Economic Watch: Under pandemic pressure, Indonesia's logistics industry explores digitalization

Source: Xinhua| 2021-07-28 10:09:02|Editor: huaxia
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by Xinhua writer Wang Aona, Benedictus Robert Yota

JAKARTA, July 28 (Xinhua) -- Entering a second year of mobility restrictions, whether government-mandated or self-imposed, Indonesians have come to rely more on online shopping.

Boosted by e-commerce, logistics has become crucial blood vessels across this archipelago to keep it operational under the new normal.

But having long suffered from low efficiency, Indonesia's logistics industry is in urgent need of transformation.


Ignatia Heidi, a 28-year-old marketer at a private bank in Jakarta, recently purchased nearly all her daily necessities online, especially after the implementation of restrictions on public activities since July 3, locally known as the PPKM.

Required to work from home for most of the week, Heidi has also reduced outdoor activities to minimize the risk of contracting the disease.

"I won't be able to maintain my life at home without ordering online once or twice a week. I bought everything online now, from food, vitamins, to detergents and shampoos," she said.

Like Heidi, many people in Java, home to nearly 60 percent of the country's population, flocked to e-commerce platforms. Today, couriers entering and leaving apartment complexes during lockdowns are a more frequent sight than the residents themselves.

Mahendra Riyanto, chairman of Indonesia Logistics Association, told Xinhua recently that the number of logistics orders for e-commerce goods in the country has increased by 30 to 40 percent during the pandemic.

"The pandemic has brought the development bonus of e-commerce in the next five years," said Jonathan Zhong, CEO of J&T Cargo Indonesia.


Indonesia has the highest logistics costs in Asia, which takes up almost one quarter of the national gross domestic product. This is in contrast to developed economies, where the number is below 5 percent.

The e-commerce boom during the pandemic has further exposed existing challenges in logistics, which include poor infrastructure, fragmented information and lack of technology, said Eric Dharma, vice president of Corporate Development of Waresix, a start-up trucking and warehousing platform in Indonesia.

"Contracts are usually handwritten and communication is done through ad hoc channels such as WhatsApp. For some logistics companies, the whole process of taking orders, finding drivers, trucks and warehouses is too manual to be streamlined," he said.

"Because of the expensive shipping fee, it's not that common for Indonesians to buy relatively larger electrical appliances like refrigerators, air conditions, and washing machines online," said Zhong. "Some retailers have to take the risk of a large inventory in fear of not being able to replenish the stock whenever needed."

According to a study last year conducted by one of Indonesia's leading e-commerce platforms, Lazada, 65 percent of respondents from micro, small and medium enterprises that had not been digitalized stated that logistics was one of their biggest challenges.

Other islands suffer from even less efficient logistics than Java, resulting in price disparities.

"The prices of the same goods in different parts of Indonesia can be extremely different," said Budi Handoko, COO and co-founder of a logistics aggregator Shipper. For example, instant noodles in Papua, Indonesia's easternmost province, are a lot more expensive than in the capital.

This is where digital logistics management can step in and straighten things out, especially for a country of fragmented geography like Indonesia, said Handoko.

The demand for a logistics system with higher cost efficiency is rather strong. And like Handoko, many have realized that digitalization is the solution.

"The silver lining is that the pandemic accelerated the digital push in the logistics industry," said Riyanto.


Young and smart players in the industry have maintained fast-growing momentum during the pandemic by optimizing resource allocation.

Digital platforms like Kargo, Ritase, Shipper and Waresix play as aggregators, offering end-to-end logistics solutions in which trucks, drivers and warehouses are selected by the system to match with shippers' needs.

"We have over 50,000 trucks and over 400 warehouses across the country in our network. The system also helps to maximize their utility," said Dharma.

As a Third-Party Logistics company, J&T Express owns an IT team of over 1,500 people to keep the technologies used throughout its operation updated. For Zhong, its IT team is decisive for improving efficiency.

In April, J&T Express launched its fastest "Super" service, which enables package delivery in the same city or across cities on the same day or the next day.

Meanwhile, Indonesia's leading e-commerce platforms like Shopee and Lazada have been providing in-house delivery solutions in recent years to speed up the last-mile distribution from transit hubs to customers.

In order to cut logistics costs, the Indonesian government established the National Logistics Ecosystem last September, which serves as a platform to record, simplify and finally speed up the originally paper-based process of goods moving from ports to warehouses.

A pilot project under the new system was launched at Batam, Riau islands this March, and similar digital systems will be installed at seven other ports this year, according to the government. The ports will help reduce shipping, distribution and other related costs to 17 percent of GDP by 2024.

"More and more shippers welcome digital solutions to their logistics," said Dharma of Waresix. "Instead of knee-jerk reactions to gain short-term profit, we expect to see more ground-breaking innovations in this industry." Enditem

KEY WORDS: Indonesia,Logistics,Digitalization,ECONOMIC WATCH