Post COVID Recovery – Indonesia Trade and Logistics Market to surpass $349 billion by 2026

The Indonesian trade and logistics market size is estimated to reach USD 349.5 billion by 2026. It is anticipated to exhibit a CAGR of 7.9% during the forecast period. The increasing infrastructure development, exponential rise in e-commerce and the encouraging trade among ASEAN are expected to drive the growth in the post COVID-19 era.

Definition / Scope
Market Overview
Market Risks
Top Market Opportunities
Market Drivers
Market Restraints
Industry Challenges
Technology Trends
Pricing Trends
Regulatory Trends
Other Key Market Trends
Market Size and Forecast
Market Outlook
Technology Roadmap
Distribution Chain Analysis
Competitive Landscape
Competitive Factors
Key Market Players
Strategic Conclusion
References
Appendix

Definition / Scope

Logistics is a business to control, execute, and plan the movement of material, capital, and service. In a general sense, logistics is a part of supply chain management that controls, implements, and plans the effective and efficient flow of goods, information and services between the point of origin and point of consumption.

Global logistic market is segmented into logistics model types, where further categories are first party logistics, second party logistics, third party logistics, and fourth party logistics. Many retailers and manufacturers are recognizing logistics management as an important aspect globally. Moreover, logistics management is making an organization more competitive in terms of quality, cost, flexibility, and delivery. Due to these factors, organizations are now focusing on improving their logistics activities.

Logistics and Trade involve purchasing, materials management, inventory control, warehousing, transport, and distribution. Logistics support effective and efficient supply chain management by integrating the flow of materials and goods from the initial purchase of raw materials through to the final delivery of a product to customers.

This includes all trade logistics processes that occur with regard to customers, retailers, manufacturers and suppliers, and the company, or logistics processes that occur both inside and outside the trading company. This is the only way to ensure that the required goods and merchandise are quickly accessible from the warehouse and goods distribution centers and can be provided by the appropriate service partners for transport to the customer, retailer, manufacturer, or supplier.

There is no official definition of logistics for most ASEAN countries. Logistics covers business activities ranging from transport and storage, post and couriers and distribution for Indonesia.

There isn’t a single industry that hasn’t been impacted by the coronavirus outbreak in some way. Severe disruptions have resonated throughout the global economy since the outbreak began late last year in China. According to the Indonesian Logistics Association, the COVID-19 Pandemic had a tremendous influence on the trade and logistics industry (ALI).

Emergency measures taken by the government to limit the spread of COVID-19 are believed to have cut logistical volume by 60-70 percent across the board. This Report presents the inferences obtained from the analysis performed for the post COVID-19 state of the Trade & Logistics Market in Indonesia considering all the Risk Factors, Opportunities, Drivers, Restraints and Challenges caused by the sudden outbreak of the COVID-19 Pandemic across the world.

Market Overview

The Indonesian logistic market is expected to get a noteworthy CAGR of 5.6 percent in revenue to reach US$ 349.5 billion by the year 2026. The impact of COVID-19 on the Trade & Logistics Market is severe and the repercussions will be felt for some time due to the lockdown restrictions imposed by the Indonesian Government to curb the spread of COVID-19 as a result of which the Indonesian economy has witnessed a slowdown of -2.07% in Gross Domestic Product (GDP) Growth in 2020 as stated by Statista.

The Trade & Logistics Market in Indonesia is expected to witness a slowdown of -24% due to the lockdown imposed which caused the seizure of the economic activities in Indonesia disrupting the supply chain equation causing delayed deliveries and increasing lead times.

With yearly product exports of $197 billion, Indonesia was currently ranked as the 28th largest export economy in the world. The country boasts a positive trade balance of $17 billion after deducting annual imports of $180 billion from their total export value.

According to Bloomberg, Indonesia’s trade balance in March 2021 is expected to be US$1.50 billion on average, with the highest estimate coming in at US$1.92 billion and the lowest at US$1.03 billion.

In February of this year, the Indonesian Bureau of Statistics (BPS) reported a trade balance surplus of US$ 2 billion, owing to exports outnumbering imports.

