Planning a business expansion in Indonesia is not easy because you may encounter problems before succeeding. To make it easier on yourself, it pays to look for a reliable distribution partner first. This means taking time to assess the Indonesian contacts you’ve already made and see which ones have business potential.
Why Indonesia is a Good Market Opportunity
There are multiple market opportunities in the world’s fourth-most populated country, including expansion in retail, health, education, telecom, and financial services sectors. The Indonesian consumer ranks as one of the most confident in the world, and it climbed to 125.2 in August 2023 from the previous month 123.5.
Indonesia’s aviation market is the second-fastest growing in the world and favors U.S. products. Aircraft replacement parts and services are a significant market. There is also demand for air traffic control and airport logistics services, including ground support equipment. With high growth, the Indonesian aviation market require infrastructure, training, and components to keep their business running. With a projected CAGR of 6.5% from 2022 to 2028, Indonesia has a highly favorable in the MRO sector. This growth is driven by increasing demand and a wealth of opportunities for industry players. With a flourishing aircraft fleet, a thriving tourism industry, and a government dedicated to advancing the aviation sector, Indonesia holds a significant potential for MRO growth.
A competitive and expanding banking sector offers significant opportunities for IT and financial technology from equipment, software, and technology providers. There are opportunities for telecommunications infrastructure, such as satellites and ground stations, handheld devices, also integration devices or enablers. Telecommunications equipment and services and satellites remain excellent areas for U.S. products and services, which have a comparative advantage technologically.
Types of Local Partner in Indonesia
Before you go finding a local distribution partner, you need to know what type of local partner supply chain management in Indonesia.
A supplier is a person or business that provides a product or service to another entity. The role of a supplier in a business is to provide high-quality products from a manufacturer at a good price to a distributor or retailer for resale. A supplier in a business is someone who acts as an intermediary between the manufacturer and retailer, ensuring that communication is forthcoming and stock is of sufficient quality.
The role of a supplier in a business can be a demanding one as retailers expect a certain level of quality, and manufacturers expect suppliers to sell a lot of stock. Due to this suppliers must be flexible and understand how to manage relationships.
A distributor is an intermediary entity between a producer of a product, or manufacturer, and a downstream entity in the distribution channel or supply chain. The downstream entity is typically a retailer or value-added reseller (VAR), but it can also be a wholesaler.
The distributor is an integral supply chain component, acting as an intermediary between the manufacturer and the downstream entity. The distributor bridges the gap between upstream and downstream entities while adding important services that help smooth the distribution process.
A distributor typically works with multiple manufacturers and multiple downstream entities. For each manufacturer, the distributor serves as an agent that enters into an agreement with the manufacturer to sell its products to retailers, VARs or wholesalers.
A freight forwarder is a company that serves as an intermediary between transportation companies that import and export goods and the businesses that need them. Freight forwarders manage every aspect of the transportation process, from storing goods before shipment to ensuring they make it through customs.
They don’t handle the movement of the goods themselves, but they establish relationships with the companies that do so they can plan each step of every shipment on a client’s behalf. Freight forwarders work with transportation companies that ship products by road, rail, water and air.
Freight forwarders prepare for the shipment of a company’s merchandise by making arrangements with storage, transportation and other logistics companies. By using the services of businesses they contract with, they give their clients an affordable and reliable way to send and receive goods both domestically and internationally.
Procurement is obtaining or purchasing goods or services, typically for business purposes. The Procurement company is most commonly associated with businesses because companies must solicit services or purchase goods, usually on a relatively large scale. It can also include the overall procurement process, which is critically important for companies leading up to a final purchasing decision.
Companies can be on both sides of the procurement process as buyers or sellers though here we mainly focus on the side of the soliciting company.Procurement involves not only deciding on what to buy based on needs and budget, but also ensuring that the company is receiving enough value from the purchase. We all perform this work ourselves as individuals.
