Many Compete in Technology Realize "Smart Logistics"

About three years ago, I had the opportunity to interview a former executive of a giant e-commerce site. He asked me one thing, have I ever shopped at his place? How long is the delivery? and other related questions.

I answered it while guessing. As far as I remember the order arrived at its destination two days after payment was made.

He then frowned and mumbled, "Hmm, that's still quite a while. The store is located in Jakarta too can yes?"

I replied, "I guess so. Oh, it's still not fast enough, is it? Even though I'm already [feeling] satisfied."

"It's still not fast because the delivery is in the city," he said. We went through the intermezzo and continued the interview.

For consumers, the sooner the goods arrive at their hands, the better the experience, including leading them to become loyal to a brand.

Behind the myriad of problems that Indonesia has, this is what has made the logistics industry so late sexy to be taken seriously. This industry also has a big influence on the e-commerce ecosystem, but innovation tends to be slow.

According to the Ministry of Transportation, logistics costs in Indonesia are around 29% of total GDP in 2018, higher than the 24% figure in 2016. World Bank data in the same year shows that Indonesia is in 63rd position out of 160 countries for the logistics performance index.

Lately, there have been a lot of concepts smart logistics as an effort to modernize the way logistics work with technology. The goal is to keep operating costs and service costs down for consumers.

In China, this concept has already been applied. According to a 2016 report by JustLogsIt and Bank of China, China has managed to reduce logistics costs over the past decade. In 2015, its ratio to GDP was 16%.

This cost is influenced by three things, namely transportation, warehousing, and management costs, which include wages.

smart logistics in China was triggered by poor quality of warehouse and distribution in the country, which prompted e-commerce companies, such as Alibaba (via Cainiao Network) and JD.com (via JX), to operate their own logistics systems.

By the end of 2015, a total of six online retail players had built 49 logistics hubs, 200 regions distribution centers, and 1.000 sub distribution centers. Alibaba had 60% market penetration for instant courier delivery, while JD.com had 26,4% in 2015.

To promote efficiency, the Chinese government released a roadmap "Long Term Plan of China Logistics Industry Development" (2014-2020) which pioneered the development of the concept of a modern logistics system to achieve 8% annual growth of the logistics industry, with a proportion of 7,5% of GDP in 2020.

Understanding smart logistics

Reflecting on the facts that happened and The roadmap Chinese government, smart logistics aims to improve the efficiency of the logistics industry as a whole by utilizing technology.

In the logistics process there is a combination of various functions, from transportation, warehousing, packaging, distribution, storage and analysis of logistics information and so on.

Utilization smart logistics can be the use of RFID (Radio Frequency Identification), GPS, cloud computing, and other information technology into the logistics process, resulting in efficiency and cost savings. Can be said smart logistics not much different from logistics 4.0.

According to Waresix CEO Andree Susanto, this is a new dimension in logistics management that uses data flows to gain new insights to optimize operations. Customers will be satisfied and protect their business.

"Important component for smart logistics will connect with data, advanced analytics, autonomous decisions, and IoT. Therefore, smart logistics will play a very important role to streamline the process between e-commerce marketplaces - sellers - logistics companies - and end consumers," he told DailySocial.

Not limited to the use of technology, according to the Head of Corp Communications & Public Affairs JD.id Teddy Arifianto, smart logistics must also start from changing mindset people, both from the service provider side to the consumer side.

"So there is an integrated utility synergy end-to-end and in the end it has an impact not only in terms of profit for business, but also for human life itself," explained Teddy.

Blibli SVP of Operations & SVP Product Management Lisa Widodo added, smart logistics aims to meet the enormous expectations of consumers for fast, timely delivery of goods according to estimates, efficient costs, traceable positions, so that they are safe from the risk of lost or damaged goods.

"An additional advantage is the delivery schedule and delivery address that can be tailored to the needs of consumers," he said.

According to Huatai Securities, smart logistics supported by four aspects, namely sensor networks, cellular and internet networks, cloud computing, and service applications. The combination results in comprehensive management of material flow and information flow throughout the logistics chain.

From the same source claimed implementation results smart logistics predicted to be maximum. First, modern warehouses can save 70% of space costs compared to traditional warehouses. Second, smart logistics can reduce 80% of labor costs in the warehousing segment.

