The Impact of Industry 4.0 on the Logistics Sector in Indonesia

Logistics companies are facing an era of unprecedented change as digitalisation takes hold and customer expectations continue to evolve. Amidst shifting planes, Indonesia continues to remain adaptive by promoting Internet of Things (IoT) technologies as part of its larger ploy to push forward ‘Indonesia 4.0’ roadmap. With more than 140 million internet users in Indonesia, Pak Janu Suryanto, Director of Electronics and Telematics, Ministry of Industry, shared with us during a discussion that Indonesia has massive capabilities to build a business IoT ecosystem worth Rp444 trillion by 2022. He also emphasised the importance of the Industry 4.0 paradigm for Indonesia to remain competitive in the global market. With substantiative support from the government and industry players, Indonesia is ready to embrace digital transformations. 

Industry 4.0 goes beyond the smart factory or the implementation of technologies for the industrial sector, it also includes supply chain and logistics management as an ecosystem. It is imperative to have an efficient and strong supply chain and logistics system to support Industry 4.0 and this will rely on technology solutions for: 

1. Resource Planning 
2. Warehouse Management Systems 
3. Transportation Management Systems 
4. Intelligent Transportation Systems 
5. Information Security

The complex systems in Industry 4.0 taps on the intuitive capabilities of machines and M2M communications to significantly increase the efficiency of the Logistics sector - a sector with a performance that is still far from desirable; logistics costs account for a massive 24% of Indonesia’s GDP. 

Firstly, the adoption of IoT technologies in Indonesia’s industries will help alleviate the lack of coordination which results in inefficiencies. Many companies have raised concerns that as a result of unsynchronised regulation, there lies the need to acquire different regulatory permits from different institutions, slowing down the clearance process and reducing the overall efficiency. A company that has successfully harnessed IoT Technology to tackle this problem is Cikarang Dry Port. Pak Benny Woenardi, Managing Director of Cikarang Dry Port (CDP), mentioned that the port ecosystem involves various parties. Formerly it was a chain communication; now it can be done simultaneously using IoT technology. So, what initially was a half-day job, can now be finished within minutes. The company has since reported an incredible 70% increase in efficiency in terms of business processing time. It is crucial for many Indonesian companies to follow the lead of the Cikarang Dry Port in the context of improving Indonesia’s logistics performance in the Southeast Asia region. For instance, the Logistics Performance Index (LPI) of the World Bank - a benchmarking tool to identify the performance on trade logistics, ranks Indonesia 46th globally in 2018, amongst Thailand (32nd), Vietnam (39th) and Malaysia (41st). Considering the importance of the logistics industry in Indonesia and its vast potential, the planned adoption of IoT technologies in the sector is bound to benefit Indonesia tremendously. 

Pak Benny Woenardi, Managing Director, CDP, sharing the challenges in digitalising the industrial & logistics ecosystem in Indonesia at Asia IoT Business Platform (AIBP) Indonesia Press Briefing

Indonesia Port Corporation, a state-owned port operator, is also in the race to realise digital ports. Pak Prasetyadi, Operational Director of Indonesia Port Corporations (IPC), briefed us on the latest projects in the company which include: real-time data recording, cargo stacking, and tracking and tracing of ship containers. He believes that optimizing information through digitalisation will bring down the cost of logistics and time. A cashless transaction system to hasten the port payment process is being pushed right now and he is still coordinating with other port operators under the Pelabuhan Indonesia (Pelindo) group. Improved service and operational performance have enabled IPC to handle a higher overflow of goods and container flow. Pak Prasetyadi is very upbeat about the future of digital logistics in Indonesia and how IPC will play a part in driving this ecosystem.

Local logistics service providers such as Kamadjaja Logistics, one of the largest integrated logistics service providers, have been very active in exploring ways to improve operational efficiency too. Pak Ivan Kamadjaja, the CEO of Kamadjaja Logistics, shared with us that digital transformation is one important priority of his. He has introduced a tagline called "Productivity through Technology" to his team at Kamadjaja Logistics as a way to encourage them to explore the use of technology in every line of their business operations. Transportation management system including load and route optimisation solutions have been implemented to drive productivity. Web and mobile applications have been launched too to improve visibility for the customers which in turns lead to better customer satisfaction. A number of startups and established solution providers have been invited by Pak Ivan to assist him in his digitalisation projects.

Ministry of Transportation has also realised the importance of digitalisation in the logistics and transportation industry especially to support President Joko Widodo's vision of Indonesia 4.0. Pak Sugihardjo, Head of Transportation Research & Development, Ministry of Transport, stressed the importance of ecosystem to drive digitalisation forward. There is a need for government, enterprises and solution providers to work together in integrating the physical and digital system to create a safe, reliable, and efficient logistics sector with the main aim to drive economic development in Indonesia.

All in all, Indonesia stands in the right direction with policies such as the new regulation in May 2019 introduced by Pak Ismail, Director General, Ministry of Communication and Information Technology (MCIT/Kominfo) to make it easier for IoT solution providers to implement their solutions in Indonesia. Successively this regulation has encouraged local enterprise end-users to explore more digitalisation projects through the use of IoT. 

Pak Ismail, Director General, MCIT, sharing the draft IoT Roadmap at AIBP Indonesia last year

It is oftentimes the exploitative courage and motivation of humans to try and see the physical and digital world side by side that gave rise to new opportunities and gateways. Industry 4.0 comes with great benefits and the combined efforts of government, telcos, enterprises and solutions providers as part of the digital ecosystem is necessary. The 32nd edition of Asia IoT Business Platform, taking place in Jakarta on August 28-29th 2019, brings together key players of the logistics vertical and government officials to share insights, and realise the ‘Industry 4.0’ vision, this includes: 

• Sugihardjo, Head of Transportation Research and Development, Ministry of Transportation
• Benny Woenardi, Managing Director, Cikarang Dry Port
• Ivan Kamadjaja, CEO, Kamadjaja Logistics
• Prasetyadi, Director of Operation, President Director, Indonesia Port Corporations
• Kian Sin Ng, Global Head of Innovation, Kuehne + Nagel

If you would like to be involved in the discussion or to know more on the latest digitalisation development in Indonesia, drop me a note at felix@industry-platform.com