The Trade and Investments industry in Indonesia witnessed a slowdown in growth due to the pause in economic activities in Indonesia due to the outbreak of the COVID-19 Pandemic, Once the economic activities take pace, the Trade & Logistics Market will experience significant growth and will continue to maintain its momentum, driven by economic and social developments and population growth. The recent change of government has helped Indonesia to become an attractive place for investment.

Since the COVID-19 pandemic hit Indonesia in early March 2020, logistics companies have seen a 60 percent drop in overall business performance, according to the Indonesian Logistics Association (ALI). The government’s emergency steps to prevent COVID-19 transmission are said to have reduced logistics volume by 60-70 percent across the board.

Despite the outbreak, business-to-consumer (B2C) and customer-to-customer (C2C) delivery services grew, but the gain was insufficient to offset the steep reduction in the business-to-business (B2B) segment. Despite widespread social limitations, the B2C and C2C segments grew due to increased demand for food, perishables, and medical supplies deliveries.

As the sector prepares for recovery and expansion following COVID-19, technology will play an increasingly important role in enabling all stakeholders, including shippers, transporters, warehouse owners, and vendors, to become more efficient in responding to changing market realities.

Despite the fact that logistics is at the heart of domestic and international trade, uncertainty persists in Indonesia’s supply chain, which is worsened by the country’s unique archipelagic nature of 17,000 islands, which means commodities cannot be delivered just by vehicle. To reach remote portions of each island, a multimodal infrastructure involving land, sea, and warehouse transportation is required.

The key trends that drive Indonesia’s trade and logistics market namely, economic growth, which fuels the purchasing power of consumers; increasing urbanization; participation in international trade and investment; the rise of e-commerce platforms, which allows customers and producers more choices in terms of suppliers; and the emergence of economic regional groupings such as ASEAN, which facilitate and enhance trade.

Exponentially proliferating Internet of things (IoT) in logistics sector enable freight companies and consumers to direct access to the company network via the internet. At the same time, IoT penetration also provides opportunities for hackers to mount an attack. Many security issues have been identified in recent years. This factor is working as a restraint for global logistics market.

Some of the restraints of the market are huge competition and low production of goods, high transportation cost and fuel prices, etc. The Trade and Investments industry in the Indonesia region will expand at a CAGR of 0.5% over 2020-26. Indonesia is going to have an expected CAGR of (-0.32) % in Imports and CAGR of 0.79% in Exports during the same time. Indonesia is a trade surplus country and will continue to be in the same state till 2020.

Indonesia Trade Balance recorded a surplus of 2.0 US$ bn in Jan 2021, compared with a surplus of 2.1 US$ bn in the previous month. Indonesia Trade Balance data is updated monthly, available from Jan 1967 to Jan 2021, with an averaged value of 538.9 US$ mn.

The data reached an all-time high of 4.6 US$ bn in Dec 2006 and a record low of -2.3 US$ bn in Apr 2019. CEIC extends history for monthly Trade Balance. The Central Bureau of Statistics provides Trade Balance in US$. Trade Balance prior to January 2008 is sourced from the International Monetary Fund.

Indonesia’s Total Exports reached 16.5 US$ bn in Dec 2020, an increase of 12.2 % year on year. Total Imports recorded 14.4 US$ bn in Dec 2020, a decrease of 6.5 % year on year.

Market Risks

The outbreak of COVID-19 Pandemic

During the COVID-19 (coronavirus) pandemic, transporting goods from point A to point B has slowed for multiple reasons, including workers getting sick from the virus and truckers struggling to get products to stores fast enough. Since the COVID-19 pandemic hit Indonesia in early March 2020, logistics companies have seen a 50 percent drop in overall business performance, according to the Indonesian Logistics Association (ALI).
But it’s been getting better than 2020, and the risk that occurred due to the outbreak of COVID-19 is lowering as the Indonesian Government has relaxed the restrictions imposed on the trade activities and also the Indonesian Government has introduced the Vaccination Programme from 13^th January 2021 has retained promise in Indonesia’s Growth and hence the In rupiah terms, FDI into Indonesia increased 14% year on year in the first three months of 2021, according to figures from the country’s investment board BKPM.
According to BKPM, FDI totalled 111.7 trillion rupiah ($7.72 billion) in January-March. Total direct investment, including domestic investment, totalled 219.7 trillion rupiah in the first quarter, up 4.3 percent over the same time a year ago.

