Today in this episode, we have a very special guest: Budi Handoko, co-founder and COO of Shipper, which celebrates its 4th year anniversary this week! Through his and co-founder and CEO Phil Opamuratawongse’s leadership, the company has become a juggernaut in Indonesia logistics with the largest tech-enabled logistics network composed of warehouses, micro-fulfillment centers, and agents all across the country, all powered through Shipper’s proprietary technology. We had the pleasure of talking to Phil in Season 1, and today we get to hear Budi’s perspective as a former ecommerce seller, software engineer, serial entrepreneur, and COO on Shipper’s tremendous growth and the impact they are making for Indonesia’s logistics.
Highlights and Timestamps
- 00:26 Paulo introduces Budi;
- 01:24 Indonesian logistics in 2016 and why Budi started Shipper; “With the growth of [ecommerce] there’s always two things that follow, one is payments. The other one is logistics. And coming from the payments background, I kind of knew what was going to happen…logistics was not really touched at that time. And I believed I had a real chance to actually solve real problems there.”
- 03:37 Impact of Shipper on Indonesian logistics; “…in terms of the broad e-commerce logistics, we can see that warehousing has become a solution for some people…one of the solutions is actually to lease your own warehouse and actually manage everything, which can be costly…So the second way is actually to let [Shipper] do it.”
- 06:38 Biggest learning as Shipper celebrates its 4th year anniversary; “…that kind of learning curve eventually made me a better person, and the company a better company, in handling these team members.”
- 07:23 The evolution of Shipper’s network; “…as we grow, people might ask if that means the agent network will be impacted. But…because everyday there’ll be more and more online sellers that come on board…the agent network businesses won’t be impacted, while the larger businesses come to our warehouse…”
- 09:37 The logistics needs of smaller sellers versus larger businesses; “For small businesses, their problem is actually, how do they scale up?…Meanwhile, for the larger businesses, all they want is efficiency.”
- 11:08 Story of a small business growing with Shipper; “Now they’ve grown into quite a sizable business and they still can do the same thing. They have some time to spend with their family. Those are the kinds of things that we believe give an impact to our customers.”
- 12:17 Behind the acquisitions of Pakde and Porter; “Instead of us building the same thing…we thought, “Hey, we should just work together to build that agent network. So, we can save some time and win the market faster.””
- 13:27 Thoughts on M&A in Indonesia’s ecommerce logistics; “[For] a lot of logistics companies, it’s hard for them to do M&A mainly because there’s no technology integration. So everybody has their own software.”
- 14:14 Evolution of Shipper’s tech stack; “A lot of the tech is actually built to suit [our] offline needs…if we assume that whatever we design as a software [we implement] without [considering] the physical or offline experience, it will not work very well from our experience.”
- 15:40 Biggest barriers in Indonesia’s ecommerce logistics today; “The elephant in the room is the expensive cost…it’s also highly dependent on the infrastructure in the destination as well.”
- 17:06 Influence of Budi’s past ventures on Shipper; “Trust and partnerships is one thing that we build a lot in Shipper as well.”
- 19:05 Shipper’s next five years; “In the next five years, we’ll come a lot closer to becoming Amazon Prime in Indonesia.”
- 20:03 Rapid Fire Round;
About our guest
Budi is a serial entrepreneur, having founded and exited several fintech, consumer, and commerce startups over the past 10 years prior to founding Shipper in 2016. He is also an engineer by profession, having worked at several early internet companies before starting his entrepreneurial career. He is also an Alibaba eFounders Fellow and most recently joined the Gen T Asia list for his contributions to Indonesian logistics.
Paulo: How are you doing today, Budi?
Budi: I’m great. I’m great. I’m actually traveling, but it’s a good thing to always have something else.
Paulo: Great to know that you’re safe as you’re traveling. Once again, a pleasure to have you on the show. So I’d like to start things off by having our audience learn more about what the Indonesian logistics landscape was like when you initially started Shipper right back in 2016? And how did you decide to eventually start this company?
