2021 International Conference on Computational Intelligence and Knowledge Economy (ICCIKE) | 978-1-6654-2921-4/20/$31.00 ©2021 IEEE | DOI: 10.1109/ICCIKE51210.2021.9410788 2021 International Conference on Computational Intelligence and Knowledge Economy (ICCIKE) March 17–18, 2021, Amity University Dubai, UAE Case Study Analysis on Readiness of 3PL Industry in Fruit Distribution Company SATYA SHAH1 Centre for Global Logistics & SCM Off-Campus Division University of Bolton Bolton, UK s.shah@bolton.ac.uk LIM HUEY YIN2 Centre for Global Logistics & SCM Off-Campus Division University of Bolton Bolton, UK m.chan@bolton.ac.uk Abstract— The research aims to examine the level of readiness among third-party logistics in Malaysia in fruits distributors. ZFruit Ltd is selected as the case study for this research. Z-Fruit Ltd faces insufficient resources in dealing with their market expansion into East Malaysia as well as the South East Asia region. Through a literature review, this study examined the characteristics of fresh fruits logistics and determine how third-party logistics may possibly assist in solving their supply chain problems. A quantitative research method was used for this research study. Survey data were collected from 150 registered members of Federation of Malaysia Freight Forwarders (FMFF). The collected research data has revealed that 40% of third-party industry in Malaysia are not ready to handle the fresh perishable logistics. Through the research data, it showed that the criterion of Z-Fruit Ltd set towards the third-party is available and practicable in the existing market, however it is considered as pretty niche among the industry standards. This can be seen with most third-party vendors providing warehousing and consolidate freight services but not the temperature-controlled service in avoiding any operation complexity and business risk. In short, outsourcing is the most strategic method for Z-Fruit Ltd to solve their insufficient resources at the current stage. The conducted research study provides Z-Fruit Ltd a selection criterion in searching for a dependable third-party logistics partner. population were the registered members of Federation of Malaysia Freight Forwarders (FMFF). The findings of this research study aim to help both the potential third-party logistics partner and Z-Fruit Ltd to develop mutual understanding and strategic management to improve future business development and planning within Malaysia. Z-Fruit Ltd was established in the year 2005 and located at the capital of Malaysia - Kuala Lumpur. ZFL imports fresh fruits from Thailand, Australia, China and Vietnam. Then to re-pack and distribute the fruits locally from Northern to Southern and Central region of West 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 [2]. ZFL outsource transport and warehouse management to third-party logistic from 2011 onwards. Regrettably, it was a terrible experience that carried delivery failure and customer dissatisfaction. Sales and operation team of the third-party are confident with enough knowledge to handle fruits cargo. However, the knowledge especially standard operating procedures stopped midway, didn’t reach down to the ground handler of the warehouse and transport division. Keywords— Outsourcing, Third Party Logistics (3PL), Fresh Fruit logistics, Perishable Logistics, Information Technology II. RESEARCH BACKGROUND AND PROBLEM STATEMENT I. INTRODUCTION Recently, Z-Fruit Ltd management had decided to expand its business target market to East Malaysia and South East Asia countries. Z-Fruit Ltd 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 freight cargo consolidation and overseas distribution to third-party. Besides that, Z-Fruit Ltd is considering outsourcing order fulfilment management so that they could expand the geographical coverage and speed up the delivery lead time [3]. In the present market condition, the consumer has magnified their expectations for shorter lead time, a lower-price cost with a better-quality product. Moreover, the fresh food supply chain is getting complicated by the recent consumer concerns on food hygiene, safety, and food quality [4]. According to Z-Fruit Ltd.’s management team, they faced There are numerous studies and research papers in the past to study the selection criterion, benefits and the complications of third-party logistics vendors in dealing with the global supply chain management [1]. The research has concluded that thirdparty logistics play an essential role in the organization to survive in this globalize competitive marketplace. One of Malaysia local fruit distributor Z-Fruit Ltd (ZFL) 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 ZFL. This paper aims to identify the problem statement and expectations of ZFL towards thirdparty logistics. Subsequently, literature review was conducted to analyse the problem statements and propose third-party logistic selection criterion to ZFL. One set of quantitative survey questionnaire were identified, and the target sampling 978-1-6654-2921-4/21/$31.00 ©2021 IEEE 175 Authorized licensed use limited to: NATIONAL INSTITUTE OF TECHNOLOGY TIRUCHIRAPALLI. Downloaded on April 15,2025 at 13:16:57 UTC from IEEE Xplore. Restrictions apply. plenty of fruit losses through supply chain process because lack of cold storage facility, lack of knowledge training and lack of standardized operating procedure. The main objective