Mitigating High Logistics Cost - UN ESCAP · Mitigating High Logistics Cost A country perspective...

Mitigating High Logistics Cost A country perspective

UN ESCAP Regional Conference for Logistics Service Provider

Jakarta, 23 June 2016

By Iman Gandi Consultant

Technical Advisor to PT YCH Indonesia

Agenda

• Indonesia logistics infrastructure and regulatory

• What cause of high logistics cost

• Initiatives taken by the forwarding sector in Indonesia to improve the situation and lowering operational cost

7/4/2016 UN ESCAP Regional Conference for LSP

Indonesia logistics infrastructure and regulatory


Background

World Bank’s latest LPI in 2014 rank at 53rd out of 160 countries SG (5), MY (25), TH (35)

24 % of GDP (TH 16 %) $80 billion a year saving (World Bank )

4th largest country in the world by population (250 million) Biggest economy in Southeast Asia ($888 billion GDP in 2014) 17,000 islands stretching across almost two million square miles

Since 2014, new government outlined ambitious expenditure plans for: 3,600 km of new roads 15 new airports 24 new seaports 3,258 km railway network expansion 29 cities public transportation improvement

by 2025, the urban population is projected to reach 65% (53% in 2010)* •Increase car population •Higher volumes of transported goods (consumer class grows) •Critical country to develop a solid level of infrastructure, *) logisticsviewpoints.com

Given Indonesia’s Island Geography, It Makes Sense to Improve the Quality of Sea Transportation


Background

Source: State of Logistics Indonesia 2015


7/4/2016 UN ESCAP Regional Conference for LSP Source: World Bank Group

Latest Development-Regulatory • Launch of economic stimulus

• There are four parts to the ninth stimulus package

Move to a single billing scheme for port services conducted by state owned enterprise (electronic system.)

National Single Window System with the “inaportnet” (monitors the flow of goods in harbors)

Make the use of the Indonesian rupiah mandatory for payments related to transportation activities (Transportation Ministry Regulation No 3/2014)

Removed equalization the prices of private commercial postal service and state postal service in Indonesia. major advantage to the state owned provider of postal service but limits competitiveness and efficiency in the postal service sectors (Communication and Information Ministry Regulation No 9/2015)


Latest Development

Vision

Implementation

Reduce logistics costs

2015 and 2019 (US$55.4b) •24 commercial ports (over 1,000 non-commercial ports) •Procurement of new vessels

2015-2018 (US$23b) •Trans Sumatera Toll •Java West to East mega toll 2016-2018 Bonded Logistics WH (PLB) •11 facilities in March 2016 •50 more by 2018

“23.5% in 2014 into 19.2% by 2019”

“Maritime Highway” “Improve road connectivity”


Causes of High Logistics Cost A perspective


i.e deviating of stated owned port operators function into competition i/o public service, upstream/downstream strategy

Major Causes

i.e $2-billion city-to-airport railway line project in Jakarta has been delayed because of disputes on its route, and poor coordination between government ministries is preventing other “priority” infrastructure projects from getting off the ground)

• Execution of mega infra project without comprehensive study and involvement of all stake holders (especially private Logistics player)

• Notorious bureaucracy and onerous regulations

i.e true partnership between foreign and local companies (transfer knowledge, empowering country resources) combined with attractive incentives

i.e New Priok, which lies east of Tanjung Priok and will have an annual capacity of three times that of the existing port’s six million containers when fully operational with nine terminals in 2023. has lack of supporting area and road band width accesing the port.

• Support to private sectors and Incentive in supporting country logistics performance

• Harmony between foreign investment and empowering local player in logistics sectors (mutualism)


Case illustration

• NSW connectivity • Customs adaptation to port

capacity increase

• Numerous Docs • Inter Gov body

alignment • NSW connectivity

- ROE conversion of US$ Transportation Ministry Regulation

No 3/2014

- Excessive Storage Charge IPC HM.608/26/2/2/PTP-16, Import D1 Free, D2 900% Non partial release

- More trucks for haulage

- Customs adaptation to port capacity increase

Non partial release -More trucks for haulage - Container Traceability


Logistics player response to the market situation Show case of Practices and Initiatives


E-commerce Urban traffic jam vs same day delivery (ASEAN biggest Fashion e-com)

Orders processing at Main DC(cut off order D-1@7pm, next day delivery), Build fixed hubs, dedicated van to feed hubs, dedicated riders for last mile ex hubs.

Main DC


E-commerce Urban traffic jam vs same day delivery (ASEAN biggest Fashion e-com)

Eliminate fixed cost of hubs, shorter cut off (same day delivery), 3rd party last mile delivery

Main DC


Land Transport (Japanese biggest car manufacture)

• Less turn per days for trucks • Low customer satisfaction level • Cut off release for big qty

Distance 60-70km away TAT 18-20 hours per trucks


Land Transport (Japanese biggest car manufacture)

Truck optimization by switching of prime mover in satellite hubs to reach optimum trips per truck

Distance 60-70km away TAT 8-10 hours per trucks


IT functionality Country Market leader in milk manufacturing & distribution

Make use IT system for consolidation of delivery to Modern trade channel (multi drop point/temperature within zones), managing stock level at distributors over daily monitoring/replenishment)


Focus on core business Telco parts hubs for biggest Indonesia operators

(outsource supporting activities to 3rd party) : WH operator join cooperation with local player for satellite hub on regular items stocks to compromise high warehousing cost and better satisfaction level.

• More than 42 hubs required spanning the archipelago • 300-1000 sqm WH requirements with 24 hours support service • Variable cost model (per pcs, unit) vs fixed overhead



Thank You For your attention

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