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8/15/2019 ICLT2014 Proceedings Full Paper

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INTRODUCTION

This is the 6th international conference organised by the Thai researchers’ consortium ofValue Chain Management and Logistics (ThaiVCML), the Centre for Logistics Research at

Thammasat Business School, Thammasat University and the Faculty of Engineering, ChiangMai University. This is major event for researchers in transport, logistics, supply chain andvalue chain management. This year’s event in Kuala Lumpur, Malaysia continues withsuccessful conferences held in ChiangMai (Thailand), 2009; Queenstown (New Zealand),2010; Male (Maldives), 2011; ChiangMai (Thailand), 2012 and Kyoto (Japan), 2013. Thisyear’s event is held during 26th – 29th August 2014 which is hosted by Malaysia Institute ofTransport (MITRANS), Universiti Teknologi MARA (UiTM).

Under the theme of “Innovation in Global Supply Chain Management”, the following topicswere welcomed at the conference:

Procurement & Supply Management

Planning & Forecasting

Relationship & Collaboration

Production Planning & Operations

Inventory Fulfilment

International Logistics

Humanitarian Logistics

Maritime Logistics

Logistics Services Providers

Logistics Development Policies

Supply Chain Design/Configuration

Supply Chain Risk

Sustainable Supply Chain

Production & Inventory

Supply Chain Performance

Global Supply Chain

Multimodal Transport

Freight Logistics

E-Logistics

Logistics Facilitation The conference best paper of this year will be specially selected and considered forpublication in the International Journal of Physical Distribution and Logistics Management[ABS: 2*, Impact Factor of 2.617] and there will be a special ICLT2014 issue in theInternational Journal of Logistics Research and Applications [ABS: 2*, Impact Factor of.0357]. The selected papers will undergo future blind review from our scientific committee

panel.


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WELCOME ADDRESS FROM THE CONFERENCE CHAIRS

On behalf of the organising committee, we would like to welcome all participants to the 6th

international conference on Logistics and Transport (ICLT 2014). It has been 6 years since

the first conference was hosted in ChiangMai (Thailand). This ICLT conference is expected to

continue on an annual basis in order to facilitate the sharing of ideas, research findings, and

teaching directions related logistics and supply chain from an academic perspective.

The theme for this year’s event is “Innovation in Global Supply Chain Management”. This

theme is a reflection and an extension of ICLT2013’s theme, “Sustainable Supply Chain

Management in Asia Pacific” and tries to further explore the growing importance of the topic in

today’s business world.

“Innovation in Global Supply Chain Management” is an important concept for industries in all

scales. It can be seen as a guidance to help in improving companies’ resources, capabilities

and operational efficiencies through innovations across the entire supply chain continuum.The challenge to harmonise these subtle changes in between each members of the supply

chain remains an elusive challenge.

Nonetheless this concept does lead to greater opportunities in reviewing and revising

processes, operations, and production activities that can comply with this given paradigm.

Other potential advantages of innovation in supply chain management can cost reduction,

waste reduction, cycle time reduction, risk mitigation, and asset utilisation.

We would like to sincerely thank all presenters, reviewers, our scientific committees, and

keynote speakers for their appreciated contribution. We also apologise in advance if there are

any difficulties you may encounter while participating the conference. Finally, we hope that

you will enjoy this conference and we hope that the deliberations will be fruitful andsuccessful.

Assoc.Prof. Dr. Ruth Banomyong

Assoc.Prof. Dr. Apichat Sopadang

ICLT General Chairs


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CONTENTS

A MULTI-CRITERIA SUSTAINABILITY MEASUREMENT FOR SUPPLIER 1 ASSESSMENT USING FUZZY AHP APPROACHSalinee Santiteerakul, Aicha Sekhari and Abdelaziz Bouras

AN ISSUES AND CHALLENGES OF SUPPLY CHAIN EFFICIENCY 9PERFORMANCE TOWARDS TRADE LIBERALIZATION: A CONCEPTUAL MODELSiti Norhadibah Azman, Harlina Suzana Jaafar, Azlina Muhamad, and Nasruddin Faisol

A REFERENCE MODEL OF THE DISTRIBUTION CENTRE IN HOSPITAL SUPPLY 17CHAIN

Angkana Leelakulkietchai and Vithaya Suharitdamrong

A REVIEW OF SUPPLY CHAIN INNOVATION: PAST, PRESENT AND FUTURE 25Chee Yew Wong

A SIMULATION MODEL APPLICATION FOR CHIANG MAI UNIVERSITY MASS 34

TRANSPORTATION SERVICE IMPROVEMENTSJirapat Wanitwattanakosol, Wapee Manopiniwes and Tisinee Surapunt

A STUDY OF LOGISTICS PERFORMANCE OF MANUFACTURING AND IMPORT- 40EXPORT FIRMS IN VIETNAMRuth Banomyong, Trinh Thi Thu Huong and Pham Thanh Ha

A STUDY ON RELIABILITY OF LOGISTICS NETWORK FOR THAI ORGANIC FOOD 47TO INDIASuthep Nimsai

AWARENESS AND ATTITUDES FACTORS INFLUENCING THE ADOPTION OF 53ENVIRONMENTAL MANAGEMENT PRACTICES FOR LOGISTICS COMPANIES

Irwan Bin Ibrahim and Harlina Suzana Bt Jaafar

CONSIDERATION ON THE SUPPLY CHAIN APPROACH FOR RESTRICTEDSHOPPERS IN A HYPER-AGED SOCIETY-A CASE OF ONLINE HOLESALINGSYSTEM 58Jimyoung Lee

COURIER SEVICE QUALITY FOR BUSINESS SUSTAINABILITY 66Sitynoryasmin Ahmad Khairuddin and Sariwati Mohd Shariff

DEVELOPING PUBLIC PRIVATE PARTNERSHIPS IN CHANGING BUSINESS 72ENVIRONMENT: EVIDENCE FROM THE DANISH AND FINNISH ENERGY SECTORSJyri Vilko and Mika Immonen

EVALUATION OF AIR CONNECTIVITY OF CHIANG MAI AIRPORT 80Supaporn Kamtaeja, Apichat Sopadang and Poti Chao

FOOD VALUE CHAIN PRODUCTION IMPROVEMENT USING QUALITY FUNCTION 87DEPLOYMENT TECHNIQUENuttawut Thepauyporn and Poti Chao

FORECASTING TRADE NETWORK OF THAILAND AND ASEAN THROUGH 95GRAVITY MODEL APPROACHNatjira Jinafoei, Poon Thiengburanathum and Poti Chao


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GREEN LOGISTICS SERVICE QUALITY AND LSP PERFORMANCE 101Siriwan Chaisurayakarn, David B Grant and Risto Talas

HALAL LOGISTICS IMPLEMENTATION IN THE CONTEXT OF ASEAN 110LIBERALISATION: A LITERATURE REVIEW

Azlina Muhammad and Harlina Suzana Jaafar

IMPROVEMENT OF USED SHOES SUPPLY CHAIN BY REVERSE LOGISTICS 116 AND LEAN CONCEPTSJureerut Somboon and Korrakot Yaibuathet Tippayawong

INNOVATION BARRIERS IN THE WAREHOUSING INDUSTRY 124Kit Meng Lum and Yan Weng Tan

LOGISTICS COST ANALYSIS OF HOTEL BUSINESSPratchaporn Setsathien and Korrakot Yaibuathet Tippayawong 132

LOGISTICS COST IN WOODEN FURNITURE INDUSTRY 141

Saranyu Wasuwat and Nivit Charoenchai

LOGISTICS PERFORMANCE MEASUREMENTS: A DESCRIPTIVE ANALYSIS 149Mohd. Azlan Abu Bakar and Harlina Suzana Jaafar

