The road to becoming the ‘Grab of freight forwarding’

Photo credit: 123RF

In the same way that an alpha lion eats its share of the hunt before the pride’s cubs can even touch it, corporations with large export volumes take priority over small and medium-sized enterprises (SMEs) when dealing with freight forwarders.

“Good, reputable freight forwarding companies are built to serve big businesses, not the smaller ones,” shares Rifki Pratomo, CEO of Jakarta-based logistics startup Andalin. “They don’t really pay attention to the smaller orders.”

Generally, SMEs have to wait for up to a week for freight forwarders to give a quotation for shipping fees. Such a delay can result in setbacks like lost sales.

This bottleneck in first-mile logistics is the reason why SMEs account for just 10 percent of Indonesia’s exports valued at US$16.4 billion last July, as per the latest data, says Pratomo.

Andalin wants to solve that.

Helping the little guys

Set up in 2016, Andalin consolidates exports from SMEs into a single shipping volume, making them more attractive to freight forwarders. Doing this reduces the processing time for quotations to as short as half a day.

The idea to disrupt this stage of freight forwarding came to Pratomo while he was serving as a supply chain finance manager at Shell Indonesia. During his stint, he saw how the energy titan addressed slow response time from freighters by consolidating its shipping volumes.

Photo credit: Unsplash

“I thought, ‘Why not give the same technology to SMEs, so that they would also have the advantage of larger companies like Shell?’” says Pratomo.

“If there are 50 SMEs shipping two containers each to the same place through Andalin, that’s 100 containers of potential shipping volume. Freight forwarders wouldn’t want to lose that kind of volume, so they respond faster and quote a cheaper price,” he explains.

By solving a major pain point, Andalin was able to grow its client base to more than 200 registered SMEs, which may export goods to the same place at the same time.

Changing the industry mindset

Despite the benefits, Pratomo says that freight forwarders initially didn’t want to get on board Andalin’s platform as “a lot of them still had a very conventional way of thinking” and did not realize the impact that internet services could have on the shipping industry.

Pratomo focused on educating them. “We can see major retailers in Indonesia closing down physical outlets as more people purchase goods online. If freighters don’t ride this internet wave, they will soon get left behind and forgotten.”

Photo credit: Pixabay

He stressed how freighters must adopt an internet service to bring them closer to small businesses and cut turnover times. Otherwise, they’d risk losing this key segment to a disruptor.

“Because of ride-hailing apps like Grab, Go-Jek, and Uber, taxi companies are all scattered now. This is the kind of disruption freight forwarders are worried about as well,” notes Pratomo.

Winning big and moving forward

In 2017, Andalin participated in the NTTINEX Startup Challenge (renamed to NTT Com Startup Challenge in 2018) in Indonesia that was organized by Japanese telecommunications company NTT Communications (NTT Com).

“When we participated, we were not entirely looking for investment. Instead, we were thinking of collaboration opportunities,” says Pratomo. “Because NTT Com has a reputation as one of the largest telecommunication companies in the world, we knew it had the right infrastructure and distribution channels that we could leverage in the future for expansion.”

Andalin emerged as one of the competition’s winners, and the publicity gave the startup opportunities to expand its services and help local SMEs tackle challenges related to cross-border logistics.

Andalin CEO Rifki Pratomo at NTTINEX Startup Challenge in 2017 / Photo credit: NTT Communications

“In March, we were also invited to Japan by NTT Com for a tour of their research and development facilities, and to explore opportunities for collaboration,” says Pratomo.

Winning the challenge also put Andalin on the radar of Japan External Trade Organization or JETRO, a government body that focuses on mutually beneficial opportunities and investments for foreign and Japanese companies. In Indonesia, Andalin was among the startups that local telecommunications provider Indosat Ooredoo injected with US$50,000 funding.

Moving forward, Pratomo envisions a trade ecosystem that provides SMEs various elements of international shipping, including insurance and customs clearance services.

He also thinks that to achieve better economy of scale, it’s crucial that Andalin expands to Vietnam, Malaysia, and other countries in the region. Vietnamese imports hit a record high of US$21 billion, while Malaysian imports reached US$18.7 billion in July, making these two markets lucrative ports for freight forwarders.

“The endgame for Andalin is to create a B2B shipping ecosystem for Southeast Asia,” says Pratomo. And once the trade lanes are completed, “everything will be efficient enough for SMEs to do cross-border trading.”

NTT Com Startup Challenge 2018 is looking for startups in Asia from various industries that aim to expand their business to Indonesia, Malaysia, and Vietnam.

The Indonesian pitch event has just concluded, but interested parties may still register for other pitch events. Applications for the Malaysia competition will remain open until September 14, while those for Vietnam will be accepted until October 18 at the latest. Winners will receive up to US$5,000 in prize money, gain access to investors, and get free access to NTT Com’s ICT services for a year.