Indonesia: view on the ground2.22.18
Supply chain success story
Companies producing in emerging markets are learning new lessons as they retool their supply chains to take advantage of the opportunities to sell into those markets for the first time.
Two companies – a consumer sports brand and a global fashion house – turned to Agility to help them make the pivot in Indonesia, where a growing middle class has the buying power to attract big brands.
The sports apparel retailer needed a reliable domestic supply chain that allowed it to store, track and distribute across Indonesia, where the company had sourced and manufactured goods for export but done little selling. Agility allocated 3,300 sq.m. of space in a 17,600 sq.m. warehouse in East Jakarta to manage distribution within Indonesia. That facility processes orders. It picks, labels, packs and ships sports apparel, footwear and equipment, using road, ocean and, when urgent, air freight so the goods get to the customer’s 11 authorized Indonesian distributors and 400 retail outlets, many of them quite remote.
Collection & Return
Reverse logistics are critical to customer satisfaction and efficient inventory turnover, so Agility also manages the collection and return of defective or recalled goods. It also gave the apparel maker 24/7 inventory visibility and the ability to track products in near realtime by integrating an Electronic Data Interchange (EDI) connection to the sports company’s order management system.
Agility’s recommended configuration enables the sports apparel company to compress its supply chain and eliminate costly steps between its factories in Indonesia and end consumers. The warehousing and distribution service reduces lead time and freight costs, and improves inventory management through better operational efficiencies.
“Companies coming to us have shifted their thinking. Now they look at emerging markets – rather than mature ones – as the places driving growth,” says Jens Wessel, SVP Sales & Marketing for Agility Asia Pacific. “We have to be able to show that we can shorten their supply chains and lead times so they can move products into different markets.”
An American “fast-fashion” retailer of men’s and women’s clothing and accessories uses a different supply chain model. A consolidation hub in Singapore receives finished products from the retailer’s production plants in China, Bangladesh, Cambodia and Vietnam. The products are then exported to Indonesia via air freight to minimize the lead time.
Agility provides the company with Direct-to-Store (DTS) service that frees the customer to concentrate on its core strengths. Each week, Agility receives shipments containing clothes, shoes and accessories at its Singapore warehouse. Each shipment contains up to 13,000 items that are then individually labeled and tagged according to customized orders. With a turnaround time of just two to three days, the items are flat-packed and distributed directly to retail stores in Jakarta, where they go immediately onto racks or displays. Fast, agile DTS service improves profit, reduces inventory, minimizes price markdowns and ensures retail stores get the right product assortment on time.
Wessel says there are important considerations for companies now selling into markets that once were primarily sources of supply:
- “You can’t overlook the need for higher SKU counts and seasonality, both of which reflect the increasing sophistication of consumers in these markets. Those factors have an impact on production and lead times for retail customers.”
- “Shorter lead times put more focus on making transportation routes more efficient and shorter.”
- “There is a premium on strong IT integration, a solid multi-modal transportation platform and good people on the ground.”
Wessel says brands have opportunities to drive more efficiency in high-velocity emerging markets supply chains. “They don’t need to sacrifice the level of service they expect across their global trade lanes that feed more developed markets.”
Indonesia has embarked on a massive infrastructure program to stimulate growth by driving down logistics costs and improving connectivity between east Indonesia and more prosperous Java. The plan is to attract advanced manufacturing and service industries and wean the nation from reliance on mining and palm oil.
At the same time, Indonesia’s youthful population is feeding the growth of its workforce and consumer class. By contrast, the workforce is shrinking or about to shrink in Thailand, Malaysia and China, where the population is aging.
For more information about Agility’s range of services for the retail sector click here.