Evaluation of Third-Party Logistics Readiness for Fruitvale in Malaysia

This research evaluates the readiness of third-party logistics in Malaysia to serve Fruitvale, a local fruit distributor. It identifies the problem statement and expectations of Fruitvale towards third-party logistics. The study aims to help both the potential third-party logistics partner and Fruitvale to develop mutual understanding and strategic management to improve for future business development in Malaysia.

Chapter 1 INTRODUCTION – 10% (5/07/2019 – 2500 words)
1.1 Introduction
There are numerous studies and research papers in the past to study the selection
criterion, benefits and the complications of third-party logistics in dealing with the
global supply chain management (Kwong Yeung et al. 2012). These papers have
concluded that third-party logistics are playing essential roles in the organization to
survive in this globalize competitive marketplace.
One of Malaysia local fruit distributor – Fruitvale has been selected as a case study
for this research. The purpose of this research is to evaluate the readiness of the
third-party logistics industry in Malaysia to serve Fruitvale. This paper aims to
identify the problem statement and expectations of Fruitvale towards third-party
logistic.
Subsequently, a thorough literature review will be conducted to analyse the problem
statement and propose third-party logistic selection criterion as a resolution to
Fruitvale. One set of quantitative survey questionnaire will be generated, and the
target sampling population are the registered members of Federation of Malaysia
Freight Forwarders Association (FMFF).
To conclude, the findings of this research study aims to help both the potential third-
party logistics partner and Fruitvale to develop mutual understanding and strategic
management to improve for future business development in Malaysia.
Keywords: outsourcing, third-party logistics, fruit logistics, warehouse, distribution
and logistics expertise
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1.2 Background
Fruitvale was established in the year 2005 and located at the capital of Malaysia -
Kuala Lumpur. Fruitvale will import fresh fruits from Thailand, Australia, China and
Vietnam. Then to re-pack and distribute the fruits locally from Northern to Southern
region as well as East Malaysia.
They trade a variety of fruits which including; grapes, apples, pears, melons, cherry,
and kiwi. The business objective is to provide variety, best quality and competitive
price of fresh fruits to the customers. They concentrate on major hypermarket,
supermarket, wholesalers, and local retailers as their target market (Fernie and
Sparks 2018).
Fruitvale did outsource transport and warehouse management to third-party logistic
in the year 2011. Regrettably, it was a terrible experience that carried delivery failure
and customer dissatisfaction. Sales and operation team of the third-party logistics
are confident with sufficient knowledge to handle fruits. However, the knowledge
especially standard operating procedures stopped midway, didn’t reach down to the
ground handler of the warehouse and transport division.
Most of third-party logistics have faulty thought that perishable logistics handling is
as secure as the general cargo. They have neglected the high perishable risk of
goods rejection, fruits contamination with the short product life cycle. Moreover,
Fruitvale perceived the importance of fruits hygiene, safety, and order lead time
which will positively affect the brand image, number of sales and fruit freshness.
These factors have lead Fruitvale to internally invest for advanced cold room facility
and several refrigerated trucking to guarantee the level of customer satisfaction.
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1.3 Problem Statement
Recently, Fruitvale’s management has decided to expand its business target market
beyond local to the other ASEAN countries. Business expansion (Surugiu and
Surugiu 2015) requires a higher level of inventory, larger warehouse capacity and
advanced information technology system to conduct effective supply chain
management.
Fruitvale’s management foresees its existing resources and capacity is inadequate
to the incoming overseas order. Insufficient funds with high investment risk have
pushed them to consider outsourcing. They are planning to outsource the non-
expertise area, which is foreign distribution, cargo consolidation, customs clearance,
and inventory management to third-party.
Besides that, Fruitvale is considering to outsource order fulfilment management so
that they could expand the geographical coverage and speed up the delivery lead
time (ILO 2016). In the present market condition, the consumer has magnified their
expectations for shorter lead time, a lower-price cost with a better quality product.
Based on (Mohamed Syazwan and Abu Bakar 2014) in short supply of
professionals in the logistic industry and lack of collaboration efforts between logistic
parties has mostly affected the development of the third-party logistics industry in
Malaysia. Additionally, the fresh food supply chain is getting complicated by the
recent consumer concerns on food hygiene, safety, and food quality (Balaji et al.
2016).
Nevertheless, an improvement in the method of fruits preservation, the reduction of
trade barriers and investment in specialised port terminals have led to spectacular
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growth in the trade of fresh fruits since the twentieth century (Malorgio and Felice
2014).
