Struggling to maintain growth<\/p>\n
Rudijanto, Contributor, Jakarta<\/p>\n
Jeremias Masto, Sea-Freight Manager of Indonesia-based Ritra
\nLogistics (Ritra), tried to look optimistic when asked about the
\ncurrent situation in the logistics business in Indonesia, but he
\nalso showed anxiety when he talked about the declining number of
\nforeign buyers of Indonesian goods.<\/p>\n
\"The declining trend has happened since several years ago when
\nmore of our overseas clients started to shift their imports from
\nIndonesia to China, Pakistan and even Bangladesh,\" Masto said.<\/p>\n
While the figures from the Central Statistics Agency show that
\nIndonesian exports in the first semester of this year recorded an
\nincrease of 27.5 percent compared to the same period in 2005,
\nexports of some commodities, particularly rattan and wooden
\nfurniture products, is expected to drop due to tough competition
\nfrom China and Vietnam, as well as because of raw material
\nproblems.<\/p>\n
Last month, the Indonesia Furniture Industry & Handicraft
\nAssociation (ASMINDO) said that rattan furniture export from the
\ncountry's rattan furniture center Cirebon is expected to drop by
\n50 percent. Production in another major furniture center, Jepara,
\nhas also dropped to 240-300 containers per month from 400-500
\ncontainers per month.<\/p>\n
Traditionally offering services to foreign buyers of
\nIndonesian products, including furniture buyers, Ritra's business
\nwas previously dependent on the amount of orders from foreign
\nbuyers to Indonesian exporters. That is why when more overseas
\nbuyers started to shift their attention on other countries, Ritra
\nwas forced to reorient its business.<\/p>\n
Established in 1974, Ritra, legally known as PT Ritra Cargo
\nIndonesia, has experienced the ups and downs of the Indonesian
\neconomy. The company has developed vast domestic networks with
\noffices in major cities as well as international networks of
\nagents and offices, particularly in the Netherlands.<\/p>\n
With over 300 employees nationwide, Ritra is a medium-sized
\ndomestic players in the Indonesian logistics market. The company
\nhas survived even amid increasingly tough competition from bigger
\ncompanies, including international giants such as DHL and TNT.<\/p>\n
While Ritra is still struggling to survive the tough
\ncompetition from these giants, it has to face the bitter reality,
\nnamely declining orders from its traditional and loyal overseas
\nclients. Merely hoping for more overseas orders is certainly not
\na good strategy in changing times.<\/p>\n
\"We are no longer too export-oriented now. Since three years
\nago, we have started to explore the potential of servicing import
\nactivities and project-based services. There are many
\nopportunities in these two areas, for instance, the
\nrehabilitation and reconstruction projects in Aceh that certainly
\nneed logistics support,\" says Masto.<\/p>\n
Ritra has certainly been impacted by declining interest of
\nforeign buyers of Indonesian goods and by increasingly tough
\ncompetition from other players. But it's not only Ritra that has
\nto work hard to boost its shipments; even giant DHL has to exert
\nmore effort to increase the number of shipments.<\/p>\n
In a message to their employees, DHL's technical advisor Alan
\nCassels said that even though the company had met its revenue
\ntargets it was largely due to the fuel surcharge applied to
\ncustomers and foreign exchange factors.<\/p>\n
While the fuel price increase has troubled many manufacturers
\nand posed a serious threat to the world's economy, DHL has
\nsomehow benefited from the fuel hike by applying surcharge on
\nclients.<\/p>\n
Instead of increasing its service fee to customers, DHL has
\napplied certain formulas in which the fee is added by certain
\npercentage of index. Thus, the total fee paid by customers will
\nbe determined by the ups and downs of the index.<\/p>\n
\"For instance, if the fee for a shipment to client is US$10
\nand the index is 11 percent, then the customers have to pay
\nadditional 11 percent times US$10. This is better than applying
\nincrease in tariff because if the index goes down, the customers
\nwill also pay less,\" says DHL's National Marketing Manager Edi
\nPrayitno.<\/p>\n
But DHL certainly has to work hard to increase both outbound
\nas well as domestic shipments in order to maintain its revenue
\ngrowth. Providing total logistic needs to customers, DHL has been
\naggressively showing innovations to reap more revenue.<\/p>\n
Aware of the business potential in tourism industry in Bali,
\nDHL has worked hard to develop this market. In the company's
\ncalculation, a conference attended by around 60-100 people will
\nbring US$8,000 to US$10,000 to the courier industry.<\/p>\n
That is why the company has intensified contacts with Bali
\nhotel managements by conducting several approaches, including a
\nseminar themed \"DHL Solutions for Hotel and Tourism Industry\" in
\nMarch 2005.<\/p>\n
Another international player, TNT, has also made a move to
\nboost its performance. The company recently launched its Domestic
\nExpress service. Aimed at enabling customers to send and receive
\ndomestic deliveries with a one day transit time, or next day
\ndelivery, this new product service is expected to strengthen the
\ncompany's position in the Indonesian market.<\/p>\n
Just like other players, TNT has applied a Fuel Surcharge
\nIndex (FSI) to all of its customers due to the surge in fuel
\nprices. By applying FSI, the company said it tried to provide
\nclarity and show transparency in fuel price fluctuations.<\/p>\n
\"Thus, customers could make savings when the fuel price is
\ndecreasing. TNT is trying to minimize the effect of fuel prices
\nby giving guidance and training to our fleet on the importance of
\nfuel efficiency,\" says TNT's new country manager Peter Langley.<\/p>\n
Fuel surcharges can be a blessing in disguise for some
\ncompanies. As fuel prices keep on their violent upward surge,
\neconomists agree that the threat of world's crisis is looming on
\nthe horizon. However, as of now, logistic companies still express
\noptimism on the prospect of doing business in Indonesia.<\/p>\n
\"The economy is doing better and the business is still
\ngrowing. I am quite optimistic, although Indonesia has taken
\nlonger to recover, but now the country is in a good situation. In
\naddition, it has very rich natural resources. Investors, for
\ninstance from China, are still coming in,\" says Alan.<\/p>\n
Peter of TNT also expressed similar optimism, saying that this
\nwas not the first time the oil price has increased. In addition,
\nhe considers Indonesia with its 230 million population still has
\na lot of potential.<\/p>\n
\"Therefore, TNT is still very optimistic and looking to grow
\nmarket share in Indonesia by offering added value and innovative
\nservices to Express and Logistics customers,\" says Peter.<\/p>\n
Just like the giants, Ritra too looks quite optimistic in
\nrunning its business in the country even amid tough competition
\nand a challenging business environment. Masto stressed his
\ncompany has had to keep on innovating to face those challenges.<\/p>\n
However, the uncontrolled movement of fuel prices certainly
\nthreatens the Indonesian economy as the government has to pay
\nmore subsidies for fuel. Any move to raise domestic fuel prices
\nto ease the pressure on the budget will not go without any risk
\nto social and political and instability.<\/p>\n
The government is certainly in a dilemma. Without increasing
\ndomestic fuel prices, economists say the amount of subsidy that
\nthe government has to pay will reach Rp140 trillion in the 2005
\nbudgetary year.<\/p>\n
In addition, economists also warned that the continuous surge
\nin oil prices will put more pressure on the country's currency as
\nit has started to be strongly linked with the movement of the
\ninternational oil price.<\/p>\n
In spite of the threats currently posed by violent movements
\nof oil prices, Indonesia is too important a country to be simply
\nignored by major logistic companies. The country's demography,
\nits natural resources, and its large population have made the
\ncountry too attractive to be left alone.<\/p>",
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