Warehousing and inter modal logistics are paving the way forward for material handling equipment (MHE) in India.
Modern warehousing and inter modal logistics industry initiatives in India, have redefined how business is conducted in the country in most industry sectors as well as its geographic regions. Value additions like lowest transportation costs; in-time delivery of products; removal of intermediaries in the business value chain; online transactions direct to retail or dealers; lowest cost to end users; ease of doing business and increased profitability for the manufacturers, are fuelling the growth of this sector to double digit levels, year on year. The entry of international majors and large corporate houses in the e-commerce space has opened new doors for this sector´s distribution systems for doorstep deliveries of items like apparels, FMCG products, white line appliances, pharmaceuticals, cosmetics, groceries and very recently automobiles! All these developments require state-of-the-art, product specific warehousing management coupled with high-tech non polluting, software enabled high productivity and sometimes fully or semi-automatic, material handling equipment and systems.
Piush Goyal, Managing Director, Kelley Material Handling Equipment India Pvt Ltd is very optimistic, ´The logistics industry in India is witnessing a boom leading to capacity enhancement by all major and medium size players. The total modern warehousing demand in the year 2014 was 900 million sq ft and the same is expected to grow to around 1,500 million sq. feet by 2019. Growth of the cold chain industry is yet another opportunity, which has witnessed CAGR of 25 per cent. The MHE industry in India is still at a nascent stage compared to China, which is around 25 times larger than present levels here. The e-commerce, 3PL, multi-brand retail and auto component will be the key growth drivers for this sector going forward.´
´The market size of logistics, distribution and warehouses to a large extent depends on the manufacturing and trade sector. Due to the slow growth in manufacturing over the last few years, logistics and sales, of material handling has seen subdued growth. With the Prime Minister´s ambitious plan of ´Make In India´ taking root, we expect to see good growth in manufacturing and consequently in logistics and distribution activities for the next few years,´ informs Cavas Dumasia, Vice President - Sales & Marketing, Godrej Material Handling Division.
Ramesh Babu, Managing Director, Seashell Logistics Pvt Ltd provides the viewpoint from the user´s perspective, ´The Indian warehousing and logistics industry is gradually getting redefined from the conventional to modern setups with automation, multi-rack and palletisation infrastructure. After GST coming into effect, the national warehousing network would be revamped, it could be considered as a single largest industry-wide opportunity to consider smart and strategic warehousing as a cost-saving opportunity across the supply chain, instead of a capital-intensive investment for federal tax reasons. With the emergence of a new sector of e-commerce and retail business houses, use of latest technology for efficient warehousing, supply chain management is going to be a necessity.
Every now and then, new redefinitions are fuelling the growth of this huge market. Some mixed reactions prevail in the industry but overall, there is a positive sentiment.
´The warehousing industry in India is currently valued at nearly Rs 850 billion to Rs 900 billion and is currently growing at 15-18 per cent since the last few years. The unorganised sector will continue to dominate, accounting for around 80-90 per cent of the industry. Of the organised sector, the industrial segment will constitute a higher share of warehousing demand, like engineering, automotive, chemicals, pharmaceutical and electronics goods. As far as geography is concerned, warehouse demand will be more in industrialised states and major markets for the specific industry. In the long run we see the industry will have exponential growth with high level of organised players providing 3PL services to manufacturing and retail sector, thereby contributing to more GDP and employment,´ says Ramesh Babu.
