DHL Supply Chain is looking at high growth in its India business, its global CEO said recently, as the south Asian nation gradually shakes off its economic ennui and looks at a fast recovery in businesses and consumption.
The company, part of Deutsche Post DHL, one of the world’s largest logistics conglomerates, is setting up its own network of fulfilment centres across the country.
Fulfilment centres are large warehouses where inventory of orders placed with ecommerce players are packed and stacked before being shipped to customers. These centres can process both business-to-business (B2B) orders—typically high volume of products that are sent to a big-box retailer—as well as business-to-consumer (B2C) orders, which are shipped directly to an individual’s home.
“We are putting together a network of inventory spread across sites. A plug-n-play model where the customer pays for what he uses. The communication, IT systems, standard operating procedures (SOPs) are all common, and hence cost-effective,” said de Bok.
DHL Supply Chain operates out of 45 cities in India. To begin with, it will set up centres in the 12 biggest cities--Mumbai, New Delhi, Ahmedabad, Chennai, Bengaluru and Hyderabad, among others, said de Bok.
“We are making huge investments into IT systems as this is an end-to-end solution, real-time, with complete visibility to the customer. We’ve made these investments in Europe and know how this works,” he said.
The demand for warehousing is expected to grow around 160% to reach 35 million sq ft in 2021, almost in line with 2019 levels, supported by growing demand in sectors such as third-party logistics and ecommerce, said property consultant JLL India.
Globally, DHL’s supply chain business has seen a recovery in the first half of calendar year 2021, even as constraints continued, especially in markets such as China which has seen a partial, temporary closure of several of its busiest ports due to spurts of Covid-19 infection. New businesses contributed to higher earnings for the supply chain business.
“The life sciences & healthcare, consumer and retail sectors accounted for the majority of the new business, with a significant portion attributable to ecommerce,” parent DP DHL said in its half-yearly report. Operating profit of its supply chain business during the period more than doubled on year to EUR365 million.
Without giving absolute numbers, Vikas Anand, managing director of DHL Supply Chain, India told ET that the company’s revenue is growing by 25-30% this year over last and that it will reach a “super peak” in the fourth quarter of 2021.
“Even before the pandemic, the opportunity in the ecommerce market in India has been evident and–is expected to grow at a CAGR of approximately 27% by 2024, with a large number of sellers in various categories showing a keen interest in shifting to an omni-channel model,” said DHL in a note.
The ecommerce boom during the Covid-19 pandemic has boosted online retail transactions across India, especially with government-imposed social distancing protocols and a resultant decline in customers at brick-and-mortar shops. Relatedly, the expansion of ecommerce and 3PL sectors is also fuelling demand for warehousing, which is expected to increase at 160%, DHL said.
Currently, Asia Pacific accounts for just 15% of DHL Supply Chain’s global revenue and India is a fraction of that.
“Asia Pacific is a fast grower for us. It is a very important market. But we also grow very fast in North America, Latin America and Europe,” said de Bok, explaining the small chunk.
He said business in Asia entails higher costs to achieve revenue than in other markets.