Mahindra Logistics

GST Implementation in warehousing industry

As is common knowledge now, with GST, India would become a uniform, common market for goods and services, breaking state barriers and borders. This would lead to re-engineering of warehouse strategy by manufacturers and logistics companies. Presently, companies feel the need to build at least one big warehouse in every State because different taxes are being imposed in different States. This decreases the storage cost and affects the warehousing structure in India. In the post-GST scenario, it is expected that decisions on location of warehouses will no longer be driven by tax considerations. This is because, in the GST regime, inter-State transactions would be on par with intra-State transactions from the perspective of applicable taxes. Warehousing decisions will henceforth be driven by considerations like location of major customer / market, plant or supply locations and optimization of goods movement.

Healthy impact on supply chain

With GST in place, there would be uniformity in taxes and companies would not be required to pay taxes in different regions. Companies would have one big warehouse at a central location which might serve multiple States, leading to decrease in the number of warehouses. Alternatively, companies may opt for warehouses at specific locations on the basis of the hub-and-spoke model. Experts believe that GST will have a direct and a healthy impact on the total number of warehouses in a supply chain.

Consolidated warehouses would be “Big Box warehouses” for accommodating more inventory at a central location, as a result reduction in warehousing cost per piece or cases or pallet and they would benefit from technological sophistication by implementing state-of-the-art planning and warehousing systems which are not possible in smaller and scattered warehouses. Similarly, even IT costs of deploying ERP systems at bigger warehouses will leverage economies of scale; a benefit which was missing in the system of smaller warehouses located at too many locations. Analysts also predict that it will ensure improved service levels at a lower cost in the overall supply chain.

MLL has large format ultra modern warehouses of 1.5 to 2 Lakh sq. ft. sizes in key locations at a pan-India level. These warehouses are pre-engineered buildings of minimum of 9 m eaves height and 5 ton floor capacity with capability to go for G+5 or G+6 level racking or multi-tier mezzanines as per product & operational requirements. The entire warehousing system, backed by technologies like WMS, TMS and Control Tower, helps you stay in control of your assets and distribution. It lets you define a set of rules that control item management and auto-generate reports such as stock snapshot, ageing report, GRN and issue report. The TMS system and Control Tower helps track distribution along with route optimisation options. These fully automated warehouses help you increase efficiency, cost-effectiveness and improve service levels so you can stay in control of your business.

As an offshoot of this, the warehousing sector will have to better organize itself and also optimize its operations and information technology systems. Logically this means that the industry will welcome more and more well-organized, well-integrated and reputed 3PLs in order to usher in a decisively more professional work environment.

Lower Turnaround Time

With big box warehouses with advance technology & high level automation will reduce Turn Around Time of vehicles loading or unloading in warehouse and with WMS deployment order to despatch TAT can be reduced and which results into quick response to customer orders.

Inventory Control

The current tax structure in India leads to complicated warehousing decisions like setting up of huge inventory and at times, running out of inventory when demand rises suddenly. GST would have a massive impact on inventory efficiency as there would be lesser stocking points and case of stock-outs would also be fewer. The GST era consolidated warehouses would be larger in size for accommodating more inventory at a central location. With organised 3PLs with WMS/TMS enable operation gives complete visibility of inventory at storage as well as in transit, which enables Planner to plan for inventory and results into reduction of inventory in supply chain.

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