of this study is to evaluate the readiness of third-party logistics in growth with ZFL consumer trends and opportunities in the South East Asia market. It is hoped that this research will determine a pathway for third-party logistics and Z-Fruit Ltd to improve in their respective in the 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. This research study is essential to build collaboration between third-party logistics and Z-Fruit Ltd in Malaysia. This research study will benefit the Z-Fruit Ltd 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 Z-Fruit Ltd to select a right partner for global distribution. Consequently, ZFL requires collaboration throughout supply chain in order to ensure goods being tracked and managed from farm to the consumer place in the shortest time. There are two types of perishable loss to fresh fruits trading of Z-Fruit Ltd. Firstly, ineffective method during transference that reduce the quantity of fresh fruits such as quantity loss. Secondly, the quality deterioration that decreases consumer preferable which are categorized as quality loss for a perishable fresh product. Finally, recent studies concluded that the most important challenge within fruits and vegetable business is towards the management of quality and safety while expanding upon the delivery response through the distribution channels [17]. B. Warehouse Management ZFL who mainly distribute fresh fruits demand a perishable warehouse element in order to secure fruits freshness, safety and extend the shelf lifetime. Location of warehouse is the primary consideration of ZFL to select a third-party warehouse. Studies have shown that proper utilisation of warehouse and transportation management practices within the supply chain network enables the flow of products within other stages of the network and reaching the end consumer [18]. Besides that, ZFruit Ltd is in the hunt for temperature-controlled warehouse located at Port Klang and Kuala Lumpur International Airport (KLIA), for South East Asia market. ZFL has been encountering costly storage charges on daily basis from shipping co-loader and airlines for temperature-controlled storage zone. The temperature-controlled system of the warehouse is also one of the factors affecting judgement of ZFruit Ltd. They need a temperature-controlled warehouse to preserve fruit freshness and maximize fruit’s shelf lifetime. The temperature required by ZFL range from 0 to 12 °C and it should be working all day long, for 24 hours at all 7 days a week. Any temperature failure will directly affect the fruits freshness and might have caused inventory wastage. The temperature of warehouse is required to be regularly monitored by once a month. Moreover, sanitation of the warehouse is also part of ZFL’s consideration. III. LITERATURE STUDIES Globalization has influenced the importance of supply chain management and the interest in the area has increased considerably amongst academicians and practitioners. Researchers are making efforts to analyse the complexity of supply chain management that easily influenced by external environment and internal facilities. People realized the necessity to implement effective supply chain to compete in borderless market. There has been an increase and the concentration on logistic outsourcing over the last two decades with the business expansion and globalization. Researchers identified that market unpredictability, hyper-competitive environment, and consumer pressure, to reduce product cost and cycle time has further motivated the growth of outsourcing to third parties [5]. This research study will be working on how third-party logistic capability affects the Z-Fruit Ltd business competitiveness. ZFL should have intended their purpose of outsource, described the extend of ownership with outsource activity and should have set expectancy towards the third-party logistics partner. C. Freight Cargo Consolidation Z-Fruit Ltd is looking for a third-party logistic to handle freight arrangement. Freight can be defined as a transfer of goods from origin to destination through ship, aircraft or truck. Z-Fruit Ltd requires freight service for fruits import and export to East Malaysia and South East Asia market. They will be assessing the freight service based on destination, the frequency, types of service, temperature-controlled and sanitation of the transport. Primarily, ZFL requires air and sea freight service to East Malaysia and South East Asia capital cities port/airport. They have a preference on loose container load (LCL) sea freight services due to demand uncertainty and lesser business volume. Moreover, ZFL prefers to have direct route types of freight service. Flight or vessel transhipment might expose fresh fruits to temperature instability and unhygienic handling that might be the possible cause of fruit’s quality and quantity reduction, including product perishability challenges within the network and thus increasing greater risks to product offering [18]. Hence, research examines review study on characteristics of perishable logistic compliance with expectation of ZFL towards the third-party. This review study is expecting to generate a theoretical framework to act as a working guideline for ZFL outsourcing management and designed a set of questionnaire survey to evaluate the readiness of third-party logistics industry in Malaysia. To address ZFL outsourcing management