Third, through full monitoring of the entire material transfer and storage process, efficiency and accuracy will be further improved. In addition, from big data system collected smart logistics, logistics companies can provide more added value for customers.

New business opportunity

Because smart logistics has many combinations of processes in it, this creates new business opportunities that logistics players can consider in order to remain adaptive to technological developments. These opportunities take the form of offering new services and business models and digitizing core operational activities.

Based on a PwC report titled "Industry 4.0: Digital Supply Chain-Logistic Autumn Conference" published in 2016, service offerings can be made by applying end-to-end integrated supply chain system. This allows the company to have an integrated distribution chain from suppliers, production, distribution, to customer.

The system will facilitate the company starting from the administrative process, recording the flow of goods in and out of the warehouse, integrated database to marketing. Regarding the recording of the flow of goods in and out, the perpetrators can offer solutions warehouse management system to B2B consumers that enables seamless warehouse management real-time, accurate, and optimized.

Another new business model for B2B consumers is in terms of transporting goods from cities to rural areas by providing a platform that brings together the distribution needs of companies and service providers in various aspects of logistics operations.

From the aspect of transporting goods, for example, a marketplace-based platform that brings together goods transport service providers and companies that require logistics transportation can be a new business model.

Various solutions like this have started to be worked out by various logistics startups operating in Indonesia. An example is Waresix which focuses on warehouse rental; TheLorry offers truck rental services; Cargo connect shipper and Transportation in platforms; Shipper as an aggregator platform for logistics companies; Lacak.io for GPS specifically in logistics vehicles, Enchanto as a SaaS platform for e-commerce technology, and many other startups.

All of these startups are still running independently by offering each of the solutions that are classified as: "niche", there are even some services that target large logistics corporations for internal companies.

Now is the moment to compete to be the biggest.

Many investors are attracted by the concepts smart logistics offered by various startups. In the past year, news about funding in this segment is getting more and more, in between funding of IDR 24 billion for Waresix of East Ventures and Monk's Hill Ventures, then funding for TheLorry Rp83 billion, led by FirstFloor Capital.

Next up, Cargo Technologies received funds of IDR 107 billion from Sequoia India and Travis Kalanick, then SiCepat received funding of Rp704 billion from Barito Teknologi and Kejora InterVest Growth Fund.

Don't want to lose, Grab recently disbursed invest in Ninja Van to develop services GrabExpress.

Closest rival Grab, Gojek, also announced the establishment of a joint venture with JD.com to develop logistics company J-Express (JX).

Conditions in Indonesia

CEO Iruna Yan Hendry Jauwena explained, in general the concept smart logistics has begun to show a slightly better development compared to previous years because there are already many conventional logistics players who are aware of the importance of technological transformation.

This segment was helped by "story" the digitalization of the economy which requires the logistics sector to take part in it. However, according to Yan, there is still a need for a deeper education process, because basically the logistics sector departs from a sector that is not very familiar with the use of technology.

He assessed that logistical solutions that started from startups still cannot answer the issues faced in Indonesia. The main issue of logistics is always related to cost. Any solution "the label" If you can't reduce costs, it means you haven't answered the problem.

“Things like tracking or upgrading visibility it is a feature that is currently a nice to have just. As long as it's expensive yah still not answering," said Yan.

In addition, most of the solutions presented by logistics startups are intended for C2C businesses. The biggest challenge is actually in B2B because there is a human resource factor.

"They are used to the old work pattern, they are not close to technology, so they certainly can't be invited to 'speed'," he added.

On the other hand, Lisa Widodo views the logistics industry as growing in line with the growth of the e-commerce industry. They continue to compete to increase capacity and operational capabilities to be more efficient and faster.

Couriers are now equipped with applications on smartphones so that they are able to provide updates on the delivery status of goods more quickly. The shipping label is equipped with Barcode or QR code so that the goods handling process can be automated for sorting and delivery status.

Managing Partner of East Ventures Willson Cuaca added, startup players are now increasingly aggressive in finding loopholes and improving efficiency in the logistics industry. This is done by integrating logistics digitally for multi-modal.