Huge competition and low production of goods

Indonesian Trade and Logistics market is badly affected by huge competition and low production of goods.
The COVID-19 Pandemic aggravated the issue by causing border restrictions and lockdowns, limiting the passage of supplies. Additional protocols (such as social separation at warehouses) implemented to guarantee worker safety contributed to freight congestion. In Indonesia, for example, the lockout caused a driver shortage, resulting in over 50,000 containers building up in the ports of Belawan or Kuala Tanjung, Tanjung Priok, Tanjung Perak, Kijing, Makassar, Bitung, and Sorong.
There is high competition in the trade and logistics market in Indonesia. Due to the low production of goods in the country, the huge import is needed due to this the cost rises which affect the market.

Top Market Opportunities

Emerging Opportunities in e-Commerce Logistics

The logistics sector in Indonesia is going through a period of extraordinary upheaval. The COVID-19 Pandemic caused lockdowns earlier this year disrupted transportation operations, disrupting supply chains and commerce flow. The silver lining is that the pandemic has also acted as a drive for much-needed industry innovation.
COVID-19, unsurprisingly, has caused changes in consumer behaviour, since many physical stores have been forced to close and many people have turned to the internet to purchase everyday essentials. The e-commerce boom in Indonesia is just getting started, and the behaviours that evolved during the pandemic will become progressively entrenched as the new normal for customers in the future.
E-commerce sales are expected expanded by 37.4 percent to IDR 351.1 trillion (US$ 25.3 billion) in 2020, according to Global Data’s E-Commerce Analytics, compared to a pre-COVID-19 projection of 22.2 percent for the same year. Between 2020 and 2024, the amount is predicted to expand at a 19.2% compound annual growth rate (CAGR), reaching IDR 707.6 trillion (US$ 51.0 billion) in 2024.

As a result, industrial players have been driven to reconsider their supply chains and accelerate their digital transformation. To address increased client demand, several organisations have begun to use technologies that enable order fulfilment in less time and at lower costs.
Shippers and businesses can simply connect to readily available warehouses and trucks by employing technology to match supply and demand through a curated marketplace platform. The concept of a curated platform is particularly significant for improving supply chain efficiencies since it matches shippers and businesses based on their needs and current capabilities. In contrast, in an open marketplace, matching is typically done on the basis of prices, without taking into account the various parties’ processes or transportation requirements.

Increasing Infrastructure Investment

The ongoing and upcoming government projects for improving the logistics infrastructure in Indonesia include the setting up of Mass Rapid Transit in Jakarta as well.
The project has a budget of US$ 1.7 billion and is aimed at relieving traffic congestion. The transit is expected to be fully constructed and operational by the year 2027, thereby having a positive impact on the freight forwarding business in the country.
Additionally, the transit will consist of 2 corridors namely the North-South corridor and the East-West corridor.

Encouraging trade among ASEAN

The establishment of the ASEAN Economic Community in the year 2015 was aimed at improving the trade scenario in the region by freeing up the movement of people and goods across the bloc.
The Blueprint for 2025 adopted by ASEAN leaders at the 27th ASEAN Summit in 2015 will help in facilitating the utilization of the ASEAN Trade in Goods Agreement and allow liberalization of logistics services across the nations including Indonesia.

Market Drivers

Increasing demand

There is rising demand and scope of trade and logistics market in Indonesia. This has become a plus point in the market growth.
Trade and logistics are very crucial to run daily life normally. There won’t be available every necessary good in a particular place. So the trade and logistics market has a high demand.
Healthcare logistics is flourishing post COVID-19 with the need for more vaccines and drugs in Indonesia. The

Robust economic growth

The per capita income of Indonesia in 2019 was US$ 4135.569 and which was expected to be US$ 4200 and 4450 in the year 2020 and 2021 respectively.
This boosts the demand for trade and the logistics market. So the robust economic growth in Indonesia has boosted the trade and logistics market growth.