MULTIMODAL AND INTERMODAL FREIGHT TRANSPORTATION: A REVIEW 156 Azizah Jamaludin, Saadiah Yahya and Ruslan Hassan

NETWORK STRATEGIES OF SUBSIDIARY AIRLINES-- ASIA-PACIFIC REGION 162CASE STUDY – Sunsook Kim

NON-PHYSICAL BARRIERS FOR THE SOUTH EAST ASIA (ASEAN) MAINLAND 167

CROSS BORDER RAIL FREIGHT MOVEMENTS: FACTORS THAT COULD AFFECTTHE REGION’S SEAMLESS RAIL FREIGHT MOVEMENTS

Adi Aizat Yajid

OCCUPATIONAL SAFETY AND HEALTH MANAGEMENT IN MALAYSIAN 175TRANSPORT INDUSTRY: AN INSIGHTSariwati Mohd Shariff, Saadiah Yahya and Norina Ahmad Jamil

POOLING LOGISTICS AS A MEAN FOR SUSTAINABLE URBAN FREIGHT 184DISTRIBUTIONNeubert Gilles, Derrouiche Ridha and Moutaoukil Abdelhamid

PROFILING THE MALAYSIAN LOGISTICS INDUSTRY 192

Mohamad Zulfadhli Jusoh, Harlina Suzana Jaafar, Nasruddin Faisol and AzlinaMuhammad

STREET TURN STRATEGY: AS A GREEN LOGISTICS TOOL IN MALAYSIA 199Nur Farizan Tarudin and Nurul Elma Kordi

SUPPLY CHAIN RISK MANAGEMENT ON RELATIONAL RISK PERSPECTIVE: A 206LITERATURE REVIEWSanti Ditsathaporncharoen and Thitima Wonginta

THE CONCEPTUAL FRAMEWORK OF LEAN SUSTAINABLE LOGISTICS 216 Apichat Sopadang, Sooksiri Wichaisri and Aicha Sekhari


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THE COOPERATION OF LOGISTICS BETWEEN EUROPEAN COUNTRIES AS 225THESE EXPERIENCES FOR SOUTH EAST COUNTRIES WHEN IT COMES TO THEESTABLISHMENT OF ASEAN ECONOMIC COMMUNITYDuy Linh Bui and Luu Duc Huynh Toan

THE DETERMINATION OF KEY FACTORS FOR A FEASIBLE RO-RO SHORT SEA 233

SHIPPING OPERATION Aminuddin Md Arof

THE EFFECT OF ASEAN ECONOMIC COMMUNITY IN THAI GEMS AND JEWELRY 241INDUSTRY DEVELOPMENTJirarak Kongkaew and Poti Chao

THE EFFECTS OF SCM DRIVERS ON SCM FACILITATORS AND SCM PRACTICES: 248 A STUDY OF THAI SMESTherakorn Yardpaga, Phil Megicks and Paul Jones

THE IMPACT OF RISK MITIGATION ON LOGISTICS SERVICE: THAI SHIPPERS’ 255PERSPECTIVE

Makhawat Cheewaratanaphan and Poti Chao

THE INFLUENCE OF NATIONAL CULTURE ON USE OF THIRD PARTY LOGISTICS 262Phoommhiphat Mingmalairaks

THE INNOVATIVE STRATEGIES FOR PORT AND CITY INTERFACE 269DEVELOPMENTRou Jin, Li

THE MAJOR FACTORS CONTRIBUTING TO ROAD DAMAGES OF FEDERAL 275ROADS IN MALAYSIANurul Elma Kordi, Intan Rohani Endut and Nur Farian Tarudin

THE NATIONAL SINGLE WINDOW IN MALAYSIA – THE INFLUENCING FACTORS 283FROM THE USERS PERSPECTIVENor Bakhriah Sarbani and Harlina Suzana Jaafar

THE POSSIBILITY OF INTRODUCING HALAL SYSTEM INTO JAPAN 291Takayuki Mori

THE QUALITY OF OUTSOURCED LOGISTICS SERVICE IN COLLECTIVIST 300CULTURE PERSPECTIVE: A LITERATURE REVIEW

Abdul Khabir Rahmat and Nasruddin Faisol

THE REFORMATION OF ENVIRONMENTAL FISCAL FROM EXTERNAL 307COST OF CO EMISSION OF THE LOGISTIC VEHICLES FOR THE

DEVELOPMENT OF GREEN LOGISTIC INFRASTRUCTURERoslina Ahmad, Harlina Suzana Jaafar and Ruslan Hassan

THE USE OF MATERIAL FLOW COST ACCOUNTING TECHNIQUE TO REDUCE 316LOSSES WITHIN THE WOODEN FURNITURE PRODUCTION PROCESSPhuriwat Chanruechai and Rungchat Chompu-inwai


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A MULTI-CRITERIA SUSTAINABILITY MEASUREMENT FORSUPPLIER ASSESSMENT USING FUZZY AHP APPROACH

1 SALINEE SANTITEERAKUL,

2 AICHA SEKHARI,

2 ABDELAZIZ BOURAS

1Excellence Center in Logistics and Supply Chain Management, Chiang Mai University, Thailand2

DISP LABORATORIES UNIVERSITÉ LUMIÈRE LYON 2 BRON, FRANCE

IntroductionCorporate sustainability is a new area of study and many researchers have tried clearly to define thesustainability terminology. Most researchers do not provide the definitions but attempt to explain whatcompanies are supposed to do to achieve sustainability (Bourne et al., 2002; Coelho, 2005).Moreover when the focal company is pressured by legal and regulation e.g. ISO14001, ISO26000,WEEE, RoHS, it usually passes this pressure on to suppliers. This situation leads to increase aconsideration of sustainability performance in supplier evaluation activity.

Sustainability performance evaluation in supplier assessment process consists of multiple aspectsbased on each sustainable dimension. Difficulties do arise from the increased levels of complexity

involved considering various suppliers therefore a number of criteria may be utilized. Supplierevaluation is a multi-objective and criteria decision problem containing many quantitative andqualitative measures (Zeydan et al, 2011). Gonvindan et al (2013) has reviewed 33 papers from peer-reviewed academic journals and proceedings on GSCM supplier selection. They found that the mostwidely used approach for multi-criteria decision making for green supplier selection is analyticalhierarchy process (AHP) (including fuzzy AHP, FAHP).

Various researchers adopted the AHP or fuzzy AHP for supplier selection problem. Handfield et al.,(2002) illustrated the case of AHP as a decision support tool for helping managers understand thetrade-offs between environmental criteria. They demonstrated how AHP can be used to evaluate therelative importance of various environmental traits and to access the relative performance of severalsuppliers along with the traits. Chiou et al., (2008) applied FAHP with an extent analysis method tosolve the green supplier selection problem by a ranking system based on different weights using four

environmental criteria among six major criteria. This application was to determine the relativeimportance of selecting green suppliers across a multicultural setting including American, Japanese,and Taiwanese electronic industries in China. Lee et al., (2009) applied FAHP with an extent analysismethod integrated with the Delphi method for green supplier evaluation. The Delphi method wasinitially used to differentiate the criteria for evaluating traditional and green suppliers. FAHP is used tosolve the green supplier selection process; they focused on the efficiencies of FAHP. They used 11main criteria and 41 sub criteria. Grisi et al., (2010) implemented a fuzzy AHP for green supplierevaluation. Fuzzy logic was adopted to overcome uncertainty arising from human qualitative judgment. This approach allows better management of data involved in global decisions, covers theuse and integration of quantitative and qualitative data, provides the necessary flexibility for theanalysis of problem, and facilitates tasks of verification for the robustness of the decision taken.

