Logistic giants enjoying high growth
Rendi A. Witular, The Jakarta Post, Jakarta
Foreign giant distribution companies are enjoying high revenue growth here as more companies have started to outsource their warehousing and distribution affairs to these firms.
Industry experts said that the outsourcing trend started in the late 1990s as many companies wanted to concentrate more on their core activities.
"Since the Asian crisis in 1997 there has been an increase in the number of companies looking to outsource their distribution and supply management for efficiency," said Colin Moran, country general manager of PT TNT Logistik Indonesia, which, last year, enjoyed a 90 percent growth in revenue.
He expected TNT to enjoy a further hefty growth of around 50 percent this year.
TNT Logistik Indonesia, which is the local subsidiary of Holland-based TNT Group Post N.V., currently provides distribution services such as import clearance, inventory and warehouse management, export dispatch, provision and management of materials and transport system design.
The company started its distribution business in 1995.
Currently, the company has over 4,000 active customers in the country and 11 major distribution contracts. Several of its major customers are PT Tigaraksa, P&G, BASF, Shell, Nestle and PENI.
Another giant distribution company enjoying a boom in business here is DHL, with its local partner PT Birotika Semesta.
Company senior technical advisor Alan Cassels said, during a recent media conference, that revenue growth this year was projected to grow at 70 percent to 80 percent.
DHL entered the country in 1976. One of its major customers is CISCO.
Industry players said Indonesian manufacturing companies still lagged behind their regional peers in outsourcing their warehousing and distribution management to distribution specialists.
But they acknowledged that the growth potential in the distribution business here was huge.
According to Moran, only 1 percent to 2 percent of manufacturing firms here already use distribution companies to handle their warehousing and distribution affairs.
"Many companies here are too scared to let go of the distribution side of their business as they don't think anyone else could manage it better than they do. But in the majority of cases they are mistaken, as we have proved to many customers," said Moran.
Despite the huge market opportunity, distribution companies said that competition was already getting stiff, as four international giants had already entered the country.
The other two are U.S.-based United Parcel Service (UPS), and Federal Express (FedEx).
UPS entered the country in 1988, with its local partner PT Cardig Air, and Fedex in 1985, with its local partner PT Repex Perdana International.
Cassels said that the tough competition had prompted DHL to focus on a specific market segment.
"We are concentrating on value-added distribution, usually vital spare parts with a high impact on business, typically for hi-tech clients. Other players mostly focus on delivering consumer goods," said Cassels.
TNT is also targeting a specific market segment, focusing more on fast-moving consumer goods, petrochemicals, automotive items, plus electronic and pharmaceutical goods.