Manojit Acharya, Managing Director, Jungheinrich Lift Truck India Pvt Ltd, states, ´The warehouse market in India is growing faster than the GDP. The warehouse market will continue to grow at a CAGR of 12-13 per cent in the coming years. The warehouse market is largely dominated by the unorganised sector (90 per cent). The current market size is approximately Rs 800 billion.´ He adds, ´With the growth in the economy, per capita consumption, policy change by government, and the Make in India initiative, the intermodal logistics (e.g., surface transport, air and sea) will also grow significantly. The growth prognosis is CAGR of 14-15 per cent during FY2016-2020. The recent Budget will spur rural demand and infrastructure growth. Agri-warehousing, cold chain, liquid and container storage will gain further momentum.´
According to Kamlesh Shah, Managing Director, Kompress India Pvt Ltd, ´Some of the leading market research companies say this industry is around Rs 560 billion (Rs 5,600 crore) which will include the gamut of warehousing, manufacturing, storage, all kinds of MHEs and automation systems. This does not include inter modal logistics and the nodal hubs, and the e-commerce logistics. This is a concept which is coming up or will be very well thought of only after the introduction of GST. With the introduction of GST, the concept of independent warehouses will emerge faster. A lot of players will start to expand and innovate as well as provide high technology equipment because GST will allow them to be able to supply to different states and cities with minimum tax implications. Automation is another major thing to push forward in the future as many medium and small players are now looking forward to increasing their efficiency in operations by way of introducing new automation and software to improve their own efficiencies.´
Sunil K Gupta, CEO & MD, KION India Pvt Ltd, also confirms, ´The Indian logistics market is estimated to grow anywhere between CAGR 12-14 per cent during the next five years.´
Acharya concurs, ´The growth prognosis is CAGR 14-15 per cent during FY2016-2020. Agri-warehousing, cold chain, liquid and container storage will gain further momentum.´ He adds, ´Customers are looking for industrial trucks, warehouse equipment, racking and logistics systems. Today, we are offering 600 truck variants. Our range of products offers manual, semi-automatic and fully automatic machines for various requirements. The customer benefits are operational reliability, high efficiency, safety and high service life.´
Goyal differs from the rest, ´The material handling equipment industry in India is still at a nascent stage and there is hardly any global player in this field who is manufacturing latest technology products in India as yet. I am sure with the PM´s ´Make in India´ initiative and ´Ease of Doing Business´, it will rapidly gain momentum and MNCs like ours will start looking at setting up facilities here.´ Samir Gandhi, Director, Gandhi Automations Pvt Ltd, very positively states, ´The market in this segment will grow by 10-15 per cent Y-o-Y for the next five years; growth in the manufacturing sector and infrastructure will be a positive for our industry. Necessary steps and policy have been made to put the country back on the growth track.´
´Based on the thrust of the current government in infrastructure and the ´Make In India´ programme, we envisage good growth in the material handing segment. The Budget of 2016-17 also lays a lot of emphasis on infrastructure building which should have a positive effect. Further, our Finance Minister is committed to fiscal consolidation as stated in the budget and this should assist RBI to reduce interest rates. This will make investments in capital goods easier. We expect a CAGR of 10 per cent in the period 2016 to 2020 in the Material Handling sector,´ comments Dumasia.
Pinching Pain Points
Every growth story is accompanied by challenges, pain points and is subject to the on ground implementation of Prime Minister´s Make in India initiative and fiscal policies, announced by the Finance Minister in Budget 2016-17, opine the industry players.
Gupta points out, ´The key challenges faced by the MHE industry is on the low market volumes causing low attractiveness for our vendors, channel and towards technology investments as a whole. As compared to any developing economy, the Indian market for material handling is a very small market considering our sizeable population. This challenge can be overcome only by driving the concept of ´Efficient way of material handling´ through palletisation and contain rational change approaches in the market. The implementation of GST will take this industry to an entirely different level and I can see the government´s seriousness on this front too.´ He critically adds, ´The budgetary announcement by the Finance Minister on the Rs 2.21 lakh crore investment opens up many positives for the infrastructure and logistics industry as a whole. However, the Budget was not clear on taxes as they would apply to the logistics sector. The GST and its onset are pressing concerns that could have been addressed by the FM in his Budget speech.´
´A growth rate of 8 per cent is only possible by implementation of policies on the ground. The industry is hopeful about growth in infrastructure and the ´Make in India´ initiative,´ points out Gandhi.
Dumasia also concurs with the industry´s opinion, ´Our Finance Minister is committed to fiscal consolidation as stated in the Budget and this should assist the RBI to reduce interest rates. This will make investments in capital goods easier. We expect a CAGR of 10 per cent in the period 2016 to 2020 in the material handling sector.´ He adds, ´The current plethora of taxes and duties across various states in India is a major cause of concern.´
MHE Products and Solutions´ available in India
´The success of the sectors I mentioned above depends upon high quality infrastructure, technology, strategic location and selection of right material handling equipment from a forklift truck to racking system to the loading dock equipment and comfort to the workmen. Kelley« offers a full line of loading dock equipment and warehouse products to companies in India. This line-up of products includes Dock Levelers, HVLS Fans, Dock Bumpers, Dock Seals, Dock Shelters, Vehicle Restraints, impact resistant overhead Door products and supply chain logistics software ù all aimed at providing customers the highest quality dependable products and the lowest cost of ownership available in the industry. More than 1,000 of Kelley products are already installed at customer locations in nearly most Indian states,´ informs Goyal. Dumasia presents the elaborate range of Godrej material handling solutions: ´Customers typically look at solutions to their material handling needs to transfer material (mostly in pallets) from Point A to Point B. As the goods are mostly palletised, this leads to high productivity and reduces overall costs in the system.