However, there are many alternative approaches to obtain fuzzy priority weight (Van Laarhoven andPedrycz (1983), Buckley (1985), Boender et al. (1989), Chang (1996), Csutora and Buckley (2001),Mikhailov (2003, 2004)). Van Laarhoven and Pedrycz (1983) extended the crisp AHP method fromGraan (1980) and Lootsma (1982) to FAHP based on triangular membership functions. In addition,they defined the operations on fuzzy numbers for FAHP based on the extension principle. Buckely(1985) proposed the geometric mean (GM) method for calculate the fuzzy weights. This procedureeasily extends to the multi decision makers situation. Boender et al. (1989) modified van Laarhovenand Pedrycz (1983) method by using an optimization of logarithmic regression function. Chang (1996)proposed a new approach, called the extent analysis (EA) method, to obtain fuzzy priority weight.Csutora and Buckley (2001) proposed a new method, called Lambda-Max (LM) method, of finding thefuzzy weights. The LM method is the direct fuzzification of the λ_max me thod, used by Saaty.Mikhailov (2003, 2004) proposed a FAHP programming to derive optimal crisp priorities, which areobtained from fuzzy pairwise comparison judgments based on α-cuts decomposition of the fuzzy judgments into a series of interval compositions. Even the fuzzy programming method claimed its

superiority over some of the existing fuzzy prioritization method (Buckley, 1985; Van Laarhoven andPedrycz, 1983) but the mathematical complexity involved may restrict its practicability (Chan andKumar, 2007).


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This paper aims to show by examples that the priority weights determined by the EA method do notrepresent the relative importance of decision criteria or alternatives. The new method, which is easyto adopt in real-life problem, is proposed. The results of the proposed method are compared with theresults from the LM method.

Sustainability Performance MeasurementConceptual Framework

There are various conceptual frameworks in sSCM but one of the most referred conceptualframeworks is the triple bottom line (TBL), which is proposed by Elkington (Elkington, 1994) Thisframework divides sustainability into three dimensions, i.e. economic, environment and society. Theother frameworks are derived based on the TBL (Carter and Rogers, 2008; Mongsawad, 2009;Teuteberg and Wittstruch, 2010). This work employs the sSCM framework which proposed bySantiteerakul et al. (Santiteerakul et al., 2012), which is shown as Figure1. This framework composesof two perspectives i.e. the supply chain management and sustainability perspective.

Figure 1: The sustainable supply chain management (sSCM) framework

The supply chain management perspective: In order to measure sustainability performancefor supply chain management, it is needed to link the concepts of supply chain andsustainability. The term ―supply chain‖ consists of multiple firms, both upstream anddownstream, and the ultimate consumer. Supply chain involves with flows of products,

materials, information, and finances from a source to a customer (Mentzer et al., 2001;Santiteerakul et al., 2012). Activities in supply chain concept have to be identified by anengagement level in both upstream and downstream. The engagement divided into threelevels, which are company level, supply chain level, and stakeholder level.

o Company level considers activities of owned company which does not engage withany external groups or companies.

o Supply chain level considers activities under taken to create opportunities fornegotiation, consultation or simply exchange of information between or amongcompany and its supply chain (suppliers, outsourced companies, customers, users orothers). However, the supply chain level consists of three sub-levels which are directsupply chain, extended supply chain, and ultimate supply chain following degrees ofsupply chain complexity from Mentzer et al., (2001).


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o Stakeholder level considers activities under taken to create opportunities fornegotiation, consultation or simply exchange of information between or amongcompany and stakeholders. In this work, stakeholder is defined as individual or groupthat has an interest in any decision or activity of a company including second-tiersuppliers, customer‘s customers, users, and so on. The local communities or thegovernment can be considered as the stakeholders of supply chain.

The sustainability perspective: It consists of eight sustainability criteria. These criteria are

derived from the TBL and the human needs theory. The economic aspect composes offinancial and non-financial criteria. The environmental aspect composes of material, naturalresources, and energy criteria. The social aspect composes of human and safety, humancapabilities and ethics criteria. In order to select the sustainability indicators and measures, itdepends on the organization strategy and the decision making objectives. This sSCMframework allows decision makers designing the performance measurement system byselecting the appropriate indicators and measures.

Measuring sustainability of suppliers According to the sSCM framework in Figure1, this work focuses on the supplier assessment activity inthe direct supply chain engagement level. An objective of the performance measurement is tomeasure sustainability performance of suppliers. The measurement model is developed based on thecase study company which is a hard disk drive manufacturer in Thailand. The manager identifies the

sustainability indicators and measures based on the eight sustainability criteria with regards to thepolicy of the company. The 10 indicators and 25 measures are selected which are shown in Figure 2.

Figure 2: The structure of supplier‘s sustainability performance measurement

Fundamental of Fuzzy Analytical Hierarchy Process (FAHP)In traditional AHP approach, the pairwise comparison matrices are treated as crisp matrices. In fuzzy AHP (FAHP), one uses fuzzy numbers for the pairwise comparisons and the main problem is tocompute the corresponding fuzzy weights. Direct computation of fuzzy eigenvalues and fuzzyeigenvectors from a fuzzy, positive, reciprocal matrix is very complicated. Various methods deviatefrom the original procedure used by Saaty in AHP for finding the weights are still too computationallydifficult.

Step 1 Define the problem and determine the kind of knowledge sought.The objective of this performance measurement system is to measure sustainability performance ofsuppliers.


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Step 2 Structure the decision hierarchy from the top with the goal of the decision, then the objectivesfrom a broad perspective, through the intermediate levels (criteria on which subsequent elementsdepend) to the lowest level (which usually is a set of the alternatives).

Step 3 Construct a set of pairwise comparison matrices by comparing important weight criteria. Eachelement in an upper level is used to compare the elements in the level immediately below with respectto it.

Comparing important weight criteria In the problem consists of criteria, decision-maker is required to give a relative important in each

pair of criterion. The membership function of comparison ratio is a triangular fuzzy number, with

and is taken as . (Van Laarhoven and Pedrycz,

1983) estimated for triangular fuzzy number as;

If a triangular fuzzy number , then =

This step results in a fuzzy comparison matrix which is a fuzzy, positive, reciprocal matrix.

Step 4 Determining the fuzzy priority weight.The EA method is relatively easier than others because of the simplicity of calculation and less timetaking (Chan and Kumar, 2007; Chang, 1996). Thus, the EA method is widely used in an applicationof FAHP for solving practical multi-criteria decision making problems. Numerous researchersemployed FAHP with the EA method to supplier selection problem (Chan and Kumar, (2007), Kilincciand Onal (2011)).

Step 5 Ranking the final weight of alternativesThe importance degree of alternatives in the objective can be incorporated into the formulation usingfuzzy priorities and rating of alternatives. For each criterion (indicator, metric, measure, etc.).

Decision maker obtains the fuzzy positive reciprocal matrix from the pairwise comparison of criteria.

Fuzzy weights for criteria are computed from matrix . If is a set of

alternative, , the decision maker obtains a performance matrix for alternativeof all criteria by the rating evaluation. The final fuzzy weight of alternative can be obtained by

using the fuzzy weight average,

(1)

The proposed Fuzzy Analytical Hierarchy Process (FAHP) approachThis method consists of five steps for measuring sustainability performance. The first four stepsfollowing FAHP approach, which are (1) define the problem and determine the kind of knowledgesought, (2) structure the decision hierarchy, (3) construct a set of pairwise comparison matrices, and(4) finding fuzzy priority weight of supplier‘s performance. In the fourth step, this work proposes the

method for calculating the priority weight of suppliers by modify the normalization and the aggregationmethods. The details of the proposed FAHP approach are as following:

Step 1 Define the problem and determine the kind of knowledge sought.The objective of this performance measurement system is to measure sustainability performance ofsuppliers.Step 2 Structure the decision hierarchy from the top with the goal of the decision, then the objectivesfrom a broad perspective, through the intermediate levels (criteria on which subsequent elementsdepend) to the lowest level (which usually is a set of the alternatives).Step 3 Construct a set of pairwise comparison matrices. Each element in an upper level is used tocompare the elements in the level immediately below with respect to it. In the problem consists ofcriteria, decision-maker is required to give a relative important in each pair of criterion. The pairwisecomparison between criteria ( and ) represents by triangular fuzzy number as shown in Figure 3

and linguistic scale regarding relative importance is given in Table1. This scale is given by Kahramanet al. (2003).