Rising population and availability of cheap manpower

Indonesia has a large population, so the consumption rate of Indonesia is also high. This has become a major factor for the growth of the trade and logistics market in Indonesia.
Cheap manpower is helping Indonesia to become a vast export country worldwide. Key factors in the growth of the Trade and investment industry have become cheap manpower.
As the manpower costs lower, the overall cost of the trade and logistics market is decreased this is a big opportunity for the industries.

Market Restraints

Impact of the COVID-19 Effect

The COVID-19 conflict has had a significant impact on Indonesia. Due to a lack of a structured and adequate government response, uncoordinated responses have resulted, including a Jakarta lockdown and business as usual in mines and agriculture. Since the COVID-19 epidemic hit Indonesia in early March 2020, logistics companies have seen a 50 percent drop in overall business performance, according to the Indonesian Logistics Association (ALI). The government’s emergency steps to prevent COVID-19 transmission are said to have reduced logistics volume by 60-70 percent across the board.

High Costs associated with Transportation

Trade liberalization is increasingly accompanied by efforts to liberalize logistics services as nations have realized the importance of logistics services in achieving economic progress and integration. However, liberalization also brings with it costs and challenges. High transportation cost is another restraint for the Indonesian Trade and logistics market. Due to the high transportation cost the market has not grown to its full potential and it has also been like a blockage for the growth of this market.
In Indonesia, logistics is a key pain point for doing business. In Indonesia, logistics costs range from 25% to 30% of GDP, but in Western nations, logistics costs are less than 5% of GDP. Even neighbouring countries, such as Malaysia, spend half as much on logistics as a proportion of GDP. Given that Indonesia is the world’s 16th most populous country and has the world’s 16th largest GDP,
The market has the potential to grow from the root but the transportation cost that occurs in Indonesia is quite expensive so the Indonesians are not willing to invest fully in this market. And this is creating restrain to grow the Trade & Logistic market in Indonesia.

Lack of Foreign Direct Investment (FDI)

Indonesia’s logistics sector is still highly shielded from foreign competition by certain restrictions its government imposes on the entry of foreign logistics services into its domestic market. These restrictions are mainly in the forms of foreign equity participation limits, joint venture and representative office requirements for several categories in the core, and related and noncore logistics services. Although the related freight services have the largest number and most substantive commitments, the restrictions on market access in this sector are quite substantial.

Also, the COVID-19 Pandemic has affected the inflow of FDI into the Indonesian trade segment, as the FDI has significantly fallen from US$ 1.29 Billion in 2017 to US$ 434.1 Million in 2020, which indicates the fall in confidence among Foreign Investors into the trade segment of Indonesia.

Industry Challenges

The logistics sector also faces challenges internationally. Free trade agreement in the ASEAN region leads to a more competitive market. Customer expectations of offered goods and services have increased. Similarly, customers demand lower costs. To respond to this situation, Indonesia needs an outperformed logistics performance.

The economic consequences of the Covid-19 pandemic have been severe in Southeast Asia’s greatest economy, which urgently requires new growth engines.

In May 2020, exports declined 28.95 percent year on year to US$10.53 billion (€8.9 billion), the lowest amount since July 2016. Reduced shipments of coal, coffee, and palm oil, as well as oil and gas, are mostly to blame for the reduction. Bank Indonesia cut its 2020 growth forecast to 0.9–1.9 percent in June 2020, down from its earlier expectation of 2.3 percent.

Another Industry challenge is high fuel prices. The fuels that are used in transportation vehicles are being expensive nowadays. And anyone would do the business or market to gain profit. But due to the high fuel prices, the marketers are not getting any profit. And this is creating huge challenges in this Trade and Logistics Market in Indonesia.

Exponentially proliferating Internet of things (IoT) in logistics sector enable freight companies and consumers to direct access to the company network via the internet. At the same time, IoT penetration also provide opportunities for hackers to mount an attack. Many security issues have been identified in recent years. This factor is working as a challenge for trade and logistics market.

