For better utilisation of warehouse space and improved operational efficiency, Redington India Ltd intends to set up four automated distribution centres (ADCs) in four metros at a total cost of Rs 150-200 crore.
The Chennai-based company is an end-to-end supply chain solutions provider for global brands in IT and non-IT verticals.
It distributes products for companies such as Nokia, LG, Whirlpool, Microsoft (Xbox) and Apple (iPod).
It recently added Imate (mobile phones) and Belkin (accessories for Apple range of products).
The products it distributes come in very small (Belkin – 6 gm) to very large (digital printing machine – 6 tonnes) sizes.
The company handles 100 tonnes of products a month out of Chennai and 600 tonnes across the country. Redington has 58 warehouses across the country.
Today, Redington incurs an expenditure of Rs 14 crore on rents. It expects to save substantially because of the ADC.
Unlike the existing warehouses, in which the racks are ‘flat’ and more spread out, the ADCs will feature ‘Very Narrow Aisle’ pallet rack system. Racks will go up 40 ft, with not more than a metre separating two racks.
“We studied nearly 50 warehouses across in various countries to select the VNA model,” Mr E.H. Kasturi Rangan, President, Redington, told Business Line.
The first ADC will come up 35 km from Chennai on the Chennai-Nellore Highways at a cost of Rs 30 crore.
The company will use Rs 25 crore from the IPO proceeds it raised last year and the balance through internal accruals, according Mr Rangan.
The ground breaking ceremony for the Chennai ADC happened on July 26.
The facility in 100,000 sq ft will be the ‘mother warehouse’ for Redington and to be operational in March 2009 quarter.
The other three will come up in the next two years, he said on the sidelines of the company’s annual general meeting.
Apart from saving in rent, Redington expects to save around Rs 50 lakh in operating expenses from the fifth year, when the company would have recovered its investments.