Supply Chain and Logistics Business in Indonesia

By: Ir. Wahyu Tunggono MBA, ALI Board member

Bandung May 18, 2006

Content
Introduction to Asosiasi Logistik Indonesia Logistics Services in Supply Chain Industry Trends in Supply Chain and Logistics Logistics Business in Indonesia

Asosiasi Logistik Indonesia [ALI]

www.ali.web.id

ALI is a professional non-profit organization in the field of supply chain & logistics management in Indonesia. ALI is open to Indonesian citizens who work as practitioners, academicians, regulators or observers in the field of supply chain & logistics management. Objectives of the organization:
To enhance the quality of Indonesian human resources in the field of supply chain & logistics management. To act as a focal point for people in the industry field of supply chain & logistics management in Indonesia.

ALI was introduced to public on January 2003 & has an office at:
Gedung BULOG II, Lantai 4, Jl. Kuningan Timur Blok M II/5, Jakarta Selatan, Phone & Fax: 6221-5210294, Email: secretariat@ali.web.id.

To become a member of ALI:

Please email to: indo_logistician-subscribe@yahoogroups.com Visit and login to our website: www.ali.web.id

Profile of ALI members (January 2006)

ALI mailing list members: 1,400+ pax Profile by area of domicile: Jabotabek 81,4% ALI registered members: 1,200+ pax West Java 5.0% Central Java 1.1% Profile by industry group:
Logistics service provider Manufacturing & marketing Trading & distribution IT & Telco Education, Consultants, etc Oil & gas Property, Equipment, etc Retail & Direct Selling 32,0% 29,2% 11.8% 7.1% 6.4% 3.5% 2.0% 1.1% 6.8%
East Java Sumatra Kalimantan Other Islands Other countries 6.3% 0.8% 1.4% 1.4% 2.3%

Profile by age group:

Under 20 20-29 (20s) 30-39 (30s) 40-49 (40s) Above 50 (50s) Unclear 0.0% 11.0% 25.1% 4.1% 1.1% 58.7%

Others (not indicated)

ALI activities
Past events 2006:
16 Jan 05, 5-days Workshop: Supply Chain Performance Measurement & Benchmarking. 3 Feb 06, 2-days Short Course: Introduction to Logistics, by Zaldi Masita 6 Feb 06, ALI Nite Surabaya @ AJBS Bowling, Jl. Ratna. 15 Feb 06, ALI Nite Jakarta @ Rasuna Bowling, Kuningan. 23 Feb 06, Academic Sharing: Logistics Execution Software @ Setiabudi-One bldg. 25 Feb 06, ALI Nite Bandung @ Widyatama University campus. 27 Feb 06, 3-days Workshop: Best Practises in Warehouse & Inventory Management. 19 Apr 06, 1-day Workshop: The Corporate Value of Supply Chain and Logistics. 24 Apr 06, 3-days Workshop: Forecasting & Managing Demand with S&OP. 17 May 06, 2-days Workshop: Understanding Transportation as Key Activities in SCM. 19 May 06, 2-days Short Course: Delivering Super Service 23 May 06, 2-days Career Day: Seminar & Job Recruitment Exhibition 24 May 06, 1-day Workshop: SCM & Logistics Professional Development

Upcoming events 2006:

ALI Website: new look !

ALI board members

Executive Board:
President: Ananta Dewandhono Organization: Mahendra Rianto Treasury: Irnantio W. Hadi Research: Clara L. Benarto Education: Didi Azhari Events: Zaldy Ilham Masita Alliances: Wahyu Tunggono

Program Committee:
Hadi Kuncoro, Ady Makhdi, Andy Ilham Said, Miftah Fauzi.

Chapters:
ALI Bandung: Setijadi Yasid & team ALI Surabaya: Andrianto Soedjarwo & team

General Secretary:
Nadra Ernest Purbasari

Content
Introduction to Asosiasi Logistik Indonesia Logistics Services in Supply Chain Industry Trends in Supply Chain and Logistics Logistics Business in Indonesia

Supply Chain is a Network

LOGISTICS is a planning orientation & framework to create a single plan for the flow of product & information through a business. SUPPLY CHAIN MANAGEMENT builds upon this framework and seeks to achieve linkage & coordination between processes of other entities in the chain: suppliers, users & the organisation itself.

Participants in Supply Chain

Producers; Producers or manufacturers are organizations that make a product. Distributors; Distributors are companies that take inventory in bulk from producers and deliver a bundle of related product lines to customers. Retailers; Retailers stock inventory and sell in smaller quantities to the general public. Customers; Customers or consumers are any organization that purchases and uses a product. Service Providers; These are organizations that provide services to producers, distributors, retailers, and customers.

