A Conceptual Paper For Human Capital In The Logistics Industry In Malaysia

Khazizul Maulod Pahim1 Malaysia Institute of Transports (MITRANS)

Universiti Teknologi MARA Khazizul384@salam.uitm.edu.my

Assoc. Prof. Dr. Hjh. Sabariah Jemali2 Faculty of Business Management

Universiti Teknologi MARA Shah Alam, Malaysia

Sabariah719@salam.uitm.edu.my

Assoc. Prof Dr. Syed Jamal Abdul Nasir Syed Mohamad3 Faculty of Business Management

Universiti Teknologi MARA Shah Alam, Malaysia

syedjamal145@salam.uitm.edu.my

Abstract— Globally, logistics is an important economic activity valued at about USD 320 billion a year and growing at an annual rate of 3 to 10 percent. Malaysia has recognized the industry as the main key towards enhancing Malaysia’s progress on becoming a globally competitive fully developed nation. It was predicted that the logistics industry would grow at 8.6% during the year 2006 – 2020 plan period and contribute 12.1% to Growth Domestic Product (GDP) by 2020. Therefore, the development of the human capital or human resource for the logistics industry in Malaysia becomes important in confirming the nation’s competitiveness. Accordingly, the aim of this study is to produce a feasible framework of human-resource development for the logistics industry in Malaysia.

Keywords- Human Resource Development; Human Resource Development Framework; Human Capital; Logistics, Supply Chain;

I. INTRODUCTION Currently, there are many public and private higher

learning institutions in Malaysia offering programs on transport and logistics. However, it is noted that these programs are not streamlined and do not meet the requirements of the industry [1][2][3][4]. Employment in this sector is not a preferred choice among the Malaysian workforce due to poor perception of the industry and thus, does not attract the best brains [2][3]. Presently, there is a lack of interest among the workforce to be employed in the industry and graduates in transport and logistics fields lack practical skills and abilities required by the industry. It then, requires employers in the logistics industry to provide special programs to fill the skills gap [2][4]. The logistics industry requires a strong, competent and experienced workforce along the entire logistics supply chain, which is able to undertake the activities in accordance with international best practices.

Despite the remarkable expansion of the industry, particularly in Malaysia there has been very little published research in the area of the logistics and supply chain resulting in a very limited dissemination of information for the purpose

coordination, learning, advancement and technology. The [4] has acknowledged the lack of qualified workforce in the logistics industry.

A recent report [5] highlighted that Malaysia has the

opportunity to create an additional value of about RM9-11 billion over the next decade, which contributes approximately 12.1% to the GDP, if the supply-chain competitiveness is improved through more efficient transport and logistics services. They emphasized that by reducing the supply-chain cost will ultimately stimulate further national growth as the World Bank has estimated that a 10% reduction in transportation costs can increase trade by 20%.

Similarly, McKinsey Global Institute [6] who is working

on the productivity improvements in industry sectors across globes indicates that such efficiency improvements are likely to translate into a GDP growth effect in a similar order. This creates a virtuous and perpetuating effect on the economy. Thus, improving industry supply chains is a very substantial opportunity that could significantly stimulate economic growth and thus enhance Malaysia’s competitiveness globally. We can achieve all of this figures by implementing the HR functions such as the implementation of new technologies, understand the nature of logistics / supply chain works and improve the logistics practitioner skills and education.

Reference [7] state that lack of career path and succession

planning are the most commonly cited in human resources challenges, and there is increasing need for succession and career meeting. In summary, there may be appearing to be a shortage of sources of skills, education and professional development opportunities. The current attraction challenges and the low awareness levels of the supply-chain sector and its career opportunities, there is a need to better educate and promote the sector in target marketplace segment with particular emphasis on those making career and education

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decisions. Delivering this type of promotion to attract new talent will require national infrastructure, perspectives, coordination, and funding.

