Interview The Jakarta Post with Hans Leo, President Director of Linc Group on April 6th, 2015
The huge market for logistics has led to the emergence of new players in the business, thereby increasing competition. Several companies focus solely on warehousing and transportation services as they are the most rapidly growing markets. Linc Group, a leading logistics firm, spoke to The Jakarta Post about the issue. Here is an excerpt from the interview.
Question: Could you tell us about warehousing and transportation services and how tough competition actually is in the business?
Answer: There are two forms of warehousing in terms of business. First, warehouses built by property developers. So it is part of the real estate business. Competition in the business is tough because more developers invest their funds to build new warehouses. Second, warehouse operated by third-party logistics companies. Warehouses operated by a third-party offer full and integrated supply chain service, which includes transportation of goods. This requires expertise, right systems and SOP [standard operating procedure]. The second form of warehousing is also equally tough but there are quite a number of players in the business.
Is it a sophisticated business?
Yes, it requires huge investment, expertise, skilled workers and system. Imagine storing 10,000 different items from 500 customers. We have to know immediately when we have to pick them up and load them onto a truck. A person who handles the items should know the inventory information and expiration date. We have to be ready, for example, to meet a customerâ€™s request to deliver goods to a remote location by 4 p.m. whereas the order is placed at 11 a.m. Therefore, everything should be systemized.
What enables third-party logistics to grow?
Despite the tough competition, the middle-class surge, continued economic growth, plus the rising trend of manufacturersâ€™ focusing on business and leaving the handling of logistical matters to a third- party logistics company. I think the trend in outsourcing warehousing and transportation will continue for the next 10 or 20 years.
Regarding market share, what percentage do you want to control?
Different players focus on different segments and currently there are a lot of different segments. When you ask me about market share, you talk about segment. There are segments that we do not focus on, such as transportation of ice cream and refrigerators, for example. We focus on infrastructure, fast-moving goods, banking, retail, fertilizer and timber. Items under the infrastructure category include cement and steel. Different segment needs different expertise, so we are also focusing on developing expertise. Ultimately we want to be the market leader for the segments that we are involved in.
How do you face the competition?
We continue to improve our employeesâ€™ skills by training them on a regular basis. There are two kinds of training â€” soft and hard skills. Soft skills include how to communicate with people, how to improve leadership capacity and the understanding of corporate values. Meanwhile, hard skills are skills needed for the job itself. So a person that operates the system must know the system well, be well versed in the SOP and put it into practice.
How does Linc Group fulfill customersâ€™ needs?
We always refer to operational excellence when operating our business. Operational excellence is the key point, focusing on three pillars: human beings, system and SOP and assets. We deliver items on time, undamaged and delivered correctly from A to Z. In the long run, our operational excellence creates customer loyalty.
Customer loyalty plays a significant role in service-based business, including warehousing and transportation. How do you maintain customer loyalty?
Service must always be good and improved. There must be ease of use. When somebody uses it, they can do so conveniently, headache-free. For example, if a user [customer] is on an overseas holiday and wishes to check their goods, then they can conveniently log onto the website to see inventory as we publish real-time information. Everything is systemized. In this way, customers will feel comfortable, which contributes to customer loyalty.
Do you run special programs for loyal customers?
Sure, we offer discounts to loyal customers. We take less profit from loyal customers who sign long term contracts. We offer more competitive rates.
How do you ensure that Linc Groupâ€™s liquid bulk (terminal) is safe?
Safety policy conducted in Liquid Bulk (terminal), is the standardization of tanks and facilities are used, as well as apply the standardization of ISO 9001, ISO 14001 and OHSAS 18001, implementing rules and regulations in force internationally and are applicable in the territory of the Republic of Indonesia including regulations on the transportation of hazardous materials and toxic (B3), as well as the rules of transportation and storage of dangerous goods either from traffic Act, the Ministry of Transportation and the Director General of Oil and Gas.
What about trucks that are used to deliver goods with regard to security?
All of our trucks are equipped with GPS to ensure that customersâ€™ goods are safe. GPS will send a message to the back office when something wrong happens, say looting. Even though we operate GPS-equipped trucks, the role that manpower play is important in this regard. Human resources must be honest and reliable. So honesty and reliability are keys to preventing irregularities. So, you must have good and honest human resources.
An expert has said that the workersâ€™ wage- increase demands will slow down the growth of the transportation and warehousing business. How do you view this?
Wage-increase demands are normal and are needed to improve the lives of Indonesians If, for example, workers demand a 40 percent wage increase, will end-users bare the cost? Certainly not and therefore the increase must be done gradually and adjusted to the inflation rate.
What are Linc Groupâ€™s future plans?
We are expanding. We are looking for more transportation project contracts. We are also looking for land to build new warehouses and hoping to extend rental contract as well. So because of the growth that I mentioned before, I believe that if you stand still, you will be eaten up. With the competition, we are always running to achieve the target. We stay competitive, stay advanced technology-wise, continue to strengthen our expertise, provide good service to our customers and strive to create a new and better key performance index (KPI).