Insight

RETHINKING WAREHOUSING AFTER COVID-19

Covid-19 has caused massive disruptions in global supply chains. Restrictions on mobility, port congestion and delayed shipments have been made worse by a worldwide shortage of shipping containers. On the other hand, consumer demand has grown exponentially, leading to acute inventory management challenges. As a result, companies have had to change their warehouse management models to incorporate resilience together with flexibility. This can involve anything from tweaking operational practices to entirely upending the business model. This paper offers insights from a few innovative examples from the Indian context.

Asian Paints eliminating the need for warehouses in Tier II and Tier III cities









Mahindra Logistics and its flexible approach









The rise of third-party services…






Digitisation will remain key…









…automation is the future for warehouse operations

RETHINKING WAREHOUSING

For an illustration of flexibility and adaptability, the Asian Paints example stands out prominently. The shift to work-from-home prompted many people to spruce up their homes, causing the demand for paint, among other things, to surge. With many of its warehouses located in containment zones, Asian Paints quickly shifted to a new delivery model, directly supplying orders from its factory and virtually eliminating the need for warehouses. Shopkeepers started to receive shipments quicker and in larger volumes. According to Forbes, Asian Paint’s revenues jumped by 144% in April-June 2020, and by 36% in the subsequent quarter.

Most organisations will – at least for now – continue to rely on warehouses but many are streamlining their processes. The first big push in this direction came from the implementation of GST in 2017, which eliminated the taxation anomalies that necessitated separate warehouses in each state. As a result, companies began to merge their warehouses – or to turn to third-party solutions providers. Faced with surging demand during the pandemic’s first wave, one such service provider, Mahindra Logistics, began converting unused spaces into warehouses. Also known as pop-up warehouses, this simple change in warehouse space-management spurred a 36% increase in its top-line in the third quarter of FY21.

In early 2019, online furniture retailer Pepperfry revamped its warehouse management processes, creating four main hubs in Jodhpur, Delhi, Mumbai and Bengaluru. Each holds inventory for a defined region and ships products to small distribution centres in line with demand. This has helped the company to fulfil short-duration orders, making it one of India’s more profitable businesses since the pandemic hit. Recently, it went further, partnering with a third-party service provider, which will manage operations at its largest warehouses, helping it to fill omnichannel orders faster.

Back in 2017, beauty and personal care e-Retailer Nykaa digitised its entire supply chain, deploying software to streamline inventory, warehousing-management and omnichannel supply lines. Digitisation has strengthened the coordination between its multiple warehouses, allowing for quick and seamless order processing. In fact, ‘digital warehouses’ are fast becoming the norm, saving cost and reducing the dependence on labour. Britannia, too, is rapidly digitising its 50 warehouses to improve inventory optimisation and bring down operational costs.

According to the Warehousing Vision Study conducted by ZEBRA Technologies, out of 1403 participant companies, 61% plan on partially introducing automation for warehouse management while 27% plan to fully automate their warehouse management systems by 2024. The study highlights that 20% of the organisations are considering robotics for warehouse operations while 7% have already started using robotics for automation systems in 2021. Some companies, recognising the importance of automation, have been acquiring robotics companies.

In January 2022, Reliance Retail acquired a 54% stake in robotics firm Addverb Technologies, which provides warehouse and factory automation products powered by robotics, AI, machine learning and IoT. The strategic partnership will enable the company to set up a manufacturing facility which will have the capacity to produce 50,000 robots every year for clients like Reliance, Flipkart, HUL, Asian Paints and Coca-Cola.

Warehouses are the backbone of any supply chain process

FUTURE-PROOF

To achieve true supply-chain resilience, each link of the chain must be agile enough to respond to shifting demand and supply conditions, and in short order. Warehousing is a particularly important link, functioning both as a storage space as well as a distribution centre. Companies are aiming to make warehouses responsive, resilient and reliable to accommodate the ever-growing e-commerce market. The future of supply chains will depend on real-time data exchanges and how well companies implement automation in their warehouse management systems. Companies which make early investments in these solutions will reap the benefits in the long term.

PEOPLE

BECOMING A STRATEGIC BUSINESS PARTNER

For the CFO, the significance of day-to-day ‘Finance’ work is diminishing relative to new demands around business leadership. Apart from a basic technical/accounting background, the key skills and competencies today’s CFO must possess rest on four fundamental pillars: leadership, operations, controls and strategy. Sumendra Jain, CFO (India & Asia Pacific) at SMS India, believes that for Finance leaders to be effective business partners, they must have the necessary leadership and communication skills. Additionally, to be able to offer an independent perspective, they must possess a strong understanding of the company's business model and industry. CFOs should also be able to identify opportunities for top-line growth, manage downside risks and drive profit improvement, not just through the traditional methods of cost-control, but using new methods like product line/regional profitability analysis and benchmarking against industry players. Sumendra’s 25-year-long career offers insightful lessons and learning for executives in general and CFOs in specific.



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