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was distributed to the manager for collecting the data. The manager made all the pairwisecomparisons using semantic terms from the fundamental scale and then translated these to thecorresponding fuzzy numbers. The questions to ask when comparing two criteria being compared,which is considered more important by the manager while evaluating supplier performance, and howmuch more important is it with respect to selection. The supply chain manager judged that theeconomic (EC) performance is strong more important (SMI) than environmental (EN) performanceand absolutely more important than social (SO) performance. Next, the environmental performance is

very strongly more important (VSMI) than the social dimension. After that, the linguistic values aretransformed into the fuzzy numbers that are shown in Table2.

Economic Environmental Social

Economic (1,1,1) (2.5, 3, 3.5) (3, 3.5, 4)Environmental (0.28, 0.33, 0.40) (1,1,1) (2.5, 3, 3.5)Social (0.25, 0.28, 0.33) (0.28, 0.33, 0.40) (1,1,1)

Table2: The comparison matrix in level 1

Dimension Proposed method Extent Analysis Lambda-MaxLocal weight Fuzzy weight Local weigh Local weight

Sustainability PerformanceEC (0.50, 0.56, 0.62) (0.43, 0.56, 0.72) 1.00 (0.59, 0.60, 0.60)EN (0.27, 0.32, 0.38) (0.25, 0.32, 0.42) 0.00 (0.27, 0.27, 0.28)SO (0.10, 0.12, 0.14) (0.10, 0.12, 0.15) 0.00 (0.12, 0.12, 0.13)

Table3: The fuzzy priority weight in level1

Figure4: Final scores of supplier‘s sustainability performance and each dimension performance

After manager compared the relative important of sustainability dimension, the next step is a pairwiseanalysis of the lower level i.e. sustainability indicators level. Two indicators i.e. supplier qualityperformance (EC1) and supplier business performance (EC2) belong to the economic dimension.Four indicators i.e. energy efficiency (EN1), resource used efficiency (EN2), emission (EN3), andemission (EN4) belong to the environmental dimension. Four indicators i.e. employee health and

safety (SO1), hazardous substances (SO2), fair trade and ethical issues (SO3), and socialresponsible competencies (SO4) belong to the social dimension. The same calculations done for themain criteria matrix are employed for these matrices as well. The same procedure is carried out for


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the other comparison matrices in all level. Table3 represents as an example to show the results offuzzy priority weight in level1.

The main objective for adopting this measurement method is the evaluation of supplier for a hard diskdrive manufacturing company. After weighting the FAHP model for determining priority weight foralternatives, the decision maker evaluates suppliers in each sustainability measure (level 3) by usingthe measurement rating scale. The five suppliers are selected to use as an example for the practical

application of the proposed FAHP model (Method-III). The five-scale of linguistic rating, which arevery weak (VW), Weak (W), Average (AVG), Good (G), and Very good (VG), is used for evaluatingsupplier‘s performance in each measure. The results of overall sustainability performance and eachsustainability dimension of each supplier with the difference method (the proposed, EA and LMmethod) are shown in Figure4.

Results and Discussion

Considering the results from proposed method, EA method and LM method which are shown in Fig4,The proposed FAHP approaches obtains the rank of supplier as same as the results from the lambda-max method. It can be noted that among five given suppliers, supplier D has the highest sustainabilityperformance followed by supplier B, E, C, and A respectively. Therefore, the sustainabilityperformance ranking among five suppliers is D>B>E>C>A.

According to these results, supplier D is the best in sustainability because of its economic

performance. However, the environmental performance of supplier D is lower than supplier C, B, andE respectively and the social performance of supplier D is lower than supplier B and A. The decisionmaker may encourage supplier D to improve its environmental and/or social performance in order tobalance these three sustainable dimensions.

Meanwhile the EA method obtains difference results comparing with others. Supplier D is the highestsustainability performance followed by supplier C, E, B, A. Noted that the EA method providessustainability performance as same as an economic performance because an environmental and asocial performance are eliminated from the decision maker‘s consideration (environmental and socialperformance are zero in all suppliers). It means that if there is a dominant criterion, it is possible toobtain zero weight for others. When an economic performance is a dominant criterion, it obtains azero value as a crisp weight for environmental and social performance. Thus, we found that EAmethod cannot use to estimate the crisp priority weight because it would assign a zero weight to a

decision criterion.Moreover, the degree of possibility defined by EA method is an index for comparing two triangularfuzzy numbers rather than an index for calculating their relative importance. Thus, normalizeddegrees of possibility can only show to what degree a triangular fuzzy number is greater than all theothers, but cannot used to represent their relative importance.

ConclusionsThe supplier performance evaluation in sustainability context is a multi-criteria decision problem. Theperformance measurement model in this thesis employed the FAHP approach for evaluatingsustainability performance. Among the various methods in determining the criteria weights of FAHP,the LM method gives better results compared to the EA method in terms of weight accuracy. The EAmethod may assign an irrational zero weight to decision making problems. However, the LM method

is quite complex for implementing in a practical situation. Thus, this work proposes a new approachesby modified a normalization method and using the weakest T-norm for aggregation in order toevaluate sustainability performance of supplier.

The proposed FAHP approach obtains the rank of alternative as same as the results from the lambda-max method. These proposed FAHP methods have ability to capture vagueness of human thinkingand effectively solve multi-criteria decision making problem. The illustrative example hasdemonstrated the thoughtfulness, flexibility, and efficiency of the proposed model to directly tap thesubjectivity and preferences of the decision makers.


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AN ISSUES AND CHALLENGES OF SUPPLY CHAIN EFFICIENCYPERFORMANCE TOWARDS TRADE LIBERALIZATION: A

CONCEPTUAL MODEL

Article Classification: Literature Review Sit i Norhadibah Azman 1 , Harlina Suzana Jaafar 2 , Azlina Muhamad 3 , Nasrudd in Faisol 4 ,

1Researcher, 2Deputy Director Research and Industrial Linkages, 3Head of Marcel, Malaysia Instituteof Transport, Universiti Teknologi MARA (UiTM), 40450 Shah Alam, Selangor

4Head of Learning Centre, Faculty of Architecture, Planning and Surveying, Universiti TeknologiMARA (UiTM), 40450 Shah Alam, Selangor

Email: [email protected]

Abstract

This paper discussed the review on issues and challenges on the supply chain efficiency towardstrade liberalization. Nowadays trade is being fiercely competitive and came in a very complex flow ofsupply chain throughout globalization. Better supply chain can reflect better opportunities and

development with higher foreign investment coming in. This has giving lot of pressure for developingcountries to reach an excellent services in order to provide an efficient supply chain flow with a lowercost and at the same time increasing profitability. Supply chain efficiency is the important key valuedriver it differentiate reliability of the country‘s trade in today‘s competitive market. The intensivegrowth on productivity when adapting the trade liberalization has given a numerous impact to manycountries. The evolution of technological and the effect of globalization have extensively enhancedthe potential of free trade around the world. Therefore, global competition has become more andmore intense. Survival in the age of free trade will certainly depend of building sustainable competitivecapabilities, which may include a variety of key competencies, such as speed, reliability,responsiveness, product quality, and appropriateness of marketing and management strategies.However, in order to have an optimized benefit of trade growth the player in the industries need to usethe right approach such as identifying the issues that affect the supply chain efficiency reliability andperformance in trade liberalization. The issues and challenges to determine successful trade

liberalization will be the main focus of this paper. This study will also highlight the weaknesses anddeficiencies in trade industry towards supply chain efficiency. As a developing country, Malaysia cantake an early prevention to eliminate such issues and by referring on challenges that took place inother countries, we can improve the efficiency of the supply chain and develop the most efficientproductivity in chain network.