process, research literature review focusses on four sections: (1) warehouse management, (2) freight cargo consolidation, (3) information technology system and (4) professionalism of employees among third-party logistics companies. Studies have highlighted that 3PL service provider is viewed as an important element within the globally competitive markets [17]. A. Characteristics of Fruit Logistics Z-Fruit Ltd are concerned on the fruit’s freshness, appearance, and extended shelf life. It was because, a desirable appearance of fresh fruit works as an indicator to the quality and of nutritive value to the consumer [6]. Fruit’s freshness displayed on the rack will directly influence the consumer’s preference. D. Information technology system With the fast pace development on the logistics industry, factors such as high-efficiency and speed, as well as accurate delivery have become the new important goals of the industry, thus the 176 Authorized licensed use limited to: NATIONAL INSTITUTE OF TECHNOLOGY TIRUCHIRAPALLI. Downloaded on April 15,2025 at 13:16:57 UTC from IEEE Xplore. Restrictions apply. intelligent logistics play an important role and has been favoured by enterprise. Technology has rapidly changed the logistics’ core competency, service delivery models and operational processes. One of the critical factors in selecting a right third-party logistics partner was its integration system [7]. The availability of advanced technology system enables ZFL in achieving competitive advantage through real-time tracking and report for management decision making. It enables ZFL’s internal and external parties to access real-time information from the supply chain processes. It also works as an information exchange platform to enhance quality of information and capability of each party, to cope with business uncertainty. Additionally, Z-Fruit Ltd is approaching a third-party logistics with order fulfilment system to handle East Malaysia and South East Asia market. It is a system works to manage steps involving its receiving, processing and delivering orders to end customers. Z-Fruit Ltd is expecting distribution centre to have this system to manage order fulfilment on behalf of them. It would help to reduce order delivery lead time, increase rack replenishment and solve the problem of geographically separation between employees and inventory. It is expecting advanced technology information system which will be accessible by both internal and external business parties. Similarly, an approach developed by recent studies proposed on two form of logistics as platform logistics or self-logistics for food delivery to achieve profitability and higher sustainability within the supply chain [20]. Fig. 1. Theoretical framework of Z-Fruit Ltd (ZFL) Logistics Outsourcing. IV. RESEARCH METHODOLOGY This research study applies a unique approach to select a local fruit distributor in Malaysia named Z-Fruit Ltd. The research hypothesis will explain on the expectations of Z-Fruit Ltd distributor towards third-party logistics. The research seeks to understand on how third-party logistics contribute to solve insufficient resource, improving the operations of Z-Fruit Ltd distributor, and make them a competitive company in fruit distribution industry. The research will evaluate on how ready third-party logistics industry is in improving ZFL business. It will also assess on whether third-party logistics are supportive in the development and expansion of ZFL distributor business. Questionnaire method will be used during data collection and sampling procedures. The research conceptual framework is as shown in figure 2. E. Expertise of employees Employee is measured as an intangible resource that involving knowledge, skills, experience and attitude that are difficult to copy compare to physical capability [8]. Effective human resource management lead to reliable problem-solving skill, reduce risk of perishable logistic, a professional working environment and enhance competitive advantage to an organization [7]. Employees in supply chain process is playing important roles in ensuring fruits safety and hygiene. Earlier studies highlight that people who do not have specific knowledge on consequences of the change will probably allow and lead to fruits contamination, second-rate quality, and goods rejection from customer [9]. Therefore, the knowledge, commitment, and capability of personnel are significant, to work out their employed responsibility throughout the supply chain process. Professionalism is one of the main factors considered by ZFL. It can be determined by the health status, employees training and industry reference of the organization. Expertise can be achieved by conducting a regular internal training, sharing sessions and external programs or interactions with employees. Best practices to handle fruit logistic, the temperature-controlled and sanitation method should be refreshed in the training regularly [10]. Literature Review AS-IS Study Framework Development Results and Analysis Fig. 2. Research Conceptual Framework V. RESULTS AND ANALYSIS The main objective of this section is to analyse the data findings collected from the questionnaires. Data has been analysed using and presented to describe the findings of each dependent variable. It functioned to test the hypotheses in this research study. A total of 200 sets of questionnaires were distributed to the target