Indonesia strives to reduce high logistics cost

Based on the latest World Bank study, logistic cost in Indonesia is still the highest in the region, compared to neighboring countries such as Thailand, Malaysia, and Vietnam.  For example, Indonesia logistic cost comprises 23.5 percent of Gross Domestic Product (GDP), compared to only 13 percent for Malaysia. According to the Indonesian Logistics Association (ALI), the main reason is the vast geography of the country and hence the long logistics flow.

Chairman of ALI, Mahendra Rianto, said: “The logistics flow is divided into the first mile, a middle mile to the last mile, or until the cargoes reach the customer. In Indonesia, we have 17,000 islands and 270 million inhabitants and so the supply chain involves different modes of transport over long distance, hence the high cost.” 

The high cost is hampering the competitiveness of the logistics industry and the government is looking to mitigate this problem.  The minister of state-owned enterprises (BUMN), Erick Thohir, has decided to merge port operator Pelindo I to IV to cut down on redundancy and increase efficiency.  He felt that Indonesia’s ports and terminals have the potential to be ranked among the best in the world.

The government is also embarking on a digitalization journey, through implementing the National Logistics Ecosystem (NLE) in 18 national ports for the management of Indonesia’s supply chain.  Sahat Panggabean, the official in charge of connectivity management to the coordinating minister for maritime and investment affairs, said the NLE, which is operating 24 hours non-stop, will save time and reduce cost.

NLE harmonizes the import-export procedures and streamlines the flow of goods and documents from the time the cargoes arrive at the ports until they are delivered to the warehouses.  All services are processed digitally, including online delivery order (online DO) and container clearance (SP2).  The DO and SP2 services can save IDR 402 billion (US$27.2 million) per year.  

Sahat said that NLE will be rolled out to other non-state ports in the future.  There is widespread support from the industry, including the Indonesian Association of Container Depots (Asdeki), whose secretary general Khairul Mahalli gave his full support.  “We support and will work with the government on the NLE program.”

The government-owned Pelindo has also started to buy better equipment for the ports to speed up the loading/unloading process, starting with the Yos Sudarso Port, Ambon.  The general manager of Pelindo Regional 4 Ambon, Nengah Suryana Jendra, said in the past, the port used Reach Stackers but now has changed to Rubber Tyred Gantry (RTG).  

RTG can handle five containers compared to only three for Reach Stackers.  As a result, Jendra said the port can now process 250 TEUs compared to 190 TEUs in the past. Pelindo now has five RTGs at the Ambon Container Terminal.

Jendra added that the layout of the terminal has also improved to facilitate movement to save time.  There is now clear demarcation and direction signs for unloading blocks, loading blocks, and a special location for the Cargo Consolidation and Distribution Center.

“Looking for containers in a big port is like looking for a needle in a haystack. Usually, truck drivers take a long time to find containers, but now with the improvement, they can find the relevant containers easily, cutting down on wasted time,” said Jendra.

Photo credit: iStock/ Burin Pochai

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