Focus on Nairobi as a major logistics hub has in recent years taken shape. The Standard Gauge Railway (line) has made Nairobi a new logistics hub, opening immense opportunities for other service providers in the industry.
This new development has received a huge boost from Kenya’s government efforts to invest heavily in infrastructure, a key driver in solving warehousing shortage. With good road networks and effective SGR warehouses, the role of warehousing in Kenya has been enhanced.
Last year, 418,000 twenty-foot equivalent units (TEUs) were moved through the SGR, a significant amount that influenced how warehouses could position themselves for the expanded roles.
Over the last few years, the demand for an easily accessible warehouse in Kenya has grown exponentially. This is being driven by the rise in demand for the storage of perishable foods, raw materials for manufacturing, expansion of retail channels and eCommerce, and growing food safety concerns, especially as the world struggles with the current Covid 19 pandemic.
“Infrastructure development projects such as the SGR have led to warehousing demands from many players among them manufacturers and industrialists. These users are today seeking warehouses from third parties to support their enterprises in providing inputs or raw materials just in time to meet their end-customers’ needs,” Mr. Job Kemboi, Signon Global Logistics Commercial Manager told Freight Logistics.
With the expansion of the SGR operations, the demand for warehousing will increase significantly in various terminals, particularly in Nairobi and Naivasha- where cargo train was launched late last year.
“Besides, the SGR is likely to spur the growth of the planned industrial parks and value addition centres handling goods ferried by rail,” Kemboi said.
The government intends to create Special Economic Zone (SEZ) in Naivasha, which warehouse operators see as a huge boost to their businesses since SEZ will use a new business model where shippers will import goods and put them in warehouses only paying taxes once the goods are sold.
Siginon Global Logistics, which is part of the Siginon Group has today created warehousing facilities with a total capacity of 300,000 square feet in order to meet the growing demand from its customers. Started in 1985, Signon provides, transit, general and bonded warehouses in Nairobi and Mombasa.
Siginon Group started as a small clearing and forwarding company at the port city of Mombasa.
“As we cleared cargo, we started getting a lot of requests from our customers who wanted their cargo transported from point A to B. So we bought some trucks to move the cargo to the final destination. Then from there, we had the customer asking us whether we could hold the cargo for them for some time because they didn’t need the goods urgently; so we started investing in warehouses,” Kemboi said, adding that this spared customers inconveniences of relying on multiple handlers for various services.
The warehousing has today been aligned to meet the needs of various customer groups that include humanitarian agencies distributing relief food to neighboring countries such as Somalia, South Sudan among others.
To meet their growing demand and increased uses, warehouse operators have invested in modern Information Technology and internet-based systems. Siginon, for instance, operates a Warehouse Management System (WMS) that assists in stock taking, cargo identification among others that support customers’ decision-making processes.
“Our warehouse system provides the customers round the clock access to their inventory and execute orders from their offices. Radio-frequency identification (RFID) system ensures accurate and efficient inventory management, stock-outs and stock-taking controlled by touch of a button,” Kemboi said.
Added him: “These then advise customers on the status of their inventory on demand to support their prompt decision-making.”
Even importers of motor vehicles are increasingly finding warehouses indispensable since some use warehouse services to ensure they have vehicle stocks ready for sale to meet expected demand.
The advance in technology, Kemboi contends, takes credit for the central role warehouses play in the success of e-commerce, which is gaining a strong footing in the country. Their role includes inventory management such as ordering, stock taking, stock-outs, and acceptances.
The growth of online selling platforms such as Jumia, Kilimall International, Masoko, Aladin, Pigiame, Africa Sokoni among other has created the need for warehouses that are easily accessible to serve clients who expect a predictable, reliable delivery.
“An efficient e-commerce process relies on the adoption of warehouse management systems to ensure timeliness, accuracy, and speed. This has eliminated the need for unnecessary human intervention and delays caused by various factors,” according to Kemboi.
Kenya’s position as a major business hub in the East Africa region has seen an increase of investors who require warehousing services locally to service the needs of their customers in the region. Besides, neighboring countries rely on Siginon among other warehouses to handle various imports for their use, especially in manufacturing.
As a nation, Kenya’s President has placed great emphasis on the Big 4 Agenda that gives a special focus on affordable housing, enhancing manufacturing, health care, food security and nutrition as key economic drivers.
“These have upped the demand for our services, and we are increasingly enhancing our capacity to meet the demands of this endeavor,” Kemboi said.
The Kenyan government has an ambitious plan to grow the manufacturing sector GDP from 9.2 percent in 2018 to 20 percent in 2022.
Challenges in the warehousing sector include heavy capital investment required, availability of land and required documents, security that assures the goods will be secured, convenient location serviced by infrastructures such as electricity, water, access roads, and drainage.
Unlike the development of any other rental property, the cost of constructing a warehouse in Kenya is prohibitive. According to Tilisi logistics, which carried out a study on the sector in 2018, an investor will need approximately $43,000 for permits, and utility connections.
If one wants to put up a grade-A warehouse or cold storage, it’s even more expensive. Trademark East Africa (TMEA) says firms that can rely on efficient logistics, modern supply chains, and just-in-time delivery systems are more efficient and cash generative and, therefore, more competitive.
“For East Africa’s exports to compete in the global marketplace, businesses operating in the region need to have reliable flows of inventories such as raw materials or finished goods, without which businesses need to carry higher levels of inventory to deal with uncertainty.”
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