Keywords: Supply chain efficiency, trade liberalization, issues in supply chain towards tradeliberalization, challenges in trade liberalization, factors, industry performance

Introduction

Since 1950s, the multilateral and bilateral liberalization have shown that an extensively lower thetrade barriers in highly developed economies followed more recently by developing countries. According to Henry et al (2009), the average contribution of trade to efficiency was 11 per cent in1970, rising to 11.6, 11.8 and 12.1 per cent in 1980, 1990 and 1997 respectively and had beenobserved to have a positive effect towards trade on efficiency. The effect of trade on efficiency hastherefore been increased when countries have become more open to international trade over time.Since trade liberalization has been introduced there was a mixed perception on the benefit gainedfrom the growing productivity. Although trade liberalization will increase the economic growth inregards of competitiveness, details on various factors need to be considered. For developingcountries, the factors might not be overwhelmed by the presence of liberalization due to difficulties toincrease the growth activities in the fiercely competitive market.

One of the important factors is to identify the problem which can encounter the ability of a country toperform in an optimum level and regain economic advantages. A great coordination of supply chainefficiency is one of the improvements that need to be considered. Supply chain efficiency has becomeone of the triggers as a key value driver for trade development. It is because in today globalizationtrade, it is a major concern to battle among them for businesses and appears as a critical tool ingaining the business competitiveness. This has been supported by previous studies (Christopher,1998, Hult et al , 2007; Khalid, 2009; Tukamuhabwa, et al, 2011). According to Ali and Guo ( 2005),

mailto:[email protected]:[email protected]


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the efficiency of supply chain has arisen as a key factor in determining the ability of developingnations to attract foreign direct investments (FDI) and trade, thus is a key to their economic growth.For trade-dependent economies, the need to enhance their trade competitiveness is an importancenowadays. Indeed, the absence of a competence transportation system can be a hindrance toefficient production which in turn can blunt their trade and national competitiveness. Furthermore, toenhance international trade, investments and economic activities must continuously improve the linksbetween its trade gateways such as ports and its economic hinterlands, and also extend their

connection to the global supply chain (Khalid, 2009).

An efficient supply chains are critical (Brooks, 2012), for APEC countries. In order to sustain or evenexpand the economic benefits from trade, an important focus of the global parts and componentstrade where aspects of supply chains such as costs, reliability, flexibility, and resilience are crucial. Anexamination of the state of supply chains in APEC economies through the Logistics PerformanceIndex reveals that a number of APEC economies can further expand trade by improving their supplychains through broad reforms involving both hard and soft infrastructure. Therefore, it is important toidentify the critical factor that related to supply chain efficiency issues so as to face trade liberalizationin near future to achieve advantages. Thus very limited dissemination of information for the purposeof challenges faced by the practitioner towards this topic has been discussed. Hence, base on thestudy that is still ongoing, this paper will examine and reviews problem that encounter by thepractitioners involved in the industry and produce a conceptual model based on the literature review.

Background of the study

To support the supply chain activity there is a crucial need to have an efficient base line in SCM.Based on Khalid (2009), the importance of supply chain management in facilitating business andtrade should become very clear. Without efficient supply chain management, goods cannot flowsmoothly from manufacturers to markets. When this happens, a series of negative chain effects willbe triggered. To shippers, the cost of holding inventory will rise. Critical goods will not reachconsumers. Raw materials will not arrive at factories. Bottlenecks will be formed along the supplychain, and the cost of transporting goods will increase due to the delays and interruptions. With thiskind of slack that happen during the trade liberalization implementation it can cause a major disruptionalong the process to become the world greatest trade productivity achiever and thus a world classsupply chain industry. More expenditure has been spent into the supply chain activities by biggercompany in order to have optimum profit. This is to strategies their supply chain activities intocompetitive advantage and eliminates the barriers and wastage of resources that obstruct theefficiency of trade activities. As a result, firms have to recognize the significance of enhancing theirsupply chain performance (Knowle et. al, 2005).

The World Economic Forum‘s report in (2013), found that by reducing even a restricted set of supplychain barriers halfway to global best practice would yield a nearly 5% increase in GDP, or six timesthe benefit of removing all remaining tariffs. They have highlighted; that best practical way to increasethe productivity trade is by reducing the bottleneck which affects the trade activities. The initiative‘s2013 report also indicated that reducing supply chain barriers could increase the world‘s grossdomestic product (GDP) by over US$ 2.5 trillion (RM8.5 trillion).

Supply Chain EfficiencySupply chain has involved many prominent activities which can lead us to an extraordinary results forcompany who can provide an efficient services such as on time delivery, providing lower cost, givingquality services and able to satisfied the customer will earn the most profitability for a long run(Chibba 2007, Borgstrom, 2008, Khalid 2009, Boonpattarakan 2012). In today‘s competitive trade andbusiness arena, companies which fail to manage their supply chains well, will risk losing customersand incurring high costs. As companies expand to reach their markets, the costs of production andtransportation increase and competition heats up. Companies need to free up resources to focus oncoming up with better products and services. The approach of managing supply chains in a detailedand all-encompassing manner from the production end to the consumption end can promotes costeffectiveness, efficiency, reliability, productivity, safety, security and ultimately customer satisfaction(Khalid, 2009).

According to Borgstrom (2008), supply chain efficiency defined as ―supply chain is a specific activitysystem, where the efficiency is compound and negotiated along the chain. The efficiency is thereindescribed as a compound evaluation of quality, delivery, cost, and overall capability that is not onlyplanned and reviewed in the relationship but also a measure of the relationship. The efficiency of theproducing/using system is influenced by serial interdependencies through relationships and thus


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evaluated of several parties within the exchange system and negotiated interdependencies determineon efficiency goals‖.

Based on a study by James (2012), there is a direct connection between cost and speed; and costand reliability. Accordingly, as reliability and speed increase, costs will generally expand and with adecrease in costs, reliability and speed will generally reduce. For instance, if the reliability, speed, andother features of a connection in a supply chain satisfy the needs of its consumers at the lowest cost,

that connection can be considered as efficient. The lowest cost would render the connection efficientfor society. Only if the lowest budgeting cost to the entire service provider is included, the connectionwould be efficient. The efficiency of supply chain has emerged as a main factor in determining theability of developing nations to attract foreign direct investments and trade, and also key to theireconomic growth (Lu and Yang, 2007).

Issues in Supply Chain Efficiency towards Trade LiberalizationThe innovation landscape and direction of industry‘s supply chain has taken into different point of viewthroughout the world because of affection to regain competence and efficient chain connectivity hasbeen major success to provide customer satisfaction. This has been mentioned by a literature that avariety of benefits have been achieved through efficient supply chain management, including reducedcosts, improved market share and sales and solid customer associations (Ferguson, 2000).Performance of the supply chain efficiencies has been addressed to weaknesses and deficiencies as

a major impediment for a company to uncover the overwhelmed effect which can produce asignificant quality of supply chain environment and attain competitiveness beneficial. Arvis in his studywith World Bank (2014), stresses that a country cannot improve through developing infrastructure,while failing to address border management and other supply-chain issues.

