I interviewed Amardeep Chougale who discussed Post-GST India Supply Chain Transformation.

 

 

 

 

 

 

Amardeep Chougale is an expert in the various facets of Manufacturing, Logistics and Supply Chain Management across varied industry verticals. He has contributed as a strategic partner in Business Strategy, Planning & Execution, Manufacturing, Supply Chain Operation Management, Business Development, Team Leadership, Coaching and Global COE setup.

 

Overall, he is having 21+ years industry Experience within India & South-East Asia Market. He worked with DHL, Nokia Mobiles & Colgate Palmolive. He is a B. Tech Chemical from LIT Nagpur & IIFT Alumni. He has been part of several strategic projects across his assignments dealing with corporate strategy, growth agenda and management partner choices. Result oriented decisive leader with proven success in new market supply chain solution deployment. Operational process improvements to drive productivity and optimize costs within end to end supply chain. Expert at establishing operational excellence thereby building cohesive team structures that drive company’s vision for profitable growth. Capable of translating conceptual models into specific growth strategies and executing local & global initiatives

 

 

What is your opinion on key challenges Pre-GST? 

 

Pre-GST, Supply chain decisions were driven by fiscal costs & Tax laws consideration rather the supply chain efficiencies. Organizations design their supply chain networks to maximize the available tax exemptions and shelters by way of differential tax rates across the states. Companies operate several warehouses all over India, to avoid inter-state CST.State border check posts are cumbersome and time consuming for inter-state transportation. Local levies of Octroi, entry tax, etc. increase the cost of goods. Working capital blocked in multiple taxes, levied at various stages of Inventory storage & movements. Another key Challenges like Small and inefficient warehouses operation at multi locations leads higher operation cost including IT cost, Higher material handling cost due to multiple layer of distribution &Very Few FDI in warehousing because of high fragmentation not attractive for global players to invest.

 

 

What is your opinion on GST impact on supply chain?

 

Post GST, taxation will be linked to the destination rather than the origin of a product, linking supply chain solutions to consumption of products.

  • Post-GST, 6 key strategic levers will emerge
    1. Import/export
      1. New ports of entry for sea and air shipments will emerge
        1. Infrastructure investments and automation for green channels
      2. Manufacturers /importers will push all imports near the consumption port

 

  1. Manufacturing re-engineering 
    1. New manufacturing corridors /hubs (sector specific) will emerge, linked to product consumption
    2. Manufacturer will explore direct stock supply to regional stockists to avoid inventory storage domestically
    3. Manufacturing strategy will be linked to
      1. Domestic consumption population
      2. Major import/export ports nearby
      3. Flexible manufacturing setup solutions will emerge 
      4. Mergers and acquisitions
      5. Change in supplier landscape
        1. New supplier parks (sector specific) will emerge

 

  1. Distribution: Network optimization
    1. Move towards a demand and consumption driven, as opposed to a tax driven supply chain
    2. No need to set up a distribution warehouse Centre in every state
    3. The tax disincentive of inter-state sales and supplies will disappear. India will operate as a single tax country. This simplifies supply chain network.
    4. Shift from state to nationally focused end-to-end supply chain network integration
    5. Cost to serve model will be assessed (cost vs. service) for warehouse consolidation
    6. Transportation will see major changes due to increase in long-haul distances and last mile distribution requirement changes
    7. New multi-mode transport solutions will emerge using road, rail and sea combinations

 

  1. Value added services
    1. Warehouse operation team will focus on physical operation of inventory management, pick, pack and dispatch, but activity related to IT / data entry will be consolidated centrally / regionally
    2. Backend shared services will emerge for the following services
      1. Customer service
      2. Order to cash management
      3. Return management
      4. Transport control tower
      5. MIS / data analytics

 

  • Channel strategy
    1. Distribution channel consolidation / rationalization will lead to a big stockists emerging to manage distribution within states, regions or across India
      1. Direct supply from factory to big stockists
      2. Pull-based demand will future material and inventory supply model
      3. Inventory automation technology will emerge using real time data analytics
      4. Organized retail channel will focus on tier 2 & 3 town expansion
        1. Direct supply from factory to centralized Warehouse of organized retail

 

  • New business models: Using technology
    1. Disruption using technology will be the new normal and GST will be an enabler for most sectors to strategize and deploy new business models E-commerce (online, market place) and Omni channel business models will have high potential to grow exponentially

 

 

What is your opinion on consolidation of warehouses post GST?