sample population. However, only 160 set questionnaires were returned with 10 set forfeited due to incomplete answers; hence, only 150 set of questionnaires were used to test the research hypotheses. Data findings from each section in the questionnaires were analysed, which are warehousing, freight consolidation, information technology system, and professionalism of the organisation. These research findings evaluate the level of readiness among third-party logistics based on each outsourcing section. From there, Z-Fruit Ltd will be able to decide the extent of outsourcing to solve the problem of insufficient resources in the organization. F. Theoretical framework and related research issues Since third party logistics for food and beverage industry is widespread to analyse all the theoretically possible characteristic and requirement, research has been narrowed down to a selected fruits distributor in Malaysia, ZFL. The accessibility of third-party logistic service provider has been geographically fixed at Kuala Lumpur, Malaysia. Basically, ZFL is expecting a third party logistic to assist the market expansion to East Malaysia and South East Asia. ZFL’s outsource objective, the four key sections, and the essentials for each outsourcing extend has been analysed and recognized in order to guarantee the effectiveness. Figure 1 below provides an overview on evaluating the level of readiness among 3PL service providers in Malaysia to serve fruits distributor ZFL. A. Warehouse Management Analysis Below figure 3 represents the availability of temperaturecontrolled warehouse in the range of 0°C - 20°C to temporary store ZFL’s inventory for a period. They require warehouses at 177 Authorized licensed use limited to: NATIONAL INSTITUTE OF TECHNOLOGY TIRUCHIRAPALLI. Downloaded on April 15,2025 at 13:16:57 UTC from IEEE Xplore. Restrictions apply. four different locations, which are Port Klang and Kuala Lumpur International Airport in West Malaysia; Kuching and Kota Kinabalu in East Malaysia. The column chart illustrated that Port Klang has the highest availability of temperaturecontrolled warehouse, which is 35%, and KLIA has 7.5% only. The data findings presented it is easier to source a temperaturecontrolled warehouse in Port Klang compare to KLIA. Besides that, there are 22.5% of respondent companies offering a temperature-controlled warehouse at both KLIA and Port Klang. Z-Fruit Ltd could probably appoint third-party logistics to handle both warehouses in West Malaysia. complete cold-temperature airfreight service to every desired destination of Z-Fruit Ltd [11]. Fig. 4. Availability of Temperature Controlled Airfreight Service Others are offering airfreight service to a selected destination only and average with less than 5.0%. Somehow, airfreight service is preferable by Z-Fruit Ltd because of the short transit time to maximize the fresh fruits rack shelf time. C. Information Technology System Analysis Figure 4 presents the types of information technology system offering by the respondent companies. Z-Fruit Ltd is expecting a third-party logistics with advanced information technology system to manage geographical distribution and encourage a higher degree of information communication between the supply chain parties. Fig. 3. Availability of Warehouse Service at Desired Location However, only 2.5% of respondent companies can offer a temperature-controlled warehouse covering both West & East Malaysia. The research findings reveal that there is certain level of difficulties in implementing centralized outsource by selecting one third-party to handle all ZFL’s outsource warehouse. Limited number of service providers will be influencing the buying power of Z-Fruit Ltd and storage charges become prohibitive. Moreover, the findings are surprised that 30% of respondent companies are not offering a temperaturecontrolled warehouse at any location in Malaysia. Few of the respondents reverted that they do offer warehouse service but not temperature-controlled warehouse. They would prefer to handle general cargo to prevent the risk of perishable quality and quantity loss throughout the storage period. In short, Z-Fruit Ltd may appoint a third-party logistics to handle both Port Klang and KLIA warehouse to temporary store both airfreight and sea freight fresh fruits cargo. It helps to solve the problem of insufficient space in ZFL’s existing warehouse. Due to the low East Malaysia distribution centre, Z-Fruit Ltd might have to think through other possibilities, for example, increase the freight frequency or to deal directly with the local warehouse service provider in East Malaysia. Fig. 5. Types of IT System Offering by respondent companies Initially, Z-Fruit Ltd is looking for three types of information technology systems to manage its supply chain in order to gain a competitive advantage in the globalized market. However, the survey findings revealed that only 5.0% of the respondent companies are up to date with a complete system available for ZFL. Besides that, 20% of the respondent companies are offering global positioning and 7.5% offering order fulfilment system only. The inventory management system has the highest availability of consuming 30%. ZFL may shift towards inventory management only to have a wider range of options. It helps to manage perishable inventory level while balancing both supply and demand in the market. B. Airfreight Cargo Analysis The availability of respondent companies who are offering temperature-controlled range from 0°C to 20°C airfreight cargo service to the desired location is as shown in figure 3. Z-Fruit Ltd needs to survey the service availability in order to decide the location of the third-party warehouse and estimate the delivery lead time to the consumer market. Bar Chart revealed that 40% of the respondent companies do not offer temperaturecontrolled airfreight service to Z-Fruit Ltd looked-for destination. 