Supply chain during the pandemic: Logistics business predicted to recover in 2021
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia: Rantai pasok selama pandemi: Bisnis logistik diprediksi pulih 2021
27 August 2020
By: Rinaldi M. Azka
Bisnis, Jakarta – The Indonesian Logistics and Forwarders Association (ALFI) predicts that the logistics sector will recover rapidly in the second half of 2021 as the coronavirus vaccine will be produced massively and the purchasing power will go back to normal.
ALFI Central Executive Board (DPP) Chairman Yukki Nugrahawan Hanafi said that logistics would recover after the Covid-19 pandemic on a sectoral basis.
In the second half of 2020, according to him, several business sectors will grow amid the Covid-19 pandemic, while others will need to fight hard.
“We see that, in the third quarter of 2020, there will be contractions. However, as purchasing power will improve, support will come from citizens themselves and the contractions will not be too severe. It can be better than the first half of 2020,” he explained on Wednesday (26/8).
He reckoned that the Covid-19 pandemic was an extraordinary event that was far different than the crisis pandemic 100 years ago.
Yukki believes that the key for the economy to grow is to maintain public consumption by improving their purchasing power. Besides that, investments must be simplified, especially for national investors.
He also mentioned that several logistics sectors would continue to grow amid the new normal.
Those sectors include e-commerce logistics service, courier service, warehousing service for basic needs and retail goods, as well as business to customer and customer to customer logistics services.
On the other hand, logistics activities that will be in a slump include air and sea cargo transportation, container trucks, export and import trucks, as well as business to business logistics services.
“Hence, collaboration is crucial as logistics businesses need to open up, reform their structure, [develop] new strategies and new visions and missions, as well as adopt [modern] technology,” he said.
Yukki also mentioned that entering the second half of 2020 would not be easy as several industries were still hit by Covid-19. However, he sees that there is a large opportunity from the domestic market for all industries that will revive logistics activities.
PT Samudra Indonesia Tbk (SMDR) President Director Bani M. Mulia believes that the negative growth that occurred in the first half of 2020 would not continue in the second half of 2020.
According to him, maritime logistics activities can rebound with the support of domestic shipping.
He added that citizens had learned to live with the Covid-19 pandemic.
“Our employees are more confident about operating with health protocols,” he said.
According to him, productivity returned to normal, and even improved, as they can work from home, the office, or anywhere else.
He mentioned that there was a positive indication for the domestic economy as domestic volume only declined slightly.
“Meanwhile, exports and imports have already improved. China’s economy has grown, so it will have a positive impact on Indonesia as 40% of international shipments are bound for and originate from China,” he said.
For the future, he will expand the working area in Indonesia selectively and determine safer routes.
Based on the predictions of Drewry Maritime Research and MOODY’S Investors Service, logistics shipment in international shipping will not drop too severely in 2020, especially for containers and dry bulk cargos. Meanwhile, liquid bulk cargos are predicted to be stable.
Demand will diminish due to the pandemic as growth of demand for dry bulk grew by 0%, while demand for containers is forecasted to drop by 5%, and there is no demand growth for tanker ships.
Still suppressed
Meanwhile, PT Pelabuhan Indonesia (Pelindo) II/IPC Business Alliance Senior Vice President Rachmat Prayogi reckoned that the port business, as a support for logistics, would still decline until the end of 2020.
He predicts that the recovery will most likely occur in the fourth quarter of 2020, supported by domestic shipment.
“The condition in the second half of 2020 is still declining, even though shareholders assume that, as the budget has been revised in 2020, the rebound will occur in the fourth quarter of 2020,” he said.
In August 2020, Rachmat affirmed that the performance of cargo traffic would still go down.
With the condition, IPC is still preparing for the worst condition in 2020.
Currently, the main issue for IPC partners is cash flow, so an incentive of port payment relaxation is required.
“We have provided a term of payment for domestic [logistics companies that allows] the payment to be late by 15 days, so that it will support domestic logistics in Tanjung Priok Port,” he said.
He also stated that there could be additional incentives that would be provided by observing the new normal condition.
He will hold discussions with his partners again, which are ship operators and loading and unloading companies.
Until now, IPC has been focusing on improving soft infrastructure, such as human resources, digitalisation, terminal operation improvement, as well as sister port utilisation as learning partners.
Maritime expert from ITS Surabaya, Raja Olan Saut Gurning said that port business was heavily impacted by international and domestic transportation, with a ratio of 40:60.
“The domestic volume, especially of food, feed, and energy or mineral commodities, might still be supported by consumption [even if it is declining],” he explained.
According to him, stimulation from the government in the second half of 2020 will tend to promote the domestic dynamics, in the form of central government expenditure to boost trade among islands.
