowed in pharma) & numerous dedicated grants
Expansion into tier-2 cities
To service the reverse-migrated population as WFH becomes the new normal
- Work from home (WFH) has resulted in a resource shift to smaller towns – increase in local consumption of daily requirements
|
MEDIUM-TERM (UP TO MAR ‘22) |
|---|
Cold chain & warehouses
To provide for ~30% unmet demand (by volume)
- ~25% vaccines wasted annually due to shortage of cold storage facilities – requirement by pharma players to conserve bottom-line
Warehouses for e-pharmacies
To provide 200-350K sqft warehouses to distribution-focussed e-pharmacies
- Gaining stronghold since GST; need to intensify due to absence of BCP among C&F agents
- Require tech-enabled warehouses (IoT for inventory management, advanced batch traceability & TMS systems)
- Use tech heavily to eliminate middlemen for transport from manufacturers to retailers/customers
Technologies that aid business continuity
Data recovery services and cyber security solutions
- Grade A warehouses are often pre-fabricated and more automated. Besides robotics, software systems drive the business
|
LONG-TERM (UP TO MAR ‘25) |
|---|
COVID-19 vaccine distribution network
To expedite reach of vaccine & gain goodwill for future investments
- India well-positioned to mass produce vaccines with prominent players like Serum Institute of India and Bharat Biotech already producing vaccines
- Fast & safe distribution for domestic as well as export volumes critical – opportunity for large logistic players Multi-party ‘logistic parks’
Multi-party ‘logistic parks’
To provide players flexibility for storage space on pay per pallet basis
- Helps players manage inventory for seasonal demand -flu, typhoid, etc.
- Useful for storage of goods with sporadic demand
- Easy adoption in near-term as collaborative practices with sharing of resources continue
Racking & vertical placement infrastructure
To optimize horizontal space requirement
- Heavy investment with longer RoI
- Portability low – poor flexibility of relocation
Organized e-commerce warehousing stock is expected to grow from ~56M sqft in FY20 to ~227M sqft in FY25; a 4x growth
Key highlights
- Ecommerce warehousing space was ~56M in FY20 and is expected to reach ~227M sqft by FY25
- Grade A & Grade B stocks to grow at 30% and 27% CAGR, respectively, till FY25
- Growth expected on account of growing penetration of e-commerce and increased reach in Tier 2/3 cities
Nine emerging opportunities for investment in Ecommerce warehousing
|
SHORT-TERM (UP TO MAR ‘21) |
|---|
Full-stack solutions - 3PL/4PL
To capture higher margins for 3PLs, expected due to network centralization & varying oil prices
- Centralized warehouses reduce overall storagecost while boosting efficiency
- Variation in oil prices can affect margins for trucking industry
Non-essential to essential shift
Need for more warehousing space, more delivery & handling labor, more automation as essential goods require higher service due to lower value to volume/weight ratio
- A category shift is likely from expensive items to basics due to altered online purchasing behavior
Expansion into tier-2 cities
To service the reverse-migrated population as WFH becomes the new normal
- Work from home (WFH) has resulted in a resource shift to smaller towns – increase in local consumption of daily requirements
|
MEDIUM-TERM (UP TO MAR ‘22) |
|---|
Streamlining return process
To minimize the return cost
- Increasing number of returns (~10-12% of the total number of orders)
- Return process to be shortened and simplified with automation and planning inventory space accordingly
Automation of warehouse operations
To reduce dependence on labor
- IoT for inventory management to facilitate availability of key parcel information
- SaaS for Warehouse Management System (WMS) and Transport Management System (TMS)
- Robotics for lot placement
- Conveyer belts for automatic sorting
Technologies that aid business continuity
Data recovery services and cyber security solutions
- Besides robotics, software systems drive the business
|
LONG-TERM (UP TO MAR ‘25) |
|---|
Racking & vertical placement infrastructure
To optimize horizontal space requirement
- Heavy investment with longer RoI
- Portability low – poor flexibility of relocation
Artificial intelligence
To manage inventory and order fulfillment
- Reduction in labor and increased efficiency
- Time saving in loading/unloading pallet, moving cargo around the warehouse; proves to be beneficial in basic warehousing operations where social distancing norms to be followed
Increase in FC footprint and specialized FC
To cater to more specialized demand of large orders
