Industry Challenges and Concerns

• The logistics cost is approximately 8.5% of the total sales value and this poses a challenge to the

Indonesia companies in general. Their aim is to reduce this cost to around 5.6% of the total sales value.

• Other major challenges that the Indonesia companies encountered are the insufficient and inflexible warehousing capacity. The latter two (2) challenges could further drive up the cost.

• Ironically, primary reason cited for outsourcing to logistics service provider is cost saving, yet the Indonesia companies are concern that outsourcing logistics could result in higher cost than if managed in-house.

• Other reasons cited by these companies for outsourcing the logistics functions are the companies

want to focus on their main core competency and they do not want to deal with multi-parties.

Industry Opportunities

• The main types of activities being outsourced to logistics service providers are inbound transportation, outbound transportation and outbound warehousing.

• Hence it is not surprising that the majority cited the activities they are likely to outsource are inbound transportation, inbound warehousing and outbound warehousing.

• In fact, both transport and warehousing take out the bulk of the logistics outsourcing business.

• The key selection criteria for choosing the logistics service providers are price, quality and responsiveness to problems