GST now pro­vides respite to ware­houses?

With the roll out of Goods and Ser­vices Tax (GST), ware­hous­ing has come out as one of the big­gest ben­e­fi­cia­ries. CARGOTALK ex­plores how the ware­hous­ing in­dus­try is get­ting a makeover through the ad­vent of the tax regime.

Cargo Talk - - Feature -

Apart from the con­ven­tional ser­vice of stor­ing, ware­hous­ing plays a cru­cial role in the econ­omy by pack­ag­ing, la­belling, qual­ity in­spec­tion, bar­cod­ing, re­v­erse lo­gis­tics and other value-added ser­vices. The roll­out of the tax re­form mea­sure could re­duce to­tal num­ber of ware­houses in the coun­try by at least 40 per cent in the com­ing months, ac­cord­ing to in­dus­try ex­perts. GST is aimed to re­shape the ware­hous­ing in­dus­try with re­duc­tion in num­ber of ware­houses, bet­ter in­ven­tory con­trol, re­duced cost, more or­gan­ised ware­houses, to name a few. CARGOTALK takes a glance on how’s the con­sol­i­da­tion of ware­houses help­ing the in­dus­try to grow fur­ther, in the post GST sce­nario.

Chan­dra Sekar K, CEO, Jayem Ware­hous­ing, says, “The prac­tice of main­tain­ing mul­ti­ple ware­houses across the states to avoid CST and en­try taxes will be a story of the past. Con­sol­i­da­tion of ware­houses in few strate­gic lo­ca­tions will re­sult in cost ef­fi­cien­cies with re­duc­tion in the cost on real es­tate, labour and trans­porta­tion. Con­sol­i­da­tion will mean lesser num­ber of stock­ing points, no stock outs and lower de­mand vari­a­tion. This in turn im­proves de­mand planning. Com­pa­nies can now make de­ci­sions on ware­house lo­ca­tion, size, tech­nol­ogy adop­tion, and sup­ply chain model based on log­i­cal fac­tors like prox­im­ity to con­sump­tion cen­ters, man­u­fac­tur­ing lo­ca­tions, and in­ven­tory con­trol, etc.”

“With in­creased op­er­a­tional ef­fi­cien­cies and cost ef­fec­tive­ness, GST is go­ing to pro­vide a huge re­lief with re­spect to var­i­ous prob­lems faced by the sup­ply chain & lo­gis­tics in­dus­try. Ser­vice providers could ben­e­fit in the long run, as they im­ple­ment the hub&-spoke model for sup­ply chain net­works by op­er­at­ing large cen­tral ware­houses and re­mod­elling their trans­porta­tion routes. As an­tic­i­pated, GST has ush­ered in an era of upgra­da­tion and con­sol­i­da­tion of ware­houses in the sup­ply chain & lo­gis­tics in­dus­try. New mother ware­houses will come up at key strate­gic lo­ca­tions, which can cater to the needs of cus­tomers based pan-In­dia. GST has a pos­i­tive im­pact on the ware­hous­ing sec­tor, as de­mand will now be driven by con­sump­tion pat­terns and cus­tomer’s pref­er­ences rather than tax-friendly lo­ca­tions,” points, Vi­neet Kanau­jia, Vice Pres­i­dent – Mar­ket­ing, Saf­ex­press.

“More­over, the av­er­age speed of goods trans­porta­tion has also gone up. Cargo trucks are able to cover longer dis­tances. The sup­ply chain & lo­gis­tics in­dus­try would there­fore be both an en­abler and ben­e­fi­ciary in the In­dian eco­nomic growth saga for years to come,” he con­tin­ued.

