The Zeromile Warehousing Park, Hyderabad’s biggest pure warehousing facility with a capacity of 1.3 million sq ft of Grade A warehousing space spread over 60 acres, will be one-of-a-kind and sought after destination by e-commerce, traditional retail and cold chain businesses. Sundeep Reddy Gummadi, Founder & Director, Zeromile Warehousing speaks to Upamanyu Borah more on their pioneering efforts towards making Hyderabad a warehousing hub in the central Indian region, while also elaborating on the country’s warehousing sector which is seemingly prepared and ready with risk management and customer retention strategies, infrastructure initiative and rapid digitisation to embrace the wave of a pre-COVID market.
What are your top 3 concerns for the industry with respect to COVID-19?
The first concern, I believe, is a huge fall in demand. Secondly, there is a threat of subsequent fallout of demand over a prolonged period, in case the COVID-19 situation doesn’t improve or a vaccine takes a longer time to materialise.
Apart from that, I see pressure building on retail businesses; their growth trajectory would not be similar to what they experienced pre-COVID times. Remember, when it comes to warehouse space, retail is a far bigger consumer than the e-commerce segment, although the latter is growing rapidly. However, I see the demand from traditional retail companies for new warehouse space mellowing down in the coming years.
There has been a rapid increase in the number of large organised players in the market. They are investing and building warehouses faster and with higher quality (moving from Grade B to A and A-plus), as their customer’s demand upgrades. What is the sudden surge behind this?
Indian supply chain environment has seen two major events in the last 4-5 years. One is the consolidation of warehousing space that happened, the precursor to which was the GST implementation.
Pre-GST, due to taxation and regulation issues, companies had had to pointlessly establish warehouses across all states where they operated and this needlessly increased the capital expenditure of businesses. These things changed as soon as the GST came into force, it removed state boundaries and abolished check posts. Companies were then able to consolidate their warehousing and supply chain operations across industrial clusters outside central locations which are able to cater to a 360 degree market.
This also offered many companies the prospect to adopt IT automation benefits and move towards sophistication by adopting Grade A and A plus facilities which allowed them to utilise the vertical spaces and also bigger box sizes (as warehouses are commonly referred). For instance, pre-GST, the average box sizes in South India were 30,000 – 50,000 sq ft. Post-GST, it has doubled to 100,000 – 150,000 sq ft.
Zeromile itself is building about 400,000 sq ft of single box. Developments like this were unheard of previously.
It is essentially about bringing down the cost of supply chain and warehousing operations drastically, increasing efficiency, and most importantly betting on the assurance of product reach or delivery on time which most of the companies, especially e-commerce rely on.
With uncertainty rife, and COVID-19 holding the potential to impact every part of a business for months, scenario planning is a critical tool to test preparedness. What are the best- and worst-case scenarios, and is the business equipped to cope?
The problem with COVID-19, unlike other unfortunate and unforeseen situation, is an absolute lack of visibility. It’s a big challenge to foresee even on a short-term. Scenario planning seems close to impossible during the ongoing situation. The next 24 months are going to be quite difficult.
My suggestion to sustain– is giving the highest priority to the retention of existing customers. Remember, everybody is struggling in this period and we are all in this together. Hand-holding your customers during this difficult time will go a long way.
I have always believed that the best companies come out of the worst possible times as they show their efficiency. Good companies chase quality, and quality is something that I personally rely on to get me bailed out of any difficult situation. When we give high-quality warehousing space and services, we attract high-quality customers who are looking at long-term relationships and the future. Quality is therefore a great investment.
I agree that this is easier said than done. But, trust me, I can vouch that it pays when you make quality a default part of product and service offering.
What are your firm’s crucial milestones contributing to the stabilisation of expectations and potentially modernising your framework in the Indian Industrial and Warehousing market?
Critically, the warehousing industry in Hyderabad like any other city grew up on Grade B and C developments. Several factors are responsible for driving the shift in demand from Grade B and C warehouses to Grade A spaces over the last 10-15 years. The drastic increase in demand can be attributed to the burgeoning cost of storage for every square feet, implementation of stringent health and safety regulations, the need for high-operational efficiency, and better provisions of infrastructure and amenities for the people working in warehouses.
Subsequently, when the industry started investing in Grade A facilities, we were the first ones to take that opportunity and come up with such facilities. Today, companies associate with us for the development of high-quality warehousing space. We believe, we have taken the leap and look forward to delivering more high-quality spaces such as Grade A and A-plus in the near future.