The study arises from the needs to manage human-

resource development of the firm to be more effectively and competitive. The rapid growths of the logistics industry increase significantly and become one of the contributors to GDP [4]. The issues and problems of training demand that firm continually assess its internal process and capabilities to remain competitive. It is known that HRD can positively affect the organizational performance [8] [9][10][4][11][12]. Numerous studies have shown a positive relationship between HRD practices and organizational performance. However, studies in Malaysia are quite scanty and limited in investigating this phenomenon. There is no denying that HRD plays the important role in order to boost the logistics industry as stated in the [4]. It also stressed that one of the strategic thrust in the logistics industry is to ensure and adequate supply of competent workforce to meet the long term requirement of the industry. The [4] also state that the capabilities of the workforce will be enhanced through among other re-training and long-life learning of the personnel to meet short and long-term needs of the industry in specific areas of technical, commercial and operation skills.

Research in [4] shows the two aspects of the human-resource requirements as:

“Ensuring sufficient availability the human resource as well as providing a facilitative environment for the workforce to acquire the necessary skills in the professional and technical field to drive the economy to higher value added activities." Due to the world globalization, it is vital to have such a

skilled worker to influence on economic growth and competitiveness as Malaysia now practice the knowledge-based workers [4].

“The Services Sector, including logistics has been targeted as the engine of growth under Malaysia’s Third Industrial Master Plan (IMP3). Total share of services in Malaysia’s GDP has expanded from 48.8 per cent in 1987 to 53.4 per cent in 2007” [13] According to skills performance, the data in Productivity

and Investment Climate Assessment (PICS) [14] shows how firms and workers perceive the quality of education, skills, and training programs in Malaysia. Employers were asked about their experience in filling vacancies and deficiencies in the quality of their existing workforce while employees were asked independently about the skills, they lack the most in doing their job as well as the adequacy between their field of education and the work they do [12].

The lack of supply of graduates was mixed with the

presence of skills mismatch as reported by firms. Due to

insufficient of university graduates, the companies have to employ workers with diploma qualification to do the job of a graduate. The lack of graduates in tertiary education contributes to sub-optimal hiring policies and loss of productivity at the plant level. This mismatch of education also reflected the qualifications of unemployed graduates registered for training schemes where about 40 per cent of them have qualifications, which are not those required by the manufacturing sector [12].

Reference [14] stated that the improvements in the skills

of the workforce can bring in substantial benefits [10][8] [15][16]. Individual firm’s view that they are incapable to employ as many skilled workers as they want. Econometric estimates suggested that addressing the skills constraint can provide large benefits to firms, raising the sales of most industries by 11 per cent of sales on average [14]. The increase in skilled employment would have the greatest benefits in terms of increased sales also have larger proportions of firms reporting concerns about skill shortages. There are also likely to be substantial increases in average earnings to the extent that the expansion in the supply of skilled workers allows Malaysia to expand into sectors that are skilled [12][16][17].

According to [14],

“Even though Malaysia has a world-class skills training infrastructure, it was noticed the firms that use these facilities is low especially among the SMEs). Large number of firms reported that the availability of skills training institutes and the existence of the levy-grant scheme for retraining and skills upgrading of employees by Human Resource Development Fund (HRDF), was critical in their decision to train. However, the firms that use skills development institutes rate them very high. More than 75 per cent of managers rank the top three institutes they use as of “good quality,” and around 20 per cent believe they are of “very good” quality. Firms believe that they would train more if the processes for training were made more efficient."

One of the factors that can contribute to the Malaysian

economy is a lack of human capital and it has been raised many times over the years [18]. The most-recent issue about this is raised by World Bank which stated that Malaysia’s education system has been a major challenge for the country to boost the economic value chain [18]. Datuk Noriyah Ahmad, the Economic Planning Unit Director General stated that estimated 80% of the country population only have the minimum qualifications of Sijil Pelajaran Malaysia (SPM) or secondary 5 level, Datuk Noriyah also mentioned that she had to look at the ways to ways up-skill our labour force because there is a need of urgency to move up the value chain [18]. The increasing numbers of highly skilled and educated Malaysian moving overseas for career advancement has effect the economic called “talent crunch." These trends especially