With GST, re­design­ing the flow of move­ment with ware­hous­ing at strate­gic lo­ca­tions will come into ac­tion grad­u­ally. With the aim of re­duc­ing op­er­at­ing cost, purely be­ing based on sup­ply chain ef­fi­cien­cies only, cor­po­rates will tend to con­sol­i­date their scat­tered fa­cil­i­ties to one with bet­ter ca­pac­i­ties and bet­ter tech­ni­cal sup­port which would be around ma­jor con­sump­tions cen­ters. De­ci­sions on ware­hous­ing would be in­flu­enced ba­si­cally on reach to mar­ket, size and qual­ity re­quire­ments,” ex­plains, Ra­jiv Passi, Head Ex­press, Sugam Group.

Bipin Kulka­rni, VP Sales and Mar­ket­ing, Spear – An FM Lo­gis­tic Com­pany, shares, “Mar­ket in­te­gra­tion in the postGST era has brought a uni­form tax regime cuts across re­gional bound­aries and had made tax­a­tion an ir­rel­e­vant pa­ram­e­ter for the ware­hous­ing and dis­tri­bu­tion. GST has fa­cil­i­tated cen­tral­i­sa­tion and con­sol­i­da­tion of ware­houses with­out adding, rather re­duc­ing, the costs. Con­sol­i­dated ware­houses fa­cil­i­tated to adapt bet­ter au­to­ma­tion/tech­no­log­i­cal changes re­duc­ing hu­man re­source and ris­ing cost in­volved with it. Post GST com­pa­nies are look­ing for con­sol­i­dat­ing cost with help of Multi Client Fa­cil­i­ties (MCF). We are al­ready wit­ness­ing lot of new op­por­tu­ni­ties in ware­hous­ing sec­tors. Post GST, MCF will be pre­ferred choice of cus­tomers.”

“Our first of many MCFs in Bhi­wandi near Mum­bai will start from early De­cem­ber. This will be a state-of-the-art fa­cil­ity which will have 250,000 sq.ft. of space un­der sin­gle roof and a stor­age ca­pac­ity of 35,000 pal­let po­si­tions, sup­ported by WMS and han­dling equip­ment. An­other MCF for NCR re­gion which will be ap­prox. 600,000 sq.ft. in area will be op­er­a­tional by next year,” Kulka­rni in­forms.

From mere brick and mor­tar shel­ters to highly so­phis­ti­cated stock­rooms, the ware­hous­ing in­dus­try is get­ting a quick makeover with the tax regime. “Today's mod­ern ware­house de­sign is larger, taller, wider, brighter, smarter, and more flex­i­ble. Ba­sic de­sign in the 21st cen­tury in­cludes higher ceil­ing heights (36 feet and higher), flat con­crete floor sur­faces, LED and nat­u­ral light fea­tures, ex­panded trailer stor­age, and highly au­to­mated ma­te­ri­als han­dling equip­ment op­er­ated in­tel­li­gent soft­ware. Tech­nol­ogy ap­pli­ca­tions, ad­vanced au­to­ma­tion, and progressive build­ing de­sign all add up to pro­vide flex­i­ble sup­port

Con­sol­i­da­tion will mean lesser num­ber of stock­ing points, no stock outs and lower de­mand vari­a­tion GST has a pos­i­tive im­pact, as de­mand will now be driven by con­sump­tion pat­terns and cus­tomer’s pref­er­ences With GST, re­design­ing the flow of move­ment with ware­hous­ing at strate­gic lo­ca­tions will come into ac­tion grad­u­ally GST has fa­cil­i­tated cen­tral­i­sa­tion and con­sol­i­da­tion of ware­houses with­out adding, rather re­duc­ing, the costs

to end-to-end sup­ply chain,” adds Sekar.

Echo­ing sim­i­lar views, Kulka­rni says, “From godowns to ware­houses, the in­dus­try has come a long way to be­come the back­bone of man­u­fac­tur­ing and other in­dus­tries. It is grow­ing fast, un­der­go­ing var­i­ous dy­namic and tech­no­log­i­cal changes re­duc­ing hu­man ef­fort. Tech­nolo­gies like track­ing mech­a­nism, ware­house man­age­ment sys­tem, ma­te­rial han­dling equip­ment, just in time, pack­ing & prepack­ing, kit­ting & de-kit­ting, bundling, pric­ing and many more has changed the face of ware­hous­ing ser­vices pro­vided by 3PL com­pa­nies.”

