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From Warehouses to Integrated Townships– The Way Ahead

Hemant PrabhuKeluskar
22nd July 2020

Hemant PrabhuKeluskar, COO – Infrastructure – Industrial, GreenBase speaks to Girish from ISCM on the future of Industrial Townships

The rapid spread of COVID and the lockdown changed the customer perception of a warehouse. The lockdown imposed severe restrictions on movement of people from their place of residence to work. Hemant PrabhuKeluskar, COO of GreenBase speaks on the new wave – integrated townships – with all amenities to help firms cope with any potential disruptions in future.

How has COVID 19 impacted warehousing sector in India? What are the pain points and opportunities? How long will the effects last?

COVID-19 is a major factor for the slowdown of our economy. Segments, like banking,hospitality,tourism,hotels,airlines,manufacturing,etc.are going to struggle both in the short and long term. Their entire supply chain has to align to the new reality. This is going to be a long process and these industries are going to take a long time to revive, and get back to the growth path. However, there is a silver lining in the cloud –and two major industries stand to gain. One is the pharma sector and other is E-commerce. Today we are getting accustomed to E-commerce as a way of life. This means entire supply chain has to be highly focused. The supply chains have to be highly structured; technology enabled and embedded with artificial intelligence and analytics capabilities. The customer delivery mechanism has to be very fast, as customer expectations will continue to be very high. The customer today is not willing to wait and wants instant gratification. Companies will definitely ramp up the supply chains which means consolidation will accelerate in the sector.

India is currently looking at lifting restrictions. However, in case there should be a relapse, firms are looking at ramping up their capacities to ensure uninterrupted availability of material. E-commerce is going to be the way forward, and all players like Amazon, Flipkart etc. are ramping up their capacities. The backend activities of the supply chain like warehousing is going to be crucial going forward. This will open up huge opportunities for the warehousing sector. Fresh demand for warehousing will be driven by the E-commerce and 3PL players. Earlier we were seeing two types of demand – for fulfillment centers and distribution centers. Now, with everything being on direct delivery platforms, a lot of the space requirements will come closer to towns. If we trace the history of warehousing space, in the pre GST era everything was fragmented. With GST we came to a centralized hub and spoke model. Today, because of COVID, inter district mobility is restricted. We will see evolution of a large central distribution center servicing a number of fulfillment centers near the markets, so the deliveries can be made even with the restrictions in place. In city distribution is going is going to be more prominent in the changed circumstances.

It is difficult to predict how long this effect will last. Impact will be different for various segments. We believe the revival will happen immediately in the warehousing sector. After the initial shock, people are trying to realign and business is slowly coming back on track. For example, when you place an online order with ITC, they dispatch an entire truck with all essentials to your locality and you can pick up your order from the truck. Payments are being made digitally, and cash is not accepted. That is the change we see going forward.

The supply chains have to be highly structured; technology enabled and embedded with artificial intelligence and analytics capabilities. The customer delivery mechanism has to be very fast, as customer expectations will continue to be very high

A clear trend that has emerged is the scarcity of manpower. The reliance on migrant labor will continue, but warehouse managers are going to factor in a scenario where such disruptions could recur. Mechanization will be the way forward. Wrapping, packing, moving, retrieval will be mechanized, with very little human contact. The consumer today prefers to have a product with zero human handling. Firms are going to adopt this technology. Which means dependency on manpower will be less and high on technology. However, when you say you are dependent on technology, you have to align operations accordingly. Infrastructure has to allow technology to come in easily. The floor has to be absolutely flat so that the material handling equipment can move and retrieve goods faster. High racking solutions can happen only if the flooring is flat. The design of internal warehouse maneuvering space has to be according to global practices, as trucks cannot wait indefinitely for loading or unloading at a warehouse. The industry looks to include robots, IOT, and AI for storage, retrieval and packaging functions, plus analyzing customer behavior. Older warehouses will have to reform, failing which customers will walk away from them. This is where new opportunities will emerge.

Will the investor confidence remain? Will investments plateau or go up?

The covid-19 has led to a situation where almost all asset classes are under stress – residential, commercial, IT – all these asset classes are under huge stress on the demand side, with a corresponding supply glut. The only asset class to emerge from this is the warehousing and logistics sector. Investors had already moved towards this asset class with a considerable inflow of funds into the sector. Investor confidence in this sector was already high. Today the investor confidence is all the more higher. This is one sector that can assure steady long term returns. Due to the harsh experiences of lockdown conditions on account of Covid, people will prefer to move closer to their place of work, which will increase the demand for self-contained townships that provide all amenities.

What are the potential changes to the warehouse space requirements in the new normal? How do you see the demand changing?