Customers´ range of requirements can be grouped under the following areas:
A range of equipment from world renowned material handling equipment manufacturers like :
Gupta talks about the material handling solutions offered by Kion, ´We are one of the few, full range MHE players in the industry covering products such as Diesel & Electric forklifts, Battery pallet trucks, Stackers, Tow trucks, Vertical reach trucks, Order Pickers & Very Narrow Aisle trucks and so on - which involves various capacities suiting various customer applications. Our complete range of MHE is able to meet the customer requirements for most of the Indian market segments through our various flagship brands such as LINDE, STILL, BAOLI & VOLTAS, at various price and technology points.´
Gandhi says, ´The range of products by Gandhi Automations includes high speed doors, dock levelers, dock shelters, rolling shutters, fire rated rolling shutters, sectional overhead doors, mega industrial sliding doors, aircraft hangar doors and shipyard doors, gates and boom barriers. Out of these dock levellers, dock shelters and sectional overhead doors are important material handling equipment, our expertise is strictly related to providing loading bay solutions, we have 70 per cent market share in this segment; all the products are designed and manufactures by our skilled engineers.´
Operational excellence is imperative
For this industry to register a continuous year-on-year profitable growth, the equipment manufacturers and warehousing or logistics companies need to join hands in achieving the highest levels of operation efficiency. Further, the expected high growth rate, in this sector, will not be localised to any geographical region of the country nor restricted to currently established portfolio of products. In fact to scale the growth will be phenomenal irrespective of the perceived or projected CAGR. Therefore, there will be an undisputable need for operational excellence. In turn, the industry is ready.
Goyal gives an innovative definition to Kelley´s products, ´There is nothing specific that a customer in India will need to specifically suit our machines. The only need is the customers´ ´will´ to switch to the globally most advanced technology. You can leave the rest to my engineers, who will visit your site at pre- and post-project stage to carry out the site survey. I have seen many of our machines working satisfactorily even after 10 years in India. By the virtue of our advanced technology and ´Zero Defect´ quality, we are able to offer unbelievable warranties on all our products in India also.´ He highlights further, ´We are globally one of the leading companies in this business. Our 4SIGHT® is an advanced supply chain logistics software that uses state-of-the-art technology to provide you with increased visibility, productivity and sustainability in your yard, loading dock and warehouse. Warehouse executives are facing great pressure to do more with less these days. Whether you need a yard management system with real-time RFID and GPS information, a dock management system that helps increase efficiency or a tailored solution for your specific application, 4SIGHT can give you the tools to make the most of your operation.
Bottom line, from the moment a trailer enters your property to the time it leaves, the system will know exactly where it is, what´s on it, where it needs to be and how to get it there as efficiently as possible.
´Despite the incredible amount of intellectual property and advanced technology that goes into 4SIGHT, the system is very easy to use. We´ve taken great care to design intuitive graphical user interfaces so that the system is simple to train new users on. Truck drivers, managers and others can all get up to speed quickly so you don´t lose time or productivity figuring out the system.´
Dumasia explains, ´Buyers and users of lift trucks are increasingly conscious of Total Cost of Ownership rather than focusing only on price while evaluating equipment purchases. This includes cost of fuel/ energy, spares services, consumables, operators, etc, over the life of the equipment. Godrej has always strived to develop products and services which make the Total Cost of Ownership attractive for its customers. Even at present, we are evaluating new power trains, energy sources and lubricants that will continue to reduce the Total Cost of Ownership for our customers in the future.´
´End-to-end logistics solutions are aimed to improve operational efficiencies, productivity and throughput. Large capacity warehouses along with skilled manpower, higher level of palletisation, good physical and IT infrastructure and process orientations - to name a few - are required for successful implementations of logistics solutions,´ explains Acharya.