“Al­though ini­tial re­ac­tions against GST may have been ex­treme in some places, but things are set­tling down for sure, and teething trou­bles will ease, too. The main chal­lenge will be a com­mit­ment by the sup­ply chain & lo­gis­tics firms to adapt to the change and make GST readi­ness a pre-req­ui­site within their com­pa­nies as well as amongst their ven­dors and sup­pli­ers. Once the pa­per­work is in place and the un­der­stand­ing of the tax regime sets in, the ini­tial prob­lems will be ironed out soon,” Kanau­jia adds.

Ef­fect of GST on ex­ist­ing ware­houses

Com­ment­ing on the cur­rent state of smaller ware­houses that are al­ready ex­isted/ex­ist­ing in the coun­try, Sekar in­forms, “Smaller ware­houses will ei­ther be shut down or merged with big­ger ware­houses for op­er­a­tional ef­fi­cien­cies. Most of these ware­houses are op­er­at­ing be­low their ca­pac­i­ties and the re­quire­ment of hav­ing ware­houses in each state is no more a ne­ces­sity.” Kulka­rni no­ti­fies, “De­ci­sion to have a ware­house will not be based on the tax con­sid­er­a­tion but purely based on con­sump­tion cen­tre. Com­pa­nies pre­fer to have ware­houses closer to big­ger con­sump­tion cen­ters. More­over, not all in­dus­tries are con­sol­i­dat­ing their ware­houses; in­dus­tries like auto and en­gi­neer­ing are not af­fected much as they still have to run smaller ware­houses near OEMs to cater to their JIT de­mands. How­ever, FMCG and re­tail com­pa­nies are con­sol­i­dat­ing.”

New hori­zons

“For sup­ply chain & lo­gis­tics in­dus­try, af­ter ini­tial hic­cups, the dust is set­tling down slowly. As we move ahead, in­ter­state form filling is get­ting re­duced in a big way, and the tran­sit-time from Des­ti­na­tion A to Des­ti­na­tion B will keep com­ing down. Not to for­get that ware­house lo­ca­tions will no longer be de­pen­dent on state tax­a­tion sys­tems and trans­porta­tion of goods will keep get­ting more ef­fi­cient,” shares Kanau­jia.

“3PL in­dus­try is evolv­ing from tra­di­tional ser­vice de­liv­ery sys­tems to highly in­te­grated and tech­ni­cally equipped player striv­ing to meet the ser­vice de­mands. Be­cause of the fewer ware­houses, the ware­houses can be ramped up and equipped with state-of-the-art tech­nol­ogy to fa­cil­i­tate long term ben­e­fits.

Lat­est WMS and mod­ern ro­bot­ics can be used for the ef­fec­tive and ef­fi­cient ware­house man­age­ment,” en­light­ens Sekar. “Ware­hous­ing in­dus­try is ex­pe­ri­enc­ing whole new change in the trend right from skilled work force to highly au­to­mated/smart tech­niques of ware­hous­ing or dis­tri­bu­tion. Im­proved tech­no­log­i­cal changes and ef­fi­cient op­er­a­tions will fa­cil­i­tate bet­ter sup­ply chain for all the man­u­fac­tur­ers,” opines Kulka­rni.

Bipin Kulka­rni VP Sales and Mar­ket­ing, Spear – An FM Lo­gis­tic Com­pany & In­dia Cargo Awards win­ner 2016

Chan­dra Sekar K CEO Jayem Ware­hous­ing

Vi­neet Kanau­jia In­dia Cargo Awards win­ner 2015 & Vice Pres­i­dent – Mar­ket­ing, Saf­ex­press.

Ra­jiv Passi Head Ex­press, Sugam Group & In­dia Cargo Awards win­ner 2016

KAL­PANA LOHUMI

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