Allcargo makes it big in the leased warehouse space

Warehouses that lead the gradeAllcargo takes its years of experience in logistics and warehousing a step further by building high-end warehouses for clients that include big names such as Flipkart and Decathlon

Warehousing has always been key to the logistics sector, but there’s a new trend in the market. India is seeing a strong shift in demand from the traditional ‘godown’ (considered a Grade C warehouse) to top quality Grade A warehouses. Allcargo’s newest business venture, Allcargo Logistics Industrial Parks Pvt Ltd (ALIPPL) is in the right space at the right time to meet this demand.

ALIPPL builds and leases Grade A warehouses — warehouses that are built with steel structures, are water proof, have good ventilation, lighting and proper fire safety equipment. These new structures are built to meet customer specifications and can house automated storage and retrieval technologies. The demand for such warehouses is going through the roof — a JLL report on the warehousing sector says that demand for good quality warehouses grew at the whopping rate of 63 percent in 2018 over the previous year, outstripping supply, which grew at 22 percent for the same period.

These figures go a long way in explaining ALIPPL’s success. Allcargo is investing roughly Rs10 billion in developing 6.5 million sq.ft. of Grade A warehousing space in the three key centres of Delhi, Bengaluru and Hyderabad. Already, 3.5 million sq.ft. of warehouse space has been snapped up — two million sq.ft. by e-commerce giant Flipkart and one million sq.ft. by sporting retailer Decathlon. About 0.5 million sq.ft. has been signed with other customers.

The built-to-suit warehousing business in India is on a growth spree, thanks to India’s adoption of Goods and Service Tax (GST) and the rise of e-commerce. ”GST has enabled a huge demand in Grade A warehousing,” says Jatin Chokshi, the head of ALIPPL. The advent of GST led to customers looking for consolidation and streamlining of their warehouse. Retailers, for instance, needed to create centralised hubs near major consumption centres. Another boost to the business came from the growth in the online marketplace.

Strategic fit

For Allcargo, the entry into the warehousing business was a strategic extension of its core competencies — its decades of expertise in contract logistics and its deep understanding of customer needs. ALIPPL is in the business of helping customers overcome their warehousing challenges. Industries like e-commerce and retail end up storing and moving huge inventories and minimising logistics overheads makes business sense. For them, leasing built-to-suit warehouses in India is a solution that will reduce logistics cost, optimise efficiency, reduce inventory cost and facilitate ease of doing business.

That’s the sweet spot that ALIPPL occupies. With warehousing emerging as a key variable and a differentiator for driving customer service and satisfaction, ALIPPL’s built-to-suit leased warehouses deliver cost, process, and time efficiencies to customers like Flipkart and Decathlon.

Customer specific warehouses

What differentiates ALIPPL in the market is that it constructs Grade A warehouses that are customised around specific client requirements. Mr Chokshi gives an example of how the company builds to client-specific needs in the retail industry: ”All the retail players in India are offshoots of a global parent company. Walmart, for instance, is the parent company for Flipkart. Walmart has global level practices dedicated towards the welfare and benefits of employees, such as welfare measures for women employees, childcare centres for toddlers within the premises of the warehouse, etc. Allcargo is the first to adapt these global initiatives across all our warehousing facilities without any added cost.”

ALIPPL goes further with steps that are eco-minded by creating green zones. It is also in the process of exploring renewable power sources such as solar panels on the warehouse rooftop.

The key advantage that ALIPPL offers customers is access to conveniently located land parcels. Allcargo is one of the few players with huge land parcels of over 15 million sq.ft. near major centres. ALIPPL was able to ride the sudden spurt in demand because it could leverage Allcargo’s land assets.

Says Mr Chokshi: ”Today it is very difficult for players to get large parcels of land close to major cities and here we have an advantage. For example, ALIPPL is the only company with over 100 acres of land in Malur, Bengaluru. The ability to offer larger boxes on land that are strategically located and can accommodate the client’s business plan is our great strength. In addition, all warehouses are located with proximity to rail connectivity.” One of the clients that ALIPPL services in Bengaluru is sports retailer Decathlon.

Integrated services

Another strategic advantage for ALIPPL is that it is well-placed to provide integrated logistics solutions in the form of import services and 3 PL. ”Unlike other players who are only into warehousing, we offer a set of integrated services that range from container services to shipping to project solutions. Our ACCI vertical provides value added services like inventory management, online assembly, supply in various forms. Where other players offer a very asset-light and basic model, we offer end-to-end services to the client. As an example, we are already offering import services to Decathlon.”

According to Mr Chokshi, the work for built-to-suit warehouses for Flipkart and Decathlon is already in full swing. The engagement with these industry biggies starts with market research and a survey of locations. ”We are predominantly looking at Pune, Ahmedabad, Kolkata, Guwahati, Bhiwandi and Chennai. We are leveraging all opportunities available, starting from land purchase. Some of the deals are in advanced stages and nearing closure. We are fully geared up as we already have established offices in these locations that will enable us in offering integrated logistics solutions.”

ALIPPL is exploring similar engagements with other industries. Says Mr Chokshi: ”We are targeting fashion and garment industry. We are also looking at auto, engineering and chemicals. We are also in talks to partner third party logistics companies.”

ALIPPL has built up a dedicated team of around 30-40 people who work to deliver impeccable execution of the projects. Technology and project management capabilities are also a great asset. In addition, Allcargo has a canopy of services aligned to the storage and movement of goods that seamlessly merge with warehousing needs, such as contract logistics, container Less than container load (LCL) and Full container load (FCL) services, special equipment for handling cargo, warehouse management technologies, professionally trained personnel, etc.

Thus clients that avail of ALIPPL’s services are able to improve efficiencies by reducing the need for multiple service providers. ALIPPL offers businesses the opportunity to maximise the potential for growth, and optimise costs and productivity.