Therefore, according to Khalid (2009), companies nowadays constantly seek to eliminate bottlenecksto ensure their products reach their customers fast and in a cost efficient manner. In doing so, theyare reducing the inventories, keeping a close network of vendors and suppliers, outsourcing logisticsservices, and enhancing distribution capacity. These issues and challenges that encounter along theliberalization formation can paralyzed the successfulness of trade growth and reliability of supplychain activities. As a result, in this paper five major constraints that affect the efficiency of chainconnectivity in trade liberalization have been identified. These five factors are extremely importanttowards a successful efficient liberal economic growth.

Figure 1: Framework of supply chain efficiency towards trade liberalization

Quality InfrastructureTrade facilitation was introduced during the negotiation on trade liberalization which has now becomea substantial feature in gaining a competitive market. In order to have successful trade liberalization isthe quality of infrastructure play a role in the overall successful of trade growth. Burn et al. (2005),also highlighted the importance of the quality of physical infrastructure for trade. Wilson et al. (2004)have quantified the effects of trade facilitation by considering four aspects of trade facilitation effort:ports, customs, regulations, and e-business which are the key for all types of trade to achieve thechain capacity. There are numerous situations that can cause disruptions to supply chains. One of thecauses is lack of sufficient infrastructure to handle the demand of the supply chain and provideefficient. If the demand for a commodity grows rapidly, the available capacity may unable to handlethe increase in demand and consequently cause delays to the delivery (Gerber, 2010).

According to WEF (2013), insufficient overall infrastructure and poor connectivity are major obstaclesfor the development of many countries towards achieving efficient competitiveness and this will

Supply ChainEfficiency towardsTrade Liberalization

Trade CostQualityInfrastructure

TimeEfficiencyLogistics

Performance

Institutional Quality


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weaken the reliability of supply chain activities. A practically well-established body of literature hasfound an understandable link between the quality of infrastructure and transport costs in internationaltrade such as (Limão and Venables 2001; Clark et al. 2004). Lima˜o and Venables (2001) haveshowed that infrastructure is quantitatively important in determining total transport costs. Theyestimate that poor infrastructure accounts for 40% of predicted transport costs for coastal countriesand up to 60% for landlocked countries. Bougheas et al .(1999) also provide an evidence by using thegravity model to proven the European countries with connecting infrastructure to transport costs and

hence trade which encounter a significant relationship that reflect the deficiencies and also the abilityof a supply chain to be efficient. All of this has given an indirect impact to the establishment of supplychain efficiency. Poor infrastructure can cause a rising cost in transportation and delay as well. Forsupply chain efficiency it aims to achieve on time delivery, minimizations of cost with maximizeutilization of resources.

Transportation systemGood supply chain connectivity need to be categorized by how well the infrastructure is being servedin the country. A weak infrastructure can lead to severe damage of the performance and effectivenessof a transportation system and thus the ability to attract FDI interest. Therefore, a competenttransportation system connecting various transport modes, links and channel is critical to facilitate thehigher demand and flow of a nation‘s production system and also to enhancing its tradecompetitiveness. Without such transportation system, insufficient distribution channel and

infrastructure bottleneck will destroy the chances to become competent with a better supply chainservices. Therefore, nations that are unable to hold trade efficiently and with cost effective approachwill not be able to survive with the increasing of trade volume. As a result, they could be portrayed asnot competitive and might hindered by businesses and investors who increasingly are putting anexcellent good transport system and services in their decision to set up foundation hence to invest ina particular country and region. An efficient trade transport network is crucial for developing countriesto channel aid in efficient supply chain activities whose economic growth is trade-dependent andexport-oriented and also to penetrate the bigger market (Khalid, 2009).

Logistics Performance According to (World Bank, 2014), the Logistics Performance Index measurement is based onefficiency of trade supply chains. Supply chains are the backbone of international trade andcommerce especially in trade liberalization. Supply chains are a complex sequence of coordinated

activities. The whole performance depends on government interventions such as infrastructures,logistics services provision, and cross-border trade facilitation. The gap between the countries thatperform best and worst in trade logistics is still quite large, despite a slow concentration since2007. This gap continues due to the complication of logistics-related reforms and investment indeveloping countries, despite the universal strong recognition that poor supply-chain efficiency is themain barrier to trade integration in the modern world. Logistics performance is strongly associatedwith the reliability of supply chains and the predictability of service delivery for producers andexporters, and it is also shown that supply chains are only as strong as their weakest links. They arealso becoming more and more complex, often across many countries while remaining critical tonational competitiveness.

Trade CostThe excellence of supply chain efficiency is based on cost minimization. Nowadays cost plays acrucial factor to determine the higher impact on trade competitiveness. According to (World Bank,2011), high transactions costs related to trade are driven by how public policies, regulations, andprocedures interact with import and export of supply chains industry. When indirect costs occurredduring the supply chain process, delivery times and reliability are being very uncompetitive and thishas severely affecting a country‘s position in highly competitive international markets that demand hasto be just-in-time for any delivery. Moreover, the value of products often declines with time while intransit, usually for perishable products, spoilage and waste can increase perpendicular with transittime. These costs can also reflect lost opportunities to party that involves in the chain connectivity, aswhen critical inputs cannot reach manufacturing plants in time or perishable commodities cannotreach markets in time or when production plants must hold higher-than-optimal levels of raw materialinventories to cover for logistics delays (Subramanian, 2012). All this critical issues need to beaddressed correctly in order to establish a better supply chain activity and also to gain customers

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Logistics CostThe importance of the logistics industry to different players in the supply chain consists of efficient andtimely movement of goods and the provision of competitive services among players. Production,distribution and marketing costs will be high or low depending on how logistics firms are able toefficiently do their part in the supply chain. Inefficiencies in the transport and logistics service industrycontribute to the high cost of doing business. Higher logistic costs are mainly due to poorinfrastructure facilities in the country. Logistics costs include transport, packaging, storage,

inventories, administration and management, are the key consideration for all players in theinternational logistics chain. Uncontrolled logistics costs prevent companies to sustain in a competitiveedge and they will experience trade reduction since higher logistics cost translate the competitiveimport and export prices. Logistics costs are more important for developing countries, where theyhave been estimated to be the highest in the world (UNCTAD, 2005). Several factors contributed todifferences in cost levels and structure, including the efficiency of distribution systems, the quality oftransportation infrastructure, and the regulatory and institutional frameworks. Without these importantcriteria‘s a country cannot cope with tremendous trade activities growth.

Time EfficiencyPart of supply chain efficiency factors that can be related to trade liberalization is delivery and deliveryhas been defined as the time to deliver the goods on time. The precise time goods arrive at the finaldestination give a great achievement for the supplier and manufacturer and support the growth in

trade. When issues like delays arise it will effect overall supply chain of an industry. The time delayscaused by the lack of trade facilitation also obstruct the benchmarking on competitiveness. Bin (2009)has identified delays in customs increase warehouse and storage costs as being among othersfactors that influence barriers. Such delays have an effect on the quality of goods thus lead to thecancellation of orders and claims of damage compensation. According to Djankov et al. (2006), oneadditional day in export time is equivalent to 1 per cent increase in distance, and a 10 per centincrease in the time it takes to move goods from factory to ship would reduce the exports of time-sensitive goods by 6 per cent. Most of the delays are due to administrative hurdles, such asnumerous customs procedures, tax procedures, clearances and cargo inspections.

