Growth Prospects for Indonesia's Logistics Industry
    Category: Column By : Gopal R Read : 2880 Date : Thursday, September 05, 2013 - 05:35:18

    Indonesia's logistics industry has good prospects, having grown around 12% annually over the last five years and is expected to grow at 14% annually during the next five years. Transportation spend in commodities moved is still the biggest contributor to the logistics industry revenues at about 80% due to the widely dispersed geography of Indonesia and transportation bottlenecks around key ports, production and consumption markets.

    Despite challenges of geographical dispersion, lack of qualified manpower and underdeveloped infrastructure, the logistics industry is benefitting from higher domestic consumption, initiatives for accelerated economic growth and strong capital flows driving manufacturing and thereby demand for logistics services.

    With about 90% of the freight volume handled by sea, investment in port infrastructure and connecting hinterland road and rail networks is essential for sustainable growth. Railway network expansion can help move bulk commodities and mining output at reduced cost and definitive delivery times. Air cargo can help deliver seasonal perishables as well as time sensitive and high-value components and equipment. To sustain and grow the volumes across air, ocean and land, it is essential to rapidly augment capacity for movement, storage and distribution, supplemented by efficient information communications and management and clearly defined and communicated process.

    The logistics user industries are increasingly demanding higher value-added services beyond just movement and storage of goods and paper processing. They are looking towards the logistics service providers to support them in packaging, fleet management, customer service, reverse logistics, vendor management, demand forecasting, information management, billing and even sales promotion as they are in touch with the last point of sale on a routine basis.

    Key considerations for customers are to manage their operations in a controlled manner, gain visibility across the supply chain and ensure integration between functions of transportation, warehousing and associated services. Indonesia's logistics industry prospects are supported by growing external trade and foreign direct investment, development of a national logistics industry blueprint and implementation of the Master Plan for Acceleration and Expansion of Indonesia's Economic Development  (MP3EI).

    External trade is expected to grow around 16% in 2013. The logistics industry attracted almost $3 billion in international investment in 2012, second after the mining sector in Indonesia.

    The government and industry's vision for 2025 is to be locally integrated and globally connected. The national logistics industry's blueprint is sculpted along six drivers: human capital, information and communications, logistics service provider capability, logistics infrastructure, regulations and commodities.

    All these activities simply mean more things to be moved, stored, accounted, tracked and planned on a continuous basis and this is what the logistics industry capability and function is all about. History has defined Indonesia on the trade routes of commodities like spices as an important player. There are several examples from history that promise Indonesia will have a logistics advantage. Accelerated implementation of various plans will help Indonesia be on the forefront of regional logistics excellence, thereby creating opportunities for Indonesia and the rest of the world.