Indian Supply Chain is not free, it is chained. With the upcoming (hopefully) GST roll out it shall get its freedom to design its Supply Chain on Logistical & Customer Considerations as opposed to taxation considerations.
This is a once in life time opportunity to relook, redesign, recreate & transform your Supply Chain. The Supply Chain function shall gain importance as the role of Supply Chain as a strategic differentiator shall grow. We are lucky to be part of Supply Chain function in this historic period.
For the Government to roll out GST it could take anything from 7 to 12 months. This is also the time required for Getting Your Supply Chain GST ready. Those who act now will reap the maximum benefits and gain competitive advantage for their organisations.
10 Supply Chain Transformations post GST
1) Sourcing Rationalisation
GST rollout shall ensure that vendors are decided on cost, quality & service considerations only and not on taxation considerations. This shall also create & opportunity for vendor consolidation.
2) Manufacturing locations/Mix
Manufacturing centres/mix decisions shall also be focussed on efficiencies & not on tax considerations
3) Lesser but Bigger Stocking points
The need to have a stocking point in each State/Union Territory shall no longer exists and no of Distribution centres required shall reduce from current up to 45(29 States + 7UT+ 9 required in bigger states) to 1, 5,15 & 30 based on desired service levels.
4) Lower Inventory due to lesser stocking points
Lower no of stocking points will free up huge cash due to inventory reduction
5) Bigger Trucks & Newer models of transportation shall emerge
Since the no. of stocking points shall reduce the load per truck per location shall increase. Also newer models of direct shipment to customers & pooling shall evolve.
6) Faster Transportation due to abolition of Border Check-posts
As per World Bank @ 30% higher freight is incurred due to inter-state border check-posts. The gradual elimination of these check-posts shall result in significant reduction in freight costs as well as reduction in transit times. This shall free up further cash blocked in inventories
Packaging needs will have to be relooked at due to changing logistics scope
8) Supply Chain Software Penetration
Supply Chains will need to have more of Supply Chain Software (In lieu of “Excel”).
9) Warehousing Transformation
Most companies will need to move from “Single User” dedicated warehouses to Multi User warehouses to take advantage of shared overheads, HD Racking, WMS & advanced MHE. There shall also be a shift from “Own & C & FA Managed” to 3PL managed warehousing
10) Working Capital Impact
GST shall have to be paid upfront & shall be recovered when it is billed to customers. Hence Shorter the Supply Chain lesser the working Capital blocked in GST.
Mr. Shreyas Malkan