As India understands the important role played by the logistics sector in the success story of any nation, both the Central and the state governments have put their focus on the development and efficiency of the sector, resulting in the emergence of many logistics and warehousing hubs across the nation. Among these is the capital city of Tamil Nadu – Chennai, which is fast emerging as the logistics and warehousing hub of India and catching the fancy of investors. In this feature, we explore the reason behind the fast emergence of the region and its future potential.
Chennai, also known as Madras, is the capital of the Indian state of Tamil Nadu. The metropolitan city, which is one of the largest cultural, economic and educational centres of South India, is now fast emerging as a warehousing and logistics hub in the country.
The city in 2019 registered a 79% year-on-year surge since 2017 as private equity funds take a keen interest in investing in the city’s logistics and warehousing sector.
Leading logistics companies like Sitics Logistics Solution, Spoton Logistics, Navata Supply Chain Solutions and logistics real estate platforms like ESR are some of the many names that have been making considerably large investments in the city.
“Raag Technologies and Services. (RTS) – the 3rdparty logistics arm of Spoton is headquartered in Chennai and has cemented its position as one of the leaders with more than a decade of experience in managing very complex supply chain and manufacturing support operations (in plant) for major OEMs and Componentmanufacturers based in the region,” informed Abhik Mitra, MD, Spoton Logistics.
Speaking of their operations in the city, Ankur Parwani, Regional Director-South, ESR India informs that in Chennai, ESR operates out of Oragadam, which houses 22 Fortune 500 companies. The region offers excellent connectivity, road and rail infrastructure, access to a quality workforce, along with access to Chennai international airport.
Tamil Nadu has been attracting both national and international companies that are looking to expand their operations. “Tamil Nadu is also a preferred location for Japanese companies and the majority of them are centered on Chennai,”said AM Sikander, Founder and CEO, Sitics logistic solutions.
While more and more companies invest in the region, we explore the reason behind the fast emergence of the state as a logistics and warehousing hub.
Multiple factors make a particular location favourable to becoming a potential logistics or warehousing hub. Right from the availability of suitable skill workers, to the presence of suppliers and vendors in the region, the location etc.
MANUFACTURING HUB:
The city has been one of the prominent hubs for trade and commerce in the country. Known as the textile hub in the yesteryears, it has now evolved into one of the key manufacturing hubs, particularly automobile. The city accounts for 30% of the country’s automobile manufacturing and 40% of total auto components production.
Chennai is also home to many original equipment manufacturers, wind energy companies, hardware manufacturers, computer, technology, food processing, and e-commerce companies.
“In due course of time, this, in turn, has led to an increase in the need for warehousing and logistics facilities in the city,” said Mr Mitra.
“E-commerce companies have set up large warehouses across the country and Chennai has been one of the chosen locations for them to have large warehouses due to the proximity to the market and as a gateway to the south,” said Mr Sikander.
The e-commerce sector during these difficult times has received significant growth due to a shift in consumer behaviour.
Adding to the same, Mr Parwani says that due to this shift in consumer behaviour and increased demand, “warehousing absorption has been high even during this time; tier 2 markets such as Coimbatore, Madurai have seen an increase in demand from major e-commerce and 3PL players.”
LOCATION AND INFRASTRUCTURE:
Chennai provides easy transportation and access to businesses. The metropolitan city is in the two industrial corridors designated by the government. The Chennai Bangalore industrial corridor (CBIC) and the Vizag Chennai industrial corridor (VCIC), which make transportation of goods via roads easy.
“Availability of large parcels of land just outside the city, industries in multiple hubs around the city, easy movement of goods flow to the rest of Tamilnadu, Karnataka, South Andhra, Telangana and Kerala all make Chennai an attractive destination for warehouses,” said Mr Sikander.
Furthermore, the Chennai Port is a gateway for exports and imports for the region. The easy access to shipping goods from Chennai port to the ASEAN countries is also a major draw for exporters to move goods through Chennai.
“The emergence of greater port infrastructure, with the proposed Kattupalli port, along with the existing Chennai and Ennore port is another major advantage,” said Hima Parvataneni, CEO, Navata Supply Chain Solutions.
Along with the right location, Chennai also offers a skilled workforce and infrastructure which helps cater to the growing needs of businesses. The city was part of the Japan International Cooperation Agency (JICA) study and recommendations on projects to improve infrastructure and as such, became a major hub for goods movement for the southern states.
“With the fast pace of urbanisation and digitisation, businesses have also put increased investments into transforming warehouses and building resilient supply chains,” says Mr Mitra.
Chennai, amongst other eight cities, including NCR-Delhi, Mumbai, Bangalore, Pune, Kolkata, Hyderabad, and Ahmedabad has added 27 million square feet to reach a total of 238 million square feet in 2020 as per the ‘India Real Estate Outlook – A new growth cycle’ by JLL, he further informed.
This is an abridged version of the original article that was published in the June edition of the Logistics Insider magazine. To read the complete article, click here.