“Just like Waresix [East Ventures portfolio] did. Since we are an archipelagic country, so no can be compared with other mainland countries," he explained.

East Ventures is one of the VCs who are starting to actively invest in logistics startups. After Waresix, the Singaporean VC announced early stage investment for Triplogic, logistics startup on demand.

Triplogic is expected to enhance the existing supply chain ecosystem to provide a better experience. Fore Coffee and Triplogic are considered suitable to complement each other because they play on logistics last mile.

Chairman of the Indonesian Logistics and Forwarders Association (ALFI) Yukki Nugrahawan added that commitment from the government and the private sector is needed in realizing smart logistics. From the government's perspective, it is necessary to strengthen the regulations and speed of execution with careful calculations and targeted time targets.

According to him, China can be what it is today because there is a strong commitment from the government. Indonesia must first improve itself with issues related to information networks and logistics. Focus on execution, not just discourse.

"The important thing is digital mind set, instead of changing the manual process to digital. We don't want to just stop in making the system, but we have to go in a bigger direction advance, going to blockchain in logistics, for example," said Yukki.

He continued, this is also related to the level of maturity and trust in a new technology. Take for example, is the document ready without a wet stamp? Are you ready for an electronic specimen? OGA ready (other government agencies) accept it all?. If the answer is yes, then the next step is to standardize digital security.

Application smart logistics

DailySocial contacted a number of logistics startup companies to explain about their products. Yan Hendry explained, the concept of Iruna is actually a form of localization of Cainiao owned by Alibaba by promoting the concept of collaboration with logistics players who have been present before, then combining all the logistics strengths of all logistics players in one platform.

"Of course the modification needs to be adapted to the Indonesian context because if logistics players can join a network like Cainiao, of course they must understand the basics in e-commerce delivery," he explained.

Iruna itself has officially been operating since 2017, providing services end-to-end starting from channel management, fulfillment centerand last mile delivery. Everything can be monitored through the Iruna Power Seller application. Another technology is Leanbox with three main systems: warehouse management system, transport management systemand rider application equipped with e-signature and visual receiver image capturing function.

The company is still continuing to build as many collaborations as possible with logistics players so that strength is formed supply who are ready to transform digitally, while at the same time guaranteeing that they will not be run over by others.

"This year Iruna strengthens existing technologies such as WMS (Warehouse management system), system integration products for the purposes of Last Mile Delivery Integrator currently running."

Andree Susanto explained that since its inception in 2017, Waresix has tried to empower logistics through the supply chain ecosystem they have built. The company develops infrastructure to support the movement of the flow of goods such as warehousing, land transportation (first mile and last mile), sea transportation, even international warehousing service for overseas clients.

Through the integration of the ecosystem, companies can work more efficiently by lowering overall supply chain costs. Not only to maintain price stability, but also to help economic equality.

"Our way to support the logistics industry is by working with great companies that complete logistics last mile like NinjaExpress, Gojek, Grab, JNE, J&T, and others like last mile aggregator, said Andre.

Waresix has more than 2.000 warehouse partners and transportation providers to assist 100 business clients from large and medium-sized enterprises. Transactions on the platform are claimed to reach 100 thousand metric tons per month, growing 25% every month. The service is available in Jakarta, Semarang, Surabaya, Pekanbaru, Bali, Makassar, Balikpapan, Bandung, Palembang, and Dumai.

With this concept, Andree said he is optimistic that the company will immediately reap profits after growing 15 times in a year.

Another startup that is trying to use technology as a service is Paxel, which is engaged in delivery solutions last mile between cities and provinces at an average rate. Paxel Co-Founder Zaldy Ilham Masita explained, Paxel was established because over the past five years the development of e-commerce has grown rapidly but has not been matched by the logistics industry.

In the last two years there has emerged a need from consumers who want delivery same days. This became a new trend and inspired the founding of Paxel.

Quoted from PwC's 2018 Global Consumer Insight Survey report, 41% of respondents are willing to pay more for services same-day delivery.

Paxel utilizes a combination of big data, algorithm and smart locker (smart lockers) for relay delivery. This smart locker is in the shape of a screenless smart locker and take advantage of mini sort location with AI routing. Also, it is universal so it can be used by all courier companies, food delivery, without the need for integration.