The design, the layout, and infrastructure around the warehouse will increasingly become very important. Industry will expect faster turnaround times and human contact will have to be minimum. Technologies like thermal sensors will become a part of the normal, as will identifying the  location from which people are coming into work, disinfecting the workers as they come in. We at Hiranandani Communities had already adopted these practices. Automation in handling systems including palletization of cargo, conveyor systems, robotics, drones, drop boxes amongst others will all come in because this is the only way to improve warehouse efficiencies. These changes are imminent. Customers will not be taking up space in warehouses which do not offer this. We at Hiranandani are now tweaking this in line with the requirements of the post covid-19 world.

The design of internal warehouse maneuvering space has to be according to global practices, as trucks cannot wait indefinitely for loading or unloading at a warehouse

Coming to the demand side, the demand was traditionally driven by automotive and electronics sectors. Electronic sector will continue to see a surge. Household appliances will see a growth. With work from home, we see a demand surge for computers, washing machines, and other household appliances. We believe business will not come to a complete stop. When one sector goes down, some other sector will pick up creating demand. If automobile sector goes down e-commerce will pick up. We do not see the demand going up or down by 10 times. It will be more or less a plus minus 10% change in demand. The only change will be, the demand will come from a different sector. Second change we will see is a shift from the urban centric demand revival to a more dispersed demand from across India.

What were the challenges you faced because of the lockdown? Especially on the labor front. How did you manage it?

One of the biggest challenges we faced was to keep our labor force motivated and calm, deliver the daily essentials for them, take care of the health care needs, and show them that the company will back them up no matter what

The issue of migrant labor is a major factor which firms will take into consideration in the future. At Hiranandani, we had around 3000 migrant laborers across all our sites. They were on site when the lockdown was announced. But the moment lockdown conditions were eased the reverse migration and movement back to the villages started. Industries cannot afford to be reliant on cheap migrant labor. They have to build alternate fallback solutions. Going forward organizations need to ensure that such events do not disturb their operations. Firms may try to get local labor at a higher cost or go in for mechanization. For example, things that were being built on site might get pre-fabricated elsewhere and transported.

One of the biggest challenges we faced was to keep our labor force motivated and calm, deliver the daily essentials for them, take care of the health care needs, and show them that the company will back them up no matter what. Ensuring that there is no social unrest is one of the biggest challenges we faced. We managed this by regularly interacting with them physically and also virtually through face time calls., and assuring them of our support. Quite obviously, senior management interaction with the labor force goes a long way towards building an atmosphere of trust and belonging..We also interacted with the government officials to obtain the necessary permissions for carrying out operations and facilitating safe return of the workers to their hometowns.

But we believe the current crisis will accelerate the trend to bring in more technology – including robots. Fortunately, there is a realization that the basic infrastructure has to be capable of accepting these technologies

Going forward, the concept of integrated townships will become more attractive – the workforce will be closer to the workplace. How do you see this spanning out?

As a philosophy, Hiranandani Communities believes that integrated townships are the future. Both our current projects at integrated townships. In our opinion, an integrated Township is one where there are dwelling units for all classes of employees – workers to senior management. For example at our Chennai project, we have residential units for workers, going up to the owners themselves. This project comes with beautiful landscaping, roads, schools, hospitals, banks, ATM, shops, restaurants, etc. Fortunately, for us customers today recognize the benefits of such an integrated township. They do not have to worry that their manufacturing units or warehouses will face locked down. In future even if there is a lockdown companies can plan on operating probably higher standards of social distancing or introduce multiple shifts. These townships have added benefits of reducing transportation cost both for the employer and employee, reducing attrition rate. We are currently offering these benefits.

Do you see technology coming into warehouse operations going forward? If so what type of technologies do you see coming in?

The first point to consider is the design of the warehouse itself which includes how the goods circulate within the warehouse, how vehicles come in and out of the warehouse how Docking stations are built etc. The tendency today is to go higher. To a customer, with a small incremental cost they get a much higher storage capacity. Which means their efficiency, in terms of cost per retrieval, and employee productivity becomes very high. To take the step further, if we integrate conveyor belt system and warehouse management system into the design of the warehouse we have complete control from a central location. If you look at developed Nations, there are warehouses where there is no human presence, and all activities are robotized. This scenario may seem far-fetched for a country like India. But we believe the current crisis will accelerate the trend to bring in more technology – including robots. Fortunately, there is a realization that the basic infrastructure has to be capable of accepting these technologies. This is where organizations like us come into the picture. We are building infrastructure which will allow our customers to move in and choose the appropriate technology. Our warehouses are currently capable of integrating world class Technology.

What were the major lessons of the lockdown for Greenbase?

One of the biggest learnings from the covid-19 pandemic, on a personal note, was it  taught us patience, brought home the importance of being humane, and not take too much for granted. From a corporate standpoint, this is an opportunity to bring in technological changes which will improve efficiency. It is understood that technological innovations will increase the cost. However, this pandemic has taught us that not everything can be measured in terms of cost. We need to focus on operational efficiency, customer value add. We at Hiranandani are thinking completely differently about our business. This was on the anvil, but the pandemic brought forward the timelines. ♦♦♦♦♦

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