All around the world it seems like individual companies and sometimes even entire industries are pushing the limits, attempting to move past economic roadblocks and traditional trading constraints. One place on the planet where this is particularly obvious right now is India. The country is more than 100 days on from the introduction of its revolutionizing Goods and Services Tax (GST) – a long-overdue reform of its previously complex, multi-layered taxation system.

The biggest winners of India’s GST reform are logistics and the supply chain because multiple taxes levied at interstate checkpoints and countrywide toll booths represented a critical bottleneck for economic growth of the country’s logistics industry, worth $130 billion back in 2013.

Take, for example, the productivity losses incurred in trucking. Some 60% of all freight travels by road in India but archaic laws and tax complexities chronically impacted these journeys. While a truck driver in the USA might cover up to 700 km per day and the world average is about 400 km per day, a truck driver in India could at best clock only 250-280 km per day.

With the new unified tax system, goods can now move more easily between Indian states, transport cycle times and costs are reduced, and bureaucratic roadblocks (including masses of red tape and paperwork) are removed.

Moving forward

At the recent DHL Technology India Conference in Bangalore, we had the opportunity to engage and exchange with customers on how this is impacting logistics and the supply chain in India. No longer obsessed with tax effectiveness, manufacturers and retailers are now driven by true operational considerations such as demand volume and materials, labor and transportation costs.

Overnight transformation would of course be unrealistic. It will take many more months and surely years for India’s logistics sector to reach its full service and growth potential.

One thing that’s capable of accelerating the pace of change is technology uptake. Companies that are getting ahead in India are using the latest technologies to optimize the distribution footprint and exploit scale economies. These organizations are rationalizing the number of distributors, streamlining the supply chain, eliminating unnecessary distribution hubs (some estimates suggest by as much as 50%), digitizing documentation, and lowering inventory holdings.

Sharing best practices

If you’d like to find out more about pushing the limits by exploiting technology – not just in India but around the globe – I can recommend the DHL Global Technology Conference 2018 in Austin, TX, USA (April 16-18). Meanwhile, I would very much like to hear from any companies operating in India about how you prepared for GST reform and what kind of impact it has had on your logistics and supply chain so far. Please add your comments below; I very much look forward to hearing from you.

Published: December 2017

Image: Shutterstock