Any purchase you make depends on the quality of the product, the amount of time it takes to be delivered to your doorstep, how much value you’ll get out of your purchase, and many other factors.
What Can Distribution Partner Do For You?
Looking for a distribution partner in Indonesia isn’t just to give you an entry into the market. It is your way to sustainability and growth. They can help you with the following:
Setting up a Business
Finding a local distribution partner can help speed up your entry into the market especially if your industry is capped. The partner’s role depends on the agreement.
There are different business structures you can choose, but two of the most popular is a special purpose vehicle and a PT PMA. In a special purpose vehicle arrangement, a local becomes the business owner at face value. PT PMA may be more complex, but it also allows you to have more control over the business as you can hold a position such as a director or a shareholder.
Buying a Shelf Company
The process of company registration in Indonesia can be long and tiring. It may take weeks, sometimes months, to complete. One of the quickest ways to establish here is to buy a shelf company. A business partner such as AsiaCommerce can help facilitate it for you to make it more convenient, easier, and faster.
Distributing of Goods
As not all markets are open to you, as well as to take advantage of existing local businesses, you can look for a partner to help you distribute and sell goods in the country. Its knowledge on the market, rules and regulations particularly on importation, and business culture will come in handy.
How to Choose the Best Local Distribution Partner in Indonesia?
You may now understand the huge role a distribution partner has on your business, but you have no idea how to look for someone reliable. There’s only one smart and hassle-free choice for you: work with AsiaCommerce.
AsiaCommerce is the right business partner for expatriates who wish to work or businesses that want to set foot in Indonesia. We provide the support you need to start, maintain, and grow your business:
- Local partner selection
- Special purpose agreements
- Product registration
- Due diligence
- Market research and analysis
Start Your Business Expansion to Indonesia For Now
AsiaCommerce provides several services such as comprehensive market research, arranging partnerships in local industry, and creating sales programs based on market research.
Our Market Insight Research, Business Partnership Engagement, and Business Registration and Establishment services can help you expand and develop your business, register and establish your products and company.
Our strategy consulting services domain focuses on supporting private sector clients with comprehensive and specialized development regarding the company’s needs and also on the public sector for a broader scope.
If you’re interested in exploring market opportunities in Indonesia, visit our service page for more information. Our team will work with you every step of the way, from finding a supplier, shipping door-to-door, and handling import documents to ensure your success in importing from Indonesia.
Entrepreneurs can find themselves hitting a brick wall when it comes time to source products. Whether you plan on manufacturing something of your own or finding suppliers to purchase from wholesale, good products aren’t always easy to find. The basics of sourcing a supplier for your next project focus on finding a manufacturer, deciding whether it’s better to work with manufacturers near you or abroad, and evaluating if a manufacturer is legitimate. There are a variety of places and ways to search for manufacturers before you examine how you should approach them. Learn more about how to find great manufacturers in Indonesia from this article.
What is a Manufacturer?
A manufacturer is any business that produces finished goods from raw materials. They sell these goods to consumers, wholesalers, distributors, retailers, and other manufacturers wanting to create more complex items.
Manufacturers typically stick to one type of product. For example, you could work with a glassware manufacturer who creates glass bottles and jars. You could work with one manufacturer for cardboard boxes and another for plastic or natural products. Retailers often work with multiple manufacturers at once to create an inventory for their product store.
Is a Manufacturer a Supplier?
Suppliers refer to anyone who can provide you with products and inventory. This encompasses manufacturers, wholesalers, and distributors. There are a ton of helpful resources online that you can find through Google. But before you begin, there are a few things you need to know and decide. You should figure out what type of supplier you’re looking for, which could depend on your e-commerce business model. This will help determine the terminology you need to use in your research. There are several supplier options, the most common being:
- A manufacturer that produces your product idea
- A supplier (who may also be a manufacturer), wholesaler, or distributor who purchases already-existing brands and products
- A dropshipping company that supplies products and fulfills orders of already-existing brands and products
Problems with Finding Manufacturers in Indonesia
There is an option for foreign investors to do business in Indonesia without establishing a foreign direct investment company. It is by finding local manufacturers in Indonesia to import and distribute your goods to your country through direct exporting.
