LastMile Dialogues: Maximizing unit economics to unlock last mile efficiencies

It was a action-packed day on the 8th Februrary, as it was the successful hosting of yet another session of the LastMile Dialogues: A series of roundtables where industry leaders of the last mile come together to share their views on key and discuss to develop their last mile capabilities for real-world growth.

In this session, titled “Maximizing unit economics to unlock last mile efficiencies,” representatives from leading Courier and Express Parcel (CEP) companies of Indonesia gathered together to look at the growth story of the industry, discuss key operational challenges, and the ways in which a digital-first approach can catalyze their development.

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E-commerce and online purchasing to lead CEP growth

The CEP industry will continue to grow robustly in the coming years, as is reflected in worldwide trends. According to studies, year-on-year CEP revenue growth is expected to reach $394 billion in 2021, up from $333.9 billion in 2020. Revenues are projected to further reach $ 519.5 billion by 2027, at a (CAGR) of 4.61% from 2022-2027.

A major reason for this growth in Indonesia is the continued popularity of e-commerce. The onset of the pandemic clearly enabled this growth as there was a 110% increase in revenue in 2021, 

when revenue reached $53.8 billion in 2021.

The strong smartphone penetration levels in the country, the convenience of making purchases from the comfort of one’s home or workplace means that there is a significant opportunities for CEP businesses to help businesses meet ever-increasing customer expectations. 

Another industry that will increase the demand for the services of CEP companies is the manufacturing and automotive industry, which is seeing significant investments in alignment with the country’s development goals. Investment in Indonesia’s manufacturing sector totaled $21 billion in 2021, a 19% rise from %17 billion in 2020. 

The growth in the manufacturing sector is expected to boost the demand for express delivery and logistics services. The government has ambitious plans to propel the country into the top ten biggest economies in the world by 2030, with manufacturing at the heart of this goal.

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Tackling operating challenges to enable last-mile excellence

The participants largely agreed that while there was a large opporutnitiy to cater to demand, it did not necessarily translate into growth in itself. This was because many operational challenges could hinder the seamless delivery experience that customers are quickly getting accustomed to.

These include: facilitating cash on delivery (COD) transactions with a proper proof of delivery; inefficient routes that cover roads with poor infrastructure, that do not account for traffic conditions, and are static in nature. As a result, they  do not change to account for any unforeseen obstacles. 

There was also the case of missed deliveries or due to poorly located addresses, lack of real-time visibility on orders, and reliance of manual functions to facilitate order management and returns. The remainder of the discussion covered how a lot of these challenges could be resolved with the aid of technology solutions to facilitate end-to-end order management, route planning, real-time transparency, among others to move past route restrictions, ensure cost reduction with better SLAs, and optimally use the volume and resources at hand.

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