Two new business model have been widely used in trade & logistics in responding the business during the coronavirus outbreak. The two models include business digitalization and business reform in any aspects of the business. Due to COVID-19, there is a shift in Consumer Purchasing Behavior from Traditional Hypermarkets, Supermarkets to Online Shopping for groceries and Other Items. E-commerce platforms such as tokopedia, Lazada, Shopee have revolutionized the retail market and other market players have to incorporate the payment process by digital wallets.

Likewise, retail stores such as Hyperfresh have introduced their own E-commerce platforms for online retailing to compete with traditional Supermarkets. This is expected to increase the scope and competition in the Last Mile Deliveries and companies need to adjust to the trend.

Technology Trends

Indonesia is facing two major developments in its economy that have bearing on the logistics industry. The first is an evolving business model, called e-commerce, and the second is the “use” of technology in service delivery. In ASEAN, the e-commerce market has been estimated to reach at US$38.195 billion in 2021.

The internet retail market includes the display and purchase of items via internet and the delivery of the purchased item to the consumer. The popularity of online shopping has increased globally in the last couple of years. There are a large number of global online retailers such as Amazon.com, eBay, Wal-Mart, bestbuy.com and Target brands, Inc.

Unlike the traditional business model of physical stores, e-commerce is encouraged as it creates multiple sources of delivery for big- and small-sized vendors, at a lower cost option. It also helps consumers access a variety of goods in distant locations. However, the e-commerce business model poses a unique challenge. Goods from vendors are distributed to warehouses, from whence it is dispersed to customers in small parcels. The process gets complicated as there are a large number of suppliers and warehouses, while customers are spread across multiple locations.

Added to these is the question of payment and product return. Managing all these activities greatly require an efficient and credible logistics system. It also requires logistics companies to acquire technology to streamline the entire supply chain.

Pricing Trends

Trade & Logistics companies that transform their pricing could increase revenue by 2 to 4 percent, translating to as much as a 30 to 60 percent increase in operating profit. However, achieving this upside requires a strategy that tackles the entire pricing cycle. Here, we make the case for reforming pricing and outline a five-step process to achieve it.

Pricing in trade and logistics is not ‘one size fits all’. Long-term contracts and spot cargo require different pricing strategies. This means that logistics companies cannot apply a single approach to pricing their services.

Most logistics companies have a mixture of different contract durations, and the ratio of each varies by type of company (Exhibit 3). This mix of long-term, medium-term, and spot contracts affects optimal pricing strategies. Additionally, each segment of logistics has its own specific challenges

Regulatory Trends

The Indonesian economy possesses sound fundamentals of social stability, strong domestic demand for goods and services, steadily increasing foreign reserves (just under $135 billion in July 2020), and stable prices with moderate-to-low inflation.

However, persistent trade and investment barriers are driven by protectionist sentiment, persistent and pervasive corruption, poor infrastructure, inconsistent interpretation and enforcement of laws, and labor rigidity, which continue to inhibit greater levels of economic growth and prosperity.

In mid-February 2020, the Government of Indonesia submitted an omnibus bill on Job Creation to the Indonesian parliament, which would simultaneously revise more than 70 existing laws, to streamline red tape, attract greater levels of investment, and fuel job creation and economic growth.

Labor and environmental groups, as well as those opposed to increased centralized government control, have been largely at odds with the business groups that are in favor of the bill’s streamlined bureaucratic processes and flexible labor regulations.

The bill, if passed in its current form, will affect all aspects of the Indonesian economy, including how U.S. businesses engage. Topics include investment, labor, micro-small-and-medium enterprise policy, research and innovation, land acquisition, economic zones, job creation, sanctions and fines, sovereign wealth fund activity, and more.

In addition, the Indonesian logistics market was also supported by e-commerce growth and Presidential Regulation No. 44 of 2019 concerning the elimination of the negative investment list.

