growth of the modern warehouse segment

Varun Gada, Director, LP Logiscience - the warehousing division of Liladhar Pasoo
“A multitude of factors like allowing 100% FDI in warehousing and increased adoption of technology have contributed to the growth of the modern warehouse segment in tier 2 and tier 3 markets, including the post-pandemic surge in warehouse demand.”

Varun Gada, Director, LP Logiscience - the warehousing division of Liladhar Pasoo

Concerns & Solutions
Expanding warehouse services to Tier 2 and 3 cities or upgrading existing warehouses in these areas presents challenges like need for compliant Grade A facilities of the right size, setting up agile infrastructure and scalability, recruiting and retaining a skilled workforce, and a comprehensive infrastructure setup with access to local resources like raw materials and suppliers. Effective transportation and logistics with a robust supply chain network, including regional distribution centers are crucial for seamless operations. Internet access and technology, security, and safety measures like surveillance systems and compliance with local regulations, are non-negotiable.

Leasing a warehouse
As a 3PL service provider, we opt not to invest in owning warehouses but instead choose to lease them, as it is much more viable due to lower rental costs compared to metros. Owning a warehouse not only ties up capital but also restricts scalability. It enables businesses to scale up or scale down as needed, without the burden of owning a fixed asset. This adaptability becomes crucial in regions with fluctuating demand. Rental properties for warehousing in Tier 2 and Tier 3 towns offer cost-effective and flexible solutions, making them a prudent choice for businesses.

Tech-enabled warehouses
The warehousing sector has evolved from traditional brick-and-mortar structures to highly sophisticated, technology-enabled, and smart storage solutions. Driven by both the nature of the business and advancements in technology, the sector is experiencing dynamic changes to accommodate the needs of a changing global consumer. Warehouses are growing in size, with the average warehouse in the country increasing from approximately 20,000 sq. ft. to 2-3 lakh sq. ft. According to a report by 'Research and Markets,' the sector is expected to reach INR 2,872.10 bn by 2027, expanding at a CAGR of ~15.64% during 2022-2027.

The pandemic was a true test of this supply chain model, highlighting its resilience and efficiency in handling surging demand across the country when the entire nation was under lockdown. Consequently, warehousing and supply chains have evolved further to accommodate advanced last-mile deliveries, multi-modal distribution networks, dark stores, in-city distribution, and several other hybrid methods.

The post-pandemic boom in warehouses in tier 2 and tier 3 markets, a surge in organized retail and e-commerce, changing consumer behaviors, and supportive regulatory measures, including 100% FDI in warehousing and tech adoption, have contributed to the growth of the modern warehouse segment, which is currently a focus of both investors and owners.

Market penetration
Expanding our operations into Tier 2 and 3 cities has helped us to significantly boost our market penetration. These cities often have untapped markets, allowing us to establish a strong presence and reach previously underserved customer segments.

The wider reach in these cities has not only helped us to broaden our service offerings to customers, but also improved our brand visibility and strengthen our market position. It has enabled us to tap into the growing markets for customers, enhancing our supply chain network, and tapping into the local resources and talent. Additionally, operational costs are notably reduced. Lower real estate costs, labor expenses, and overheads have led to improved cost-efficiency. This cost advantage has allowed us to offer competitive pricing and enhanced profitability.

LP Logiscience
We offer Integrated Warehousing Management Systems, such as a Web-based, cloud-integrated WMS and customizable systems. Our highly advanced logic-based put-away system and Efficient Forecasting Algorithms ensure optimal inventory positions, resulting in direct cost savings. We also provide Barcode, RFID, and voice-picking-enabled processes for efficient and accurate material movement.

With multiple forecasting models that incorporate exponential smoothing for demand spikes and drops, Advanced Warehouse location Management with configurable racks and locations, and the ability to log in from any part of the world to place orders, the company has become a preferred partner for some leading global companies. In just 11 years since its inception, we have grown the warehousing and transportation business to cover 3 million sq. ft of storage space and reach 10000+ distribution pin codes pan-India, dealing in Specialty Chemicals, Paints, FMCG, and Consumer Durables, to name a few.

LP Logiscience's integrated warehousing systems redefine efficiency

Driving demand
As per a report by India Warehousing Market Report – 2023 released by property consultancy Knight Frank, the Indian warehousing market demand in 2022-23 has been primarily driven by the third-party logistics (3PL), manufacturing, and retail sectors. Compared to 2022, the 3PL sector saw the highest rise in demand at 34%. The manufacturing sector recorded a 23% year-on-year (YoY) growth while the e-commerce sector recorded a decline in demand in FY23, mainly due to early capacity building and a gradual shift towards flexibility.

Also, the volume capacity for e-commerce sector experienced a 71% YoY decline in FY23 due to the excess capacity built during the pandemic to meet the surge in consumption. We have also seen a notable rise in demand from segments like Paints, Specialty Chemicals, including Cosmetics.
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