- Growing number of orders due to increasing population, purchasing power of rural masses, and orders
- Setting up regional FCs closer to the end user to increase speed-to-market
Organized manufacturing and engineering warehousing stock is expected to grow from ~76M sqft in FY20 to ~132M sqft in FY25
Key highlights
- Manufacturing & Engineering warehousing space was ~76M in FY20 and is expected to reach ~132M sqft by FY25
- Grade A & Grade B stocks to grow at 12% CAGR, respectively, till FY25
- Growth expected on account of increased manufacturing and engineering activities with rising demand and strong policy push by Government
Six emerging key opportunities for investment in distribution and warehousing for manufacturing sector
|
SHORT-TERM (UP TO MAR ‘22) |
|---|
Automation of warehouse operations
To reduce dependence on labor in textiles & machinery (including aftermarket) sectors
- IoT for inventory management
- SaaS for Warehouse Management System (WMS) & Transport Management System (TMS)
- Robotics for lot placement Coal stockyards
Coal stockyards
To provide larger storage spaces to unified entities resulting from M&A
- ~20% (by volume) of thermal coal in India is produced & supplied by private players – facing insolvency due to freefalling prices in a leveraged industry
- M&A among private players imminent – expected demand of better infrastructure coal stockyards
|
LONG-TERM (UP TO MAR ‘25) |
|---|
Grade A&B warehouses closer to manufacturing hubs
To optimize working capital & warehouse rental charges for textile & machinery sectors- Supply network consolidation resulting in simplification of distribution for better supply chain visibility & reduced leakages
- ~65-80% of branded textile players relocating to Grade A or B, post GST
Pre-fabricated steel warehouses
To provide flexible storage space for warehousing space intensive commodity businesses- Arbitrage-driven stockpiling of commodity raw materials like coal, metals, & chemicals – increase in storage space demand met by assembling of pre-fabricated warehouse on site
Cater to new manufacturing hubs that are expected to be set up
Expected benefits from changed global attitude toward Chinese manufacturing- Expected infrastructure investment to enable low-cost, high-quality production
- Factories moving out of China to reduce supply chain risks
AI-based demand & price prediction
To optimize working capital (inventory for raw material & finished goods) for commodities- Margin savings by better inventory & production management in industries like thermal coal, chemicals, & non-ferrous metals
- Existing inventory levels used as inputs to prediction machine to estimate price for steel, chemicals, & cement
Organized auto and auto ancillaries warehousing stock is expected to grow from ~25M sqft in FY20 to ~68M sqft in FY25
Key highlights
- Auto and auto ancillaries warehousing space was ~25M in FY20 and is expected to reach ~68M sqft by FY25
- Grade A & Grade B stocks to grow at 32% and 13% CAGR, respectively, till FY25
- Growth expected due to increase in sales, COVID and BS6-driven pent-up demand, and increasing car ownership due to social distancing requirement
Five key opportunities in warehousing in the automobile sector
|
SHORT-TERM(UP TO MAR ‘21) TO MEDIUM-TERM(UP TO MAR ‘22) |
|---|
Automation of warehouse operations
To reduce dependence on labor
- IoT for inventory management
- SaaS for Warehouse Management System (WMS) and Transport Management System (TMS)
- Robotics for lot placement Expansion into tier-2 cities
Expansion into tier-2 cities
To service the reverse-migrated population as car purchase increases due to pent-up demand and social distancing requirements
- Work from home (WFH) has resulted in a resource shift to smaller towns – increase in demand in Tier 2 cities
|
LONG-TERM (UP TO MAR ‘25) |
|---|
Warehousing hubs near manufacturing hubs
New hubs are expected to be set up as India becomes a hub for automobile manufacturing with increased domestic and export demand
- Helps manufacturers/suppliers in maintaining centralized inventory
- Expected investment in R&D by both domestic and foreign players to enable increased production of low-end and high-end models
- Electric car boom to further increase ancillary product warehousing demand
Secure warehouses near dealerships in Tier 1 cities for high-end cars
Increased demand for high-end cars, especially in Tier 1 cities, with rise in disposable income
Racking & vertical placement infrastructure for auto ancillaries
To optimize horizontal space requirement
- Heavy investment with longer RoI
- Portability low – poor flexibility of relocation