Lucrative logistic warehousing business

The Jakarta Post
August 19, 2007

The logistics service industry is indeed a relatively recent line of business. However, its development is quite significant as evident in the great number of companies engaged in this line of business, either locally or internationally. The potential US$1 billion in the express and logistics service business is a lucrative figure. This figure represents annual spending covering transportation, warehousing and warehousing management services as well as efficiency in the flow of products.
The springing up of logistics service companies is inseparable from the increase in customers' or companies' need for this type of service. If you wish to dispatch only documents, you can just rely on an express service. However, when vast volumes need dispatching it requires vast infrastructure.

The pattern of thought is simple. For example, a manufacturing company obviously produces goods of some sort and therefore requires components. At the same time, the company must continue to market its goods. Nevertheless, all documents and parts must be sent punctually without any tolerance for even the slightest mistake. It is quite complicated, indeed. The most suitable solution would be to provide warehousing facilities to expedite dispatches.

However, this would require a large investment. A plot of land would need to be purchased to build a warehouse. Then the warehouse would need to be built and equipped with office equipment, and personnel employed to run it. In short, a lot of money would need to be spent and a management system put in place.

In view of all this, there is a promising business opportunity for companies providing express and logistics services. Today, the overall business of logistics services constitutes promising business opportunities. Therefore, these companies have built warehouses or teamed up with other parties to accommodate consignments of a larger volume. They have applied a warehousing management system integrated with certain facilities and guarantees. Even the customers they do business with come from international-class companies or distributors.

They play quite a big role. These companies provide a relatively comprehensive warehousing management solution. Usually these services are provided by means of operating a logistic service network with logistics centers located at strategic airports.

The domination of express and logistics services are found in almost every country with potential, including Indonesia. Indeed, the potential of the logistics market in Indonesia is quite big. As a result, Indonesia is eyed by world-class logistics players. At present there are five global logistics players with networks in Indonesia: DHL, CEVA, FedEx, Evergreen and UPS. As for local logistics companies, the records of the Indonesian Association of Express Dispatch Service Companies (Asperindo) show that the number of these companies continues to increase and today total 800 companies. The sales volume of the players in this business grows above 10 percent annually on average.

One prominent express and logistics player here is DHL. To ensure that it remains the market leader in the logistics market in Indonesia, DHL has introduced a number of superior services, including integrated warehousing management.

This demands quite complex infrastructure. The characterization of the warehouse and the warehousing management system, for example, is comprehensive. The application known as Warehouse Management System (WMS) is implemented to manage various warehousing operations in the context of controlling supplies, work efficiencies and the level of order services to be met.

As a result, DHL has teamed up with various global WMS vendors to give its customers the most fitting WMS to handle the complex management of supplies. Warehousing services that DHL offers include Inbound Logistics, distribution and post market services by means of increasing supplies, reducing operational costs and increasing the time cycle.

DHL provides facilities in regard to storage and this is fully integrated with a broader supply chain that maintains the level of service. The WMS records all stages of consignment starting from receipt, handling and storage of products and order in the warehouse. The WMS also accurately records the location of supplies stored in the warehouse. The WMS arranges all critical processes in the warehouse and constitutes vital support for the concept of transportation and distribution. This covers planning, time arrangement, storage, transportation capacity, communication with customs officers, etc.

The competition in the express and logistics business is quite fierce. Just look at PT CEVA Logistik Indonesia operations. CEVA manages over 1.3 million square feet of multi-user warehousing and manages over 150 trucks delivering over 900,000 tons of goods each year within the domestic market. CEVA has developed its shared-user facility distribution center to provide efficient logistics services.

According to data at Soekarno-Hatta Airport, 402 companies belong to the Indonesian Forwarders Association (Gafeksi) and 80 percent of the movement of goods is handled by freight forwarders. In the face of this trend, RPX (Republic Express), representing U.S. company Federal Express (FedEx), does not want to lag behind. The essence is that a service business of this type can at least be a master in its own home.

The performance of RPX is reflected in the operation of over 100 outlets located in major cities. RPX has expanded its warehousing network to dozens of cities in Indonesia by establishing cooperation with PT Bhanda Ghara Reksa (BGR), a state-owned enterprise providing domestic warehousing. Through this collaboration, the RPX Group can use the 400 warehouses owned by BGR Jakarta, Semarang, Surakarta, Surabaya, Bandung, Denpasar, Padang, Medan, Palembang, Makassar, Palu, Pekanbaru and Ambon, among others.

To illustrate its seriousness in this business, BGR has a warehousing area of hundreds thousands of square meters. This warehousing facility is closely linked with the series of supply and chain service program run by RPX, which accommodates customers for products ranging from electronics to automotive, as well as other large companies. (Iwan Suci Jatmiko)