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involve the science and technology field [19]. The government’s lack of will power has to be address and has to check its inability to capture or attract its talent pool. Education, meritocracy, equity limits, the scarcity of high-technology industries and security standard have been raised or on the other side, politicians and political analysts have cited a lack of transparency in government [19]. Dr. Edmund Terence Gomez an Associate Professor in Universiti Malaya said that Malaysia does not have the sufficient quantity of “quality” human capital needed to boost the country’s economy and Shamsuddin Bardan an Executive Director for Malaysia Employers Federation points out that Malaysia has no shortage of grand plans an extravagant project, including Multimedia Super Corridor (MSC) and E- Village, but the question is could the country get enough people with the right skills and attitude to sustain them.

“There is no point coming up with multi-billion-dollar projects if we do not have the right people to fill up the positions. As it is, we’re already facing difficulties attracting the right skills and talents to propel our economy up to the value chain." Explain Shamsuddin the Executive Director for Malaysia Employers Federation (MEF)[19]. Therefore, the problem statements for this study are to

propose or develops a Human Resource Development framework for the logistics industry in Malaysia in order to keep pace with the global challenge and have a competitive nature.

II. LITERATURE REVIEW

Logistics Industry Overview

A. Global Overview

“Economic competitiveness is relentlessly driving countries to strengthen performance, and improving trade logistics is a smart way to deliver more efficiencies, lower costs and added economic growth,” said World Bank Group President Robert B. Zoellick, who is visiting Berlin January 13 -15 to discuss global development and economic issues. “Streamlining the connections among markets, manufacturers, farmers and consumers offers tremendous growth and investment opportunities and should be a top focus for developing country growth strategies. As we issue this global report, I’m pleased to be in Germany, the top performer on efficient logistics” [20].

According to Otaviano Canuto the Vice-President and

Head of Network Poverty Reduction and Economic Management.

“Improving logistics performance has become important in recent years as logistics now contribute a major impact on economy activity. Logistics performance index 2007

and 2010 indicate that countries at the same level of per capita income, those with the best logistics performance experience additional growth: 1 % in Gross Domestics Product (GDP) and 2 per cent in trade. In order to boost the economic and emerge in stronger and more competitive positions found that it is really relevant as developing countries need to invest in better trade logistics”[21] Logistics Performance Index report by World Bank in

2007 and 2010 shows that high-income countries lead the top logistics rankings. Most of the top 10 ranking is alike the LPI report for 2007. Most of them are the key players in the logistics sector, occupying important places in a variety of global and regional supply chains. The results mirror the openness of these countries to international trade and investment as part of their successful economic development strategy [21].

B. Asia Overview

The Asian economic crisis late 1990’s act as the catalyst for companies seeking the transformational change. The growth is seemed to be returning to the region and the possibility of change will be exponentially, challenging the current situation for many existing trading patterns, arrangement and relationship [22]. China is the top performer with 3.49 logistics performance index followed by Malaysia 3.44 and Thailand at the third place 3.29. To become competitive in markets, companies must continuously strive to gain maximum return on their investment in resources. Many companies have identified the logistics or supply-chain management process as an area of opportunity to add value, whereby they can reduce costs and increase efficiencies [23]. Besides, there is a growing recognition that supply-chain management operations can have a strong effect on customer service levels, thereby enhancing revenues [23]. Reducing costs and improving the quality of the logistics and transport system will improve the international market access and lead directly to increased trade and through this to higher incomes and a wider scope for significant reduction in poverty and this situation make Asia progress on logistics has failed to keep pace with its growth in trade, developing countries in other regions now catching up so faster progress on logistics development will be crucial to sustain East Asia Competitive Advantages [24]. C. Malaysia Overview Through the expansion of traditional markets of the United States of America and the European Union and the diversification in growth markets of east and west Asia. The merchandise trade of Malaysia’s is assuming to reach 2.8 trillion by 2020 and it is believed that the total cargo by marine will increase by three-fold from 252.6 million tons in 2005 to 751 million tons in 2020 while the air cargo trade