30% of the respondent companies are offering D. Employee Professionalism Analysis ZFL was emphasizing on the importance of evaluating employee's professionalism among third-party logistics. The expertise of employees will be affecting the fresh fruits hygiene, safety, and preserve the shelf time throughout the supply chain procedures. It separated into two categories, from internal management or external parties. 178 Authorized licensed use limited to: NATIONAL INSTITUTE OF TECHNOLOGY TIRUCHIRAPALLI. Downloaded on April 15,2025 at 13:16:57 UTC from IEEE Xplore. Restrictions apply. purpose. Freight cargo consolidate are common in the existing market but not the temperature-controlled consolidate service [14]. Although, the availability of temperature-controlled airfreight service is higher than LCL service, but they are more expensive than LCL freight service. Z-Fruit Ltd must compare the freight in terms of rates, frequency, transit time and availability of port/airport warehouse to decide the transport mode of distribution. Research has demonstrated that the availability of East Malaysia trucking service is very limited among the respondent companies. It is similar as East Malaysia warehouse that Z-Fruit Ltd will have to approaching third-party logistics directly in East Malaysia for the distribution purpose [13]. Z-Fruit Ltd is looking for third-party logistics with advanced information technology system and they are targeting three types of supply technology system including inventory system, global positioning and order fulfilment system [15]. The availability of inventory management has the highest ranking, second-rated global positioning system and the least order fulfilment system. At this moment, Z-Fruit Ltd could only focus on inventory management to ensure the inventory are well taking care of. The others are optional to improve overall effectiveness might have to delay afterwards. Fig. 6. Instructor of employees training in respondent companies Based on the pie chart, 65% of the respondent companies are conducting both internal and external training to their employees. The method of obtaining data from internal management or external parties having 23% and 2% respectively, whereas 10% of respondent companies are not obtaining or conducting any training to their employees. ZFL is expecting third-party logistics with training obtaining from external parties. They have confidence that an organisation with external training will be able to propose and conduct strategic global supply chain management. Research findings reflected that ZFL 's expectation is possible and practicable in the existing market. The overall necessity of Z-Fruit Ltd towards third-party logistics has been analysed in this chapter. The expectation is available and practicable in the existing thirdparty logistics industry located at Kuala Lumpur, Malaysia. It demonstrated that Z-Fruit Ltd is on the right track to have a workable third-party selection criterion for its logistics outsourcing. However, the availability of all-inclusive thirdparty is considered as niche and limited in the existing market. Hence, ZFL will have to review its outsourcing management to make it a centralized or decentralised approach. The limitations of this research within literature review materialise the advantages of logistics outsourcing and capability of third-party logistics to improve logistics and distribution effectiveness of Z-Fruit Ltd. The research concentrates on supply chain efficiency for food logistics who are sensitive to time and temperature [16]. It highlights fresh perishable knowledge and propose potential third-party selection criterion for them. Future research is recommended to evaluate the third-party logistics in East Malaysia. It has determined that the warehouse and trucking availability in East Malaysia are classified in short supply. This probably have happened because lack of collaboration or cooperation between West and East Malaysia third-party companies. Hence, researcher has mentioned upcoming research to concentrate the third-party respondent companies in East Malaysia. The research study is advantageous to both food and third-party logistics in Malaysia. Z-Fruit Ltd must evaluate the selected third-party in terms cost, service level and payment terms to mix match with their expected outsource achievement too. VI. CONCLUSION AND FUTURE DIRECTIONS Research findings discovered that it was not easy to source a third-party logistics to handle perishable logistics, especially fresh fruits cargo in Kuala Lumpur, Malaysia. At least 40% of respondent companies, answered they are not ready to serve a fruits distributor [12]. Moreover, out of 40% respondent companies that responded yes, numerous of them are unable to fulfil ZFL’s expectation in terms of freight consolidate and information systems availability. 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