According to (Gowri Vijayan et al. 2014) fruits inventory is facing many supply chain
challenges which are lack of information technology system, continuous rack
replenishment and stock forecasting. Fruitvale’s target market is demanding for a
broader range of fruit variety with a short product life cycle. It requires a higher level
of holding inventory to occupy the continuous rack replenishment and time-sensitive
delivery to their local and overseas market (Xu Yang 2014).
According to Fruitvale’s management team, they faced plenty of fruit losses through
supply chain process because of lack of cold storage facility, lack of handling
training and lack of standardized quality control procedure. Furthermore, lack of
traceability system, ineffective demand management (Balaji and Arshinder 2016)
and a large number of intermediaries in between supply chain has enlarged the risk
of fruits supply chain management.
The highlighted problem statement and potential risk of fruit logistic have escalated
Fruitvale’s challenging to hunt for business survival and differentiation. All these
should have included in consideration of third-party logistic as part of requirement
and expectation to guarantee the success of outsourcing. Although it was not easy,
it is possible to achieve with the right selection criterion.
1.4 Hypothesis/Propositions/Objectives/Questions
The perception of the Fruitvale will be applied as a research proposal of this study
that third-party logistics service provider in Malaysia isn’t prepared for fruit logistic.
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The readiness of third-party logistics will directly affect the decision of Fruitvale to
outsource third-party or invest internally for the growth of ASEAN country market.
The main objective of this study is to evaluate the readiness of third-party logistics in
growth with Fruitvale’s consumer trends and opportunities in the ASEAN market. It
is hoped that this research will determine a pathway for third-party logistics and
Fruitvale to improve in their respective business environment.
Formulation of research questions will guide on the literature search in deciding
what data is needed to be collected, analyse and most importantly, it avoids any
unnecessary information and findings. The following questions will be explored
throughout the research study:
I. What is the characteristic of fruit logistic?
II. How does warehouse management improve the effectiveness of fruits inventory?
III. How does transport management work to improve fruit distribution?
IV. Why is the expertise of third-party logistic importance to fruit logistics?
V. Are the existing third-party logistics service providers ready to support the
development and expansion of Fruitvale to the local and ASEAN market?
VI. List out the selection criteria of the third-party logistic party for Fruitvale.
The development of research hypothesis will be discussed in the methodology
chapter upon completion of the literature review and conceptual framework.
1.5 Rationale/Importance of the research
The purpose of the literature review is to conduct brainstorming and gives practical
insights on how to develop operation efficiency, competitiveness, and profitability for
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Fruitvale’s supply chain management. A talented outsourcing performance leads the
organization in achieving sustainable competitive advantage (Smith, Warren and
Charter 2013). Third-party logistics service provider plays an essential role in
attaining the competitive advantages for Fruitvale to compete with the international
fruit distributor.
This research study is essential to build collaboration between third-party logistics
and Fruitvale in Malaysia (Long et al. 2016) highlighted that the success of logistics
management varies depending on the performance of third-party partner. The level
of achievement among logistic service providers is regulated by their adaptableness
to the unpredictable challenges and opportunities of the industry environment.
According to (Nor Aida Abdul Rahman et al. 2014) having creditability long-term and
good relationships with third-party logistics partner helps to establish the brand
image, as well as improve supply chain effectiveness and enhance business
profitability (Sadiq Sohail, Rohit Bhatnagar and Amrik Sohal 2006) has summarised
that outsourced logistics activities benefit the organization by improving the level of
customer satisfaction, credit term extension and also reduce the risk of investment.
(David Grant 2012) has mentioned that the benefits of outsourcing logistics include
the enjoyment economies of scale and scope with broader geographical coverage.
Moreover, outsourcing helps to reduce the number of employees needed, offering
advanced information technology system and cargo consolidation for the
organization (Rajagopal and Bernard 1993).
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In short, most of the studies reviewed that logistic outsourcing will positively affect
the effectiveness of one’s supply chain management. This research study will
benefit the Fruitvale by looking into understanding the importance of outsourcing
and how does third-party can assist in improving their fruit logistic. Furthermore, this
study breadth focuses on warehousing, distribution and expertise of third-party
logistics which is beneficial for Fruitvale to select a right partner for global
distribution.
(Rakesh Raut and Bhaskar Gardas 2018) stated that distribution is one of the key
factors in the fresh produce market as it contributes to the final price and lead time
of the goods. Fruits transportation is essential as the cargo need to be kept in
temperature-controlled trucking and transfers to the markets in the shortest time.
Besides that, Fruitvale needs expertise third-party logistics service provider because
fruits are perishable cargo that necessitates particular handling practice.