Other Key Market Trends

Growing E-commerce in the country

Indonesia has the largest population in Southeast Asia by far, and its e-commerce penetration is still very low, making it one of the hottest e-commerce markets in the world. Attracting both global and local companies’ interests, Indonesia now has a fast-growing e-commerce scene and is poised to become a global powerhouse.
E-commerce is expected to expand at CAGR of 10.21% in Indonesia. Although the market is not as mature as e-commerce in Malaysia or Singapore, the Indonesian population of more than 260 million makes the absolute numbers of growth in the country high, with millions of new online shoppers every year. The user penetration will be 57.4% in 2021and is expected to reach 77% by 2025.
The gross merchandise volume (GMV) for online transactions is predicted to reach US$ 130 billion by the end of 2020. The average revenue per user is expected to amount to US$240.75. This growth of e-commerce is a major driver for the cross-border and domestic road freight logistics market growth.

Increasing Trucks to support the increasing demand for road freight transport

The population of freight trucks is expected to grow to 50% every year in the next few years. The growth was due to the support of the improvement of toll road infrastructure and the expansion of factories of large companies.
The performance of these business services will be even greater if inter-modal synergies, namely cooperation between trucking service companies and ship and railroad transportation companies, also occur, because the process of shipping goods will reach a wider area between regions and islands.
However, government policy support is needed to facilitate truck transport mobility, so that the intensity and volume of trips also increase. Among the policies needed is monitoring the weighbridge, which is placed directly at the entrance and exit of the industrial area, given the flow of traffic in and out of trucks in places.

Market Size and Forecast

The Indonesian freight and logistics market (hereafter referred to as the market studied) was valued at US$ 81.30 billion in 2020, and it is predicted to expand to more than US$ 135 billion by 2026, with a compound annual growth rate of more than 7%, thanks to a number of infrastructure projects developed by the Indonesian government.

The contribution of the logistics market to Indonesia’s Gross Domestic Product (GDP) in 2020 reached 5.5%. This makes Indonesia one of the countries with the largest logistics market in ASEAN. Indonesia has the largest population in Southeast Asia by far, and its e-commerce penetration is still very low, making it one of the hottest e-commerce markets in the world.

The COVID-19 crisis has had a significant impact on Indonesia. Due to a lack of a structured and adequate government response, uncoordinated responses have resulted, including a Jakarta lockdown and business as usual in mines and agriculture. Since the COVID-19 epidemic hit Indonesia in early March 2020, logistics companies have seen a 50 percent drop in overall business performance, according to the Indonesian Logistics Association (ALI). The government’s emergency steps to prevent COVID-19 transmission are said to have reduced logistics volume by 60-70 percent across the board.

The Only soothing factor that emerged out of the COVID-19 Pandemic is the growth of the E-Commerce Market in Indonesia which is expected to grow at a CAGR of 37.4% compared to the estimates of 22.2%. Attracting both global and local companies’ interests, Indonesia now has a fast-growing e-commerce scene and is poised to become a global powerhouse. With yearly product exports of $197 billion, Indonesia has currently ranked the 28th largest export economy in the world. The country boasts a positive trade balance of $17 billion after deducting annual imports of $180 billion from their total export value.

Indonesian Trade Balance recorded a surplus of 2.0 US$ bn in Jan 2021, compared with a surplus of 2.1 US$ bn in the previous month. Indonesia Trade Balance data is updated monthly, available from Jan 1967 to Jan 2021, with an averaged value of US$ 538.9 Mn

The Trade and Investments industry in Indonesia continues to maintain its momentum, driven by economic and social developments and population growth. The recent change of government has helped Indonesia to become an attractive place for investment.

Indonesia eyes market opportunities for rattan furniture in Japan. Meanwhile, there are at least six market targets in Saudi Arabia: business, furniture, garments, books, bedroom furniture, and baby clothes.

The Indonesian government is preparing a strategy for boosting exports, to meet the target for the economic growth of 6.1 percent next year. It is far from this year’s target, which is set at 5.1 percent. Therefore, the Indonesian Ministry of Trade must revise its strategy.

Market Outlook

The Indonesian Trade and Logistics market valuation is expected to get a noteworthy CAGR of 7.9 percent in revenue to reach US$ 349.5 billion by the year 2026. E-commerce is expected to expand in the high double digits in the future in Indonesia. Although the market is not as mature as e-commerce in Malaysia or Singapore, the Indonesian population of more than 260 million makes the absolute numbers of growth in the country high, with millions of new online shoppers every year.

