NEW DELHI: Major consumer products companies are busy tweaking their warehousing systems and supply chains, and modernising IT infrastructure, ahead of the rollout of the unified goods and services tax (GST) regime that will facilitate seamless interstate movement of goods.
Companies such as PepsiCo, DaburBSE 0.45 %, Kellogg’s and Hindustan UnileverBSE 0.24 % among others are in the last leg of preparations in anticipation of GST, which will replace all indirect taxes on goods and services and is likely to take effect from April 1next year.
At present each state has its own tax regime and, to comply with that, companies need to have warehouses in almost all the states. However, under GST all states will follow a uniform taxation, and hence it would not be necessary to have warehouses everywhere.
Most companies making fast moving consumer goods (FMCG) are looking at switching to larger warehouse hubs instead of several smaller hubs spread across the country, which will facilitate better management of logistics and faster movement of goods.
“The big unlock will be the warehouse consolidation since that will shift from a distributed, state driven model to consolidated large warehouses and the investments in IT and modernisation will enable this,” said Niteen Pradhan, vice president for supply chain at PepsiCo India. “This will also bring in global best practices to the warehousing industry in India,” he said.
Parag Aggarwal, cofounder of logistics solutions provider Gobolt, the implementation of GST will shift the focus of FMCG companies towards more efficient transportation systems with better transit times.
“This would facilitate reduction in inventory levels and hence the associated costs while allowing flexible demand fulfilment strategies,” he said. Gobolt handles logistics for some large consumer goods and FMCG companies including PepsiCo and Panasonic.
GST is also expected to help improve distribution efficiency with better IT infrastructure across industries.
Most companies have already prepared a blueprint of the proposed changes in the supply chain and are waiting for the fine print of the levy.
“We have already completed the impact analysis of the pre and post-GST scenario, along with an external consultant,” said Lalit Malik, chief financial officer at Dabur IndiaBSE 0.45 %. “Dabur has also completed the groundwork with regard to amendments in our IT infrastructure to ensure a seamless transition,” he said.
Kellogg India has set up a core project taskforce with experts from across functions to look into the short and medium term impact of GST across the value chain, including impact assessment, process enhancement opportunities and potential IT system changes. “We had initiated work last year,” said Sangeeta Pendurkar, managing director at Kellogg India.
Meanwhile, companies, including the country’s top FMCG player Hindustan Unilever (HUL), are also working with vendors to make their process more efficient. “As we near the final stretch, we will be working closely with our vendors and customers to ensure that we transition smoothly to GST,” said a HULBSE 0.24 % spokesperson. “While there are clear long-term benefits, we expect the transition to be challenging as we are working to very tight timelines and the rules are still being clarified.”
HUL has been preparing quite extensively for the rollout over the past few years, making changes to its warehousing infrastructure, manufacturing footprint, and tax and financial accounting systems.
Source : Econoctimes