GST Opportunity & Impact On Demand Planning

GST finally got rolled out this month marking a red-letter day for the Indian economy. From here on the life for the businesses shall never be same again and mostly for better as it is expected to vastly improve ease of doing business in the country. While the overall long-term impact of this landmark reform will be seen only in time to come, let us discuss some of the possible effects of the same from the demand planning perspective and the contribution opportunity that this brings in for the function.

Events leading to GST launch
Being a major tax reform, the Indian consumer market witnessed an unprecedented activity in the month of June 2017. Almost every retailer and brand offered a Pre GST sale. The end of season sale that usually begins in July was advanced by a month to get a spurt in sales and liquidate stocks. It is estimated that for the first time the revenue from this sale period surpassed the biggest sale period of Diwali in the country. On the other hand the primary sales saw a big decline owing to uncertainty and lack of clarity of the law till the last moment.

This being a one off event in the history requires a data clean up for the future forecast cycles both for the primary and secondary sales and must be immediately done from the July cycle itself.

Post GST Impact on Consumer Demand
While there is some major and some minor change in rates for the products across the sectors, it is unlikely to affect the consumer demand in any big way. Since the change is not affecting any one or bunch of companies in particular but the entire sector, the choice to consumers remain the same. In some cases, like Telecom services, which shall become more expensive, the newer companies like Jio who are aggressively pricing, may benefit with some demand shifting more positively in their favor.

Planners must however, closely watch for any shift in trend as part of demand sensing and engage with the sales teams for feedback.

Impact on Stocking
This would be a major concern for the companies and a big opportunity for the planning team to contribute. With the point of tax shifting to supply, the internal transfers to warehouse and branches shall attract GST. This would mean that the working capital requirement of the company would go up and put a cost pressure on inventory carrying.

A leaner and accurate inventory shall gain further importance to ensure healthier cash positions and profitability. This can only be achieved with robust planning and improved forecast accuracy.

In pre GST era, the poor forecast accuracy of the branches was made up by quickly making stock transfers from other branches by incurring only the logistics cost. Now in addition to the logistics cost, each such transfer shall require investing in GST. This will have direct impact on margins and calls for an immediate process improvement from the demand planning perspective.

Here lies the great opportunity for the planning function to not only improve the planning process but also to partner more strongly with Finance and Sales teams and play a more elevated role in the organization.

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