Cover Story. warehouses. Re-imagining. warehouse design
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1 Re-imagining warehouse design 4
2 A highly competitive market and maturing value chains have led to a change in the dynamics of warehousing design being that it is integral to an efficient and effective supply chain network Lionel Alva 5
3 When it comes to warehousing, we are still prisoners of the past, as warehousing in the Indian context is still synonymous to that of a basic four-walled structure with a sub optimal dimensions, inadequate size and poor ventilation. However, increasing competition and evolving value chains have led to a change in the dynamics of warehousing since it is a crucial aspect of the supply chain network. Although the warehousing segment constitutes a mere 15 percent to 35 percent of the total logistics costs, it has a significant impact on the overall functioning of the supply chain. Thus several organisations have been focussing on building state of the art that serve as a key ingredient of an optimal supply chain network thereby giving them a competitive edge. The evolution from storage go-downs to multipurpose logistic centres is highly desired as form a crucial supply chain element holding the key to both customer satisfaction and cost reduction. The growth in warehousing is being impelled by policy changes, focus on the manufacturing sector, emergence of organised retail, increasing investments into infrastructure and rising domestic consumption. Recent trends highlight a sea change in the approach towards warehousing and mark a new epoch in the country s warehousing sector. While there exist several opportunities in the country s warehousing sector there are also various challenges that must be dealt with including a need for consistency in warehousing operation. Since an inefficient supply chain could lead to massive losses during transportation, storage and distribution of goods. Evolving supply chain The logistics and warehousing sector in India is still at an initial stage of development and is still not on par with that of most of the developed world. Until recently, management of the transport network and handling of the storage of goods defined the supply chain strategy for most companies in India. There has been a shift in this approach due to various multi-national companies setting up manufacturing facilities locally that have facilitated the implementation of global best practices in the domestic supply chain. Consequently, this has led to organisation seeking a more integrated supply chain system in a highly competitive and fragmented market. The burgeoning Indian economy, strongly supported by increasing FDI, improved market reforms and regulations and growing consumption levels in the country has been the major driver of the logistics market. Today, serve not only as a stocking point, their utility portfolio has diversified to being consolidation centres for multiple sourcing locations, Although the market for a Warehouse Management System(WMS) is still relatively immature, those companies who have shown the readiness to invest in technology adoption have benefited tremendously in managing their warehouse resources. Sushil Rathi Mahindra Logistics providing cross docking facilities to retail distributors, sorting centre for customer deliveries, and an assembly facility for final packaging and bundling. Currently, the organised sector has a minor market share, however it claims a major portion of the revenue. Significant investment in infrastructure for improvement of cargo transport modes, ICD/CFS and 100 percent FDI in logistics has provided a tremendous boost to the warehousing market. Emergence of third party logistics service, PE activity in warehousing market, adoption of WMS is some recent emerging trends in the warehousing market, says Raaja Kanwar, Vice Chairman and Managing Director, Apollo Logistics. 6
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5 With the increasing demand for modern, global players have started foraying into the market either in partnership with domestic real-estate companies or by setting up their own subsidiaries in the country. The value proposition for logistics providers is optimising logistics costs for customers, shortening the length of order completion cycle & reducing the number of fixed assets. Kaanwar adds, India s warehousing requirement is expected to grow at an annual average rate of nine percent to 1,439 million sq. ft. in 2019 from 919 million sq. ft. in The additional demand for warehousing space per year will be around 104 million sq. ft. The additional demand for warehousing space per year will be around 104 million sq. ft. till 2015 and will entail investments of about Rs15,000-16,000 crore every year. Raaja Kanwar Apollo Logistics Key market drivers Implementation of the Warehousing Bill upside for agri logistics Proposed rationalisation of tax structure in GST and FDI in retail incentives for cold chains PPP policies to facilitate private investment in rail-based and terminals Multimodal Transport Act Thrust on development of multimodal logistics parks till 2015 and will entail investments of about Rs15,000-16,000 crore every year. There are several functions that perform today, apart from their general functions of being physical storage points, such as shipment consolidation, break bulk operations, processing/postponement, assortments, stockpiling, product mixing, value addition, distribution, customer service, billing or invoicing and at times even order-taking, etc. Besides, several other core and non-core activities carried out by warehouse service providers include inventory management, proper handling practices including usage of warehousing equipment like stackers, pallet trucks, documentation management, communication management, etc. Girish VS, Director, India Supply Chain Management avers, We need to be a little more interactive when it comes to warehousing design per se. We need to use intelligently enough where it would add value to my services. Warehouses should be looked at as a distribution point where I can bring in products from multiple points and bring in 8
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7 Due to higher cost of investment in technology it is important to have a close collaboration between companies, financial institutions and government as well as a long-term vision. Amit Dhingra Menlo India multiple packages and then ship it out to various destinations. However, for warehousing to become more effective there is a need for a single nationalised market and the free movement of goods from state to state. This can only happen once the Goods and Services tax (GST) is implemented by the government in the earnest. Girish VS adds, The first and foremost thing that would rationalise the warehousing sector in India is GST. Once the GST rollout happens, a lot of what we see in the warehousing sector in India would be redefined. Foremost, organisations would need as many as they do today. Today, are required in multiple locations as every state has a different tax regime and structure. The implementation of GST would allow the seamless movement of goods between states. Furthermore, the emergence of next-generation storage models like FTWZs (Free Trade and Warehousing Zones) are expected to play a crucial role in overhauling the Indian supply chain by offering a world-class, single- window solution for multiple logistics activities, with special focus on EXIM flow. Once GST is introduced it will replace the current complex tax structure levied on goods and services by central and state authorities. This development will definitely be beneficial for a company like Menlo, as its key strengths are in managing larger