Delivery on Demand: In-city warehousing set to become an integral part of the logistics supply chain

Sudeep Mehrotra, Managing Director, Alvarez & Marsal

India is currently experiencing the rapid progression of Industry 4.0. The pace of this transformation is unparalleled, and the im­pact extends far beyond anything witnessed in the past. Two fundamental elements that drive growth – intelligence and energy – are achieving new milestones every day. In this context, the impact on consumer behaviour for product discovery and the purchasing process is bo­und to witness immediate short-term chan­ges. With greater internet penetration, accelerated bro­ad­band speeds and affordable smartphones, transformations in consumer behaviour have extended beyond metropolitan are­as, encompassing Tier I, II and III cities. The ad­vent of digital payment has also revoluti­oni­sed purchasing patterns, allowing businesses to bypass the conventional supply chain and connect with consumers directly. Advance­ments in mapping technology, coupled with the proliferation of gig workers, have effectively bolstered these em­erging structures, facilitating seamless product delivery to consumers’ doorsteps. As a result, a new paradigm of business referr­ed to as “quick commerce” has emerged.

Tracking growth

As individuals increasingly lead fast-paced lives, the demand for quick-delivery services has surged. Consumers now expect same-day delivery, or even delivery within mere mi­nutes of pla­c­ing an order. As market competition in­tensifies, platforms catering to everyday es­sentials such as groceries, medications, and various retail products have begun offering consumers an unprecedented level of flexibility – delivery services available any time and anywhere.

During the previous retail transformation, India witnessed a transition from local kirana stores to chain retailers, improved outlets and a wider merchandise selection. This pivotal tra­nsition necessitated a revamp of the physical warehousing infrastructure. Escalating land prices, the need for value-added services and the imperative for enhanced logistical efficiency have led to the development of Gra­de A wa­re­houses outside urban clusters. In the past de­cade, these warehouses have undergone sub­stantial growth, becoming larger, better and more environmentally sustainable.

The escalating demand for instant product delivery is generating an unprecedented need for in-city warehousing infrastructure. These no­vel warehouses will differ from their traditi­o­nal counterparts in terms of their use cases, network within a city and the technology em­p­loyed in their supply chain operations.

In-city warehouses need to deliver on the promise of efficient turnaround time (TAT). Hen­ce, these warehouses will be located all around us, much like retail stores, bank branches or fuel pumps. However, these establishments will be located in high-density residential and office complexes in low-profile buil­dings, discreetly delivering the value that brands promise to provide.

Ongoing trends

In quick commerce, be it cloud kitchens or the prompt delivery of groceries, the quest to mini­mise the time between order placement and des­patch remains an ongoing endeavour. Ac­hieving rapid TAT is crucial for delivery vehicles and manpower, necessitating a fundamental shift in the design of warehouses. Rather than prioritising expansive storage capacities, the focus should be on accelerating operati­onal velocity. This can be accomplished by im­ple­me­nting the following techniques:

Shared repository for inventory

In the next 3-5 years, a comprehensive system is likely to be established to enable the monito­ring of all unsold inventory across various warehouses, retailers and distributors. The TAT of receiving an order to its delivery will depend on the brand’s “customer promise”.

Automation in picking

Warehouses are increasingly employing artificial intelligence (AI) and other solutions to qui­cken the picking process. The usage of techno­logies, including internet of things applications such as cart automation and robots, are witnessing a significant surge in converting orders to picking requests.

Quicker packaging and despatch

New sorting machines are expected to be introduced in in-city warehouses within the next 4-6 quarters to enhance the packaging and des­pa­tch processes for accelerated order fulfilment.

In-city warehouses must have the following attributes to service these needs:

  • A design structure that allows them to co-exist with urban infrastructure: Unlike large-scale warehouses situated outside city boundaries, in-city warehouses coexist within the fabric of urban infrastructure, alongside office complexes, residential buildings, restaurants and cinemas. Consequently, their design and construction should blend with the surrounding environment, facilitating a seamless coexistence.
  • Layout and building automation, which allows the use of multiple floors for logistics: Given the spatial limitations inherent in urban are­as, in-city warehouses are typically constrai­ned by smaller spaces, which impede ho­ri­zontal storage expansion. To enhance storage capacity, these warehouses must employ in­novative layouts that effectively utilise multiple floors. Moreover, the incorporation of ad­vanced automation systems will enable the efficient movement of goods across these vertically oriented spaces.
  • Accessibility of various types of vehicles for in­bound and outbound services: In-city wa­reho­uses may operate within cramped spac­es, wh­ere obtaining plot frontage for traditi­onally used large vehicles such as trucks and lorries pr­o­ves challenging. Consequ­en­tly, alternative mo­des of transportation, such as bikes and sc­ooters, are commonly em­p­loy­ed for deliveries within a radius of 0-5 km. In order to cater to a diverse array of ve­hi­c­les, the warehouse infrastructure should be capable of accomm­o­dating and servicing various types of vehicles.
  • Incorporate ergonomic features to support the needs of people living and working in big cities: The workforce in in-city warehouses often have prior experience from working in various urban establishments such as retail stores, office complexes and residential support systems. Therefore, people operating wi­thin these warehouses should receive trai­ning that enables them to effectively utilise the skills they already have for operations within in-city warehouses.

In-city warehousing networks and supply

In-city warehousing will expand with time and will lead to the creative discovery of new supply sources. These establishments are usually built by repurposing existing structures like old office complexes, abandoned cinemas and parking lots. Additionally, new buildings will co-create space for warehousing. All sta­keholders must come together to ensure the successful operation of this emerging infrastructure.

Governments must draft policies to allow zoning and development of in-city warehouses, developers need to come up with creative strategies to develop the asset class, and finally, companies need to identify suitable structures for in-city warehouse operations.

Supply chain technology

Technology plays a primary role in expediting various warehousing processes such as picking, sorting and allotment. Going forward, there will be a full-fledged establishment of omnicha­nnel delivery, where businesses of all sizes will allocate substantial resources to enhance their supply chain technology.

Businesses can revolutionise their wareho­use operations by embracing cutting-edge te­ch­nological solutions to significantly reduce the time required for crucial tasks. Automated sy­stems equipped with advanced algorithms can swiftly and accurately identify and retrieve items for order fulfilment, streamlining the picking process. Similarly, sorting mechanisms that use machine learning and AI can efficiently categorise products.

As omnichannel delivery begins to take root, businesses are integrating various sales channels into their supply chains, resulting in a shift in supply chain organisation and operation. To meet the increasing consumer demand for convenience, organisations must reimagine their supply chain infrastructure and make strategic investments in innovative technologies that en­hance omnichannel delivery. From advanced warehouse management systems to real-time inventory tracking solutions, businesses must use technological advancements for robust supply chain operations. Organisations that proacti­vely invest in cutting-edge technologies will gain a competitive edge and ensure growth.

In sum

In a nutshell, in-city warehouses are going to be next-door neighbours to the stores we visit, the houses we live in and the offices we work in. In metro cities, in-city warehouses are estimated to occupy 8-10 million sq. ft in the next few ye­ars. City planners and development authorities will come up with suitable policies to support such infrastructure. Developers are likely to experiment with various options in green and brownfield projects, with tenants and operators developing automation and technology to service customer needs. This presents an opp­o­r­tunity for all to participate in this disruption and leave a mark.