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The Impact of GST on Supply Chain Management

There is a significant influence on the structure of a supply chain management system by various taxes that are levied on it, on the basis of the business’s location. With the introduction of a unified tax scheme such as GST, multiple state taxes are now eliminated, which in turn, can help in the consolidation of warehouses by logistic companies; as the practice of maintaining a warehouse in each state to avoid the central tax, can be done away with.

There is a prospect of significant cost savings now by companies, as a result of this and GST hence, can be used as a basis for further investment for advance serviceability. Post the implementation of GST, there needs to be a re-arrangement of design in supply chain, to base it upon customer service and cost-efficient logistics; assisting firms in increasing the accuracy of forecasts.

Here are some of the impactful benefits that can be garnered by organizations post-GST:

  1. Personalized Supply Chain: With GST in effect, manufacturers can look at tailored supply chain models, that can suit customer needs as well as the requirements of their supply chain. The elimination of stock transfer benefits will also help in increasing the share of direct dispatches for medium/large dealerships.
  2. Enhancing Inventory Management: The elimination of multi-state-level taxes will help in reducing channel inventories, thus optimizing stock points. Fewer transit-stays will also benefit advance lead time, as well as help in decreasing inventory levels at stocking points, thus creating opportunities for efficient warehouse management.
  3. Decreasing Incoming Logistics Costs: The incoming supply chain is now expected to see peripheral benefits in direct out-of-state purchases, as well as logistics cost. Hence manufacturers can now look at expanding their vendor base beyond the boundaries of states and also the modification of sourcing models.
  4. Modified Distribution Models for Aftermarket: There can be an overarchingly large impact of GST on the spares aftermarket due to the increase in requirements of storage and retail penetration. Organizations can also evolve their distribution footprint and try to shift away from consignment stocking, which will enable re-imagined supply chain models while ensuring high-quality service and cost-efficient availability.

Hence, to take the most benefits out of the impact that the new GST regime is set to make on Supply Chain Management Systems, organizations need to have ample preparation and the right entrepreneurial attitude to rise up to the challenge.

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