The company developed this smart locker with a partner company in Hong Kong named Pakpobox.

"We have roll out 100 smart locker These are in office buildings and apartments in Jakarta," explained Zaldy.

Play in the realm last mile This, he continued, has its own challenges because there is no standardization of domestic logistics, both physically and data. They need the government to step in to solve this problem.

"There are many challenges that we have to solve as the first movers, but in line with the development of better infrastructure, we expect problems line haul between cities we can deal with immediately."

Since its establishment, Paxel's business has continued to grow well with an average volume growth of 30% per month. Paxel service can now be used for delivery same-day delivery in Java and Bali. The company plans to expand its wings to Medan and Makassar in the third quarter of this year.

Player last mile Meanwhile, AVP Marketing Ninja Xpress Indonesia Tika Sylvia Utami explained that the issue of logistics players is Indonesia as an archipelagic country, so a solution is needed with smart-delivery.

The company takes advantage of the need for delivery with a technology-based logistics network. For example with update real-time tracking, alternative pick-up points and package tracking options that consumers can take advantage of.

"We rely on technology as well as operations excellence supported by human resources for more effective and efficient delivery. We strive to ensure that delivery service data can be organized in the right place, at the right time, and ensure that real time," said Tika.

It is claimed that Ninja Xpress hascover 100% Indonesian territory. Last mentioned they already have 30 thousand couriers, 70% of whom are two-wheeled fleets.

JNE does not want to lose in developing the latest technology to strengthen its business penetration in Indonesia. President Director of JNE Mohammad Feriadi said, the company periodically continues to develop technology and is currently still in the construction stage of the Mega Hub located in Tangerang. The plan hub it will be unveiled at the end of this year.

Inside the Mega Hub will be equipped with a robot sorting goods or so-called automatic crossbelt sorter machine. This technological robot is provided by Damon, a company that provides logistics and operational support tools supply chain leaders from Shanghai, China.

Feriadi explained, Mega Hub will be able to sort up to 1 million items per day or 48 thousand shipments per hour. With this capacity, the company is certain to be able to handle more packages and distribute them throughout Indonesia and 250 countries around the world.

"In terms of competition, now many new players bring technology that is so great and good. Of course, it is a challenge for us as old players to adapt to current conditions. The way to do this is to change processes, to be more efficient and competitive by utilizing technology and internal improvements," explained Feriadi.

Periodically, the company continues to improve technology tracking. In the past, consumers were satisfied when fast delivery arrived. But now it is possible to directly monitor the position of shipments between points directly real-time.

The application has also been improved. Consumers can find out the location of the nearest JNE from their reach along with other supporting features such as: tracking, check rates, and facilities for guests seller who want to connect with JNE logistics.

Every year, since 2010, the growth of the express courier business at JNE has grown by 30%-40% per year. Its growth continues to increase, even in the last few months reaching an average of 19 million packages per month, even more than 20 million packages during Ramadan and Eid in 2017.

E-commerce company participation

E-commerce companies are the most dependent on logistics services. Behind all the challenges, there are those who choose to combine it by building their own or working with an existing company.

The investment that must be disbursed by the company is quite large because it has to manage warehouses and build a fleet network. These companies include Lazada with LEX (Lazada Express), Blibli with Blibli Express Service (BES), and JD.id with J-Express (JX).

Teddy Arifianto explained, JD.id is lucky with the company's own logistics network, although it has not yet served 100% of Indonesia, it has begun to transform technologically with the system. Tracker.

"We also partner with several other logistics services to ensure that services to consumers are maintained," said Teddy.

According to him, the e-commerce industry can be the main catalyst for advancing logistics, both in terms of improving the quality of human resources, developing infrastructure and using technology. At JD.com, smart logistics become the main key that changes and determines retail in the future.

"At JD.com already implementing smart logistics through the use of technology on all fronts: the warehouse that full automation, until delivery using drone for rural areas and difficult to reach."

Tokopedia also realizes the vital role of logistics. Tokopedia Co-Founder and CEO William Tanuwijaya took the initiative to develop on-demand merchant AI technology using smart warehouse (smart warehouse).

