Service Supply Chain: How Does It Effects to the Logistics Service Effectiveness?

Abstract

In 2009, Malaysia’s International Trade and Industry Minister Tan Sri Muhyiddin Yassin quoted services sector in Malaysia is expected to have a significant impact on the growth of Malaysia's economy and targeted to contribute 70% of the gross domestic product (GDP) by 2020 and the services sector currently contributing about 55% to Malaysia's GDP (17th March 2009, BERNAMA). Importance of services industry seem to be acknowledged well by, Ellram et al. (2004) through the article entitled “Understanding and Managing the Services Supply Chain” and this author have popularized the term service supply chain. Sengupta et al., (2006) have taken a next step by differentiating between service supply chain and manufacturing supply chain. They argued that human labor forms a significant component of the value delivery process in service supply chain and while physical handling of a product leads to standardized and centralized procedures and controls in manufacturing supply chains. With regards to the performance of service sector in Malaysia, the transport sub-sector registering the highest growth of 4.5%, followed by trade, finance and utilities sub-sectors. Services sector achieved total factor productivity utilization of capital and labor. The sector is expected to grow by 2.8% in 2009 supported by broad-based expansion in all services subsectors (Productivity Report, 2008). From this data, it shows clearly that the transport sector which comes under logistics industry plan plays an important role in the development of services industry in Malaysia.The present trend of logistics industry in Malaysia is about outsourcing and this has increase the growth of third party logistics (3PL). This is supported by Sohail and Sohal (2006) in their study, in which they found that 67.7% companies in Malaysia use the contract logistics services, with a primary focus on domestic operations. The significance growth logistics industry is offically recognized and underlined under the third industrial master plan (IMP3). According to Ali, Jaafar and Mohamad (2008), Malaysian government has set targets to achieve a growth of 8.6% and the GDP contribution is estimated to be 12.1% by the year 2020 under the Third Industrial Master Plan. The government has decided to increase the total marine cargo by three fold, air cargo by more than two fold and railway freight by more than fourfold by 2020. It is estimated that currently, there are about 22,000 companies in the logistics industry in Malaysia undertaking various areas of activities. Therefore, this study is interested to study about service supply chain management in the context of Malaysian logistics industry.