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Optimism Is a Must, Strategy Is a Demand

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The covid-19 outbreak has hit any sector, including the logistics sectors. Link Pasipik Indonusa (LPI) – Blue Sea, one of Indonesia’s leading forwarder in consolidation, affirmed it. But, LPI has shown a very good response. Doing innovation and focus to certain commodities encouraging this company to still keep stable market during this hard time.

The coronavirus disease 2019 (COVID19) is flowing through the global economy and supply chains. The widening impact of COVID-19 has impacted on retail and manufacturing demand. Cargo owners are forced to delay receiving goods.

World Trade Organization (WTO) forecasts that world’s goods trade is expected to fall by between 13% and 32% in 2020 as the COVID 19 pandemic disrupts normal economic activity and life around the world. WTO
economists even believe the decline will likely exceed the trade slump brought on by
the global financial crisis of 2008/09.

It said estimates of the expected recovery in 2021 are “equally uncertain, with outcomes depending largely on the duration of the outbreak and the effectiveness of the policy responses”.

WTO predicted that nearly all regions will suffer double-digit declines in trade volumes in 2020, with exports from North America and Asia hit hardest. It said trade will likely fall steeper in sectors with complex
value chains, particularly electronics and automotive products.

Trade volume drop will automatically hit the logistics and transportation activities, including freight forwarders. After facing a 10% drop in first quarter (Q1) 2020, freight forwarders are expected to face a sharper drop in Q2, according to some analysts.

Investment analysts Jefferies said that freight forwarders may see volume declines of 20%-30% in air and sea freight in the second quarter of this year with the worth took place in April, ranging from 30 to 50%.

“April would face the sharpest drop. Air freight volume expected to be 40%-50% lower, while sea freight would be down by 20%-30% from April to May,” Jefferies said.

Just like global condition, Indonesia freight forwarders are facing similar situation. Chairman of Indonesia Logistics and Forwarders’ Association (ALFI/ILFA) Yukki Nugrahawan Hanafi noted that unless doing innovation, forwarders will suffer a drop until 70%.

He said that by commodities, forwarders who handled delivery of electronics and textile will deeply suffer. By the model of transaction, the conventional logistics with transaction of B to B will suffer much, while
those who do business from online orders with transaction of B to C will even enjoy business increase.

“Those who do transaction with B to B and handle the commodities which are mostly hit during this hard time, will face a drop up to 70%,” said Yukki.

Echoing the views, General Manager of LPI Yulia Ningrum affirmed such trend drop, but saying that each forwarding company will face different impact, depending on the strategies of each.

“It is true. We are facing some drop of demand in certain commodities. However, there are some commodities which are now growing up. To prevent from a further drop, it is important for a forwarder to take market from commodities which are growing up, in addition to improve service to customers, of course,” Yulia said in a discussion with Indonesia Shipping Gazette.

Yulia affirmed there were some drop in some commodities of textile, textile-related products, and electronics but some commodities of health equipment, foods, and drinks that even grew up during this

“It is true there were significant drop in some commodities, the textile in particular. But, some commodities even grew up higher during the pandemic,” she said, naming some including health equipment, foods, and drinks.

“Alhamdulilah (Thanks God), we got new customer from health equipment products,” Yulia said.

This new customer, according to Yulia, has made LPI keep a stable market during this hard time. “Though lower than the target, but overall we still kept balance during the first quarter,” she said, adding that in Q1
there were 17% lower than target or LPI still reached over 83% of the target.

LPI’s stable market is also helped by its various customers. “Our customers are very various. They are facing various market drop from 10 to 30%,” said Yulia.

Yulia mentioned some factors of the drop, including the lockdown at the destination countries or domestic policies of wider scale physical distancing (PSBB), or work from home. This has significantly decreased the
volume of certain commodities. However, some commodities experienced an increase in trade flow including health facilities and equipment, and raw material for foods and drinks.

“We are benefited from our various customers. Some faced a volume drop, others enjoyed a market increase,” she said.

Keeping Customer Trust during This Hard Business

Amid the coronavirus that most of business were forced to minimize operational, but LPI guarantees to continuously serve its customers. Furthermore, the policy of PSBB still allowed logistics companies to open.

“We are doing shifting system. Some are WFO (work from office) and some others are WFH.

“In brief, amid this pandemic, we continue to provide excellent service quality but we follow the government protocols to prevent further spread of this virus. Shifting system and doing WHF are parts of our efforts,” she said.

To support its customers during this period, LPI also provides some incentives, including providing E-DO (electronic delivery order) for import shipment so no need for customers to come to LPI Office and free storage if they can meet some requirements.

Though until now LPI has not revised the target yet, but it will be very probable. In doing the revision, LPI will refer to the condition of macro and micro economy and the market condition.

“We predict the target will be corrected by 15-20%,” she said.

However, she affirmed that the covid19 outbreak has forced forwarding companies, including LPI, not to optimize its programs in business expansion nor programs for customer care.

LPI has to delay the programs of fleets renewal, investment, delay of some customer gathering and human resources training, replacement of new managerial boards, outing, etc.

“LPI has to delay some programs of renewal of some operational trucks and trailers and delay of investment in procurement of SOC containers for new service of Jakarta-Port Kelang-Jakarta,” Yulia said.

“In addition, we have to delay placement of new marketing manager for LPI Malaysia, delay of our international conferences in Bangkok and Singapore, our visit to agents abroad, customer gathering,” she said.

Incentives and Synergy

Yulia agrees with initiatives of related associations that asked for incentives and relaxation for business of transportation, logistics, forwarding, etc. She also appreciated the government policy to allow logistics companies to open service during the PSBB.

“We appreciate for this government policy. Of course, we will follow any protocols suggested to prevent this pandemic further spread,” she said.

But, she asks the government to soon realize tax incentives and duty relaxation to help forwarding companies from further loss.

“For example, the government can cut the export manifest penalty and the progressive tariff at the port, zero import duty for products relating health equipment.”

In brief, to make the business sustainable during this hard time, all stakeholders must uphold synergy. “The government is expected to give tax incentives and duty relaxation while customers are expected to continue support. Within this synergy, we, forwarding companies, including us (LPI) will provide excellent service,” she said.

LPI, she said, even within this very difficult time, will continue to provide excellent service to customers through maintaining and product development to the current customers.

Reference: ISG – Edition: May 2020

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