The gross merchandise volume (GMV) for online transactions reached US$ 130 billion in 2020. This growth of e-commerce is a major driver for the cross-border and domestic road freight logistics market growth. The sector is projected to remain as the key driving factor for the transportation sector. Rising Internet based retailing is boosting the development of the logistics market. Dramatically multiplying online shopping across global market is acting as significant driver of the strategic market. Besides, bother free shopping and home delivery options are supporting the market at present.

Further, brief timeframe transfer delivery, after sales backing and administrations are powering the internet retail market. Knowing the reality, online retailer ought to give great logistics administrations to shape and keep up great and agreeable associations with the clients. The development in internet retail market is in this manner driving the logistics market as of now and comparable pattern is foreseen to be seen over the gauge period. Moreover, cross-fringe sales will end up being a huge development driver of generally speaking internet business, as indicated by overview members. This was the view held by the two transporters and LSPs.

For the United States, Indonesia has identified two opportunities. First, market information about furniture products. It includes product type, shape, design, color, and materials that attract American consumers. Second, fishery products. Moreover, Indonesia is interested in penetrating France’s market for dolls and garments.

Another country, Belgium, is perfect as a destination for Indonesia to export pineapple and pineapple juices, garments, wood furniture, and frozen shrimp. Exporters of those products or commodities contributed 11,9 percent of Indonesia’s total non-oil exports to the United States. It equals US$ 15.7 billion.

Post COVID-19, as the industry positions itself for recovery and growth, technology will play an increasingly important role in enabling all stakeholders, including shippers, transporters, warehouse owners, and vendors, to become more efficient in responding to changing market realities.

Technology Roadmap

Unsurprisingly, Covid-19 has created shifts in consumer behavior. Many physical stores were forced to close, causing people to flock online to buy their daily necessities. Indonesia’s e-commerce boom is only just beginning, and the habits developed during the pandemic will increasingly become entrenched as the ‘new normal’ for consumers going forward.

Enterprise Resource Planning (ERP) systems and Software-as-a-Service (SaaS) companies are providing flexible technology solutions to the e-commerce business. Automation or robotics is also increasingly being used in warehouses for activities like loading/unloading, labelling and sorting products in shelves.

Moreover, the increasing use of Internet of Things (IoT) and Big Data Analytics are assisting companies with inventory and procurement management. Hence, going forward, the changing business model will put pressure on logistics companies to use technology to reduce inefficiencies and improve precision in final delivery. But attached to these innovations are new expectations and standards, forcing logistics companies to either adapt or fall behind.

Much pressure comes from customers in the form of individuals and enterprises, all of who are demanding their products or services come faster and cheaper than ever before. Cloud technology can enable platforf solutions, which in turns makes it possible to use new business models, such as ‘virtual freight forwarding’. It can also provide flexibility and scalability, as well as standardized and harmonised processes across the whole organisation.

Distribution Chain Analysis

Indonesian Logistics and International Trade involves purchasing, materials management, inventory control, warehousing, transport and distribution.

Logistics supports effective and efficient supply chain management by integrating the flow of materials and goods from the initial purchase of raw materials through to final delivery of a product to customers.

Fig: Supply chain of Indonesia’s Trade and Logistics Market

Competitive Landscape

The Indonesian trade and logistics industry does not have a high level of industry concentration, especially with regard to the international players. International players are responsible for approximately 30% of the market size.

The remaining 70% is made up of local players. Within the 70%, the concentration is medium, and even the 10 largest players do not make up for more than 30% of the local market. This can be attributed to the fact that the large players are more focused on trade transport and logistics infrastructure, and hence, are more than just logistics infrastructure providers.

The market players vary by economic stature, industry and operating strategy. The industry has seen many mergers and acquisitions of small start-ups over recent years. The market is fragmented in nature and is headed towards consolidation. The global players have an upper hand, years of experience and are efficient operators.

Logistics players are facing an era of unprecedented change as digitisation takes hold and customer expectations evolve. New technologies are enabling greater efficiency and more collaborative operating models; they’re also re-shaping the marketplace in ways that are only just beginning to become apparent. New entrants, whether they be start-ups or the industry’s own customers and suppliers, are also shaking up the sector.

