Indonesia is an important player in the global supply chain, particularly because of its vast natural resources, strategic location and growing manufacturing sector. In recent years, the country has focused on developing its technological infrastructure to support and modernize its supply chain operations.

Despite its important role as the backbone of the Indonesian economy, the logistics industry still has several shortcomings, in particular, the inefficiency of the logistics sector in this country with more than 17,000 islands, as a result of the disconnected national supply chain information. This poses challenges to the distribution flow.

The logistics industry has experienced tremendous growth in the past two years, especially during the COVID-19 pandemic, which drove e-commerce activities. However, high logistics costs remain a problem, as evidenced by the logistics costs in Indonesia reaching 23 percent of gross domestic product (GDP), higher than neighboring countries such as Thailand (15 percent) and Malaysia (13 percent).

The complexity of information handling and the strict bureaucratic work structure result in inefficiencies, which are another challenge in reducing logistics costs in Indonesia.

Efficient supply chain management is crucial to ensure goods are transported effectively across the country’s diverse geography. As Indonesia aims to achieve its vision of Golden Indonesia 2045 – that is, to become a high-income country by that year – its industrial goals in sectors such as electric vehicles, pharmaceuticals, technology and agriculture require supply chain capacities to be developed in two ways.

The first is to identify and manage the distribution of critical materials such as lithium, which, when combined with domestic nickel, are essential for producing EV batteries. Second, the supply chain serves as a vital source of information for capturing new markets, facilitating the export of Indonesian products.