 

Warehouse consolidation is linked to cost to serve. This will involve supply chain network optimization, based on each sector’s needs and ‘go to market’ strategy, in addition to optimal channel strategy and inventory. In some sectors where optimal customer service requirements mean delivery lead time will be a critical factor, there will be fewer changes in the existing supply chain, though some degree of consolidation will happen basis Centre of gravity (demand vs. supply delivery lead-time is less than 12 to 24 hrs.).

 

In sectors where cost is a key strategic driver, there is a major possibility of warehouse consolidation. Organizations will operate with national / regional hubs, it being economically more viable to simplify distribution networks and merge warehouses into 3-4 major regional centers. Greater scale means greater process optimization as the market moves towards advanced 3PL service offerings (Demand vs. supply delivery lead-time is within 72 hrs.).

 

Other sectors will have a mix of both cost and service linked to Centre of gravity.

 

Going forward, big box warehouse solution will emerge with shared warehousing space for multiple clients, offering greater flexibility and synergies of scale. Emerging major warehouse hubs to manage these regional / national warehouses in Mumbai, Nagpur, Ahmedabad, NCR, Ambala, Lucknow, Kolkata, Guwahati, Hyderabad, Chennai, Bengaluru and Kochi (12 key strategic locations).

 

 

Which sector would witness maximum consolidation and why?

 

Warehouse consolidation will be linked to each company’s business strategy, go to market/ business model, cost to serve, and channel strategy.

 

Projected sector specific impact is as follows:

  • FMCG and Electronic Goods: Warehouse consolidation from 30 to 12 warehouses
  • Technology: Finished goods warehouse consolidation from 21 to 5 warehouses but spare parts will continue state / City specific small cross docks to manage delivery SLA from 2 to 8 hrs.
  • Healthcare: Pharma warehouse consolidation from 30 to 20 warehouses since stock on self is critical, although medical devices will witness major consolidation from 15 to 5 warehouses
  • Fashion: Warehouse consolidation from 21 to 1 or 4 warehouses
  • Automotive: The automotive industry will move to make to order and dispatch directly from factory to 4 regional hubs, plus inventory holdings at dealer points, although spare parts will be fully centralized in the national/regional hubs. Similarly, spare part suppliers will also consolidate manufacturing plants plus inventory holdings across India.
  • New Trends: Automation, Digitization & 3 D Printing will further change Supply Chain Foot Print in India in next 5 to 10 years.

 

 

What is your opinion on transportation post GST?

 

Transport Industry is undergoing major changes post GST. Post-GST network optimization is linked to B2B & B2C business models, driving reduction in movement of goods within primary, secondary and last mile transport, resulting in increased long-haul movement. For some sectors, primary and secondary movements will be clubbed as single movements due to warehouse consolidation. Inter-state distribution will see FTL volumes from multiple customers consolidated into larger capacity trucks to reduce cost/ton. Local distribution will see common milk runs used for multiple customers. New higher capacity and technology enabled vehicles will be available with telematics, on-board devices with sensors like GPS to monitor vehicle movements, side curtain vehicles and load optimization technologies.

 

The removal of check post and entry tax will have the following benefits, including reduction in vehicle halts at check posts, improved delivery lead time, vehicle utilization and reverse movements, and greater transport capacity due to efficiency improvement. In the long run, this will improve cost economics and have carbon emission benefits.

 

New modes of transport using sea and rail will also emerge, but linked to new government policies to support the same. Technology-based solutions will emerge to provide end-to-end transport movement visibility and manage day to day transport market capacity.

 

 

 

About Amardeep Chougale

 

 

 

 

 

 

Amardeep Chougale

 

Senior Supply Chain Management Professional | Distribution | Logistics Operation |Business Development |Strategy

 

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