The logistics service business is lucrative indeed. Reportedly, the market potential in Indonesia reaches 10 percent of gross domestic product. Or, if Indonesia’s GDP in 2006 stood at Rp 3,300 trillion, the market potential of the logistics service at home was no less than Rp 330 trillion. Fantastic indeed.
It is this condition that has made global logistics players eye Indonesia. There are at least five global logistics players with networks in Indonesia, namely DHL, FedEx, UPS, Evergreen and CEVA, previously known as TNT. As for local players, according to records of the Indonesian Association of Express Courier Service Companies (Asperindo), the number is at least 800.
Indeed, manufacturing companies are generally managed conservatively. They run their own logistics activities, ranging from warehousing to the distribution of goods. In fact, the future trend of investment in the manufacturing industry will be only the establishment of a factory and the production of goods. It is here that a logistics service company can play an important role. In the future, industry should no longer think about warehouses and vehicles for the distribution of goods. This matter can be outsourced to more experienced companies, namely logistics and courier companies.
The development of the logistics business in Indonesia will eventually not be influenced solely by economic macro indicators such as economic growth, people’s purchasing power and the exchange rate of the rupiah. However, what is of no less significance is the speed at which the domestic industry can keep up with the world’s trend of outsourcing logistics activities.
That’s why PT Pos Indonesia, which conservatively controls the courier service industry, has also entered the logistics business. This step was prompted by the drop in its earnings from mail dispatches, followed by the trend to use short message services (SMS), electronic mail (e-mail) and 3-G technology.
In addition, the future trend in industry will be to shift logistics activities to other parties. Diversification like this has become a trend in the logistics business in Indonesia. Collaboration in postal, logistics, courier and cargo services will optimize the use of a company’s assets.
However, as mentioned earlier, Pos Indonesia is one of hundreds of local players in this business. Although the market has yet to reach saturation point, global players will continue chipping away at the market share of local players unless the latter immediately come up with innovations, either in technology or in ensuring that their investment is sufficient on a global scale.
Nevertheless, in reality, it is DHL Express/PT Birotika Semesta, a global logistics player from Germany, that now controls 36 percent of the logistics market in Indonesia, with a turnover of some US$72 million. According to Tim Wong, managing director of DHL Global Forwarding Indonesia, this company, which was set up in Indonesia in 1973, is aiming for sales volume growth of double digits.
At the international level, the DHL network links over 220 countries and regions and is supported by 285,000 employees. Meanwhile, DHL Express is the largest company with a market share of close to 50 percent in the category of international air express courier company. The activities of this company are supported by 90 outlets (gateways, offices, service centers and warehouses) and 300 vehicles.
To remain the leader in the logistics market in Indonesia, DHL offers a number of innovative services, including Export-Import Express and Sample Express, which is intended for customers from the electronics, textile, automotive and mining industries.
Meanwhile, another global player that is no less expansive than DHL is PT CEVA Logistik Indonesia (CECA), previously known as TNT Logistics. CEVA was established in Indonesia in 1995. The company has operations throughout Indonesia, including Jakarta, Medan, Surabaya and Yogyakarta. The company has a strong focus on the chemical/industrial, fast moving consumer goods, telecommunications and pharmaceutical industries.
Another global logistics service company that has secured a firm position in Indonesia is UPS (United Parcel Services). This company, which has, on a global scale, entered a list of 100 Top Brands of Interbrand version through a (re)branding strategy, is indeed one of the top companies in this business. In the international market, UPS has made a big leap and has surpassed its nearest competitor, Federal Express.
Michael Eskew has encouraged the business growth of UPS, an old giant in the business, without too much reliance on geographical expansion. What he has done is offer new services to the company’s existing customers, just like his predecessors did before him. To this end, UPS has developed two new business wings: UPS Logistics and UPS Capital. This strategy has been successful and will be applied in various countries, including Indonesia, for the logistics service business.
FedEx is another foreign player that has scored successes in Indonesia through its partnership with a local player, namely RPX. The partnership between a local company and a foreign company should be positively perceived as a balanced partnership, and not one in which one side serves as servant to the other. This is what inspired Harsha Joesoef, chief executive officer (CEO) of Republic Express or RPX Group, as the provider of one-stop logistics services, to team up with an international company of FedEx’s class. By establishing a partnership with a company of international renown, RPX Group can claim to be expert at the domestic level.
This business group, initially set up in a garage and employing only six people, now has seven strategic business units, namely RPX International Express (with a license from FedEx), RPX Domestic Express, RPX Airlines (served by three Boeing 737-200 cargo airplanes), RPX Warehouse Services, RPX Customs Brokerage, RPX Freight Forwarding and RPX Moving & Packing. The RPX Group is one of the leading companies in the logistics industry, on a par with companies like UPS and DHL, which is also a player in the Indonesian market with 1,400 employees, 106 branch offices in 35 cities and a fleet of three Boeing 737-300 cargo planes.
So to speak, the logistics business offers vast potential that will never be exhausted. However, a logistics service company cannot be a stand-alone firm and work without the support of supporting facilities, such as a forwarding company. This business is the architecture of the regulation of dispatches through a number of facilities such as overland, sea, air and railway modes.
In the implementation of multi-mode transportation and distribution of cargo, a forwarding company serves to integrate the four modes (overland, sea, air and railway) through transportation logistics engineering. In this way, the movement of cargo is not only safer, faster and cheaper but also punctual, meeting the demands of customers in modern trading practices. This can be a supporting solution to logistics service companies. (Burhan Abe)
Jakarta Post, August 19, 2007