Logistics is the backbone of domestic and international trade. Over the years, the industry has resisted change. Several young Indonesian entrepreneurs now want to bring a digital revolution to the sector, and they are already receiving attention from investors.
Waresix is a smart logistics startup that can’t complain about a lack of capital. Founded in 2017 by Andree Susanto and Edwin Wibowo, the startup connects shippers and businesses with available transporters and warehouse spaces across Indonesia. It currently reaches over 30,000 trucks and 300 warehouse operators across the archipelago.
The company closed a USD 1.6 million pre-Series A funding round with East Ventures and Monk’s Hill Ventures in October 2018. That was followed by a USD 14.5 million in a Series A round led by EV Growth and USD 11 million in an extended round in July 2019 and early 2020. In just 18 months, Waresix had raised more than USD 27.1 million in equity.
Susanto and Wibowo met when they were studying in the United States. However, they didn’t think about starting a business until their return home. Leaving his position as an engineer at oil major Chevron in 2012, Susanto set up a lubricant distributor for trucking companies and franchise car dealers.
That’s when he teamed up with Wibowo, who worked at a transportation company and was one of his clients buying the lubricants. Both lived 400 kilometers apart at the time, Wibowo in Semarang and Susanto in Jakarta, and that was when they discovered how cumbersome the shipment process actually is.
“We saw that the distribution chain was not efficient, so we came up with an idea to solve this problem,” Susanto told KrASIA in a recent interview.
Attracted by B2B logistics
In 2017, most Indonesian logistics players were focusing on the last mile. E-commerce was booming and everyone rushed into it. The duo’s eyes, however, were set on the B2B logistics sector: “Larger market than last-mile, yet almost no players,” they thought.
The logistics supply chain process combines various functions, including transportation, warehousing, packaging, distribution, and storage. According to a World Bank report from 2018, Indonesia’s logistic performance ranked 46th of 160 countries, lagging behind neighbors Singapore and Malaysia. Inefficiencies along the chain lead to higher costs which are trickling down to manufacturers.
Logistics accounts for 25% of total production costs in Indonesia, compared to just maximum 15% in Malaysia. Susanto points out two factors that contribute to this problem: Inefficiency and uncertainty.
Susanto and Wibowo initially tried to solve the issue at the starting point: The warehouse. Relying on the founders’ networks, Waresix quickly onboarded warehouse owners to their platform. The system then connects them to clients in need for temporary or longtime storage, and also helps manage item transit and overflow. Waresix charges commissions ranging from 5–15% in accordance with the services provided, which is still cheaper than traditional brokers who take at least a 20% cut.
As the client and partner base grew, some of them demanded transportation services. In April 2019, the company launched a trucking service, which solved another problem of Indonesia’s logistics sector.
“The utilization of trucks is never clear,” said Susanto. Drivers don’t know when goods will be unloaded and what they are going to do next, whether they have new orders waiting or not. A truck can spend at least two days on the warehouse site for transit, before being offloaded. Then they basically have to return to their company’s office, which could be hundreds of kilometers away.
The waiting period is a waste of time, space, and money for shippers and warehouse owners.
Waresix helps to avoid trucks sitting idle during transit by logging each and every step. Warehouse owners will be notified about trucks docking on their site and can promptly unload the goods. Furthermore, truck drivers can accept new orders during transit and head to the next place after offloading. “Transporters don’t like it when trucks are idle for too long,” he added.
Susanto says that his firm helps shippers and transporters reduce their usual logistics cost by at least 5%.
Bright future ahead, with some snags
The company is not alone in the smart logistics industry. With regards to warehouse services, it has a competitor in Crewdible. In trucking, there are Ritase and Kargo.
“Other players are focusing on FMCG (fast-moving consumer goods). We are targeting more vertical industries,” said Susanto.
The majority of his clients operate in agriculture, commodities, and infrastructure which are much more relevant to the Indonesian economy. With that, the company reached a 30-fold monthly revenue increase in 2019, compared to the previous year, and went EBITDA positive. As for 2020, Susanto still expects Waresix to grow five-fold compared to the same period last year—despite the pandemic.
It explains the company’s lack of interest in entering the retail sector. The e-commerce penetration rate in Indonesia is only 10,8%, and even though it might reach 30% in a year or two, it’s still not as attractive as the offline distribution market.
“We might support them for long-distance transport, but not for the last-mile service,” said Susanto. “We have no plan to tap into the e-commerce market.”
Fueled by the Series A funding, Waresix bolstered its engineering team and expanded its network to cover more ground. Susanto foresees a deluge of demand approaching, especially as clients now heavily depend on digital information to get their orders. The company is in the midst of raising a Series B this year, though Susanto declined to comment further on the topic.
Indonesia’s logistics industry is expected to reach USD 2,8 billion in 2020. However, a lot of improvements are going to be necessary. First of all, the administrative process: Intercity logistics requires a lot of documents that have to be submitted in hard copy. “The administrative process alone, like sending transport permit documents to another island, needs at least six days,” said Susanto. “What if the document is incorrect? It will take longer. We need to start adopting soft copies for efficiency.”
Second is the digital infrastructure, with some truck drivers still relying on brick phones. “We help connect the truck companies, small and medium, with smartphone distributors. They upgrade the drivers’ gadgets from there,” he said.
Training clients to adapt to smart logistics takes time, but Susanto thinks most of them are open to it. His role is not to compete with traditional providers: “We just assist them to work efficiently.”