These issues have been identified by other researcher like Alburo (2009), according to him, on thePetrapole-Benapole border activities, close to 80 per cent of the loss of time is related to parking,customs clearance and crossing the border. Those issues must be addressed by trade facilitation

rather than transport-related measures. For example, delays related to the actual border crossingreflect inadequate warehouses, a lack of safety measures at the border, congestion, poor entryformalities, and other factors. The amount of time spent loading and unloading is also related to tradefacilitation measures, specifically: (a) loading cargo at the point of departure or exit; (b) unloadingcargo carriers from the exiting country at the border; and (c) reloading cargo into carriers of the arrivalcountry. To the extent that there are restrictions on cross-border movement of cargo vehicles, theseborder activities lead to time losses on the part of the exporting country (up to the border) and on thepart of the importing country (from the border).

Custom EfficiencyThe efficient movement of goods to and from manufacturing facility until they reached the customer iscrucially essential in which to any world class manufacturing facility must have an access to anoutstanding source of material and component. Efficient movement is also important component insupply chain efficiency to achieve a significant benefit. For modest improvement in trade facilitationsuch as custom administration would lead to increases of US$ 1.5 trillion (RM 5.1 trillion) equal to2.6% in global GDP and US$ 1.0 trillion (RM 3.4 trillion) corresponding to 9.4% in global exports byWorld Economic Forum (2013). Efficiency of customs administration refers to the speed and easewhich imports and exports can clear customs with minimum time along with the quality and range ofservices provided by the national customs authorities. Inefficiency usually reflects an insufficientdistribution of resources to customs agencies or a malfunction to adopt best practices in customsprocedures. These issues can include frequent inspections and long wait times. Border delays andburdensome requirements can extend beyond a customs administration to include a lack ofcoordination between border agencies and compliance with import-export standards. Thus far,nowadays companies spend significant amount of money, time and effort to re-engineer their supplychains through business practice changes and technology. Cost deduction and increasing speed ofdelivery are the key value to drive in any business these days. A delay and problems arise instandards inspection showing as poor customs procedures can actually create a severe supply chainconnectivity problem and thus fail to gain overall of supply chain efficiency.


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Institutional QualityMost of the time when dealing with a globalization and liberalization, a good policy can be animportant role in order to achieve an efficient of supply chain coordination. Inefficient ports, poortransport system and logistics services are not the only impediments for exporting and importing firmsin developing countries. These firms also facing policy and institutional constraints in the forms ofcomplex laws, burdensome regulations, inadequate enforcement of contracts, poor definition andenforcement of rules of engagement, onerous documentation and other procedures causing delays at

customs and border crossings, pilferage in transit, and highly restrictive protocols on movement ofcargo (Subramanian, 2001). Besides that, Anderson and Marcouiller (2002), have studied the effectsof institutional quality on trade where they have find that higher transactions costs associated withpoorly enforced commercial contracts and lack of transparency and impartiality in government policiessignificantly slow down the international trade. They also find that by 10 percent increase in acountry‘s index of transparency and impartiality leads to a 5 percent increase in its import volume.

De Groot et al, (2004) examine institutional quality which reflected by such dimensions aseffectiveness of governance, regulatory quality, voice and accountability, rule of law, and control ofcorruption. They find a positive and significant link between improved regulatory quality and incrementin bilateral trade. The LPI result has shown that good policies matter give impact to developing anefficient supply chains but many developing countries still lag behind to provide a better development.The ―logistics gap‖ evident in the research still prevails and underscores the importance of consistent

policies across sectors (trade, customs, and transportation). The imperative of facilitating tradethrough more transparent and consistent border clearance is now universally recognized and becauseof that the importance of efficient logistics is now widely accepted by policymakers worldwide (WorldBank, 2014).

Conclusion The literature on the effect of reforms in supply chain efficiency towards trade liberalization shown theevidences that issues and challenges from the failure to provide a better development oninfrastructure, logistics services, cost competitiveness and institutional policy can give a criticalconstraint to support the efficiency of supply chain in a developing country. Countries will mainly beingaffected from the lack of effective player in competitive global and regional market which encounterfrom such issues and barriers that cannot be eliminate or improvise by the government.Consequently, by improving the infrastructure, logistics services, trade cost and institutional policy

towards trade, the development and operation of efficient supply chain can be supported and also canhelp to boost the trade competitiveness of developing countries thus increase the export prospectivefor economic prosperous. Thus, these papers are based ongoing study that will continue to develop aperception and measurement on supply chain efficiency performance in Malaysia towards tradeliberalization and how to strategize a better supply chain efficiency for Malaysia in facing the tradeopenness in 2015.

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Literature reviewReference Models (RMs)Reference Models (RMs) are generic conceptual models and framework which represent thebusiness‘s best practice universally applied in company specific processes or projects. The benefits ofimplementing Reference Models to business includes cost and time reduction, quality improvement,risk reduction, process transparency, common language and basis for benchmarking (Kirchmer, 2011;Miers, 2008). The development of process design and continuous sustainably improvement for the

company or cross-industry could reuse the RMs in combination or individually, to reduce thedevelopment cost and time to company‘s specific process models (Kalpic and Bernus, 2002; Pajk etal, 2012). Verdouw et al. (2010) brought about an example of Reference Model usage designed forfruit industry in Europe. They analysed fruit-specific knowledge and generic knowledge in cross-industry standards and proposed the business process that could provide fruit companies withpersonalized configuration in supply chain design and information system implementation.

Similar to hospital supply chain, the reference process model designed using generic process couldbe applied to hospitals at all scales. The benefits will not be limited to the hospitals themselves butextended to the related players in hospital supply chain and, ultimately, to the patients. The referenceprocesses in the model explain the roadmap for each role and responsibility with step-by-stepactivities. Besides the operational steps, the reference processes provide control points and keyperformance of each activity. The outline activities and performance metrics support the management

team in decision making and can be adapted to company‘s needs. In sum, the reference processmodel engineers the management plan at strategic, tactical and operational levels.

SCOR ModelThe Supply Chain Operations Reference model (SCOR), designed by the Supply Chain Council(2012), is the most widely used business process reference models in various industries. It is one ofSupply Chain management tools used to address the overall processes and activities from supplier‘ssupplier to a customer‘s customers. The SCOR model has five basic processes: Plan (P), Source (S),Make (M), Deliver (D) and Return (R), and provides a standard process model which describes theorganization best practice framework of management processes. The model contains a linkagebetween business objectives to supply chain operations, with standard metrics to measure processperformance or KPI at each level of hierarchy. SCOR Model has four levels of hierarchy: top,configuration, process element and implementation. The top level (Level 1) is the design of process

types (Plan, Source, Make, Deliver, Return). The second level (Level 2) involves configuration of thesupply chain that is the detailed descriptions of the process types‘ sub categories, such as ‗Make tostock‘, ‗Make to order‘, and ‗Engineer to order‘ or ‗Production execution‘ The third level (Level 3) is thedecomposition of processes to the process element level, in line with its strategies and performancemetrics. The fourth level (Level 4) is the implementation of the supply chain and best practice solution.This level is not included in SCOR framework but can be applied as a sub-process in specificbusiness conditions.

Figure 1: Levels of SCOR Model

Since the SCOR level four requires specific details from each hospital environment for theimplementation stage, the proposed reference process model was upgraded to SCOR level 3.5

adopting generic processes. The SCOR level 3.5 takes into account the tactical and operational levelsthat support management team in making decision as shown in Figure 1.