However, it is not always easy for foreigners to deal with Indonesian manufacturers due to Indonesian archipelagic nature, red tapes and business culture. By engaging local manufacturers in Indonesia, many foreigners have the goals to earn the maximum profit, cut down costs, and enhance the overall product flow and quality. Read on to know more about common problems with finding manufacturer in Indonesia and how you can begin solving them.
1. Lack of Online Resources to Find Manufacturers in Indonesia
It is harder than you think to actually find Indonesian manufacturers online, even though the Internet has advanced greatly in the country. This is because most of the companies in Indonesia are still relatively traditional and do not rely on the Internet very much.
Even when some companies do have websites, it is still difficult to find on the Internet due to the lack of optimization. Moreover, some of the information provided on the website may also be outdated.
2. Language Barrier
Overcoming the language barrier when finding and dealing with Indonesian manufactueres is one of the biggest challenges most foreigners are likely to encounter when starting a direct exporting business. It can be overwhelming and extremely challenging because English is the main language used by many foreigners for all sorts of communications and paperwork.
However, most Indonesians do not speak much English, and the lack of English skills can be more obvious outside of major cities. Therefore, you will need an Indonesian consultant or someone who is fluent in both Indonesian and English to avoid any miscommunications, especially when it comes to signing agreements.
3. Inaccurate Goods Quality
Foreign investors may find the quality of goods to be subpar or even bad when the shipment has arrived. These poor quality products are not what they expect and do not meet the requirements they have agreed with the local manufacturers.
This issue is not uncommon in Indonesia but it can be avoided through adequate quality control and spotting potential quality gaps before it happens. It is a good idea to have a local representative to conduct scheduled quality checks and report any discrepancies before the products are shipped.
4. You Will Only Get a Reply if You are Lucky
If you happen to be able to get the information and contact of a manufacturers in Indonesia that you would like to partner with, you will need to understand that a lack of manufacturer’s responsiveness is a common issue for most foreigners.
Partly due to their business culture, most Indonesian businesses take things slowly and will not reply to your enquiry right away. And if the enquiry is sent by email, the probability of getting a reply is much lower due to the lack of utilisation on the Internet.
Furthermore, Indonesian businesses do not bother to deal with someone whom they have never met before. If you need a quick response, calling directly or meeting in person is the most reliable way.
Challenges in Manufacturing Industry in Indonesia
The manufacturing industry is a business group that is engaged in processing materials into semi-finished goods or finished goods so that the price of an item increases. Inside there are various companies that produce different items.
In Indonesia, the development of this industry continues to increase, giving a significant impact. However, this does not mean that the manufacturing industry has no obstacles. There are various challenges in the manufacturing industry faced in Indonesia. What is that? Let’s break it down!
1. Prediction of Product Demand
One of the main problems that are often faced by today’s manufacturing industry is the difficulty of predicting customer demand. This could be due to the absence of a sophisticated reporting system with tools to predict the goods they sell for some time to come. As a result, the product produced is not in accordance with the request.
2. The Control of Inventory
It is not only that controlling the existing inventory system is a challenge for companies engaged in manufacturing in Indonesia. Although there are currently various technologies that make the supply process simpler, some small industries have not been able to run this technology because of the high costs that must be incurred.
3. Increased Return on Investment (ROI)
It is undieniable that ROI or return on investment is the main focus of all companies. Every company has its own goals in increasing ROI where the steps often are taken by increasing production or increasing the value of a product.
Unfortunately, this step is not effective especially with economic conditions that are often uncertain. As a result, the existing products did not sell because of the ability of consumers to buy products also declined.
4. Management of Sales Prospects
In addition to predictions of product demand, management and sales prospects are a challenge for the manufacturing industry. Because the company often makes prospects in the same way.