Budi: So, 2016 is almost six years ago. It seems to be [so] long ago. But, as a matter of fact, I think we have grown so much in terms of the way logistics works. During that time, 2015, 2016, I had problems actually in shipping my own products. I was trying to sell online to ship a particular product. It took me ages then to go to a particular logistics agent and offline store where I need to line up, because there’s actually a long queue. And I believe that there was a [time] even earlier that I had to fill out the paperwork, like just a manual form, just like when you go to the bank and make a deposit or withdrawal.
So imagine that was the situation at that time, and I had to line up for about an hour before I got served, then not to mention the travel time to go back to my house. The whole shipping process actually takes a while. And at that time ecommerce was still growing. It was just getting started, and imagine, if the logistics in Indonesia, if they had to grow 10x or 20x or 100x from there, imagine what will be the logistics backlog or bottleneck, for that to happen.
So, because of that, I believe there is a real problem here that we need to resolve. How do we make sure that all the people who actually sell online don’t have any problems in dealing with logistics companies, especially the first mile? And I’ll explain a little later why the first mile is very important as well. And then how can we actually have a single platform because we are selling from multiple locations? How do we actually track or look at all of the orders from one single platform, which is very important as well? And that’s how Shipper started. We believe that there’s actually something we can build, something meaningful here to solve all those problems.
Number two is that I also believe that with the growth of [ecommerce] there are always two things that follow, one is payments. The other one is logistics. And coming from the payments background, I kind of knew what was going to happen. So I also believe that logistics was not really touched at that time. And I believed I had a real chance to actually solve real problems there.
“With the growth of [ecommerce] there’s always two things that follow, one is payments. The other one is logistics. And coming from the payments background, I kind of knew what was going to happen…logistics was not really touched at that time. And I believed I had a real chance to actually solve real problems there.”
Paulo: One thing that we regularly see when we talk to founders on the show is that a lot of the companies that they start really stem from personal experiences and yourself, being an e-commerce seller five years ago, really went through that whole traditional process with the paperwork, and now Shipper has been changing that for thousands of customers across 30 plus cities in the country. It certainly has grown a long way from five years ago. So we’d love for you to share, fast forward to today, how has the landscape changed from what you’ve described earlier and what has been Shipper’s biggest impact would you say in terms of this rapid evolution of e-commerce and logistics in the country?
Budi: One thing there that is obvious is the bottleneck in going to the logistics office. I mean, at that time [when we started], there’s no pickups. People have to deliver everything, even when they have a van full of products, they have to drive to the logistics agents with a box full of products, and have to go through the same queuing process too. Imagine, one parcel takes one hour. I don’t know what’s going to happen with a hundred boxes. So I think that has changed a lot, meaning that, the last mile logistics players, they also see the same problem, so some of them already started to offer the pickup solution as well. I think that was the most common [change] and we actually do a lot of our own pickups to be passed onto all these third-party logistics as well.
Secondly, I believe in terms of technology, it has grown a lot. A lot of the shipping data has been transformed. It’s no longer a manual process that I have to fill up [paperwork] and then input [the data], but everything is actually already integrated. So the orders are coming into sales channels and everything is already inputted. So there’s nothing that we need to do except print labels and we stick the shipping label to the parcels for the delivery. I believe that with what we do at the moment, I think there is a solution where we track all the shipping within one platform. So that’s how technology in the shipping front has changed.
And obviously, in terms of the broad e-commerce logistics, we can see that warehousing has become a solution for some people, because as you expect, people grow their business in ecommerce sales where they used to fulfill from the house, and obviously when [the business] grows, the house cannot fit the products anymore. So then they have to find a solution.
So one of the solutions is actually to lease your own warehouse and actually manage everything, which can be costly because well, you have to focus on the marketing, you’ve got to still operate a warehouse and normally with warehouse lease or rental, you’ve got to pay a full year ahead. You gotta put on a lot of CAPEX and also manpower and there’s also the risk of losing items as well. And not to mention the management of the fulfillment: when you have errors, the impact is not only in money, but also in trust and level of loyalty to customers.
