The logistics industry plays a vital role in supporting and enhancing the distribution flow of most manufactured products to all areas across Indonesia. Being the largest archipelagic country in the world, where two-third of its territory is water, Indonesia depends mainly on maritime transportation to boost its domestic and international trade.

High growth and end-to-end distribution

Parallel to President Joko Widodo's commitment to consolidate maritime connectivity through the development of maritime highway across Indonesia, the logistics industry foresees high growth, particularly within the shipping industry. The Ministry of Transportation has recorded a 17% increase on national logistics distribution volume within the last 3 years; predominantly due to the increase of not only port-to-port distribution, but also end-to-end distribution, which directly reaches out to consumers.

With the growing demand for end-to-end distribution, the demand for air freight and last-mile delivery services is also expected to increase. Air freight also increasingly becomes the favourite service as it provides higher On-Time Performance (OTP) rates to fulfil the demand of island-to-island delivery with a shorter time span.

However, with the recent spike of air cargo tariff from 120% to 350% imposed by major domestic air cargo providers, the providers of last-mile delivery, which mainly cater to ecommerce business have taken a big hit. This has swiftly moved the users and consumers to consider other alternatives either via land or sea. Some major last-mile delivery providers have partnered up with the state-owned railway operator, PT. Kereta Api Indonesia, to maximize the delivery service and minimise the time span and cost of the delivery especially to remote areas only accessible through railroads.

The future is promising for logistics companies

On the bright side, the future of the logistics industry in Indonesia is promising. With the combined demand of major agriculture commodities exports valued at approximately IDR 500 trillion and also ecommerce transactions valued at approximately IDR 77 trillion so far, the demand on the logistics industry as the vehicle to mobilise business-to-business, business-to-consumer, and consumer-to-consumer delivery is also projected to increase regardless of the tariff situations mentioned above.

Furthermore, it boosts expansions, investments and the establishment of new players in this field; including the merger and acquisitions of major multinational logistics companies and also joint-venture establishments between local and multinational logistics companies.

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