Decoding Grade A Warehousing and its rising demand

Varun Gada, is the Director of LP Logiscience, the warehousing division of the 100-year-old legacy brand Liladhar Pasoo. He is a seasoned supply chain management professional with 11+ years of valuable experience and expertise in the field of contract logistics.

Grade A warehouses, modern storage spaces with state-of-the-art technologies, that are compliant with industry standards of excellence, are witnessing significant demand today. This is mainly due to several industry trends, including the rise of multi-client warehouses, the popularity of 3PL and 4PL service providers, the need for customization/specialization of storage facilities, as well as positive government support, like the introduction of incentive schemes such as PIL, and standardization efforts across the supply chain among others. Apart from being efficient and compliant, Grade A warehouses also cater to businesses across industries efficiently, offering a smart and efficient storage solution.

According to the latest report by Savills India, an international real estate advisory firm, the 3PL sector continued to be the driving force behind warehousing demand, accounting for 40% of total absorption in Q1 2023 whereas the manufacturing sector accounted for 23%. And, while warehousing as a sector grew exponentially, the demand for Grade A warehouses also grew exponentially, accounting for 52% of both the total absorption and supply in Q1 2023.

Some of the key benefits of Grade A warehouses that have been driving the rising demand for them, include:

Operational efficiency: Grade A warehousing comes with advanced infrastructural capabilities which provide enhanced management of traffic and cargo movement, supporting the easy implementation of cutting-edge MHEs that maximizes productivity. With increased cargo loading and unloading docks and strategically created entry and exits, the movement to and from warehousing is swift and fast.

Enhanced Security: Accidents and human errors can be heavy losses for businesses. Grade A warehouses come with compliant safety and security standards, including advanced surveillance and firefighting systems, tech-enabled 24x7 monitoring, and excellent SOPs and resources in place for crisis management.

Scalable and Agile: Grade A warehouses are built to scale and are equipped with short or long-term needs of scaling up or scaling down operations. The agility also comes with the option of customization and thus Grade A warehouses can be future-ready. Any business, big or small, would want to expand and grow and Grade A warehouses are an apt choice to effortlessly accommodate the growing needs of the business.

In line with the above, here are some of the key drivers that are responsible for the rising demand for Grade A warehouses:

Proliferation of e-commerce The paradigm shift in customer behavior from offline to online shopping has led to an increase in e-commerce activities. With more e-commerce players entering the industry to capitalize on the customers' home shopping habits, larger warehouses that can store bigger inventories became the need of the hour which subsequently pushed the demand for Grade A warehouses characterized by gigantic spaces. E-commerce companies now need Grade A warehouses more than ever due to the changing customer dynamics. Customers expect same-day deliveries and hassle-free returns from e-commerce firms, and strategically located Grade A warehouses are integral to achieving the same. It is safe to say that faster last-mile delivery focus by e-commerce firms has catapulted Grade A warehouses in the country.

Rise of third-party logistics: Companies are increasingly outsourcing to 3PL players to achieve better efficiency in logistics. 3PL firms are driving the demand for Grade A warehouses in Tier I and Tier II cities to facilitate intra-city last-mile deliveries and efficient storage for businesses, especially e-commerce and pharma sectors. Grade A warehouses offer efficient material handling and additional floor-load capacity. When companies hire 3PL firms, they are looking for storage solutions matching international standards which has led to 3PL firms investing in Grade A warehouses to gain a competitive edge.

Favorable government policies: Government policies like National Logistics Policy have contributed to a favorable regulatory ecosystem. Government initiatives like Make in India have pushed manufacturing activities in the country. The manufacturing sector needs advanced, sustainable warehouses built to suit specific industrial needs, and only Grade A warehouses can cater to the complex demands of the manufacturing sector. Unlike other sectors, picking, quality control, and testing processes vary for the manufacturing sector. Grade A warehouses can cater to these specific needs with material synchronization and specialized equipment for material handling for efficient production processes.

Demand for tech-enabled solutions: The demand for digital and contactless operations has risen post-pandemic and businesses are scrambling to deliver the best to customers. Grade A warehouses offer a platform for the implementation of cutting-edge technology that reduces human intervention. The advancement in technology has enabled Grade A warehouses to be more agile. Grade B and Grade C warehouses have limited infrastructural capabilities and cannot accommodate advanced tech-enabled features. Grade A warehouses enable efficient supply chain operations with the aid of sophisticated technology like Automatic Identification and Data Collection (AIDC), Automated Storage and Retrieval (ASRS), and QR codes that help streamline warehouse operations.

With tech advancing at a fast pace and customers favoring quick, efficient services, the demand for Grade A warehouses will remain robust. Grade A warehouses have emerged as an answer to businesses in the pursuit of modern storage solutions. With 30% additional open space, 30% space for internal cargo handling, 40% storage height to enhance movement, improved floor height and construction quality, and enhanced safety and security are some of the salient features of Grade A warehouses. Grade A warehouses are therefore in high demand, thanks to the increasing complexity of logistics and persistent efforts by the industry to promote standardization and match with global quality standards.