So the second way is actually to let [Shipper] do it. So we have shared warehouses. We have everything, all the systems integrated to our metabase as well. When we receive orders, we just pick [them up] and pack them for you. And the cost is only chargeable per order So it doesn’t really cost you a lot of money to do that. These have been I think the most [apparent] changes in e-commerce logistics.
“…in terms of the broad e-commerce logistics, we can see that warehousing has become a solution for some people…one of the solutions is actually to lease your own warehouse and actually manage everything, which can be costly…So the second way is actually to let [Shipper] do it.”
Paulo: So Shipper is celebrating its fourth year anniversary. And it’s certainly been a great four years for the company. I wanted to ask what’s the biggest lesson that you’ve learned from these past four years, running Shipper and growing Shipper to where it is today?
Budi: One thing that keeps me in the learning process is actually building a team. I still remember building the team from a team of five to 30, to 100,150, 200, now 450 to 500. We also have 2000 people on the ground too. So I think that kind of scale actually gives me different problems every day. So when we had five people, the problem that we’re dealing with is different than when we had 30 people or 100 people. And I believe that kind of learning curve eventually made me a better person, and the company a better company, in handling these team members. Learning how to manage the team is actually the most important lesson for us.
“…that kind of learning curve eventually made me a better person, and the company a better company, in handling these team members.”
Paulo: Shipper’s platform has evolved as well several times since 2016, initially starting as an online dashboard, aggregating all of these logistics players, then adding an agent network. And then, as you’ve talked about [awhile ago], most recently also adding in warehousing. So could you run our audience through these various layers and how they play into the first mile logistics needs of SMEs and even larger companies?
Budi: The first part is the dashboard, where you can actually monitor all the shipping within one platform basically. We have about 40 3PLs integrated, so you can pick and choose any of them for the shipping, and you can take all the orders within that particular platform. That’s the beauty of that. Customers can just go to their account and change their shipping [provider] as well.
And secondly, in terms of the agents’ network, when we built this platform, we believed that pickup is actually one of the most important things besides the data. For the pickups, there’s two ways of doing that. We [could] have our own drivers and we just assign them to pick up, which can be costly and can be inefficient. That’s why we have built our own “mitra” or this is called agent’s network where they will help us to pick up with a revenue sharing basis. So there’s no fixed salary or fixed cost for that. That’s how we have evolved. We get the data, we get the shipping, then we can see that, “Hey, they actually need pick up.” So we built an agent network.
The third piece, warehousing is [due to the reality], as I explained earlier, that the growth of e-commerce actually has been quite good for certain customers and they need some fulfillment services, so then they would store goods in our warehouse.
And obviously, as we grow, people might ask if that means the agent network will be impacted. But I don’t think so because every day there’ll be more and more online sellers that come on board. So the agent network businesses won’t be impacted, while the larger businesses come to our warehouse, mainly because the agent network has limitations in capability. They’re not able to deliver 50 parcels or 100 parcels at one point because they are using motorbikes. So they become a problem in the SLA and that’s why we believe with warehousing solutions those [issues] can be resolved.
“…as we grow, people might ask if that means the agent network will be impacted. But I don’t think so because everyday there’ll be more and more online sellers that come on board. So the agent network businesses won’t be impacted, while the larger businesses come to our warehouse…”
Paulo: The progression has been really intuitive. And I like what you said about how, even as the businesses [you work with] are growing and you’re accommodating them with warehousing solutions, there’s still that funnel of newer businesses joining the internet economy that will still avail of the agent network which you started years earlier.
And speaking of accommodating larger businesses and growing businesses in ecommerce, what has been the challenge working with them and incorporating warehousing into this logistics network?
Budi: Small businesses and large businesses that have different problems. For small businesses, their problem is actually, how do they scale up? How do they make sure that they actually focus on the marketing, focus on the sales or adding new products without worrying about the logistics piece?
Meanwhile, for the larger businesses, all they want is efficiency. They start looking into efficiency. They start looking into data integrity. They start looking into real SLA. They start looking into the satisfaction of the customer as well. So we’ve worked with different larger businesses. One of the examples is Matahari.com, where we actually manage all their ecommerce fulfillment, from our facility in Balaraja. And the metrics that we are talking about are different from the smaller sellers. And a lot of those are mostly just because they’re different business scales.