He described that later businessmen could serve to all provinces where the market is located without having to build warehouse alone. So the urbanization trend is not necessary.

Tokopedia's Head of Fulfillment Erwin Dwi Saputra added that this smart warehouse can be used by sellers to store product inventory in areas where the demand level tends to be high. Buyers in these areas can ultimately get their needs more efficiently due to lower shipping costs and shorter delivery times.

"Innovations like this are expected to bring real solutions to the online trading ecosystem, considering that Indonesia is the largest archipelagic country in Indonesia," said Erwin.

The company has started presenting these smart warehouses in several cities in Indonesia as a first step and the initiative will be officially announced in the near future.

"We believe the above innovations will be the next leap, which can accelerate the achievement of our mission for digital economic equality in Indonesia."

Jet Commerce as a solution provider end-to-end e-commerce also felt the importance of logistics presence to support e-commerce operations much more effectively and efficiently. The relationship between the two mutually reinforce each other in providing the best experience to consumers.

Jet Commerce Marketing Director Agustina Putri Wijaya explained, there are still many people who think their company is a facility provider warehouse and logistics, even though the services provided are more than that.

The company provides services end-to-end which is done starting from setting up and operating the account official store on various e-commerce sites, designing and executing digital marketing, providing CS team, to services warehouse and fulfillment.

"Regarding logistics, we are trying to overcome and minimize these operational constraints through: warehouse management system (WMS) and technology fulfillment center qualified," said Agustina.

Jet Commerce just launched fulfillment center The newest location is in the Daan Mogot area of ​​3.700 square meters or three times larger than the previous location. The facility is supported by WMS, order management system (OMS), as well as equipped with modern equipment such as conveyor belt and mobile scanners.

The concept brought by Jet Commerce was inspired by Alibaba's Tmall e-commerce site. Tmall as an open platform provides the infrastructure to help brands operate their digital storefronts. Therefore, Jet Commerce is an official partner, not a subsidiary of Alibaba.

"The rapid growth achieved has also enabled us to expand to other countries in Southeast Asia [Vietnam and Thailand]. In addition to improving the e-commerce business performance of brands that have partnered, we will add more brands from other categories."

Meanwhile, Blibli is still focusing on adding 18 new warehouses, bringing it to 32 warehouses this year, which will be placed around Java and Sumatra.

Bringing the Cainiao concept to Indonesia

China's rapid development to advance the logistics industry is contributed by Alibaba's aggressive role in building networks from various aspects. Alibaba co-founded Cainiao in 2013 along with other partners, including four major express courier companies in China.

Cainiao does not deliver packages independently, but operates a logistics data platform to increase the capacity and ability of logistics partners to fulfill transactions between merchants and consumers on a large scale. Companies use big data and technology to increase efficiency across the logistics chain.

The data that Cainiao provides can be accessed online real-time by merchants to better manage inventory and warehousing. Consumers can also track their orders. Express courier partners can optimize delivery routes with the platform provided by Cainiao.

Various system updates were carried out such as opening the largest robot warehouse in China. There, the robot is equipped with system updates in the form of advanced route planning and inventory allocation according to consumer demand, avoiding congestion, and speeding up delivery rates.

Regarding cross-border shipments, at 11.11 last year, as many as 5 million imported packages were processed through customs in less than five hours. Previously the same requirement took about eight hours and 57 hours in 2017 and 2016.

Cainiao's extraordinary ability is an ambition for every Indonesian logistics company to adopt it. Like what Iruna and various other startups have done.

With modifications adapted to the geography of Indonesia, the local version of the Cainiao is certain to be present. Nevertheless, Zaldy Ilham Masita ensured that one thing that Indonesia should emulate from Cainiao is the implementation of the same standardization of data exchange for every logistics partner on Alibaba.

"So that logistics service companies can collaborate with each other. This is what Indonesia should emulate," he said.

In terms of regulation, a strong regulatory umbrella is needed, especially the realization of the E-Commerce Roadmap which had stalled.

Willson is even more optimistic that the Cainiao concept will come in the next 3-6 months. "We wait 3-6 months, there will be a business model that will be Indonesia once," he concluded.