Though potencies will give the shipping and logistics a very good prospect this year (2022), challenges and business risk will also be there, both coming from the industry itself and some external factors. The biggest issue facing policymakers around the world is likely to be inflation.
Bani Maulana Mulia, President Director of Samudera Indonesia, and Erry Hardianto, Senior Director and Area Managing Director for A.P. Moller – Maersk Indonesia, warn the disruption in the supply chain will continue this year.
Bani noted similar challenges this industry faced last year. Last year, some imbalanced supply and demand problems disrupted this industry, resulting in container and vessel space shortages. In addition, the pandemic covid-19 protocols and policies triggered port congestion, resulting in a longer waiting time and higher operating costs for shipping lines.
Though not so agreeing with the term of container shortage, Bani affirmed the issue has been a corridor talk among players and has significantly influenced the logistics activities.
“To be honest, I don’t so agree with the term of container shortage. The containers are actually there. They are available, depending on price deal,” he said.
What is clear, according to Bani, is that the imbalance between supply and demand will continue this year as demand for commodities, including from the US market, will still be high. On the other hand, the supply will grow moderately.
Bani also reminded that the shipping lines will still face higher expenses for operating, bunker, and charter rate problems. “Last year, all these costs increased significantly. Let’s say the charter cost increased by more than 400% last year,” he said.
“For shipping lines, these factors have been considered in setting up the freight rate,” he said.
“The main driver of the elevated rates is the high demand,” Bani said, but affirming that the increasing expenses of shipping companies due to the increased operating cost, bunker cost, and higher charter are other factors for shipping lines in setting up freight rate.
“High demand on one hand and port congestion and vessel delays, on the other hand, will still be driven factors of the supply chain disruption,” said Erry.
Erry also emphasized that this causes pressure on space availability but also causes pressure on schedule reliability. “The supply chain is like a chain. When one link in the chain has a problem, it affects the other links. When many ships are late to return from destination countries to Asia, it will also put pressure on supply chains in Asia,” he said.
Carmelita Hartoto, Chairwoman of Indonesia National Shipowners’ Association (INSA), underlines that high cost will be the main problem for the shipping industry this year. The cost includes fixed costs and operational costs. The fixed cost includes crew and interest rate expenses, while the operating cost includes bunker and port costs.
“Bunker contributes the highest in total shipping operational cost. So, when the marine fuel price is still high, the shipping cost will remain high this year. This is a challenge for shipping in doing business more efficiently,” Carmelita said.
Digitalization, Cost Control, Appropriate Investment
In optimizing the potencies and minimizing the risk, sources have recommended at least three steps: business digitalization, cost efficiency, and appropriate investment.
Those potencies and problems, according to Carmelita, will make the shipping business more challenging this year. Carmelita expects the shipping companies to do transformation intensively. “Adoption of digitalization in this industry will make shipping companies more competitive,” Carmelita said.
Bani meanwhile suggests shipping lines to set up appropriate strategies in operation and prudently make the investment as no one knows what will happen in the future. What is clear is that investment needs high cash at this time. “Now, we should be more prudent in investing. Since the price for new vessels is now costly, it is not the right time to order new vessels,” Bani said, suggesting shipping lines to focus on optimizing existing fleets.
Like in the shipping sector, the logistics business is also expected to take appropriate steps to optimize the potencies and minimize the risks.
Supply Chain Indonesia (SCI) Chairman Setijadi that logistics service providers need to carry out proper business planning. Strengthening and expanding market segmentation can be carried out on several sectors and groups of products or commodities with good volumes and growth rates.
Adil said that the Covid-19 pandemic had disrupted all industries in Indonesia, including the logistics industry. Therefore, logistics players should take quick steps to adapt to survive the pandemic, including the digitization of logistics.
“ALFI has continued to encourage and make Indonesian logistics more competitive, dynamic, and innovative. We also hope that ALFI members can continue to collaborate with all parties. Collaboration is the key to making Indonesian logistics more competitive and innovative,” Yukki said.
Meanwhile, Yukki Nugrahawan Hanafi, ALFI Chairman, urges logistics players to innovate, build collaboration, and run a digital-based supply chain to increase competitiveness. These are key steps in strengthening the current and future national logistics industry.
This article was published in ISG Print Magazine January 2022 Edition.