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expected to increase two-fold, from 1 million tons in 2005 to 2.4 million tons in 2020 meanwhile, the railway freight will increase almost five-fold from 4 million tons in 2005 to 18.6 million tons in 2020 [4]. Malaysia has achieved ranking 29th in the World Logistics Performance Index 2010. Malaysia has fall into the upper middle-income countries and achieved second ranking of the categories [21]. According to [4], one of the strategic thrust in order to achieve the target is ensuring the adequate supply of competent workforce to meet the long term requirement to the industry and the capabilities of human workforce will be enhanced through re-training and long life learning of the staff. The joint-ventures with the other international institution will provide the skills and capabilities of the Malaysian workforce to reach the global standards [4].

III. THE NEEDS FOR TRAINING

In today’s global market place, companies and employees within the logistics industry require specialized and affordable training and development to increase their competitiveness with the continued growth of the transportation industry companies, and it is also stated that employee in the global transportation require specific technical knowledge in the area of the industry fundamental, operation knowledge, customer service, sales and negotiation skills [8].

According to [8] employee training can improve the performance productivity of staff and ensure they have the skills that industry needs. The possible training benefit would be increased employee motivation, satisfaction and morale, increased competitiveness, consistency message, increased efficiency, reduction in employee turnover and increased innovation in strategies and product.

There are employers identify that technical development courses is very important for personnel in the supply-chain sector and according to[17], training in logistics is very important as: • Lack of awareness and understanding of the logistics

sector. There is a lack of sector awareness among the future workforce participant, so some training has to be undertaken in order to build some awareness and understanding of the logistics industry.

• Attracting, developing and retaining supply chain

specialist an emerging priority. IT and policy change influencing the supply chain/logistics businesses. Due to the shortage of workforce, retaining the supply-chain specialist is vital as they have the experience in the industry.

• Emerging occupations/specialist skills set.

Due to new technology adapted in the industry and vary from each other, human-resource strategies will need to be adaptable to match a variety type of job ranging from semi-skilled (operational) to professional (technical) to executive level (managerial).

IV. HRD STUDY IN LOGISTICS / SUPPLY CHAIN AREA.

A review of the major human-resource challenges in the

sector revealed a limited pool of skilled employees and the need to develop skill sets to cope with emerging technologies and a global market place. In addition, the sector must overcome general lack of awareness and understanding of the supply-chain sector and its occupations. In order to achieve 12.1% to the GDP over the next decades or RM 9 – 11 billion [4], the government had to take the positive action by improving the logistics or supply chain using the HR function. It is believed that by stressing HRD activities towards logistics can improve the productivity and efficiency and directly achieved 12.1 % GDP [4].

Some researches suggest that effectiveness of the supply chain has been limits by organizational implementation barriers and could be improved by human-resource factors [26][27][28][29]. According to [], 30]. The evaluation of supply-chain management (SCM) resulted from the integration of the manufacturing and marketing process. The aspect of development of internal human resources as a means to enhance SCM practices has yet to be studied. However, such effort may improve the likelihood of a firm maximizing its SCM performance.

V. CONCLUSION

In the previous study, they have highlighted the issues of HRD in the logistics industry. So, this paper is to examine and develop the framework for human-resource development in the logistics industry in Malaysia. Based on the literature, hopefully there will be a framework in this industry in order to make the industry more competitive and have a good image and perception by the people especially the fresh graduates. Hopefully, this paper can adapt the existing model from overseas or come out with a proposed framework for the logistics industry in the future. This research not only can be a guidance for the industries to look for their potential workers but also can promote the logistics industry in Malaysia as a one of the industries that contribute to the country development and income.

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ACKNOWLEDGMENT

The authors would like to thank Malaysia Institute of Transports (MITRANS), UiTM for the Malaysia Logistics Council (MLC) research grants.

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