Supply chain shift and its impact on Indonesia’s packaging sector

The effects of COVID-19 containment measures have led to industrial production in China declining by 13.5%. According to Dun & Bradstreet, this has directly impacted five million companies globally through their chain - based suppliers, including in Indonesia. The production disruption has been immediate and devastating. This disruption has upturned the key supply chain pillars of supply and demand management and is at a level beyond the previous contingency measures businesses have developed.

Indonesian Packaging Federation (IPF) Executive Director, Henky Wibawa, shares his insights on the current Fast Moving Consumer (FMCG) market situation in Indonesia, especially related to the packaging business. As Mr. Wibawa stressed: “Companies are now urgently focusing on better understanding their supply chains’ risk areas as they strive towards building more resilient and assured supply chains.”   Mr. Wibawa explained how companies could further RETHINK within the opportunity in regards to supply chain landscape shifting.  When restating a business’s purpose, a good start is keeping front and centre that the design of any supply chain starts with the end in mind and the nature of the markets to be serviced. At its core ‘the promise’ consists of two elements ‘availability’ and ‘delivery’ with the third element ‘recovery’ being triggered as ‘necessary’.

As Mr. Wibawa puts it: “Resilience is about developing strategic contingency plans. These plans would be identified through gaming potential scenarios and then used to develop effective countermeasures to mitigate the risks that can threaten the business. Supply chain resilience as a concept is not new, with brandowners like Pepsi Co, and Procter & Gamble successfully implementing such strategies since 2012. They have invested significantly in supply chain resilience by collaborating with its partners and creating supply chain maps that visualise the networks for each of its product components.”

However, this changing environment brings added risks arising from the need to accommodate international jurisdictional complexity and counter seasonal challenges in the context of the sub scale market and global economic pressures. And while it is true that businesses have in many ways adapted to these challenges. Recent circumstances have reinforced the relevance of these trends and the elevated urgency to develop appropriate strategies:  Service and Resilience; E-commerce and M-Commerce; Automation; Blockchain, Data Management & Analytics; and Sustainability and Assurance.

Mr. Henky Wibawa

Supply chain transparency is considered the most important factor in achieving supply chain resilience. It is all too common that companies who sell finished goods only have information on production and shipment schedules relating to their suppliers. Greater visibility over supply chain may help identify opportunities to reduce lead time, boost efficiencies or reduce waste.

Traditional supply chain network flows and functional capability must be challenged through rigorous scenario testing. What this also means is the incorporation of cost-based risk overlays to ‘lean’ supply chain and ‘just-in-time’ inventory management solutions that have been exposed by the crisis. Supply chain agility is about a company having the ability to thrive in a changing and unpredictable business environment. By establishing collaborative partnerships, organisations can work together during catastrophe and mitigate risk. Organisations can achieve this by enhanced integrated business planning, achieved by collaborative planning through all tiers of the supply chain to communicate more meaningful information more readily and matching customer demand and supplier capabilities through collaboration.

Similar to the global trends, the continuous growth of modern, e-commerce and traditional trade businesses are driving growth in packaging in Indonesia. “As we know most of the hot topics today are focused on Sustainability in Plastic Packaging. And by 2025 most of the industry leaders, non-profit organisations and government's institutions have to deliver major projects that facilitate a circular economy, where waste is designed into new products and services,” Mr. Wibawa explains. www.packindo.org