GST Implementation: How it will change the way we do Warehousing in India
Who could have thought that storage facility in India which about a decade ago was a place with four wall, no shed, no ventilation, a book keeper for managing and tracking inventory would have changed drastically. The warehouse industry in India is estimated to be at INR 745 billion(FY13) with a 15% growth rate in past 3 years and estimated at 18% till FY17.
With ratification from more than 50% states and President’s approval it’s just a matter of days for GST to become a reality. Today, with 90% of warehousing market being captured by unorganized players, first few years after GST this market will still be dominated by these players. Post complete implementation it will be the operational efficiency and price charged by these players that will govern the fate of their existence in the market.
The GST Effect
GST being a destination based tax will have a strong impact on the manufacturing firm, warehousing, logistics, supply chain and distribution channel. Under the new tax structure, focus would shift from saving tax by having smaller warehouses to improve overall operational efficiency.
Merger of warehouses and their operations would drive productivity of the overall supply chain. The location, storage capacity, additional services and price offered to customer will be the driving factors, which will set the tone of the industry for the coming years.
Warehousing in India as We know it
Growth sectors like agriculture, manufacturing, ecommerce and organized retail are driving the growth of warehousing. Expectations from warehousing as an industry has also increased, way beyond from just being a traditional storing services to provide additional services. These services may include merging and breaking up of cargo, packaging, classifying, bar coding, reverse logistics, adding value to the customers.
Expected Changes in Warehousing
Given the current deficit of about 120 million Sq.Ft (Estimated by ValueNotes), expectations around additional services and implementation of new tax structure, warehousing industry will go through a major reform. Such reforms will not only improve customer service levels, but also reduce burden on the other supply chain elements.
Organizations will now have to explore different distribution models where aspects like aggregation of inventory, lesser number of stocking points will improve the efficiency and provide better control. This would allow the organizations to take advantage of economies of scale and consolidate warehouses to reduce capital, deployed in the business.
While Warehousing as an industry is struggling to cope up with lot of changes, there is enough headroom for improving operational efficiency. Especially with GST implementation, the impact will be positive across the chain.
Companies in this space, shall need to take right set of initiatives towards optimizing the network with respect to stock points location, capacity and transportation. This will not only drive the growth, but will also improve customer service levels and hence the opportunity for bigger market share.
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