Without beating around the bush, in simple terms, the India GST Impact on Supply Chain (Business) is broadly two folds; they are –
2) Way we do Business (Strategy, Planning and Operations)
The reason why I have started with a tag ‘Beating around the Bush’ is because of the way India GST has been projected and a panic has been created in the Industry. I would be writing a detailed article on the India GST Impact on the accounting practices in Supply Chain specifically on the taxation and the logistics routines. But, in this article let me give a brief of it.
Impact on Accounting:
Now let’s assume that you are an organization who has already have the best accounting practices, a reliable system in place and you have been always prompt in compliance (Pre-GST). GST Transition is a cake walk for you! Trust me on this, all you have to do is to know your commodity and business model, update the tax structure and few changes on your routines. Those changes like GST way of accounting, Input tax credit, e-way bill, etc. are actually going to smoothen the accounting.
Yes, GST is New but not Complex as it is projected; Not only GST, any Change impacting the whole country would take time to settle; but it is a…
Major Change & Pain for Organizations who struggle on Compliance & enjoy the loop holes today (Pre-GST) but for the Compliant Organizations, GST Transition is a Cake Walk.
Then you can ask me why there is so much of hype in the market. Yes, there are two reasons.
- The Main reason is, still trying to find a way around.
- There is a saying called ‘Fishing in Troubled Waters‘. I would like to leave it there.
So, this is my view on way forward. There will be a lot of noise for next 6 months due to acceptance of new change. But certainly things will stabilize, then the full benefits would be realized and talked about.
What gives Competitive Edge to your Business?
Now, getting into the crucial view point – when all the organizations are moving to GST; How come GST would be a competitive edge? Two Organizations belonging to same Industry, will have the same impact post GST once they are fully compliant for GST accounting.
Mere change in accounting and compliance to GST won’t give an Organization any Competitive Edge; But the Organization which looks at the Impact of GST on the way the Organization do business and re-visits the Supply Chain would have the edge over the competition.
Impact on Way we do Business:
GST Impact would be on all facets of your business value streams – Strategy, Plan and Execute (Operations). The Transformational Change would happen at the Organizational Strategy.
The catch here is –
If you don’t follow the GST way of accounting, you may get a notice from the concerned officials. Unfortunately, no one is going to send notice to you or compel you, if you don’t evaluate and change the way you do business; but that is the real competitive edge.
Now that the message is clear on ‘what is the real competitive edge to the business’, I would like to explain the approach to evaluate and implement the post GST Supply chain.
Post GST Supply Chain – Approach!
The following are the three pronged approach which is going to give your business the competitive edge in the market; Only this approach will aid your business in reaping the full benefit post GST Implementation.
- Change in Supply Chain Network – The most crucial phase and the most critical decision post GST which will reap the maximum benefit to the organization. But,
Supply Chain Evaluation and Decision in Isolation is a Suicide.
Learning from Mistakes is great to say and motivate; but in reality, A bad decision on supply chain will cost you time, money and brand value.
Supply Chain Simulation is a Must; that may sound complex but I’m not talking about any technology or software here. In Supply Chain, you change one and it would impact ten other parameters, hence ‘As a team all the factors have to be carefully thought about, available data, trend and relationship to be documented, and then all the different scenarios are to be simulated to arrive at the way forward on Supply Chain. Below is a schematic on some of the key factor of consideration in a supply chain change.
2. Process Re-Engineering – Once the Supply Chain Strategy is set, the processes have to be re-engineered. By the amount of change, process tools like Lean, Six Sigma, TOC etc. can be used.
Process Re-Engineering for GST is a must and have to be aligned with the set Strategy. But, it never ends there. Ideally, this should be a routine and organizations can use GST as an opportunity to make continuous process improvements (kaizen) a Habit.
3. Implementation – the timing of the Supply Chain implementation is crucial. Let’s think of a commodity which is negatively impacted on taxation front by GST and the net impact is say 3% on cost of doing business. An organization which has worked on the Supply Chain strategy and implementation in parallel, could absorb that and still avoid a price hike. Isn’t that a huge advantage? Isn’t that a great marketing push? Think about this.
I strongly recommend Supply Chain Evaluation / Implementation for GST should happen along with the GST accounting transition.
As a concluding note, GST is not as complex as it is been portrayed; Once we take time to knock it down and understand what it means to your business, you would get the clarity on what needs to be done. Else you would be a victim of what I said earlier ‘Fishing in Troubled Waters’.
GST Accounting is Standard and Binomial (Right way of doing or Wrong) but not the Supply Chain change that would give you the real benefit. The Supply Chain design and change would be so unique to you and your business model. Blindly following a standard on GST Implementation would result in rework and would adversely impact the business. At that time, GST is not to be blamed but the Decision Makers in the Organization.
About the Author: Alvis Lazarus is a Senior Leader in Supply Chain & Logistics with more than a decade (15+ Years) of SCM hands-on experience in devising Country Level and Global Supply chain strategies, Solutions design and spear heading Supply chain Implementation across 10+ Countries. He has handled All India Operations at 3M, Flipkart and Commonfloor and also served in a Global Consultant Role with Caterpillar. He is a Certified Lean & Six Sigma MBB and Champion and coached more than 500+ Lean and Six Sigma Green belts and Black Belts. Holds the distinction of driving Supply Chain programs across various industries such as Retail, E-Commerce, Automotive, FMCG, Health Care, Manufacturing and Real Estate.
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