warehouse spaces and operations, observes Amit Dhingra, director operations, Menlo India. It is widely believed by industry experts that with excellent infrastructure, mechanisation and regulatory incentives, the FTWZ model offers significant potential to save costs in the overall supply chain. As consolidation gathers momentum customers will move away from traditional to more modern distribution centres which will improve operational efficiency and help to manage inventory more effectively Policy reforms from the government including the establishment of logistics parks in the PPP model, the implementation of the Warehousing and Development Act 2007 and the implementation of GST coupled with the entry of 3PLs shall give new impetus to the warehousing sector in India. The role of technology Better legislation and the rollout of GST shall pave the way for a more optimised supply chain strategy. Organisations shall be able explore opportunities to build a more modernised warehouse set-up to enhance their efficiency. New and enlarged will have to be designed or redesigned and with the increasing demand for products and warehousing services, the demand for planning and product management at new constructed and redesigned will have to be reevaluated. It is also noticed that significantly large portion of the are still not well-equipped, are unorganised and incapable of handling large operations efficiently. There is also lack of adequate Key differentiators that set world-class apart from average ones are: High throughput rate per square meter of the warehouse space High productivity in terms of machines and personnel Advanced technologies such as WMS, RFID, that improve the overall warehousing operations Automation solutions such as AS/RS, sorting systems, picking systems etc that reduce manual effort and lead times within the warehouse Smart and efficient lighting such as LED can be used at and storage environments to deliver high performance lighting and reduce human error due to inefficient lighting training in the usage of technologyenabled systems coupled with reluctance on the part of the people to adopt to newer and seemingly more complicated methods. Dhingra adds: Clients need to understand the real value of new technologies and how it can drive out inefficiencies from their operations. Due to higher cost of investment in technology it is important to have a close collaboration between companies, financial institutions and government as well as a long-term vision. The increasing demand for modern assets, rising share of organised retail and over production and consumption growth are influencing the logistics industry to set-up large with state of the art technological systems. Sushil Rathi, senior vice president, supply chain, Mahindra Logistics, observes: The role of technology has metamorphosed from being just 10
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9 Warehouses should be looked at as a distribution point where I can bring in products from multiple points and bring in multiple packages and then ship it out to various destinations. Girish VS India Supply Chain Management New approaches to freight More freight to make its way to urban areas by rail or water Go directly to urban areas or major distribution parks serving them Ensure all distribution parks are rail/water connected an enabler of efficiency and quality to playing a more strategic role in gaining a competitive advantage. Although the market for a Warehouse Management System (WMS) is still relatively immature, those companies who have shown the readiness to invest in technology adoption have benefited tremendously in managing their warehouse resources. A WMS often utilises automatic identification and data capture technology, such as barcode scanners, mobile computers, wireless LANs and potentially radio-frequency identification (RFID) to provide real-time information about the status of bin utilisation and efficiently monitor the progress of products through the warehouse. Technologies like light or voice recognition for picking are also gaining popularity amongst large companies having the ability & inclination to invest in advanced systems. A few leading WMS suppliers provide inbuilt analytics and dashboard to manage key performance inducators. WMS software adoption facilitates various activities within the warehouse like an ability to cater to typical requirements in India including legal and statutory requirements, taxation, road permits, besides making the supply chain efficient via ability to track and trace and centrally manage inventory stock at various distribution centres. Rathi adds, Mahindra Logistics (MLL) has invested in technology and developed IT-integration as a value proposition. It has developed a customisable transport management solution in-house called MILES (Mahindra Integrated Logistics Execution System) based on Oracle Transport Management System (OTM) which can interface with customers host system through its middle ware. MILES helps in managing key areas namely pre-outbound inspections, vehicle reporting, dispatch and delivery. Smart logistic companies see technology as a way to continually increase productivity and operating efficiency. A well tuned and modern warehouse can help reduce space allocation, inventory management, labour costs and increase work flow and customer satisfaction. To cite an example : In the Lavanta Distribution Center, where high technology is used in operations, 85 percent of total volume handled is operated without using any man-power by the help of automated storage and retrieval system (ASRS). This automation system consists of five cranes and 300 meters conveyor system, having 52,800 Euro pallets storage capacity, has a throughput capacity of 150 pallets inbound and 250 pallets outbound. With the support of lifts integrated to automation system, movement of pallets between all mezannine floors are done fully-automated as well. During shipments, full pallets are retrieved from storage locations and sorted to 50 shipments chutes without any human touch, mixed pallets are prepared using a pick by voice system, without any pen, paper or hand terminal requirement. Comparing to conventional solutions, this automation solution investment has provided 12 percent reduction in unit costs, with 60 percent saving in human resource and 40 percent saving in space usage. Support ongoing maintenance of waterways and removal of obstacles such as low bridges Undertake improvements to boost rail freight capacity alongside major projects supporting alternate transport When it comes to warehousing, the role of technology has metamorphosed into facilitating with state of the art amenities that would help it meet the demands of an increasingly globalised market. The nature of a competitive marketplace has led to organisations re-thinking their approach towards the supply chain leading to a steady adoption of modernisation and optimisation techniques throughout the supply chain to acquire a competitive edge. The sustainable growth of the warehousing sector will rely heavily on how effectively industry players and the government can work together to address challenges in the long term. Firms will have to look for new optimisation techniques with respect to the growing warehousing sector. Small will have to be replaced with large facilities or equipped with modern systems to attain modernised warehouse functioning. To maintain the current lead time, firms will have to redesign the warehousing system by factoring in the best warehouse practice to get the most from the warehouse or distribution centre. A new and interactive approach towards the setup of the warehouse system will have to be kept in mind. 12
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