Retailers' shopping list: Centralise logistics and supply chain

Post GST, warehousing costs and inventory levels will come down by half

Retail chains are looking at centralising their logistics and supply chain to take advantage of the benefits offered by the goods and services tax (GST), which aim to remove the complexity of multiple state and central taxes and ensure a seamless flow of input tax credit in the value chain.

Kishore Biyani’s Future Group has already taken the lead, said a senior group executive.

“Future Group is already GST-ready in terms of logistics and supply chain. We have a central warehouse in Nagpur, which is about one million square feet, from where we can supply pan-India,” said the executive.

The executive said the Nagpur warehouse can take maximum inventory and four to five other warehouses can be used as feeders to supply across its stores in the country.

“We will look at the benefits offered by GST in taxes. If it helps, we will look at consolidating our warehouses and logistics,” said a senior Trent executive, who said the company has already started its spadework on information technology systems.

Anshuman Singh, founder and chief executive officer of Stellar Value Chain Solutions, said post-GST, large warehouses will replace unorganised and smaller warehouses.

“Post-GST, the number of warehouses will come down for any retailer. Inventory and working capital will also go down,” he said, explaining if a retailer has to maintain 30 warehouses to meet tax needs, now, he can make good with a minimum number of such warehouses. Singh said warehousing costs and inventory levels, too, will come down by half.

“Earlier, if they had to keep 100 pieces in 30 locations, now, they can keep 200 pieces in five locations and supply faster,” he said. However, according to international brokerage Nomura, certain negatives exist for retail companies.

“The fact that companies will now need to pay GST as goods leave the factory and not when sold to the clearing and forward agents will hurt retailers, as they store significant amounts of finished goods inventories for a large numbers of days before the goods are sold.”