Gandhi offers a much wider perspective to his customers, ´During construction stage of a warehouse we consult with our client and understand their requirements; keeping those in mind, we ask them to construct the structure so products can be installed efficiently. Our skilled engineers install the product at the client´s site with perfection; the client has to worry about nothing. We also provide annual maintenance service to our clients; our customer care service is available 24 x 7 on our toll free number.´
From the other side of the table, Ramesh Babu elaborates, ´The logistics and warehousing sector in India is still in its initial stage of development and has a long way to go to match developed economies. Managing transportation - the network and storage of finished goods - was the definition of supply chain management for most of the companies in India till a few years back. After globalisation of the Indian economy and its integration with developed economies and various multinational companies setting up manufacturing facilities in India, have helped in bringing global best practices to the Indian market. It has resulted in a gradual shift from simply managing a transport network and godowns towards a more integrated supply chain management system. In order to understand the evolution of the logistics sector in India, it is better to understand the competing markets that have moved ahead in the value chain. The USA is considered to be the most evolved logistics market in the world and can be used as a benchmark to compare with the Indian market. The USA spends 9 per cent of its GDP on logistics; in comparison to it India spends nearly 13 per cent of its GDP in logistics. India´s proportionate expenditure on transportation is nearly double that of the USA´s despite having only one-third of its landmass. This indicates requirement for more efficient transportation service in India. USA´s logistics sector has a value of almost 10 times that of the Indian logistics sector. Yet the USA logistics sector employs only one-tenth the number of people that the Indian logistics sector does. The reason for such a difference is that the logistics sector in developed economies is highly mechanised and uses automation extensively unlike in India where even today it is largely dependent on the labour force. There is significant scope for growth and efficiency in India´s warehousing and supply chain management.´
Shah concurs along similar lines, ´The warehousing industry is evolving in India. In developed markets like Europe, US and other Western countries it has already been there for a long time. In India, the concept of proper warehousing started just 10 years back. So this is here to grow as every industry requires warehousing so also the storage solutions and MHE. For example, in every airport coming up there is a cargo facility attached to it. So, the storage and material handling segment can expect good growth in the coming years.´
Gupta says, ´Our Sales drivers are efficiency based engineered products with Value for Money proposition involving the complete product life cycle enabling customers to enjoy the cost benefits.´
The Material Handling industry especially with relation to the Industrial Trucks is very small in size vis-a-vis markets in other countries of equivalent economic size. While the awareness for the need of mechanised handling is increasing at a faster clip than before, certain products and aspects continue to be a constraint for this industry. Lack of standards for palletisation; unsafe lifting and handling practices largely prevalent in small scale industries or unorganised sector and people expected to lift loads heavier than 25 kg which is not a practice in most well established economies worldwide, are all accepted situations impeding the growth of this sector in India. Despite the same, the Material Handling solution providers, warehousing and intermodal logistics combine is poised in a very favourable spot and the nation as whole looking forward to witness how the industry overcomes the challenges, works around the pain points and fructifies the available opportunities, commensurate with the projections.
We expect to see good growth in manufacturing and consequently in logistics and distribution activities for the next few years.
Growth in the manufacturing sector and infrastructure will be a positive for our industry.
Five Key Market Drivers
India story of growth and changing demography: The Indian economy is currently the fastest growing in the world. With growth in the economy, the aspiration of the consumer and manufacturing industry will also be increasing. This requires adoption of new technology and optimising the operational capabilities to be competitive.
Demand for high-end services and infrastructure: With the emergence of new sectors like e-commerce, there´s the need for high end services with transparency. Delivery of consignments in no time and replenishment of goods quickly is also required. This requires operational excellence in supply chain management.
Global competition and practices: In the global village the global trade demand, requirements and practices become part of the decisive factors for supply chain management. To be competitive with the global competitors, operational excellence is a must.
Rising share of organised retail: In India, a large part of supply chain management is still under the unorganised sector and this sector has very low level of adaptability for technology vis-a-vis operational excellence. The growth of organised industry sectors such as retail, automotive, manufacturing, pharmaceutical and agriculture in India, is expected to give rise to more organised integrated supply chain companies.
GST implementation: This is considered as the biggest reform in commercial taxation in India after 1947. The introduction of GST will result in the Indian manufacturing sector being globally competitive and will promote entrepreneurial initiatives and economic activity, on the whole. Most of the manufacturers have constructed regional warehouses of their own to avoid interstate taxes. But under GST, they can streamline their operations and outsource their operations to 3PLs to save up to 20 per cent.