Efficient logistics means profitable business

Ari Darmawan, Contributor, Jakarta

The role of logistics in the business world is becoming more and more important. Delivery of products is required to be early and at the very least on time, otherwise competitors have the opportunity to fill the gap and eventually grab a part of the market.

On time delivery, besides having a positive impact on customers, also makes it more convenient for retailers or outlets to prepare the necessary payments and monitor the level of stock for more efficiency.

"With today's advanced logistics method that guarantees on time delivery, our retailers do not have to keep a high level of stock. When previously, stock was piled up for one or two months, today the inventory level is down to a maximum of two weeks or even less. This way their money is not locked up unnecessarily and they can use it to expand their business," said Agung Surjoatmodjo, a supply manager at one of the leading milk and milk-based manufacturers in Jakarta.

Realizing the vital role of logistics in the overall distribution that eventually affects a company's marketing, many major companies in Indonesia have seriously developed their logistics divisions. Among the essential elements to be attended to are the proper network and sophisticated information technology. Due to the huge investment involved, however, only really big companies are capable of developing their own logistics departments.

Another trend has come up within the past decade or so in Indonesia. Instead of taking all the trouble of setting up an extremely costly logistics division, including the warehousing, information, communications equipment, manpower and so forth, a number of companies have turned to outsourcing. They prefer to leave their entire logistics work to the experts, like some of the courier or cargo companies, for example.

"In the United States, this trend started many years ago and flourished further in the late 1970s or early 1980s. It was the ideal solution to America's major companies' demands for efficiency in distribution. Many of them were customers of large courier companies, like Federal Express (FeDex) or DHL," said Johari Zein, chief executive officer of a local courier company, Tiki JNE.

The need of courier companies' clients has expanded, from the previously simpler task such as sending products in smaller quantity to keeping them in larger volume in their warehouses for longer periods. This newer assignment for the courier companies means more revenue from the rental of warehouse space. With the growth of this need many courier companies have also expanded their services in providing the required warehousing.

In Indonesia, the use of courier companies as logistics providers initially began with foreign manufacturers operating in the country. With the efficiency that they have experienced in their home countries they started to look for the right courier companies here to be their logistics "partners". Some of the world's most renowned corporations operating here that use the services of leading courier companies are Nestle, Sony Ericsson, Hewlett Packard, EMC and EMI Indonesia.

EMI Indonesia distributes its musical compact discs and cassettes throughout the nation using logistics services provided by Tiki JNE, while the state-owned corporation PT Telkom relies on PT Repex Wahana.

"Using the logistics service we provide, our customers can easily calculate the related costs. Thus, making their short and long-term business plans less complicated, plus they get what they seek, efficiency," said Heni Purwani, Logistics Coordinator at Tiki JNE.

Former managing director of EMI Indonesia Yohanes Teja had similar reasons for using logistics services provided by the country's leading courier companies. "The first reason was we did not have our own logistics division, which would have been a huge investment had we set up one. The next reason, obviously, was that using a reliable and experienced courier service was more efficient. And we could always compare quotations given by each company and then decide on the one with most superior service," he said.

Yohanes added that Tiki JNE was chosen to take care of his company's logistics due to the reasons he mentioned as well as their good networking, competent manpower and their mastery of information technology (IT). "The IT system that we used at EMI was later adapted by Tiki JNE, so on this aspect compatibility was another added value," he said.

In line with the current rapid development in technology and marketing, today's courier companies are more than "senders" of packages from one place to another. Presently they use state-of- the-art information technology to enhance their entire range of services, which is called supply chain management in marketing jargon. Their services even include assistance on importing raw materials, distribution nationally and globally and even after sales service.

"To meet all sorts of customers' courier needs, IT is a must. With our wide range of sophisticated IT equipment and facilities plus our networking we are committed to providing a full-range, one-stop service to each of our customers," said Andry Adiwinarso, managing director of sales and marketing at PT Repex Wahana.

For example for Hewlett Packard, he explained that this customer keeps a certain amount of stock at Repex Wahana's warehouse. With the aid of the company's IT system, delivery of spare parts to Hewlett Packard's customers is guaranteed within one hour for the Greater Jakarta area.

The giant telecommunications company Ericsson, meanwhile, has been able to secure large business from PT Telkom due to, among other things, its commitment to deliver spare parts within three hours to most parts in Indonesia. Failing to deliver within the stipulated time means penalties for Ericsson.

"To comply with Ericsson's commitment is only made possible by our IT equipment and facilities, wide networking, professional manpower and all the related logistics infrastructure, such as warehouses, various means of transportation, including our privately owned aircraft and so on," added Andry.

The advanced IT has made the world much smaller in a way. In the world of business this means fiercer competition in the way companies are forced to be more innovative and efficient in their supply chain management. With today's highly sophisticated IT and, naturally, "the people behind the computers", who are required to be more professional, efficiency in logistics matters can be achieved.

"In most areas, logistics service providers have come up with solutions for many companies. In my opinion, this type of service is the future of logistics service companies in general and particularly courier companies," concluded Johari Zein.