The success of emerging Grade A warehouses

Rajesh Singhai, General Manager – Business Development, Warehousing Solutions, Rhenus Logistics India Pvt. Ltd.
“The success of emerging Grade A warehouses in select Tier 2 and 3 cities hinges on the yet-to-be-determined market potential of these regions for the specific products requiring warehousing.”

Rajesh Singhai, General Manager – Business Development, Warehousing Solutions, Rhenus Logistics India Pvt. Ltd.

Challenges
The primary challenge revolves around small volumes and uncertainty in buying patterns, necessitating the construction of larger warehouses. Additionally, warehousing parks are not sustainable in these markets. Secondly, if any of these cities are situated in or near industrial areas, the land cost is reasonable enough for the manufacturing plant itself to become self-sufficient in building its raw material and finished goods warehouse requirements due to the ample availability of in-house land.

Trends & Prospects
Grade A warehouses are beginning to emerge in select Tier 2 and 3 cities, but the success of these developments is yet to be seen and felt. This success will depend on the market potential of the region for the specific products that require warehousing. Connectivity to cities and markets plays a crucial role in determining the warehousing requirements in these Tier 2 and 3 cities. The return-on-investment period for Grade A warehouses in Tier 2 and 3 cities is also considerably long, which makes investors less enthusiastic, as the rental expectations of clients are relatively low. Despite this, we are observing that a few reputable logistics park development companies have invested in and developed Grade A warehouse parks strategically positioned to cater to their respective regions.

Rhenus transforming logistics with end-to-end solutions & real-time visibility

Unlocking the potential
While Grade A warehouses hold the potential for numerous benefits and economies of scale, their advantages are not yet fully comprehended by users. These benefits are contingent upon factors such as the availability of skilled workers, automation, innovative operational methods, robust IT/WMS software, telecom connectivity, and the presence of a well-established distribution infrastructure and network. In the current Indian landscape, significant growth is evident, marked by the establishment of numerous industrial and high-tech parks in and around Tier 2 and 3 cities. This growth is driving the demand for Grade A warehouses in these locations to facilitate distribution across various sectors, including manufacturing and automotive.

Rhenus Logistics
Rhenus, an integrated logistics solutions and service provider, offers comprehensive end-to-end logistics services to its customers. Leveraging Business Intelligence Tools and a Warehouse Management System, Rhenus provides real-time visibility, empowering customers to make immediate decisions. Currently, Rhenus operates 31 warehouses covering 24 lakh square feet of warehousing space across India, with observed demand for large box sizes ranging from 4,00,000 to 7,00,000 square feet. The sectors with increased warehousing demand include Automotive, Chemicals, FMCD, Pharma, Industrial, Fashion, Medical & Healthcare, High-tech, and Electronics. We operate state-of-the-art multi-user facilities in several cities, offering advantages such as broader reach, optimized operational costs, expanded company footprint, and opportunities for portfolio diversification.

Government's Focus
The Government is actively prioritizing the logistics sector with the primary goal of reducing our overall logistics costs. The National Logistics Policy is anticipated to bring about numerous changes, and all relevant ministries are collectively striving to lower per-ton delivery costs. The contemplation of standardization is underway, aiming to assist the warehousing sector in reaching new milestones in inventory management and operational cost efficiency.
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