Logistical nightmares<\/p>\n
A recent study of 75 large export-oriented companies at four
\nof Indonesia's largest seaports concluded that logistics services
\naccounted for an average of 14 percent of total production costs.
\nThis finding, released on Monday, simply confirms what most
\nbusinesspeople have long complained about -- the relative high
\ncost of doing business here -- that makes exports less
\ncompetitive internationally.<\/p>\n
The study, conducted by the University of Indonesia's
\nInstitute for Economic and Social Research, found that the high
\ncosts derived mainly from poor infrastructure, illegal fees and
\narduous bureaucratic procedures.<\/p>\n
The timing of the report could not have been better because
\nthe issues surrounding the cost of doing business will again
\nbecome an increasingly hot topic within the next few weeks in
\nconnection with the government's plan to increase fuel prices in
\nOctober. Higher gasoline, diesel and kerosene prices certainly
\nwill increase the burdens on businesses as the prices of
\nelectricity and other goods and services will follow those hikes.
\nCompanies also will face strong demands from trade unions for
\nhigher wages so employees can cope with an increase in daily
\nexpenses.<\/p>\n
Businesses have often argued they would easily be able to
\nweather the upcoming rise in fuel prices, if the high-cost
\nfactors of doing business here could be reduced. Citing one small
\nexample, the Food and Beverage Industries Association claims that
\nhauling cargo from Jakarta to Surabaya requires an average of
\nonly 200 liters of diesel fuel which, based on the current price,
\namounts to only Rp 440,000 (US$44). However, illegal fees imposed
\non trucks by officials at the 14 weigh stations and bridges in
\nbetween the two cities often reaches well over Rp 400,000
\n(usually a standard Rp 30,000 at each). If these illegal payments
\nwere removed, businesses could easily absorb the additional costs
\nderived from higher fuel prices.<\/p>\n
But why is there so much fuss about the logistics of moving
\nmerchandise to and fro? The logic is quite simple. Lower
\nlogistics costs -- lower transport costs, shorter transit times,
\nreliable delivery schedules, careful handling of goods in cold
\nstorage chains -- are vital for trade and smooth distribution of
\ngoods. Reducing the costs of moving goods between markets reduces
\nthe price paid by consumers and increases the profit for
\nproducers.<\/p>\n
Large companies cannot manufacture goods without the inputs
\nthey need and, in the case of Indonesia, most manufacturers still
\nrely on a lot of imported materials, parts and components. Hence,
\nif delivery times are expedient and reliable, manufacturers would
\nnot need to hold large inventories of raw material, thereby
\ncutting down on their inventory costs.<\/p>\n
Superior logistics management is the key to making Hong Kong
\nand Singapore an efficient trans-shipment hub for their neighbor
\ncountries. In addition to their highly efficient port-handling
\nsystems, their auxiliary services like customs and freight
\nforwarding are also smooth.<\/p>\n
Foreign investors will be encouraged to enter Indonesia if the
\ncountry can offer efficient logistical services. However, an
\nefficient supply chain requires a minimum set of conditions,
\nnotably efficient transport and expedient customs services to
\nensure the free flows of goods and services (including labor).<\/p>\n
Inefficient logistical services are a major reason why
\nIndonesian products remain grossly uncompetitive on the world
\nmarkets and why the country remains among the least favored
\nplaces for doing business, as confirmed by the latest survey by
\nthe International Finance Corporation released here on Tuesday.
\nThe IFC, the World Bank's arm for private sector development,
\nranks Indonesia 113th out of 155 countries surveyed for its Doing
\nBusiness in 2006: Creating Jobs report, which measures the
\ncompetitiveness of a country as a place for doing business.<\/p>\n
Modern production systems indeed require much more than simply
\nefficient transport services but, more importantly, many other
\nsophisticated logistical needs, which make up an efficient
\nsupply-chain management to allow for lower warehousing costs,
\nlean manufacturing, right-on-time delivery.<\/p>\n
International studies have shown that supply chains in
\nIndonesia are still very inefficient, as evidenced by the high
\nportion of production\/operating costs needed for distribution and
\nlogistics, and their affect on the prices of goods. Reduction in
\ntransportation and telecommunications costs and significant
\nimprovements in supply-chain management will help make the
\ncountry a viable place doing business as a regional production
\nbase.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/logistical-nightmares-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}