E-commerce logistics system for Indonesia’s cinnamon exports

Abstract

Indonesia is a primary world cinnamon exporter, half of the world’s consumption is supplied by Indonesia. From every retail transaction, some 25% goes to the farmers. Farmers do not have so much benefit from the increasing export price. The rise of e-commerce seems to be a promising instrument. This e-commerce grows rapidly particularly in Indonesia. The improving internet connection speed and bandwidth results in a growth of internet users. The aim of the study is to investigate the viability of improving logistic system by using e-commerce for export. The case study is the cinnamon export from Padang to Baltimore, with annual demand of 21 ton. At present, the delivery of cinnamon from the farmer to end user takes in average 59 days with a shipment cost of IDR 113,000/kg (USD 7.94/kg). By using e-commerce, a small size delivery could be shorter, namely only nine days, with a shipment cost of IDR 299,300/kg (USD 21.04/kg). Considering the frequency of shipments, cash flow, and deteriorating quality and price for a long shipment, it is found out that e-commerce is very promising alternative for cinnamon export, where the total point-to-point shipment would cut by half. For large shipments by exporters, a substantial benefit is obtained from a shorter delivery time of 29 days, with the same unit shipment cost. It is obtained that marketplace scenario is the most optimum with total logistics cost and time for about IDR 113,000/kg (USD 7.94/kg) and 9 days respectively.