A few days ago I had a chance to visit a warehouse estate in Cakung area, East Jakarta, just a few minutes from the Jakarta International Container Terminal (JICT) in North Jakarta on normal traffic condition.

Despite the Covid-19 pandemic, activities at the warehouse estate were quite busy with several trucks coming and going out of the area, distributing stuffs mostly consumer goods.

A large truck was seen uploading bottles of mineral waters while another one, a smaller truck with chiller, was uploading packs of pasteurized milk.

The presence of warehouses or, some say, fulfillment centers, is highly needed as part of the supply chain industry to ease the distribution of commercial goods. In current condition, where business activities also involve e-commerce or marketplace, the presence of fulfillment centers is even crucial.

University of Indonesia’s Economic and Business Department researcher Taufiq Nur said warehouse business prospect was supported by high demand from three industries, namely manufacture, logistics and trade, which also includes e-commerce.

According to him, e-commerce has become the main driver of the digital economy in 2020, posting annual growth of 54% compared to the previous year.
The government’s large social restrictions policy, which also limits people’s movement, has helped boost traffic on e-commerce during the Covid-19 pandemic.

Online shopping has become “an escape” for people, who in normal time usually travel but now have to stay at home during pandemic. When e-commerce traffic increases, demand for warehouse also rises.

“This brings positive impact on warehouse business. When e-commerce business is robust, demand for warehouse will also be high,” Taufiq said.

The positive correlation between e-commerce and warehouse businesses does not apply only on retail-oriented or B2C e-commerce but also on B2B marketplace that offers sales of product in bulk.

Cross-border logistics service provider Janio Indonesia country head Widiatmoko said warehouse and fulfillment center business is robust especially with the growing number of e-commerce players.

With regard to B2B global e-commerce business, Widiatmoko said, the presence of warehouse or fulfillment center is very crucial. The warehouse for Indonesian products in Manila, for example, will speed up the distribution of those products when there are orders from Manila.

“Demand [for Indonesian products] from Manila will quickly be fulfilled by the fulfillment center,” he said at a recent Virtual Trade Show Indonesia-Philippines 2021 organized by MadeinIndonesia.com and Philippine Business Club Indonesia.

Whenever there are orders or demands for Indonesian products from consumers in the Philippines, they don’t have to wait shipment directly from Indonesia. The Filipino consumers can receive Indonesian products much quicker as they are taken from the inventories at the warehouse.

Trade Attache at Indonesian Embassy in Manila, Lazuardi Nasution, has expressed his agreement with the idea to build warehouse or fulfillment center of Indonesian products in Manila.

“Once, I had thought of the idea to build a warehouse. I later shared the idea to Indonesian community or diaspora in Manila. Unfortunately, they were not enthusiastic,” he said at the same event.

It was regretful that such a great idea was not continued to be realized and stopped only as a material for discussion.

A study on the fulfillment services market and analysis suggests that the global e-commerce fulfillment services market size was valued at US$69.68 billion in 2019 and is expected to expand at a compound annual growth rate (CAGR) of 6.5% from 2020 to 2027.

The growth of e-commerce and the resulting rise in the number of online shoppers, especially in the emerging economies is anticipated to fuel market growth. Fulfillment service centers enable e-commerce sellers to outsource services including bundling, warehousing, shipping, and other value-added services such as return management and urgent parcel service.

Meanwhile, business-wise the presence of warehouse or fulfillment center will save cost of transportation. A study on Amazon’s Fulfillment Center Network finds that Amazon saves between $0.17 and $0.47 for every 100 mile reduction in the distance of shipping goods worth $30.

In the context of its distribution network expansion, this estimate implies that Amazon has reduced its total shipping cost by over 50% and increased its profit margin by between 5 and 14% since 2006, according to the study jointly conducted by Cornell University, Pennsylvania State University and University of Pennsylvania.

Logistics and warehouse provider Shipper stated its various services have helped merchants or traders boost their performance and eventually earn higher revenues.

Given the importance of warehouse in the supply chance, the time is high for the Indonesian government to help Indonesian business players to expand abroad by providing warehouses in foreign countries.

So far, the government has only made promises that it will give incentives to Indonesian business players who are ready to sell Indonesian brands overseas. The latest statement was in February when Trade Minister M. Lutfi said the Indonesian government will build a warehouse and fulfillment center of Indonesian products in Hungary to help distribution for central and eastern European areas.
We hope this plan will be realized soon and serve as a milestone in the country’s moves to jack up exports.

Kurniawan Hari
MadeinIndonesia.com