Positive Impact of Supply Chain Disruption

KOMPAS/AGUS SUSANTO

Container loading and unloading activities at Tanjung Priok Port, North Jakarta, Thursday (23/9/2021). The Central Statistics Agency noted that Indonesia's non-oil and gas exports in January-August 2021 amounted to USD 134.132 billion, growing 37.03 percent on an annual basis.

Although its impact has been devastating, the global supply chain disruption has also had a positive effect on the economy as many domestic industries have turned to local raw material suppliers. (Kompas, 13/12/2021)

Data from Statistics Indonesia (BPS) showed that the recovery of the domestic downstream industry in recent months was also accompanied by the strengthening in the upstream and intermediate sectors. This strengthening occurred in line with the impressive expansion of the domestic manufacturing industry during the pandemic, as shown by the increase in the Manufacturing Purchasing Managers' Index (PMI) issued by IHS Markit in November 2021. Indonesia’s PMI rose to 53.9 in the month, the most expansive in ASEAN countries.

We hope that this trend will continue so that local import substitution industries can also develop and gradually reduce their dependence on imported raw materials. It will also help fill in the gap in the fragile domestic industrial structure.

Also read:

> Sustainable and Competitive Exports

> Preserve Export Quality

In coping with the global supply chain disruption, resilience and agility are the keywords to survive and continue expanding.

Supporting policy toward such a direction is needed. This is important, because no one can predict how long this disruption will last.

The scarcity of containers, the chaos of the entire global supply, logistics, production and distribution network, which has resulted in a lack of key components in the manufacturing industry, backlogs and delays in the delivery of goods, soaring transportation costs and soaring prices of goods at the consumer level cannot be immediately resolved.

KOMPAS/AGUS SUSANTO

Aerial photo of import-export activities at the Jakarta International Container Terminal (JICT), North Jakarta, Wednesday (16/6/2021). JICT is the largest and busiest import-export container terminal in Indonesia.

This has a huge impact on the national and global economy. The shortage of semiconductor chips that has hampered the production of automotive and computer materials and many other products in recent months is just one example.

We are grateful that, despite supply chain disruptions, the improvement of our trade balance during the pandemic has been quite impressive. The trade surplus was recorded at its highest since 2006 and exports hit an all-time high in September this year. Exports continued to increase, both monthly and yearly, with double-digit growth.

This shows that our manufacturing industry has good resilience amid the pressures of the pandemic. The improvement in the manufacturing sector has also been supported by the economic recovery, improving global demand and rising prices for a number of Indonesia's main export commodities. The economic recovery, marked by an increase in consumption and a surge in the need for raw materials, must be used as an opportunity to boost upstream and local industries.

Also read:

> Import Substitution Problem

> Promoting Export-Oriented MSMEs

We cannot take it for granted. The disruption has forced businesses to rethink or transform their global supply chain models and learn to respond to unpredictable conditions. Resilience is the key.

It shows the importance of supply chain diversification, inventory strategy and building agility in production and distribution networks. Many producers collapsed because they generally relied only on one supplier of raw materials or a certain export destination. They did not have a strategy or risk management that could anticipate potential disruptions that could occur, be it in supply, logistics or production disruptions.

This article was translated by Hendarsyah Tarmizi.