Though each prospect has a different character, needs, and preferences. Companies also often have difficulty in identifying prospects that have the potential to generate more value so that they only focus on things that have no opportunity.
5. The Increasing of Qualified Workers
It cannot be denied if the use of machinery in the production system replaces the role of employees in the company but it does not mean that human power has been replaced by a machine. However, the ability of human resources is still needed to analyze and solve problems that exist in the production chain.
The problem that occurs is the lack of a qualified workforce so that not a few companies require additional employees. Therefore, companies need to do creative ways to recruit qualified employees, for example using online media to announce job vacancies.
6. Development of In-Factory Efficiency
Finally, another problem often faced by companies in the development of efficiency within the factory. It is because the budget must be spent to improve the efficiency of performance in the factory is high.
One of the most efficient manufacturing factory which has proper locations in Indonesia is Karawang New Industry City (KNIC). This area is located in West Java carries many advantages including world-class integrated technology and systems so that the presence of world-class infrastructure is in this place.
Various developments in the latest technology trends continue to be carried out by companies in KNIC to increase efficiency in order to meet consumer demand. The strategic location near the toll road, Jabodetabek LRT, train station, airport, and port makes it easy to deliver goods everywhere.
Besides aiming to support the performance of a manufacturing company, KNIC is also present to support the acceleration of regional economic growth and to present a multiplier effect that is useful for socio-economic development in Karawang and areas in the West Java region.
3 Steps for Finding Manufacturers in Indonesia
With the increasing production costs in China, the number of buyers diversifying their sourcing destinations to other Southeast Asian countries has risen dramatically and Indonesia has become one of the preferred import countries manufacturing Footwear, Textiles, Furniture, Electrical and electronic equipment, Rubbers, Handcrafts and Agriculture. If you are also interested in producing your products in Indonesia, here are 3 useful steps to find manufacturers in Indonesia.
1. Sourcing Websites & Platforms in Indonesia
The first step to taking advantage of the Indonesian production industry is to find yourself some supplier options. And the two easiest and quickest ways are through sourcing websites and tradeshows. Due to the current travel concerns that the world faces today, connecting through online platforms is an amazing option that was challenging for buyers to do even five years ago. Here’s a list of three online websites/platforms to help get you started.
2. Sourcing Manufacturers in Indonesia via Tradeshows
For those of you who aren’t held back by travel restrictions or concerns, attending tradeshows is one of the greatest tools that connect suppliers to buyers. It gives each side the opportunity to develop an immediate face-to-face connection, which has the potential to build a great business relationship for generations to come. If you have the capability to enjoy a casual business trip to Indonesia, the end of this article has a few tradeshows you could look into attending.
3. More Easier to Find Manufacturers in Indonesia with AsiaCommerce
It is more easier to use AsiaCommerce services than looking for a local manufacturers in Indonesia on your own. Our process is convenient and hassle-free :
- Submit your request and product details to our Customer Support.
- AsiaCommerce conducts a business development analysis with selected local manufacturers and our business channels.
- AsiaCommerce contacts and negotiates with the chosen manufacturer or partner.
- AsiaCommerce then plan for any required processes such as consultation, translation, reports, business follow-up, etc.
- AsiaCommerce ensures the on-going good communication with the suppliers and the monitoring of your product quality.
AsiaCommerce Ready to Help You Find Great Manufacturers in Indonesia
AsiaCommerce is ready to help you find the right manufacturer for your company. Our experienced team uses a wide range of qualitative and quantitative research methods, including surveys, focus groups, and interviews, to provide our clients with comprehensive insights and recommendations. We have channels to introduce you to our business partner in the manufacturer. We will support your company to initiate and expand to Indonesia market.
If you’re interested in sourcing products or finding great manufacturers in Indonesia, visit our service page for more information. Our team will work with you every step of the way, from initial market research to developing a customized market entry strategy, to ensure your success in Indonesia market.