When prices rise too quickly, it can make it hard for people to afford the things they need. This can lead to a number of problems, such as people not having enough money to buy food or pay their bills. It can also make it harder for businesses to invest and grow.
The Bank of Indonesia (BI) has set a measured inflation target for the 2024-2025 period, ranging from 1.5 to 3.5 percent. This target is the lowest since at least 2001, reflecting BI’s strong commitment to maintaining price stability and supporting sustainable economic growth.
As one of the determinants of inflation, the logistics sector plays an important role in maintaining food price stability and suppressing inflation. Efficient logistics systems can help to reduce the cost of distributing goods, which can help to keep prices down.
“The logistics sector is the backbone of the economy,” said Setijadi, CEO of Supply Chain Indonesia. “It connects producers to consumers, ensuring that the goods we need are available at affordable prices. When logistics systems are inefficient, the cost of distributing goods increases, which ultimately falls on consumers.”
Setijadi added that the cost of food logistics in Indonesia is relatively high, ranging from 20 to 40 percent of the price of products. This is due to a number of factors, such as inadequate infrastructure, complex distribution processes, and high transportation costs.
“To improve logistics efficiency, we need to focus on a number of areas,” said Setijadi. “We need to improve coordination between the government, businesses, and academia. We need to invest in modern infrastructure. And we need to adopt new technologies to improve the efficiency of our supply chains.”
To improve logistics efficiency, SCI provides a number of necessary recommendations, including:
- Increased coordination and cooperation between the Bank of Indonesia (BI), the central government, universities, and research institutions to map the national food supply chain. This mapping is necessary to understand the current state and potential of the Indonesian food supply chain.
- Increased coordination and cooperation between BI, local governments, and local universities to map regional food supply chains. This mapping is necessary to understand the current state and potential of the food supply chain in specific regions.
- Increased cooperation with local governments to develop local logistics systems, including efficient food logistics and distribution. Efficient local logistics systems can help to reduce the cost of distributing food at the local level.
- Development of a resilient logistics system to support the development of domestic product and commodity supply chains with the potential to reduce reliance on imports. Developing domestic supply chains can help to reduce logistics costs for food overall.
- Development of a food information system to monitor food stock availability and distribution processes in order to maintain food price stability. A food information system can help the government and businesses to monitor food stock levels and distribution processes.
- Setting more competitive lending rates for the logistics sector, especially for infrastructure development and facilities to improve logistics connectivity, as well as the procurement of transportation fleets. More competitive lending rates can help businesses to invest in logistics.
Efficient logistics is a key to achieving low inflation targets. The recommendations made by SCI can be a starting point for improving logistics efficiency in Indonesia.