There is always certain complications and risks in every right, un-doubt happening
of weakness and disadvantages throughout the logistics outsourcing. This includes
the disclosing sensitive information to the third party, the loss of direct contact with
customer and supplier, as well as the over-dependency on certain parties that might
lead to the loss of bargaining power (Ramazan Erturgut 2012).
To sustain the importance of third-party logistics and strengthen their position for the
future fruits industry, this research works out to design a competency
recommendation framework for logistic service providers.
1.6 Methodology
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The methodology applies for this research is a combination of qualitative and
quantitative method. The qualitative method will be used in the literature review to
analyse the problem statement, to determine the characteristic of perishable
logistics (Kant and Pal 2017) and develop the requirement of third-party logistics to
serve Fruitvale. Whereas, the quantitative method will be applied to the set of
questionnaires to investigate the level of readiness among third-party logistics
against the expectation of Fruitvale in Malaysia.
Qualitative is a method of a comprehensive review of previous studies as
preliminary data collection from various databases, such as Emerald, Research
Gate, Science Direct, and ProQuest Bolton. It is conducted using related keywords
that match with the outsourcing, third-party logistics and fruit logistic. The various
sources of research include master thesis, books, journal articles, magazines, and
conference papers.
Subsequently, quantitative works by conducting a survey questionnaire and the
targeted respondents are a third-party logistics service provider in Malaysia. A set of
questionnaires will be design based on the research hypotheses from the initial
qualitative findings. The sampling population is expecting about 80 respondents
selected randomly from 40 companies who registered under the FMFF Association
in Malaysia (Maria Leonor Domingues, Vasco Reis and Rosario Macario 2015).
After that, an analysis software - Microsoft Excel will be used to analyse the data
collected from the questionnaire. List of figures, tables and diagrams will be
generated based on the information retrieved from data analyse. The data finding
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and results are expected to verify the research hypothesis and explanation will be
added to summarise the research findings.
1.7 Scope of the study/ Demarcation (International, National, geographic area)
This research study will concentrate on the third-party logistics service (Leuschner
et al. 2014) provider and Fruitvale in Malaysia. The literature review will cover the
global reference for example; case studies, academic books and research paper.
After that, it will go precise to local Malaysia; development of third-party logistics
based on Fruitvale’s requirement. Though, the questionnaire survey distribution will
be limited to the national third-party logistics who are registered under the
Federation of Malaysian Freight Forwarder (FMFF).
1.8 Structure of the dissertation
First and foremost, the introduction section presents the Fruitvale and identify the
objective of the study. It has to analyse Fruitvale’s business background,
characteristics and problem statement. The topline draft of the research method and
structure will also discuss in this section to work as a guideline for further study.
Next, the research will move into the literature review of related research keywords
which include outsourcing (Oshri, Kotlarsky and Willcocks 2015), third-party
logistics, the characteristic of fruit logistic (do Nascimento Nunes et al. 2017) the
perishable warehousing; distribution and expertise in the global and local market. It
will help to identify the gap between current and previous studies of third-party
logistics focused on fruit logistic and generate a few relevance research hypotheses.
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After that, the research will be continued by the research design and methodology.
This will be rationalised by a target group of the sample population for the
questionnaire survey as well as identifying the method of data collection and data
analysis. Once survey questionnaire collected, the data will be analysed and
converted into information to summarise the hypothesis of this research. A list of
figures, tables and diagrams will be designed to display the statistical numbers
(Claudia et al. 2017).
Finally, the last chapter will be a brief selection criterion of a third-party logistics
partner for Fruitvale. Limitation of research, recommendation and areas for future
research will be discussed in this chapter too. The outcome of the research
hypothesis will be used to evaluate the level of readiness among third-party logistics
partner to serve Fruitvale in Malaysia.
1.9 Conclusion
In short, most of the previous studies have concluded the capability of third-party
logistic to support the growth and sustain the global competitive advantage for an
organization. The purpose of this research is to evaluate the readiness of third-party
logistic against the Fruitvale’s logistic requirement for future business partnership.
In this chapter, research objective, problem statement and structure of the study has
been stated clearly to work as a guideline for further research. It is essential to make
sure the future chapters of this study focus on the initial objective and narrowing it
down later within the expectant breadth and depth of the research.
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Subsequently, a literature review of Fruitvale’s supply chain management will be
conducted to define the character and problem statement to describe the perception
of this study. It should analyse the recommended problem solving and develop a
selection requirement for Fruitvale’s to find the right third-party logistics partner. The
conceptual framework and research hypotheses will be formed as a guideline to
draft questionnaire for quantitative survey purpose.
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