Local companies need to increase awareness 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.