Courier service remains prospective despite reduced market
Courier service remains prospective despite reduced market
JAKARTA (JP): Indonesia's courier service remains prospective
with sharper competition despite a reduced market and steady
growth rates, executives of the industry have said.
The current situation, in which the economy is recovering from
a prolonged economic crisis, forced the players in this sector to
introduce innovative services to maintain or attract customers.
TNT Director Colin Moran admitted that competition was very
tough as players were pushing for market share growth in a
reduced market size.
He said that TNT forced itself to be different from the rest.
"This is why we are really focusing on the value-added areas
such as high tech, where we have state-of-the-art solutions for
customers to manage their parts distribution throughout
Indonesia. We have also launched a domestic overnight service
which links all our branches with a next-day service that also
carries a full money back guarantee," he said, adding that the
service enjoyed strong growth.
He said that growth had been steady, with major advancement in
the five years leading up to the crisis, which hit in late 1997.
"Today, the industry is showing signs that the volume is
recovering, however, there is severe pressure on prices, and the
recent global fuel crisis is placing extreme pressure on costs."
He said that the other area of growth had been in the express
import area, where, with its global network, TNT could pick up a
product anywhere in the world and import it to Indonesia with
express customs clearance and bill the customer here for the
service. "This gives them greater control over their costs."
TNT, a Dutch courier service which commenced operations in
Indonesia in 1979, now operates 21 offices and employs 400
personnel in its express division and another 300 in its
logistics division, which probably makes the company the largest
in the country among the major multinational companies in the
industry.
TNT estimates that the growth rate in this sector will remain
low over the next couple of years.
"We believe the generic growth of the industry is still quite
low, maybe 5 percent to 10 percent. However, we are targeting
growth in excess of this mainly due to product innovation and
value-added services," said Moran.
Another leading company, PT Birotika Semesta/DHL, has also set
strategies to expand its operations by operating more offices
throughout the country. It has invested millions of dollars to
increase its services by establishing more infrastructure in
Indonesia.
DHL senior technical advisor Mike Fitzpatrick said: "There is
nothing else we can do but improve services in this situation,
with an economy still suffering from the impact of a financial
crisis. We see recent growth rates of 5 percent to 10 percent
annually."
Meanwhile, UPS Indonesia technical advisor for marketing, Nell
R. Bond, said that his company expected to see a double-digit
compound growth, both into and out of Indonesia over the next
three years.
Challenge
Most businesspeople will agree that the country's economy now
greatly depends on its political stability, as seen by Bond.
He said that the main challenge being faced by the Indonesian
market was a fluctuating currency and political instability.
Soraya shared the opinion, saying that the challenge for this
industry in Indonesia was economic recovery, which is happening
at a very slow pace.
PT Titipan Kilat (Tiki) Director Ahmad Yuniarto agreed. He
said that courier service prospects in Indonesia would depend on
the domestic economic growth.
"This sector will always be prospective, in accordance with
the economic recovery. However, the challenges between domestic
and overseas players are slightly different, depending on the
investments for new branches, human resources and information
technology," he said, adding that market segment was also
significant in this sector.
He said that since most of the players aimed to get corporate
customers, other players like Tiki could penetrate and focus on
the retail market.
He added that overseas players concentrated more on services
out of Indonesia, so local players would be able to dominate
services within Indonesia.
"In terms of service quality, both local and overseas players
are dealing with fair rivalry. Both local and overseas players
are offering guarantees in delivery time as well as packaging
insurance," he said.
Guarantee of delivery is the main challenge for courier
service players, which is why a strategic alliance is also
important for them.
Yuniarto said that players in this industry include the postal
service firms, freight forwarders, telecommunications as well as
transportation operators and travel agencies. Some of the
companies have set alliances to improve service quality. By
setting up an alliance -- instead of competing -- they can also
expand their market shares.
The best example in alliance is the state-owned postal service
provider PT Pos Indonesia (Posindo), which has set up
collaborations with DHL and TNT.
Moran said that such alliances would improve Posindo's global
service levels and strengthen its international image as a
service provider.
"TNT also intends to accelerate coverage throughout Indonesia
through branch openings or agency-type arrangements. We are also
planning to position our company with great strength in the high-
tech areas of industries," he said.
Internet
As a matter of fact, the Internet, which offers ease to people
in sending documents virtually, has not much affected the courier
business.
Moran said that the Internet had been a tool expanding TNT's
business, making it an a efficient medium to conduct business.
"Via the Internet, TNT customers can place a pick up booking
within Indonesia or any country overseas on our website, track
the whereabouts of their package, check the rates and reorder
supplies."
Bond said that the Internet had also been a major medium of
trading, therefore, courier companies could be well-positioned to
align themselves with the e-commerce market.
"UPS has been selected as the 'Company of the Year' by Forbes,
which described it as providing the missing link in Internet
retailing," he said.
Nonetheless, e-commerce will always need manual, physical
actions to delivery products from point A to point B, said
Soraya, therefore, an effective logistic and distribution system
would remain as a great role in the era of e-commerce.
Regulation
According to Moran, the industry is still restricted in terms
of foreign investment and as such reduces the cash flow into the
industry.
"This obviously reduces employment growth opportunities within
this industry and slows the introduction of more high-tech
enhancements for the industry."
He said that TNT was working with the government to develop
new customs procedures that would allow faster more efficient
clearance of imported products through the airport. "This is a
slow process and needs to be a prime focus to improve the service
to Indonesian importers."
Yuniarto, who is also vice chairman of domestic chapter of the
Indonesia Association of Courier Service (Asperindo) said that
the association had proposed the government to amend the Postal
Law No. 6/ 1984.
"Asperindo also proposes to the government to group the
business of postal services, courier an cargo under one single,
integrated regulation, covering the sector of post and
telecommunications, as well as land, air and sea transportation,"
he said.
He said that such a regulation was needed as the courier
business was operated by many players, therefore, there were no
significant differences between couriers and cargo handlers.
He added that global competition, which does not recognize
monopolies, would require flexibility with international
standards.