Going the distance with e-commerce

Indonesia-focused logistics firm Satsaco Group has had a trying three years, with profits falling on the back of a sluggish economy and a weakened rupiah. But it is on track to turn things around by venturing into e-commerce logistics, a high growth area in Indonesia.

WHEN a leading e-commerce firm first came to them, it was burning S$20,000 to S$30,000 for every round of merchandise air-flown to Indonesia. It was taking its agent one to two weeks to clear the goods, too.

Now, the e-commerce firm has turned to using sea freight instead, allowing goods to reach its Indonesia warehouse within seven days at a third of the previous cost - all on the advice and services of local logistics provider Satsaco Group.

Satsaco, which specialises in freight forwarding to Indonesia, began providing business-to-consumer (B2C) services to e-commerce players only last year. Five years ago, it started catering for business-to-business (B2B) e-commerce fulfilment. And though it is in its early stages, income from the e-commerce segment already accounts for more than half of the company's revenue of S$11.3 million in 2016.

"E-commerce is still very new in Indonesia, and we want to tap that growth," said Sukrisno Chiuman, 52, managing director of Satsaco.

For the company, which has been hit by falling profits over the past three years due to a patchy economy, fiercer competition and a weakened rupiah, the rise of the online marketplace signals a new hope.

e-commerce spike

According to a 2016 joint report by Google and Temasek Holdings, Indonesia's e-commerce market value is expected to spike to US$46 billion (S$62.6 billion) by 2025 from US$1.7 billion in 2015, with a compound growth rate of 39 per cent.

This would represent 52 per cent of e-commerce in South-east Asia, said the report, which excluded data from consumer-to-consumer (C2C) and peer-to-peer (P2P) platforms such as Carousell.

In a business where lead time is everything, the 29-year-old firm is wooing clients with tailored solutions to their logistics needs in a bid to boost efficiency. Satsaco has also procured an Electronic Data Interchange licence that allows them to integrate their database system with that of the relevant authorities, enabling quicker transmission of documents and speedier clearance of goods.

"This is a technology-driven industry," said Mr Chiuman, who founded the company at the age of 23. "When we were very small in the early 90s, we bought a simple freight management system; I noticed that many other forwarders like us were still using manual typewriters."

Back in 1988, he borrowed capital from his father to start Satsaco Express Transportation, specialising in air freight forwarding for spare parts, and later, electronics.

Having mined airline industry contacts while working at his father's travel agency, Mr Chiuman was able to slowly grow his customer base, and the firm turned profitable after two years.

In 2007, the Satsaco Group ventured to Hong Kong and in 2011 to Shanghai - a move that saw revenue climb 30 to 50 per cent year on year, reaching about S$18 million in 2011 from S$6 million in 2007. Satsaco now has 50 staff in Singapore, Hong Kong and Shanghai, as well as joint ventures in Indonesia.

Throughout the company's growth, technology has remained at the core of its workings. Satsaco's current ERP system was developed to meet changing demands from customers.

Centralised service

Mr Chiuman spent one year convincing his team that instead of having different system modules for air freight, sea freight, customer relationship management and finance, these modules should be seamlessly centralised.

"You have to think of the future. This system can currently deal with customers who adopt B2B business models. But what happens if our customers change their business models to B2C? The system has to be able to cope too."

Following many meetings with vendors and an approved partial funding from SPRING Singapore, the S$600,000 system went live in 2015. Where previously it would take two months to consolidate accounts, the same could be done within one week.

Satsaco's next step will be to integrate its new upcoming ERP system with that of e-commerce clients' through an application programming interface, enabling smoother and quicker workflow with real-time visibility.

The firm currently counts Zalora, Shopee and Reebonz among its clients. "With the new system, we can confidently go straight to the local brand owners that have gone regional," said Mr Chiuman.

But challenges in venturing into e-commerce logistics remain. Though the firm completes 10,000 deliveries a day in Indonesia, the country's weak transport infrastructure hinders last mile delivery.

DBS analysts, in an E-Commerce in Asia report, said: "As a result, e-commerce players face difficulties in reaching the more remote locations, and most online sales are highly concentrated around Jakarta."

Many of Indonesia's consumers still have the "cash-on-delivery" mindset as well - research by A.T. Kearney revealed that in 2012, only 20 per cent of adults in the country have an account at a formal financial institution, forcing logistics firms like Satsaco to also handle cash payments for clients.

Improving links

But the situation is looking up. Indonesia's president in August signed the E-Commerce Roadmap plan, which details various strategies to accelerate the country's e-commerce growth.

Satsaco will open its Indonesia office in Jakarta early next year to further cement its presence there. The firm is also in talks to partner a Singapore start-up focusing on last- mile delivery. Mr Chiuman is optimistic that sales from the e-commerce segment will enjoy double-digit growth year on year.

And as the company matures, so do its people. Said Mr Chiuman, "We want to be tech-savvy, and we will leverage on IT to drive ourselves forward."

  • The writer is a final year student at NTU's Wee Kim Wee School of Communication and Information, and a former intern at The Business Times.