With the rising demand for warehouse facilities in the country, it’s expected that a significant portion of this infrastructure will undergo various levels of automation by 2030. The primary goals are to enhance efficiency and reduce logistics costs. According to a report from business advisory firm Alvarez & Marsal, more than 80% of Indian warehouses will incorporate some degree of automation by 2030. Grade A warehouses, known for their cutting-edge facilities, are projected to experience a compound annual growth rate of 12.5%, resulting in approximately 324 million square feet by 2027-28.
Grade A warehouses are characterized by their modern, high-quality storage, assembly, and distribution capabilities. The surge in e-commerce, driven by increased consumption and heightened consumer expectations for swift deliveries, as well as escalating land prices, is the driving force behind the imperative for warehouse automation. The report highlights varying levels of automation maturity, ranging from Level 0 (manual operations) to Level 4 (end-to-end automation), with most Indian warehouses currently falling within Levels 0 to 2.
Manish Saigal, Managing Director at Alvarez & Marsal and Co-lead of the India Business Transformation Services practice, emphasizes the need for organizations to carefully assess the costs and benefits of implementing automation technologies. While automation enhances efficiency and reduces human error and theft, technologies need to align with strategic goals and operational needs.
The report acknowledges certain challenges in adopting automation within the Indian warehousing sector, given India’s labor-intensive nature in industrial sectors. Establishing a robust ecosystem for automation will require investment in local service providers, cost-effective technology tools, competitive differentiation, and ongoing maintenance and technical support. The return on investment (ROI) for automation is typically higher for larger warehouses with substantial package volumes. However, the report points out that the current size of warehouses in India can limit the financial feasibility of certain automation technologies.
Moreover, the extended payback periods for automation solutions often conflict with the shorter lease terms commonly offered by third-party logistics providers, posing financial challenges for potential adopters. Increasing efficiencies across the logistics supply chain aligns with the objectives of the National Logistics Policy, which aims to reduce the country’s logistics costs from 13-14% of the GDP to single digits.