Is India ready for fully-automated robot-operated warehouses?

Historically, all the warehouses in India were designed based on the tax structure and not on supply chain synergies. For example, in the pre GST era, companies used to maintain warehouses in each state of the country in order to save taxes. As a result, companies had to handle several small and sub-optimal warehouses.

Implementation of GST (one tax across the country) has completely changed the rules of the game. Now companies do not get the advantage by maintaining multiple warehouses in different states. In the present scenario, companies are achieving economies of scale by installing bigger and multiple commodity warehouses. In this changed scenario of warehouse consolidation, the smaller and existing warehouses are lying in an ideal stage.

Bigger warehouses always demand huge manpower in their astute management and here the role of automation comes in play. While we all crave for automation (which was a fallout of the various phases of industrialization, be it 1.0, 2.0, 3.0 and 4.0), it makes economic sense if the cost of automation is less than manual labour cost.

Robot operated warehouses still a distant dream for India

In the US and China, the cost of the robot is less than the labour cost due to the shift in aspirations of the youth (who want more high-end jobs) and hence automation has resulted in huge cost saving in warehousing in these countries.

For a country like India where labour is in abundant supply and cheap, fully automated robot operated warehouse is a distant dream. For example, in the US, Amazon has robots in their warehouses but when Amazon builds a warehouse in Hyderabad the company prefers human employees for its operation.   

But yes as we move towards a more sophisticated warehousing solution, some warehousing activities may be automated in warehouses. We will need skilled people to operate these sophisticated warehouses and the manual part will be eliminated to a certain extent. So certainly there will be a shift in the skill set mix for operating these semi-automated warehouses.

GST led to warehouse consolidation

In post GST period, companies are undertaking consolidation activities based on cost savings and supply chain synergies. Another fundamental shift is that now states are offering rebates if one produces and sells in the same state. GST being a destination-driven tax, the focus will now be more on optimizing the supply chain network from a profit and/or cost optimization perspective.

Another trend which is likely to come is of On-demand warehousing, whereby there will be specialized players who will be able to trade on warehouse space. This works well for the e-commerce players where the demand is highly variable and we cannot predict the warehouse space needed each day. With supply chain costs going down, the cost of distribution will come down, some of which will be passed on to the customer. This is an exciting time for supply chain professionals in India.

The article is authored by

Sandeep Chatterjee, Senior Manager, Deloitte India

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