Express’ Transformation to Supply Chain Management

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GLOBALIZATION has diminished country barriers for expansive economic activities. Next to product innovation, tight competition has made manufacturers look for the most efficient methods in production. That is why many producers in developed countries try to find competitive resources outside their countries. Resources are not only raw materials but include more competitive manpower.

Therefore, many manufacturers turn to outsourcing to reduce the business process and transfer it outside of their country’s borders. As a result there is a huge flow of goods and services around the world, involving the transfer of raw materials, components and final assembling. The assembled products are later sent to distribution channels before finally reaching customers.

In the old management style, a manufacturing company usually handles all aspects of the logistics, meaning inbound logistics of raw materials to the factory and the outbound traffic of product distribution to sales units. The law of efficiency in this global era has compelled manufacturers to leave the more sophisticated distribution system to third parties so that they can concentrate on their core business.

Hence, the presence of courier and cargo companies are most welcome. That is why many courier and cargo companies have built strategic alliances with manufacturers by taking over the inbound and outbound traffic matters and developed the required supply chain management service.

Globalization has opened up new opportunities for courier and cargo companies. Some of them have revolutionized themselves. In the international world, renowned names like TNT, DHL and UPS are always ready to provide supply chain management globally. In the past several years, TNT Express has delivered about 3.3 million dispatches across 200 countries every week, which is a fantastic figure.

In Indonesia, Pandu Siwi, one of the major logistics companies, cooperates with Emirates Post, a postal company belonging to United Emirates. Pandu Siwi president director Bhakty Kasry said he wanted to expand the company’s business regionally and internationally.

Today, many courier and cargo companies provide inbound and outbound logistics services for manufacturers. They provide this in an integrated and comprehensive way for the efficiency of the manufacturers, so in short they have taken over the supply chain management.

As the goods flow across countries’ borders, courier and cargo companies handle the necessary customs documents, including warehousing and storage. All this saves a lot of money for manufacturers. United Parcel Service (UPS) in the US provides such services for various industries while connecting producers with more than 18,000 dealers, retailers and service centers.

Similarly, in Indonesia, Pandu Logistics, for example, handles the storage and delivery of Ericsson products, including its BTS throughout the country. Pandu Logistics also handles the warehousing and distribution for United Tractor Komatsu, Mobile 8 and Kalbe Farma.

For more efficiency and to reap more profits, manufacturers must be able to get raw materials from any part of the world. Likewise, the production process can be done in different countries or continents, in which case courier and cargo companies can collect and send parts to an assembling plant. After production is complete, courier and cargo companies again play a role in distributing the products to the required distribution channels.

Thus courier and cargo companies have taken over the role of supply chain management provider so that manufacturers can concentrate on their core business without being bothered by other matters. The problem in the courier and cargo business is not only distance, but the complicated customs regulations of each country. However, they are quite expert in this matter as well.

The core business of manufacturers is creating new, innovative and competitive products, deciding on the best and cheapest raw materials, choosing the best location for assembling with the lowest wages and then marketing the products.

Production transit is common in the world of courier and cargo. Apparel is the easiest example. Many leading brands are produced in Bandung and several other cities in West Java, but the raw material is sourced from Korea, Taiwan and Japan, all of which have more advanced technology. However, as manpower is cheaper here companies have opened factories here, such as Nike in Tangerang.

After labeling, products made in Bandung or Tangerang are packaged and sent back to the country of origin. Some of the products can be found here in branded stores in malls. This only happens to products that have a high profit margin, but not with products like newspapers and drinks, the manufacturers of which have to think hard to cut down on costs, such as those related to transportation and distribution.

The country’s largest newspaper, Kompas, cannot print solely in Jakarta to distribute in other areas, say like Makassar. Likewise, products like bottled tea, where in Jakarta a wholesaler can purchase it for, say, Rp 1,000 a bottle and a retailer can sell it for Rp 2,500. A customer in Makassar may have to pay Rp 5,000 a bottle if it was not manufactured locally.

The redefinition of courier and cargo companies have been made possible with the support of sophisticated technology. The transformation is based on advanced information technology. Today, customers can track their goods in real time. This is now a standard service provided by many courier and cargo companies. TIKI’s website, for example, has a trace and tracking facility. A customer has only to enter the airway bill number and in a moment information will appear on the whereabouts of the consignment.

Next to PC-based tracking, the TNT website provides tracking through SMS, WAP for mobile phones and PDAs. UPS uses integrated software called the Quantum View for the same purpose. These companies also provide support software, such as billing analysis tools as well as time and cost calculation. This way regular customers can calculate how efficient the system is.

TNT uses the services of HP, which has created its OpenView Service Desk. This facility consolidates TNT’s activities globally and integrates numerous data in one virtual global service desk. This way one can easily monitor his or her consignment. Globalization has indeed changed the world’s economic activities.

Today, goods and services can reach almost any part of the world in a sophisticated way. Companies are experiencing transformation, not only manufacturers, but courier and cargo companies as well. (Eddy P. Kasdiono)

The Jakarta Post, August 25, 2009

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