Fresh produce packaging: more than just a pretty face
Australia’s post-harvest technologies and Indonesia’s multi-modal transport flexibility were identified as key areas for collaboration at the AIC’s recent supply chains discussion.
“‘Supply chain’ is no longer an academic word,” opened Professor Nyoman Pujawan from Institut Teknologi Sepuluh Nopember, or ITS. “Everybody is now talking about [it].”
- Post-harvest technology (and down-stream processing) is a key area for bilateral collaboration
- Finer data and more communication strengthens supply chains against spikes and other disruption
- Closed state borders gave Australian business a taste of “inter-island trading” which could help them approach the Indonesian market
Specifically, everybody is talking about disruptions to supply chains. Professor Nyoman, an AIC Senior Fellow and lecturer in Supply Chain Management, ran a survey early in the pandemic on how various industries had been affected, finding manufacturing the hardest hit with 90 percent of respondents feeling moderate to severe disruption – and this was back in April.
An example from the everyday he shared related to packaged mineral water sales: “Now there is an increase in demand for the gallon size and a significant decrease for the cup size,” because the cup size is generally used at events.
Early on, Australia’s international supply chains were disadvantaged by the fact the country was essentially “at the end of any line,” reflected Louise McGrath, General Manager of International Competitiveness at the Australian Industry Group.
Getting products, especially fresh, in and out of the country became increasingly difficult as supply chains elsewhere bogged down.
One benefit, however, is that many Australian companies keep larger inventories to mitigate the risks that come with being at the end of the world.
“There aren’t many companies in Australia who rely on just-in-time for inputs, because we’ve always had these risks and shocks,” said Louise. This absorbed initial shocks for some Australian companies and led to some delivering European products to European consumers faster than local suppliers could.
A key advantage held by Australia’s primary producers, and a strength that Indonesia should learn from, is not logistics of supply chains but rather preparation and packaging, according to Vincentius Sariyo from agriculture e-commerce platform TaniHub.
This, he says, is holding back Indonesia’s export potential: “We cannot deliver the fruits in a good condition.”
Louise McGrath agrees, but added that many Australian producers still have not realised that this is an area for business and engagement with the world.
“What’s valued is not actually those vegetables, it’s all those processes [in] HACCP: all our quality control, our traceability, our packaging… If Australian companies start to think that is their expertise, rather than grapes or apples or whatever, then that really provides a lot of opportunities for [collaboration].”
And Australia could learn from Indonesia’s multi-modal transport.
“We’ve become quite lazy,” Louise observes, “just putting things on trucks or on planes. If we had some of the Indonesian flexibility in using all the modes of transport at our disposal, I think that would have held us in better stead [for the crisis]”.
Managing spikes with data
How did TaniHub keep up with a 300 percent spike in consumer demand while some competitors were forced to pause operations to cope?
“A combination of data analytics and experience,” says Pak Sariyo, Director of Supply Chains for the start-up.
As small spikes grew into “unimaginable spikes” as the crisis spread, TaniHub ramped up data collection on farmer stocks from daily tabs to three times a day. Distribution of “ultra-fresh” produce (from harvest to consumer in just a day or so), he explained, presents particular challenges, with data needed on “availability, shelf life and quality”.
“We discuss intensely with our farmers regarding what is ready, what is not ready. For the items in stock, we increased purchasing up to 500 percent, just to secure the availability.”
This mirrors Louise McGrath’s observation that the biggest change in supply chain processes this year has been an increase in communication.
Pivot to online
Although TaniHub had to adjust quickly to contactless deliveries, being a digital-based operation saw them relatively well placed for a pandemic. Many other companies had their entire pivot to online thrust upon them.
This was particularly the case for business-to-business (B2B) operations, explained Louise McGrath, adding that, conversely, “business-to-consumer (B2C) products, such as wine, food and skincare, were very early adopters of e-commerce, particularly for international sales”.
AI Group received a “quite extraordinary” flow of requests, she said, around how to set up online shops and do online marketing from companies that had “never considered it before”.
Inter-island trade experience
One positive Louise hopes to see emerge from covid is Australians being more ready to enter Indonesia, having both switched to digital and experienced inter-island trading of sorts at home.
“Although we are one island right now, we’re broken into many islands as we have internal state border barriers. [This] might give companies more confidence in looking at Indonesia.”
“The fact that they’re so successfully navigating this crisis and managing to maintain a national logistics chain, even if it is diminished, is a really positive story for Australian companies.”
IA-CEPA will compound these benefits, she adds, with some rules around data and digital processes being “the first [of their kind] Indonesia has agreed to with any other trading partner.”