So I think besides serving these small to medium enterprises, we also serve the larger customers which require warehousing. These businesses also have two kinds of businesses: ecommerce fulfillment, which is normal traditional ecommerce, but they also have their other fulfillment, which is a B2B business. So that is also another sector where we add value to our customers, so that they actually don’t need to rent big, full warehouses for their B2B businesses. They can run a small portion at our shared warehouse, but they can still run their B2B businesses, while using our service too.
“For small businesses, their problem is actually, how do they scale up?…Meanwhile, for the larger businesses, all they want is efficiency.”
Paulo: You’ve been sharing a lot of examples, which is really great, because our audience really loves to hear a lot of these customer scenarios or customer stories. Do you have one in particular that relates to what you’ve been talking about where you have these businesses join Shipper earlier on a few years back and then grew with Shipper as well? Initially, probably they were just doing small fulfillment, but then as they grew and as Shipper also went into warehousing they also availed of those services as well.
Budi: We do have some fashion brands that have been growing with us. So I remember there’s one customer that started from their own house, and from the very first day, we helped them to do the pickups and we have them to ship. Then a few months after that, when [the owner] had her daughter’s birthday, she told us that, “Hey, this is the first time I can celebrate my birthday, my daughter, would you like to come?” Because they had never had time to do that before.
Now they’ve grown into quite a sizable business and they still can do the same thing. They have some time to spend with their family. Those are the kinds of things that we believe give an impact to our customers.
“Now they’ve grown into quite a sizable business and they still can do the same thing. They have some time to spend with their family. Those are the kinds of things that we believe give an impact to our customers.”
Paulo: People don’t really associate logistics companies with families being able to celebrate birthdays, but that’s really the impact that you guys have in terms of freeing up time for these entrepreneurs to be able to really focus on things that matter to them.
I’d like to shift gears a little bit and talk about something that has happened since we had our conversation with Phil last year, which is Shipper’s acquisition of two logistics startups in Indonesia, Pakde and Porter. So how have these acquisitions shaped up Shipper’s network?
Budi: We would trial warehousing beforehand ourselves. The challenge for that would be actually to have the know-how and also the tech stack that we need to run that operation. When we looked at Pakde, we were working together at the beginning where we helped them with the shipping. Then we realized that we could actually work together tighter to actually do fulfillment. We could see there’s a lot of synergies there. And I think that’s how the conversations started. We actually met the Pakde founders through the introduction of people that we met on a plane. I think it was destined to be for us to work together.
And for Porter, we see that they had actually very strong shipping and because they were building the same thing — building shipping networks and agent networks. Instead of us building the same thing — it’s a waste of time and resources, we thought, “Hey, we should just work together to build that agent network. So, we can save some time and win the market faster.” That was the whole idea around the acquisition.
“Instead of us building the same thing…we thought, “Hey, we should just work together to build that agent network. So, we can save some time and win the market faster.””
Paulo: Do you see more of these happening moving forward, in terms of actual acquisitions, as opposed to partnerships, for example, when it comes to e-commerce logistics in Indonesia?
Budi: I think broadly M&A will happen for the whole logistics space, because there’s a lot of things to do. And when we have a lot of logistics companies, it’s hard for them to do M&A mainly because there’s no technology integration. So everybody has their own software. They have their own piece and they might not even have software, but as we grow our tech stack, we can see that there’s potential like this type of M&A will happen again, but in particular, we don’t have anything specific. We don’t have any target, like, “Hey, we should go and buy this, or we’re going to acquire this company.” We look at the opportunity. We look at what comes and we will decide accordingly, and we’ll see how each entity can add value to our company in the long run.
“[For] a lot of logistics companies, it’s hard for them to do M&A mainly because there’s no technology integration. So everybody has their own software.”
Paulo: Being COO, one thing I wanted to ask is also your perspective on Shipper’s tech stack. And with your background as an engineer, how has it evolved alongside the offline aspect, which is the agents and the warehouse as well?
