HK’s OpenPort wants to fix Indonesia’s archaic logistics sector

• Indonesia’s logistics cost is 24% of GDP, highest in the region
• OpenPort enables full visibility of logistics process, reducing cost

LOGISTICS is a persistent challenge in Indonesian trade. The country’s logistics performance index (LPI) lags behind Malaysia, Thailand, and even Vietnam, according to the World Bank (click chart below to enlarge).
 
The logistics cost in Indonesia was 23.5% of the country’s gross domestic products (GDP) in 2014, according to the Annual Logistics Report published by Institute of Technology Bandung, the Indonesian Logistics Association, Netherlands-based STC GROUP, and the World Bank office in Jakarta.
 

Indonesian President Joko ‘Jokowi’ Widodo has declared he wants to bring this down to 19.2% of GDP by 2019, the report noted.
 
While the Government is trying to reduce logistics cost with policy reforms and by accelerating infrastructure development, Hong Kong-based digital logistics startup OpenPort is attempting the same via technology.
 
“With more than 17,000 islands scattered across the country, Indonesia needs to make its logistics and supply chain management system more transparent and more efficient,” its chief executive officer Max Ward (pic) told Digital News Asia (DNA) in a recent phone interview.
 
“And it is impossible to do so without deploying technology and systems that can seamlessly monitor processes, and cut out inefficiency wherever possible.
 
“We believe that the key to revolutionising logistics is through direct collaboration between shippers and transporters,” he added.
 
Ward, who was previously Asia Pacific vice president of Kuwait-based Agility Logistics, said transparency was important to clean up inefficiency, which means dealing directly and cutting out the middlemen who mark transportation costs up by 15% to 20%.
 
The Indonesian Logistics and Forwarder Association (ILFA) has highlighted that the republic can unlock a potential US$250-billion worth of value in the logistics market if it could make the sector more transparent and cut out hidden costs.
 
Currently, Indonesia’s logistics market – comprising the transportation and warehousing subsectors – is only worth US$33.34 billion, according to ILFA.
 
In an official statement last month, Indonesian Chamber of Commerce and Industry chairman Rosan Roeslani said that logistics accounted for 30% of total production cost.
 
Ward claimed that the OpenPort platform can save companies’ logistics cost by up to 30%.
 
How it works
 

 
For shippers, OpenPort integrates its clients’ Oracle or SAP enterprise resource planning (ERP) system with its end-to-end solution, enabling them to track the whole distribution process – right up to the point of delivery.
 
“Our platform provides end-to-end visibility to the whole supply chain, including valuable real-time data on the location and condition of freight, and electronic proof of delivery,” said Ward.
 
“This creates new opportunities for shippers to control product quality and security,” he declared.
 
However, the startup needs to also target transport providers or carriers in order to give that needed direct link to its FMCG (fast-moving consumer goods) clients, he added.
 
For carriers, OpenPort offers a free app-based ‘dispatcher tool’ to send order instructions to drivers with their phone numbers as ID (identification), and a marketplace platform for them to offer their services to shippers on both a contract and ad hoc basis.
 
“The marketplace can create further savings by enabling on-demand procurement for shippers who wish to bring more of their supply chain management inhouse,” said Ward.
 
The OpenPort platform also allows carriers to reduce the number of empty trucks they have via backhaul and shared loads.
 
Incidentally, OpenPort currently makes money by charging a fixed percentage of each transaction.
 
Meanwhile, connecting shippers and carriers via technology would also fasten the payment process, declared Ward.
 
“Usually with a paper-based process, it will take up to three months for carriers to get their payments in Indonesia – all because of the inefficiency in manual processing.
 
“But with a digital platform, payment will take only one month to process,” he claimed.
 
The journey and the plan
 
Founded in early 2015, OpenPort provides a cloud-based digital logistics platform to manage the supply chain inhouse, and connect shippers and transporters directly without going through a middleman.
 
It has operations in Brunei, China, India, Indonesia, Pakistan and the United States.
 
It previously operated under the name ‘Kinabalu,’ and had received a grant from the Brunei Economic Development Board for an undisclosed amount in July 2015.
 
That same month, it also secured more than US$500,000 in an initial investment round led by angel investors who included Gabriel Fong, the chief executive officer of venture builder Jaarvis Lab.
 
“Not only were we able to exceed our US$500,000  initial fundraising target for the round, but more importantly, we were able to gather the support of an outstanding board of advisors who will help guide the company,” Ward said in an official statement at the time.
 
By the end of July 2015, the startup had rebranded from Kinabalu to OpenPort, to support its story of making logistics more open and transparent. At the same time, it also announced its expansion into Indonesia via PT OpenPort Indonesia.
 
The company recently secured an undisclosed Series A investment round led by US-based Susquehanna International Group, with participation from Hong Kong-based Caldera Pacific Ventures.
 
“We plan to operate in 20 emerging markets in Asia, but that will take time,” said Ward.
 
“Right now, we want to focus on building our existing markets, especially our new operations in Singapore,” he added.
 
OpenPort established operations in the Lion City earlier this month with the appointment of Morten Daamgaard, also from Agility Logistics, as its Singapore-based chief operating officer (COO). He will also lead its Asean operations.
 
The new round of funding will be used to expand the company operations in Indonesia to Surabaya, where the major Perak Port is located, and Makassar, the hub to the eastern part of the country.
 
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