With the Centre and states finally reaching a consensus on the Goods and Services Tax (GST), India is all set to roll out the largest indirect tax reform since the introduction of the value-added tax in 2005.
The impact or rather the opportunity is huge for Manufacturers & 3PLs to lower the overall Logistics cost and achieve a Demand-Driven-Supply-Network. Firms can benefit by adopting state-of-art technology to improve overall customer service level and increase end-to-end supply chain efficiency while lowering the COGS(Cost of Goods Sold).
The Goods and Service Tax Bill or GST Bill, officially known as The Constitution (122nd Amendment) Bill, 2014, would be a Value added Tax (VAT) to be implemented in India from April 2016. GST stands for “Goods and Services Tax”, and is proposed to be a comprehensive indirect tax levy on manufacture,
sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian Central and State governments. It is aimed at being comprehensive for most goods and services.
Indirect Taxes played a major role in deciding the supply chain network design.
With the elimination of CST (Central Sales Tax) in GST- Tax would not be a deciding factor on supply chain network design and the necessity of having warehouses in each state to avoid CST would be eliminated.
With GST regime, the supply chain network design would be purely based on logistics cost & customer service and provides a greater flexibility into Supply & Demand matching. This would lead to club many small warehouses and have bigger, fewer, and highly efficient warehouses. This also would reduce the share of unorganized sector in warehousing.
In addition, GST also improves the transit and consequently delivery times because of state border crossing are likely to be simplified.
The bigger warehouses can benefit from the technological sophistication by adopting state-of-the art planning and warehouse execution system while optimizing the total IT cost.
This would enable the firms to Improve demand forecast accuracy, can leverage collaborative planning processes – to consistently balance supply with demand and enables to achieve a true perfect order fulfillment process by synchronize the customer order in real-time with the warehouse activities (Integrated MFS, optimized operator/equipment/space, cross docking, wave optimization,…) and transportation activities(optimized freight unit, optimized route, FTL, Carrier collaboration,..) with a greater & accurate transparency on traceability.
This was not feasible in smaller & scattered warehouses in the supply chain network.
For more information on How SAP’s solution can help, please visit the following sites:
Logistics Order Fulfillment: Link
Demand Driven Supply Network: Link