Further, our strategy to establish one cold chain facility of about 4,000-5,000 pallets positions within any warehousing development project would help us to meet the rising need for cold chain infrastructure, and in turn elevating India’s position in the global cold chain market.
How many sq mts of industrial/logistics parks space have you developed/leased out so far?
Zeromile has successfully developed around one million sq ft and leased it out already. Under construction is about two million sq ft of which the first phase will see the accomplishment of one million. By December 2020, we are expecting to accomplish developing six and a half lakh additional sq ft space. As such, we will have a total of 1.6 million sq ft for delivery by the end of this year, and around 2 million sq ft by March 2021.
What about the Zeromile Warehousing Park?
To build and develop the Zeromile Warehousing Park in Medchal, the hotspot for all the warehousing activities in Hyderabad, we initially acquired over and about 25 acres. Currently, we have crossed above 60 acres and by the end of this year; we should be crossing about 75 acres easily. It will be one of the landmarks in terms of Hyderabad’s warehousing destination.
Cold chain infrastructure being a capital-intensive business with a longer gestation period sometimes acts as a deterrent for the investors. But, it surely makes economic sense with bigger and better warehouses. Do you also agree to the fact cold storage yields are a big inducement for investors? What do you think the Indian government should be doing about helping Cold Chain businesses?
Hyderabad houses some of the biggest cold chain facilities in the country due to its unique advantage in the cold chain business. Hyderabad is the seed capital of the country. Essentially, a lot of seed/agri storage in the cold chain happens. Also, there is an increasing demand for storage of processed foods.
Zeromile Warehousing runs Hyderabad’s most premier and advanced cold chain facility. We have leased it out to cold chain company Snowman Logistics. Our association with Snowman has been really good in the cold storage segment. We hope to develop and add more space for them in the coming years.
Also worth mentioning is, at our 60-acre Zeromile Warehousing Park near Medchal, we have dedicatedly preserved a slot of space for purely cold chain operations. Any customer within the park who would seek any cold chain facility, we are ready to serve and meet the customer’s requirements.
During the post-pandemic period, increased enquiries from e-commerce and third-party logistics players are expected with a preference for Grade A properties due to adherence to additional safety norms. How can warehouse developers get the most out of their responses?
Safety is a non-negotiable factor – human, property, or otherwise. Grade A facilities give the comfort of safety to e-commerce and third-party logistics (3PL) companies. What Grade A warehousing also does is, it gives value for money to these companies with increased cubic feet storage capacity vertically. We at Zeromile strive to design spaces that not are just Grade A by specifications but also worker-friendly.
I would smaller developers to build high quality structures. Build lesser space than planned if budget is a constraint, but don’t compromise on quality and grade. You could always build any remaining space at a later period but can’t change an already built sub-grade structure. Your warehouse should not be a temporary fixture, but something that serves at least for next 20 years.
How should companies use technology to leverage emerging patterns during disruption?
COVID or no COVID, technology is and going to be a more constant disruptor to every business. The use of technology use will only increase as we move forward, as the economy is getting digitised at a breakneck pace. The product and services we offer have all moved into a digital sphere. The next wave of e-commerce will hit tier II and III towns which is going to be massive.
Companies would need to develop a tremendous amount of back-end supply chains to cater to customers in far-flung areas, and this naturally requires relying heavily on technology. COVID has only accelerated this pace.
Companies can also create a decent online presence for their offering and keep a tab on changes in the industry all the time. On-demand warehousing, an Airbnb sort of warehousing where retailers get to know and find warehouses that have excess capacity, is going to be significant in the next decade; this is completely driven by technology. I am sure a lot of startups would want to target that space. There is definitely a huge scope for doing wonders there.
How can the industry best plan for future events like COVID-19? Where should the focus be?
COVID will leave behind a changed world. Companies from now on will need to factor in an exigency like COVID-19 and be prepared. As Nassim Nicholas Taleb says, this is not a black swan event but was just a matter of time – of when it would hit us. Growth cycles have to factor in disruptions like this. The personal, social habits of humans will undergo a massive change; societies will realise that simple things like wearing masks and social distancing is way cheaper than lockdowns. The society as a whole can’t afford more lockdowns.
The industry will have to find a way to work through pandemics by maintaining high safety and health standards. The focus of the industry should be towards making these changes a part of our normal lives and deliver goods to customers as efficiently as possible, making lives easier and unaffected. Technology will invade warehouses with a greater force to reduce the dependency of manpower, which in turn would create a need for warehouses that are capable and designed to accommodate automation.
I am personally very particular about compliance and documentation. My two cents to anyone looking to establish a mark: get all your paperwork in place before you start. It pays you well and in time.