GST is India’s boldest reform. Logistics sector is at the core of this change. The true success of GST will depend on how the supply chains in the country get re-configured. It is also a ‘once in a generation’ opportunity to change the paradigm of the sector.

GST Can Lead to Digitization of the Supply Chains

GST is a window of opportunity to do the ‘system upgrade’ at the network level. The companies can consolidate the supply chain from warehousing to transportation and work with organization and technology based players to reduce cost and inefficiencies. Transparency and pace of information flow will determine whether the efficiencies promised by GST will be captured by Indian companies. If you are a business or supply chain leader, following should be the foremost agenda on digitization to lay a strong foundation for supply chain post GST era -

Make it paperless & cashless (use E-POD’s, get reports/dashboard manually generated)




Ask for GPS/tracking sensors and visual reporting of all warehouses & trucks (sensors are very low cost today)


 


Automate decision making through simple algorithms (based on SLA and cost) to remove manual errors (e.g. allocation of loads, dispatch schedules)




Look out for new age technologies for your plants & warehouses for further scale up




Link up the complete supply chain from suppliers, plant, warehousing, transportation to distribution through technology

Start from ‘zero’ warehouse mindset – use value density, customer service and transit times as parameters to re-design the network to as few warehouses as possible

GST Can Enable Faster Transportation & Delivery Network

This is the only way ‘consolidation’ benefits of GST will get passed through. Most companies can evaluate reducing the number of layers to reach the customer and can create faster delivery network.

Change the supply chain design to ‘pull based’ and ‘direct to customer’. This has significant second order benefits in the supply chain from reduction in cash and inventory blockage to provide more opportunities for product proliferation and SKU addition.

Move transportation to larger trucks and demand for 50-70 percent lower transit times. Delhi to Mumbai can be delivered on the 2nd day and Delhi to Guwahati on the 3rd day.

Start from ‘zero’ warehouse mindset – use value density, customer service and transit times as parameters to re-design the network to as few warehouses as possible. RIVIGO has done a comprehensive network design study to help companies plan the warehousing footprint based on industry type, value density and service level required.

Build A Cheaper ‘Overall Cost’ Network

GST can lead to cost reduction by 30-40 percent and this is how companies can work to reduce cost structure in the supply chains -

Think of inventory and working capital reduction by 80 percent in your supply chain. Most Indian companies do not have a very clear account of the inventory in the system and even less accountability. This is an opportunity for these companies to evaluate reduction of inventories significantly and bringing down overall cost due to wastage and working capital blockage. Our estimate is that over the years, Indian companies together can release $100-150 billion capital that is blocked in inventory and working capital through this optimization.

Reduce your cash blockage due to ‘tax at source’ by creating ‘pull based’ and faster supply chain. Tax at source will be a big hit for several companies with high level of inventory in the system and the negative impact of this can be reduced by shipping goods as close to the consumption dates and creating a more efficient pull based system. The cost of cash blockage is a significant percentage of the logistics cost and companies should measure the impact to take supply chain decisions.

Collaborate with your peers and competitors in the industry to build a multi-user and shared-ecosystem. Indian companies are the lowest users globally of 3 PL services at nine percent compared to 57 percent in the U.S. We are likely to see a 30-40 percent growth in the 3PL services in India as more and more companies will go for shared infrastructure to manage complexity, adopt technology and provide scalability to supply chains.