Supply Chain structure

Content
Introduction to Asosiasi Logistik Indonesia Logistics Services in Supply Chain Industry Trends in Supply Chain and Logistics Logistics Business in Indonesia

Organisation Evolution
Traditional Organisation:
Everything is produced or done by itself, internally. Focus on products, profit. Consequences:
High Over head, High Working capital, High number of labor, Bureaucratic, High fixed asset, Minimum effort for customer satisfaction.

Modern Set up Organisation:

Effective, lean structure, working with external partners. Focus on business, profit. Consequences:
Profit/business oriented, Minimum Working capital, Reduce number of labor, Direct communication, Minimum fixed asset, Full effort for customer satisfaction

Fast Focus Flexible

Outsourcing trends
A strategic decision to obtain goods or services from independent organization outside of a companys legal boundaries To purchase goods of services instead of making or doing them ourselves To divert a portion of work to a competent third party in order to gain services and enable company concentrate on main business activities by considering risk, investment and efficiency Todays business environment encourage a return to core competencies...

Why logistics outsourcing

The company need special skills that are unavailable in-house or not cost efficient to handle in-house Focus on core competencies, companys core business does not include logistics Other reasons:
Necessary capital to maintain the art of logistics Continues development of logistics technology Development of new business with limited logistics knowledge Improve customer satisfaction Logistic become last frontier of competitive advantage

Short term cost saving & reductions must not be the only consideration when evaluating outsourcing

Collaborative Supply Chain

Companies need to shift away from viewing Supply chain management as solely about operational excellence to a collaborative supply chain models, in order to achieve quantum improvements in their supply chain.
Unlocking the Potential
e-Procurement e-Fulfillment e-Network Management e-Procurement e-Fulfillment e-Network Management Supply Chain Planning Shared Services New Business Models Industry Solutions

Operational Excellence

Performance

Performance

Supply Chain Planning Transportation & Distribution Materials Handling Product Development Customer Support Inventory Management

Shared Services New Business Models Industry Solutions

Performance Gap

Transportation & Distribution Materials Handling Product Development Customer Support Inventory Management

Performance Gap

Time
Functional Process Driven Collaboration e-synchronization Functional

Time
Process Driven Collaboration e-synchronization

Outsourcing Strategy
What do you want to achieve by outsourcing the logistics? Squeezing marginal reductions in rates or increasing value added? Singular focus on cost typically results in;
commodity logistics - low cost, low service. traditional buyer supplier relationship & short term benefits only. fragmented benefits as limited scope to outsourced activities. expect to have to change service provider.

Or strategic logistics partnership with a focus on value and development;

- strategic benefit,

- enabler for ECR, - long term gains in service & productivity, - continuous improvement,

- supply chain focus, - high service level, - high value added, - competitive advantage.

Content
Introduction to Asosiasi Logistik Indonesia Logistics Services in Supply Chain Industry Trends in Supply Chain and Logistics Logistics Business in Indonesia

Indonesia logistical facts: the challenges

Geography:
Land area: 2 million sq. km; Maritime area: 7.9 million sq. km. Terrain: More than 17,000 islands; 6,000 are inhabited. Primary cities: Jakarta, Surabaya, Medan, Bandung. Local government: 30 provinces (growing) with 20 secondary key cities.

Infrastructure:
Jakarta is the primary international hub/port. Surabaya is the hub/port for east part of Indonesia archipelago. Java island is the primary market for distribution. Modern Retailer 20-30% & Traditional Trade 70-80% of market. Multi modes transport (land & sea) to supply whole country demand. Freeway (Toll) is only in Jakarta-Bandung area & Surabaya area. Lack of modern warehouse facilities available to use/rent. Poor, limited coverage & expensive IT & Telecommunication infrastructure.

Supply Chain Network in Indonesia

Hub and Spoke concept
Optimal logistics hierarchy decisions on: production locations, sourcing, number of warehouses, locations of warehouses Hub Spokes Hub Spokes

Jkt Hub

Sby Hub

Logistics Business Opportunity

China .
China government is encouraging Chinese companies to outsource logistics And encouraging logistics players of all stripes to develop modernized warehouses.

Indonesia . ??

Indonesian Logistics Service Provider

Why do major companies outsource their logistics?
Lower supply chain costs Improved customer service performance Access to world class technology Better focus on their core business Implement change more quickly

Who is a 3PL?
a service provider who leverages its total volumes, supplier relationships, industry knowledge and technology capabilities in order to offer a range of supply chain services to its clients, as a one-stop shop

Then 4PL? Can Indonesian LSP answer & be the above?

Terima kasih

Asosiasi Logistik Indonesia (ALI) www.ali.web.id Mailing list: indo_logistician-subscribe@yahoogroups.com