Competitive Factors

The market is highly fragmented and fairly competitive. There are currently a large number of players in the market making it a competitive industry. The connected products help companies develop closer customer relationships through product differentiation and moving away from price competition.

The key players have been exploring the market by adopting mergers & acquisitions, expansions, investments, new service launches, agreements, collaborations, and joint ventures as their preferred strategies.

Technologies such as WMS, TMS, Cloud reporting, ASRS, RFID tagging, and more are done by the companies as logistics companies in Indonesia are competing on price, clientele, industries catered, services offered, and more to win over their clients.

Online Aggregators such as Kargo backed by big conglomerate groups are providing an Interactive platform for shippers and clients, reducing the logistics cost. Smart warehouses provided by tokopedia, micro-warehousing startup Crewdible and cross-border e-commerce fulfillment AllSome are supporting small individual sellers to become enterprises.

Warehousing Aggregators such as Waresix, Ritase are funded by huge investors such as Sequoia Capital, Jungle Ventures, Golden Gate Ventures, Insignia, and more. These players have been exploring new geographies through expansions and acquisitions across the globe to avail of a competitive advantage through combined synergies.

The lucrative prospects within this market are also attracting a large number of new industry players. This competition is resulting in heavy investment by the top players into research and development to differentiate them from the rest.

Key Market Players

The key market players in Indonesian Trade & Logistics Market are Deutsche Post DHL group, CEVA Logistics, PT Samudera, PT Siba Surya, PT Bhanda Ghara Reksa.

Company Profile of Key Market Players:

Deutsche Post DHL group

Deutsche Post DHL Group is the world’s leading logistics company. The Group connects people and markets and is an enabler of global trade.
It aspires to be the first choice for customers, employees and investors worldwide. The Group contributes to the world through responsible business practice, corporate citizenship and environmental activities.
By the year 2050, Deutsche Post DHL Group aims to achieve zero emissions logistics.

CEVA Logistics

Led by Rodolphe Saadé, the CMA CGM Group is a world leader in shipping and logistics.
Its 489 vessels serve more than 420 ports on five continents around the world and carried nearly 22 million TEUs (twenty-foot equivalent units) in 2019.
Present on every continent and in 160 countries through its network of 755 offices and 750 warehouses, the Group employs 110,000 people worldwide, of which 2,400 in Marseille where its head office is located.

PT Samudera

PT Samudera Indonesia Ship Management (SISM) incorporated in 1991 to support shipping activities by providing professional, efficient and added value in a form of competitive advantage for the customers.
SISM is a merger from the several ship management divisions in numerous shipping business units in Samudera Indonesia.
SISM is also supported by highly competent people and a team of expertise to operate the ships safely and to meet national and international requirements according to market needs, as well as best practices in ship management.

PT Bhanda Ghara Reksa

As a State-Owned Enterprise (SOE) engaged in logistics services which was established on April 11, 1977 in Jakarta, PT.
Bhanda Ghara Reksa (Persero) or BGR Logistics as “Beyond Digital Logistics Company” has a vision of becoming a logistics company that provides integrated, reliable and reliable solutions.

Strategic Conclusion

The demand for trade and logistics services is going to increase in Indonesia due to growing urbanization, increasing trade and investment due to integration, and emerging new business models like e-commerce are accelerating the demand for efficient logistics. In addition, the success of their emerging e-commerce business depends heavily on an efficient logistics delivery system. The logistics sector is inherently complex due to its scope, ranging from physical infrastructure covering four modes of transport, customs, and services.

Both comprehensive and integrative policies, together with a strong governance structure and implementation capacity, are needed to achieve the seamless logistics that they seek. Though the Indonesia Trade and logistics market was affected by the sudden outbreak of COVID-19 pandemic for some time, it has started doing well now. So, it is expected that during the forecasted period, there would be significant growth in the Indonesia trade and logistics market.

References

Appendix

CAGR: Compound Annual Growth Rate
IoT: Internet of Things
SEA: Southeast Asian
SMEs: Small and Medium Enterprises
US$: United States Dollar
IDR: Indonesian Rupiah