Budi: In true startup spirit, the tech stack that we built at the beginning was just an MVP and we just needed to make sure that it’s running and it’s running well, but along the way, when we scale up, there were problems in actually scaling up. So we had a lot of trouble earlier where servers were down or we had people unable to input orders.
Because of that, we started to focus a lot on our tech stack to solve the basic problem of how do we make sure that we can scale up? So we built a proper technology team, not that it wasn’t built properly before, but it’s more of hiring skillful people who are better than me. And when we build products, now we actually do see where we want to be and how we built the infrastructure. A lot of the tech is actually built to suit offline needs. Otherwise, if we assume that whatever we design as a software [we implement] without [considering] the physical or offline experience, it will not work very well from our experience.
So the tech stack will evolve a lot, [but it also] depends on the offline model that we have. And obviously, as we scale up the networks, we have been preparing the technology for that already. So we don’t have to do a lot of repetition.
“A lot of the tech is actually built to suit [our] offline needs…if we assume that whatever we design as a software [we implement] without [considering] the physical or offline experience, it will not work very well from our experience.”
Paulo: It really makes sense that you make sure it aligns very well with the offline network that you’re building. I wanted to shift gears again and talk about what Phil mentioned in the podcast with us last year, that there’s still a long way to go in terms of how e-commerce logistics develop in Indonesia. And so, from your perspective, what do you think are still some of the biggest barriers to e-commerce logistics in Indonesia?
Budi: The elephant in the room is the expensive cost. I think it’s still there. It’s actually a big problem to solve. There are some working solutions to that already, but I think it will take time to implement that, and it’s also highly dependent on the infrastructure in the destination as well. So I believe that the timeline to that solution, gradually it will be done, but it will take at least three to five years to do that.
The other issues that are normally happening — one is, the COD (cash-on-delivery). From a customer perspective, you don’t see a lot of problems. The problem is actually happening on the 3PL [side]. Naturally, they suffer a lot. They’ve burned a lot through anything that happens in the COD process like fraudulent [transactions], or maybe lost parcels — they just have to [recuperate] the cost — also for lost money [not] collected.
The third point is the returns. Return delivery is still one thing that needs a lot of solving. Trust is actually one thing, right, so we need to make sure that we’re able to build the trust level that whatever the customer returns is actually what they received before. And that the challenge is how do we do that? That is going to be the next space of solutions.
“The elephant in the room is the expensive cost…it’s also highly dependent on the infrastructure in the destination as well.”
Paulo: One thing I noticed is that at least the last few problems that you mentioned are very behavioral, and very much tied to behavior that we can see very commonly, not just in Indonesia, but Southeast Asia in general.
One thing I wanted to ask also is about your past experience. I mentioned earlier in the introduction that you’ve founded and exited several startups in different spaces. And so having worked on those companies, how has that influenced your leadership approach when it comes to Shipper?
Budi: There are two things actually. One is actually how the previous businesses [I started and worked at] impacted the decision to build Shipper. Secondly is leadership. I think [as for] the decision to build Shipper — I was in a payment aggregator before. It’s a Malaysian company called MOL and they were acquired by Razer after.
So my business was acquired by MOL and MOL was acquired by Razer. So in there I actually learned about aggregator businesses. Who are the stakeholders? How do we satisfy each of those stakeholders? How do we make sure that the whole ecosystem will work? It’s the basic [foundations] of Shipper.
I think in terms of leadership, we believe in partnership. How do we make sure that we are always working together with all the stakeholders, to make sure that we don’t blame other people for anything that happens, that they always have to come to us because in terms of the payments, it’s all about trust.
So, when we deal with money, I always have to look at ourselves and see, what have we done wrong? Why is this money problem happening? How do we make sure that we transfer all the money within that ecosystem well? That is actually a very important building trust within that ecosystem through partnerships.
Trust and partnerships are one thing that we build a lot in Shipper as well. Phil and I value this trust and that’s what we share with all the team members. No matter what, we gotta be open and transparent, so there’s no office politics, just voice out your opinion. So those are the values that I get from previous experience.