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Reference Process model designProduct movement types are to identify the products‘ demand characteristics especially for hospitalsthat implements stockless supply chain policies. The demands have to be analyzed and modelled ona daily or monthly basis and it can be defined from the frequency of usage and Sales forecast. It canbe classified into three levels as Slow-moving, Moderate-moving and Fast-moving, which affects there-ordering point in order to manage inventory cost to balance with demand. From the genericprocesses in the distribution centre of general Hospital, the pattern of product movement shows that

most of medicines are usually kept stock for daily demand usage and some that are for vital usageare required to be stored in hospital even with no demand. Therefore the ‗Reference Process Model‘will be designed based on Make-to-Stock model structure using five major processes withindistribution centre (see Figure 2), which enable suppliers to deliver the products within a short lead-time when Purchasing place the Orders.

Figure 2: Generic Distribution Center Processes

SCOR Level 1 and level 2When we adopt the SCOR Model to describe the pharmaceutical products flow and information flow

within and throughout the Distribution centre, the activities that are used to determine on processtypes for SCOR Level 1 is as shown in Figure 3 (left). For process categories, as mentioned earlierthat we focused on distribution centre processes (some parts on ‗Purchasing‘ will also be considered),the SCOR Level 2 in Figure 3 (right) is modelled based on Make-to-Stock products, which we renamethe process categories to align with distribution processes and hospital supply chain per following:-

- Plan (PL) : the process to determine requirements and corrective action to achieve supply chainobjective for inbound and outbound logistics

- Receive (RE) : the process of ordering and receiving products, including replenishment inventory andreturn for defective product

- Put-away (PU) : the process of transferring verified products to storage location- Order-Picking (OR) : the process of receiving the orders and pick up products to be ready for

shipping

- Shipping (SH) : the process of order management and order fulfillment activities to serve customersatisfaction

- Return (RT): the process of moving defective products back through the supply chain or supplier

S C O R L e v e l 1 H o s p i t a l S u p p l y C h a i n

Manufacturers Suppliers Distribut ion Center Dispensing Points (Hospital)

Make

Deliver

Plan

S ou rc e D el iv er

Plan

S ou rc e D el iv er

Plan

S ou rc e R et ur n

Return

Make

Return

Plan

-

Figure 3: Distribution process in healthcare supply chain (SCOR level 1 and 2)

SCOR level 3 to level 3.5In previous section, SCOR level 1and Level 2 described how the processes are defined in the highlevel of distribution centre in hospital supply chain. SCOR Level 3 will break down processes into atactical decision level while additional model Level 3.5 will consider the operational decision level ofthe distribution centre using the generic Inbound and Outbound logistics throughout the processes(see in Figure 4). As mentioned in section 2.2, we have put in extra effort to upgrade SCOR modelLevel 3 to Level 3.5, in order to show users the roadmap on how the reference model can beimplemented in such environments.


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Figure 4 Reference Model for Distribution Centre Process in Hospital Supply Chain (SCOR-BasedLevel 3.5) shows us the interface between Purchasing – Distribution Centre (Inbound) – DistributionCentre (Outbound) – Dispensing Points. It is written in BPMN platforms to represent the start and endprocesses of information flow and product flow for the whole processes. This is important for the ITpart; to design on how each of the information will be link together, and using that to select the properIT supports to achieve the most efficiency performance. The Reference Model can also be used tosupport the Capability Requirement, Network Design, Facilities Considerations, and scope down to

Operational Planning as mentioned (Rouwenhorst et al., 1999; Coyle, 2003).

Figure 4: Reference Model of Distribution Process in Hospital Supply Chain (SCOR-Based Level 3.5)

Determined the case studies scenarios into reference model based on SCOR Best-practice, weclassified the Process Categories according to processes within Distribution Centre as; Plan (PL),Receive (RE), Put-away (PU), Order-Picking (OR), Shipping (SH) and Return (RT). With thisclassification, the management of hospital can see the operation scale and manage in which positionis required for each activity, and design for the organization workforce at each process for the

required role to be fulfilled. At the beginning, each role will be triggered by receiving information tostart the process. For example, Purchasing will start Process PL1.1 from Inventory level, thenestablish and communicate supply chain plan, PL1.2 (Ordering plans) submit to suppliers with RE1.1(Product Schedule) to deliver to Distribution Centre (Inbound). The workflow process will continue tothe next role and activities respectively, as well as, product and information movement wherenecessary along the roles and responsibilities. However, some processes are the same activities andare defined as same Process ID, such as, RE 1.2, RE 1.3 and PU 1.1 process. These are separatedand specified more particularly by roles and responsibilities. Also the performance metrics using ateach process, each roles are different by the measuring methods, which will be described in the nextsection.

Performance measurement system design

As mentioned in Section 1 in the overview of problem background that hospital supply chain still

require a proper improvement and control of inventory with quality of goods storage and distributionpractices conditions, those system affect directly to the patient safety and hospital‘s performance andservice level. In this section you will see the performance outcome of Metric ID at each activity basedon SCOR Level 3 that impacts the top-down process and decision in terms of time, cost andefficiency. We have mapped the processes and Performance Metric IDs for each Role andResponsibility within the distribution centre process of hospital supply chain, in order to show theimplementation roadmap on how the interaction of the process and how the key performance can bemeasured.

In our research, the designed Reference Model of Distribution centre in Hospital Supply Chain isconsidered at Process / Metrics Alignment level based on SCOR Best Practices. The Performance-Process mapping diagrams show that outbound distribution, starting from order receipt to deliver tocustomers, is the key function in Distribution centre and it has the most impact on overall

Performance. Reliability and Responsiveness are the major Performance attributes of the outbounddistribution with covering process activities about 40.74 and 44.45 percent respectively; as they are


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addressed to customer-facing attributes, whereas Agility, Cost and Asset Management Efficiencyhave a small impact for about 15 percent from total 27 processes in Distribution centre.

Hence the Metric is a standard for measurement of the process performance in supply chain, andSCOR Metrics are demonstrated in three-level of pre-defines metrics. From Table 1, Performance Attribute – Reliability at Level-1 Metric is RL.1.1 (Perfect Order Fulfillment) as its strategic metric andkey performance indicators (KPI). It has four main ‗Level-2‘ metrics and various ‗Level-3‘ metrics

identified with the processes. It shows that Process SH1.2 (Load Vehicle & Generate Shipping Docs)at Distribution Centre (Outbound) directly affects the performance ‗Level-2‘ Metric RL2.3(Documentation Accuracy), and those are part of the KPI at Level-1 metric RL1.1 (Perfect OrderFulfilment).

Table 1: Level-1 through 3 of Performance Attribute – Reliability and Processes linked

The standard process-metrics alignments need to be analyzed to reflect performance aspects at eachprocess. Reliability, Responsiveness, Agility, Cost, and Asset Management Efficiency attributes aredemonstrated in three-level of pre-defines metrics. The consequence of the standard performancemetric IDs are mapped to SCOR model-level 3, which will serve the performance attributes at thelevel-2 and level-1 to support the decision making. Therefore the analysis of performance metrics IDfrom Level-1 through level-3 can help manager to find the root cause of overall performance and leadto maximize the long term hospitals‘ efficiency and cost.

DISCUSSION

In conclusion, this research has reached its objective and the research question. The main purpose ofthe present study is to develop a standardized business process models with a set of performanceparameters for distribution center toward improving the hospital supply chain. The proposed referenceprocess model was designed based on the generic distribution processes at three-large-size hospitalsin Thailand. BPMN Notation and SCOR framework were applied to main activities in distributioncenter; Plan, Receive, Put-away, Order-Picking, Shipping and Return, where specific roles andresponsibilities are defined at each process. The efficiency of business process, data consistency andsupply chain management system for the end to end process between parties, have been consideredfor the performance measurement system design. With these results, it can be used to assist themanager on setting standard guidelines for implementation and/or process improvement withinDistribution centre and toward Hospital supply chain. A well-structured reference model demonstrateskey performance indicators at each process and roles can help management to analyze the problemroot cause for further development.

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