FOR GENERAL ISSUE - SUPPLY CHAIN MANAGEMENT -- MARCH 11

FOR GENERAL ISSUE - SUPPLY CHAIN MANAGEMENT -- MARCH 11

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Supply-chain-services

Local companies need to be more aware of SCM

Rudijanto
Contributor
Jakarta

No doubt Supply Chain Management (SCM) is not a new concept
for many decision makers in Indonesian corporations, but
entrusting their companies' SCM to the hands of professional
logistics companies has yet to become a way of doing business in
this country.

While domestic companies may have their own reservations about
outsourcing SCM, professional logistics companies also have their
reasons to believe that their SCM solutions will help companies
to be more efficient.

PT Repex Wahana (RPX) chief operating officer Abdul Rahim
Tahir said that outsourcing SCM would give companies a
competitive advantage over their competitors as they can benefit
from more productivity at less cost and time.

"By outsourcing SCM, companies can concentrate on production.
Their productivity will increase because they do not have to
maintain their own warehouses and inventory, which are usually a
costly investment," said Tahir.

Apart from being costly, DHL business development manager Edi
Prayitno said that the problem with many Indonesian companies was
that their SCM was not yet time-responsive in supporting product
distribution to customers.

Edi believes that with currently fast-developing economic
conditions, customers expect faster delivery of products. Thus,
customer expectations constitute a big challenge for many
domestic companies.

"Thus, there is a new value here that says 'fast distribution
of products to the market constitutes the main goal of many
producers'. This will give them an edge over their competitors,"
Edi said.

An oft-quoted success story in SCM is that of Dell computer.
The U.S.-based computer maker has bypassed distributors and other
resellers and sells directly to customers. The SCM applied by
Dell has enabled it to build a customized configuration for every
buyer.

Another important point in creating Dell's success is that the
company is able to sell its PCs below retail price. Certainly,
Dell' success constitutes solid proof that with SCM a company can
produce better product at a more competitive price.

It is hard to imagine that without the support of a
professional SCM solution provider Dell would have been able to
know customer's needs, get supplies from its committed suppliers
at the exact time, produce the needed PCs and distribute them to
buyers on time.

While Dell and many other overseas companies have
subcontracted their SCM to professional SCM solution providers,
many Indonesian companies seem to be reluctant to do so.

These domestic companies may have their own reasons not to
outsource their SCM needs but RPX's Tahir warns that if
Indonesian companies do not follow the global trend in
outsourcing SCM, they will lag behind many other international
companies.

"SCM is a proven thing. It is our task to educate the market
about this need for SCM. We are the ones actively approaching
those in top positions in order to create changes within their
respective organizations," says Tahir.

In spite of the currently low response rate of the market,
Tahir believes that the market for SCM in Indonesia is very
promising. Inquiries are already being made by RPX customers
regarding the company's SCM solutions.

RPX currently has 4,000 to 5,000 customers from its different
subsidiaries. These subsidiaries have alignments with various
international logistics companies such as Federal Express
Corporation, Sumitomo Logistics, Tokyu Air Cargo, Yellow
Consolidation Service and Hanshin Air Freight.

But of these total existing customers, only a very few,
including HP, Yamaha and Telkomsel, have relied on RPX's SCM
solutions. While this small figure may reflect low awareness
among Indonesian companies on SCM, it also shows that the market,
if properly developed, is huge.

Such a huge market has increased RPX's confidence, as
reflected in the company's decision to add a new Boeing 737-200
to its fleet to boost RPX Airlines' cargo capacity. RPX currently
operates two aircraft.

"We shall remain focused on developing SCM for our customers.
It takes a long time to develop SCM that really responds to each
customer's needs. That's why we already feel happy at our current
number of SCM clients because we only started in October 2001,"
Tahir added.

No less optimistic on the prospects for the Indonesian market,
DHL has continuously increased its investment, particularly in
strengthening its information technology. The company has
introduced its Track & Trace system by launching a unique portal,
TAS (Trade Automation Service).

DHL's TAS provides a variety of information to customers,
including that on customs regulations in 53 countries.
Interesting features of TAS include information on product
compliance, comparative landed costs, trade documents,
interactive classification and restricted party screening.

Since the end of last year, DHL has also equipped its couriers
with personal digital assistants (PDAs). These wireless scanners
combine cellular phone features with GSM/GPRS (global positioning
system), bar code scanner and pager, in a single, hand-held unit.
This new equipment assists DHL couriers in picking up and
distributing goods and documents to and from customers.

DHL Express has been operating in Indonesia since 1973.
Beginning in 1982, DHL's operations in this country were carried
out by PT Birotika Semesta (BS). Today, the company not only
delivers documents and packages but also provides integrated
logistics solutions.

"Because we are good at distribution, we are often asked by
customers if we can maintain stock for them or do local and
international distribution and so on. This prompted us to be a
logistics solution provider," says senior technical advisor to
BS/DHL Alan Cassels.

Though less developed than more advance countries, Indonesia
constitutes a growing market for many logistics companies. Apart
from RPX and BS/DHL, another world player actively penetrating
the market is Davids Logistics (Davids) through PT Davids
Distribusi Indonesia.

Currently, Davids offers outsourced integrated logistics
services. The company not only handles traditional warehousing
and distribution functions, but also provides supply-chain
logistics to its clients.

Coming from a background of fast-moving goods, Davids has
diversified into a range of sectors from apparel to general
merchandise, as well as banking requisites from warehousing
through branch delivery.

The presence of some of the world's major logistics companies
will certainly make market competition tougher. Like all players
in this sector, RPX's Tahir also expresses confidence on the
experience and skill of his company to provide the best to the
Indonesian market.

However, as with many other companies, one of Tahir's problems
is related not to the competition but more to the slow work rate
of Indonesian Customs offices and the poor state of
infrastructure, such as highways.

"Of course, there have been some improvements in Indonesian
Customs, but they have been too slow," Tahir said.

It is no secret that Customs has become a major headache, not
only for SCM companies such as RPX but also many others that have
to rely on Customs services to facilitate their businesses.

Since Customs offices are an area beyond any SCM company's
control, most can only expect that the government will
continuously improve the offices. Otherwise, Indonesian Customs
will remain a black spot that has the potential to slow down the
SCM process.