How GST played a major role in Warehouse Automation?

In an interview with ET Infra, Naman Jain, Founder and Chief Executive Officer of Falcon Autotech, a warehouse automation solutions company, highlighted that GST played an important role in consolidating the warehouse industry in India and putting in motion the development of large warehouses that need automation.

The National Logistics Policy aims to cut down India’s logistics cost as a percentage of the gross domestic product to single digits from current 13-14% and improve the country’s ranking in the World Bank’s Logistics Performance Index. Warehouse automation with focus on quick turnaround time on the movement of goods, will play an important role in achieving those objectives. In an interview with ET Infra, Naman Jain, Founder and Chief Executive Officer of Falcon Autotech, a warehouse automation solutions company, highlighted that GST played an important role in consolidating the warehouse industry in India and putting in motion the development of large warehouses that need automation. Indian companies including Falcon Autotech are not just serving automation needs domestically but also clients overseas in developed markets.

…Edited Excerpts

Tell us about Falcon Autotech’s current operations. Are you also engaged in warehouse automation operations overseas?
Today, Falcon Autotech has approximately 600 permanent employees on rolls, and we run four manufacturing plants in North India and if you add the contractual staff that works with us in our factories, it is 1,000 to 1,100 people in operation. Today we are not just catering to customers in India, we are also catering to customers globally. So we have projects in the Middle Eastern region, we have projects in the European region, we have projects in Australia and New Zealand region, in the African continent. So we are exporting to these geographies from our facilities in India.

What are the kinds of automation solutions that Falcon Autotech is specializing in?
We have five product lines. The largest and the most important product line for us is sortation systems. We have seven different technologies of sorters in our portfolio to handle different kinds of use cases, which vary from 1,000 to 1,500 pieces every hour and also we have complex technology which can do as high as 80,000 parcels every hour. Second product line that we have is called conveyor systems, which helps goods movement within the warehouse. The third product line is robotics, which includes 3D ASRS systems (Automated Storage and Retrieval Systems), which are mobile robots roaming within the warehouse and have the ability to climb racks. The fourth product line is Dimension and Weight Scanning Systems, which enables measurement of products, and the last product line that we offer is Pick To Light Systems/Put To Light Systems, which are small light and electronic devices that get installed at storage racks, at picking racks and there is a software that is controlling these electronic lights, enabling handling of products.

What role did goods and services tax reform play in increasing the demand for warehouse automation?
Before GST, the way logistics and the supply chains in the country were structured for large organizations was state specific, because there used to be an inter-state tax. So companies, if they wanted to cater to their customers in Maharashtra, they would ideally want to have a warehouse in Maharashtra and similarly in other states to optimize on the taxation that would have otherwise applied for interstate shipping. This led to consolidated volumes being spread across multiple small centers and in each of those centers, the volumes were probably not high enough to justify investment in warehouse automation. After the introduction of the GST regime, companies did not have any incentive to run smaller centers. Companies started to consolidate the smaller centers into larger centers. Now, those larger centers suddenly had much more volumes inside one box and those volumes eventually made a lot of sense for companies to look at warehouse automation.

What is Falcon Autotech’s business model?
Currently, we have three large business models. We have an upfront capex sale. We design a project, we deliver that project and against a capex investment from the customer. Now once the system has been deployed, the second revenue model kicks in which is the Lifecycle Services, which includes servicing the machinery or robotics in the warehouse automation system over a period of time. The third business model which we have launched is SAS or Software-as-a-Service, which comes along with the core products that we sell to our customers.

How much demand is there globally for warehouse automation services provided by Indian companies such as yours?
We are at that inflection point and at the cusp, where countries globally have started looking at India as a genuine source of technology. Falcon Autotech has executed projects in the UK, Ireland, Australia, and also emerging markets like UAE, Saudi Arabia, Africa, South Africa. So we are getting a very healthy pipeline of projects from overseas and to cater to that demand we have recently opened our own entities in Dubai, in Australia, and we will set up a base in Europe also so that we are closer to our customer.

What is the advantage of applying Artificial Intelligence (Ai) Technology in warehouse automation?
When it comes to warehouse automation AI uses are multifold. We as an organization are already leveraging AI. One is for image analysis. The systems that we deploy come in with a lot of cameras and these cameras are continuously taking photographs of the products that are passing in front of them. Now using deep learning image classification AI, we are able to identify an object and also use the same for enhancing decoding barcodes, as well as use AI for predictive analysis based on date trends.

What is the expected market size of warehouse automation in India in the coming 5-10 years?
Our sense is that current warehouse automation, it should be somewhere in the range of $800 million to a $1billion dollar market annually. In the coming years, labour, cost of real estate for warehouses and nature of customer demand will be the main drivers. For the future, if we take a better look at what has happened in the last 10 years, our sense is that this market should be easily in the range of $4 billion to $5 billion in the next 10 years.

When it comes to the topline, how is Falcon Autotech performing?
In FY22 (2021-22), our topline was close to Rs. 205 crores. What we have seen in the last five years, as an organization, we have always grown almost 35% to 40% annually. We believe that in the next five years, we should be easily looking at a topline of anywhere between Rs. 1,000 crores to Rs. 1,200 crores.

What is the revenue mix in terms of domestic and international markets?
We started exporting in 2020-21 (Apr-Mar). Over the last two and a half, three years, that percentage of exports as a function of our topline has only grown. So for example, in 2021-22, we did a topline, which contributed approximately 15% to 18% of revenue from exports and this number has only grown to around 25% to 30% in 2022-23.


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Media Contact:
Abhishek Sahu
Marketing Manager

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