“Trust and partnerships is one thing that we build a lot in Shipper as well.”
Paulo: Trust and partnership are really written across the whole story of Shipper, working with different stakeholders and even Phil joining the company later on, in what turned out to be a really great partnership between the two of you, and the trust that you build with the customers as well. Another thing that I find interesting in what you said is that we find a lot of commonalities between financial services and logistics as well — the way that these pain points are being addressed by aggregating different players together, different services together on platform companies.
So it’s been five years since you founded Shipper. One thing that we always ask our guests is where do you see your company in the next five years. So where do you see Shipper in the next five years, especially in the context of what we’ve been discussing when it comes to Indonesia’s e-commerce logistics landscape?
Budi: I think in the next five years, we’ll come a lot closer to becoming Amazon Prime in Indonesia. That’s the dream we’re building. So, I think in the next five years, I mean, we can see our solution actually being used across islands, across countries, and across regions too. So we could be looking at how these different regions are interconnected within our networks as well, and we would also be able to offer real cheap, logistics solutions. When I mentioned the logistics cost being so expensive, I think hopefully in the next five years we should be able to [solve] that.
‘In the next five years, we’ll come a lot closer to becoming Amazon Prime in Indonesia.”
Rapid Fire Round
Q: What are the top 3 skills a COO should have?
Budi: Be a good listener to your team. Build trust for your team as well because you need to start leveraging a lot of work. You cannot just do it yourself. And number three is actually get involved in a product pipeline in all the departments where you need to know everything.
Q: What is the biggest misconception that people have about logistics technology in Indonesia?
Budi: They think logistics technology is purely just technology, but we have some operation involvement as well. It’s not as simple as logistics technology.
Q: What is the biggest challenge hiring engineers in Indonesia?
Budi: It’s actually finding the really good engineers. We can see that there’s a lot of tech companies in Indonesia here. People are working there, but the fact is after they work there it doesn’t mean that they’re really good. So we really have to find the best talent to work with. And it’s not enough in Indonesia.
Q: Any advice for early-stage tech founders raising their first round?
Budi: I think the most important thing, especially in the first round of funding, actually falls into two things. One is actually the founders. Number two is actually the dream or the vision. So if you actually don’t have a very strong profile I suggest that you build your profile first like what I did. I wasn’t very popular in Indonesia. I mean, nobody knew me. So I actually joined a lot of competitions, to make sure that the concept was validated as well, and also learn a lot of ways to practice pitching. Number two, about vision and dream — vision and dream are very important when you build a company even before funding, because that’s how you sell the dream to your employees so I think building that kind of dream is super important. and if you can sell the dream to your employees, I think there’s a good chance you could sell the dream to investors as well.
Q: We’ve all been students once (and always are arguably) — most memorable class you’ve been in?
Budi: It was when I went to the Alibaba e-Founders fellowship program in Hangzhou, when I met Jack Ma. That’s where he actually shared a lot of life advice as an entrepreneur.
Q: What was the best advice you still remember from that time?
Budi: When you build a startup, when you’re at an early stage, you’re like riding a horse very slowly, but as you grow, you grow faster and the horse is faster and faster and you have to be careful because once you fall down, it will hurt you a lot.
Q: When you started shipper you were also an ecommerce seller as well. What were you selling at the time? And if you were to start an ecommerce business today, what kind of product would you be selling?
Budi: I was selling fashion stuff. And today, I think fashion would still be one, fashion or fashion accessories, mainly because there’s a lot of variety, so that there’s a lot of accommodation that I can do for that.
Q: What do you do to de-stress?
Budi: I think that as an entrepreneur, how to deal with stress is an art. For me, I have practiced that art because of the practice that I did in religion, where I learned that everything is not permanent. So I know that everything that happens in the company, whether that is a bad thing or whether it’s a good thing, it’s not something that’s permanent. It will come and go away. So when things are running very well, I always remind myself that I can’t enjoy too much but when we are in that position good things will come as long as we solve the problems here, and don’t get too attached to the problem, but really understand what the problem is and how to solve it.