Enhancing Halal Sustainability: Resources and Capabilities of Operations in Third-Party Logistics (3PL)

Enhancing Halal Sustainability: Resources and Capabilities of Operations in Third-Party Logistics (3PL) NOORLIZA KARIA MUHAMMAD HASMI ABU HASSAN ASAARI Universiti Sains Malaysia, 11800 Penang, Malaysia noorliza@usm.my Abstract: - The resource-based (RB) theory holds that firms gain growth because they have sustainability by acquiring and accessing resources and capabilities. It is applied in this research to investigate the halal sustainability of third-party logistics (3PLs). This research enlightens what and how resources and capabilities are acquired and accessed by 3PL firms to achieve halal sustainability. The interview results uncovered that physical, technology, knowledge, relational and organizational resources are acquired and accessed by 3PL firms. This research triggers halal for humankind and is a novel attempt to initiate constructs of halal logistics resources and capabilities. The findings also verified that these resources are extended, developed and integrated and determine factors of firms' halal sustainability. It highlights the needs for logisticians to focus on developing their resources and capabilities for achieving halal sustainability, and further integrate their resources and capabilities to enhance innovation capability for innovative services and operations in 3PL. Key-Words: - resources and capabilities, halal logistics, halal services, halal sustainability, third-party logistics 1 Introduction Halal has become the strategy paradigm that embraces broad concerns of universal issues in halal-oriented economies. Efforts to facilitate the halal international trade are vital for third-party logistics (3PL). Halal is safety for humankind and has been prominent in the non-muslims countries e.g. USA, United Kingdom, Europe, China and Thailand. Thus, third-party logistics (3PL) firms have become a significant for delivering halal products and/or services to global consumers but there is only a few 3PL firms have halal logistics compliance. Thus the existing 3PL firms are still insufficient to offer and supply halal logistics services and operations due to lack of resources and capabilities. What 3PL firm necessity are the right paths and methods that lead to the halal of service and sustainability but the literature of halal is more predominant in manufacturing perspective [1,2,3] The halal research of logistics service is the fewer discovered and much of halal literature has been exploratory in nature [4]. This research reflects the halal logistics service as a new service offered which requires new structure on practical system or muamalat which covers aqidah, akhlak and shariah. Furthermore, the literature of logistics and halal was lack of theoretical development and application in halal logistics studies. Thus, this research embarks on exploration of the means for 3PL firms to achieve halal of service and sustainability. In reality, halal business is more complex and challenging via expectation of the new and advanced global consumer. According to resource-based view (RBV), a firm is a collection of heterogeneous resources, factors of production or bundles of resources or inputs that allow a firm to perform an operations and activities and execute business and strategies [5,6,7]. For example, in 3PL firms, resources and capabilities are considered the basic element or prerequisite for the halal services and operations. Hence RBV provides a key theoretical foundation for halal sustainability. This research attempts to gather empirical evidences which explore resources and capabilities of operations in 3PL firms. Based on case 3PL firms, this research explores what and how resources and capabilities are accessed to achieve halal services and sustainability. 2 Literature Halal logistics is an emerging business, reflects as service innovation where innovative 3PL firm offers new service portfolios. The 3PL firm provides halal as value-added service from the front-end to the end user while the new global ISBN: 978-1-61804-273-6 206

consumers need wider and advanced halal services from halal 3PL firms. Due to significant demands for halal industry, number of 3PL firms have been developing for serve more than billion Muslim worldwide [8,3]. Halal logistics has made halal products and services possible to be accessed globally by consumers. Non-Muslim consumers also insist for Halal logo or brand which represents quality, hygiene and safety. In reality, the halal logistics services have been developed to assure halal integrity as promised from the source of suppliers of suppliers to the consumers of consumers. These attempts show that 3PL firms have acquired resources and capabilities to offer and supply halal logistics service and further enhance halal sustainability. So far very few studies have discussed halal logistics [4,9]. The recent study by Karia & Asaari [10] initiates the concept of halal logistics service based on Islamic-based view (IBV). Karia and Asaari [10] pointed that halal logistics service is constructed by halal aspects of behaviors, activities and operations which are not violated or conflicted with the Islamic-based, operated and performed with trust, dedication and honesty, and follow term of agreement or Shariah compliant, minimizes hardship and generates welfare or benefits to people (society), planet (environment), profit (economy); and ultimately the desire for Allah blessing [10]. The strategic halal service determines a firm sustainability in terms of product service (e.g. zero defect, shariah compliant, cheating, corruption, monopolies, hoarding), people (e.g. good action, moral practices, avoiding all kinds of sins), planet (e.g. maximize benefits of environment and others) and profit (e.g. maximize interest of firm and public). Essentially, the RB theory can provide valuable understanding of the halal sustainability. First, firm as a collection of heterogeneous resources, or factors of production or as bundles of resources including all inputs that allow a firm to operate and implement halal strategies [5,6,7]. Second, firm s internal processes create a resource bundle which can become the means of creating and sustaining halal logistics service. These essential or sticky resources cannot be transferred from a 3PL firm to another without cost. Thus the theory holds that a halal sustainability comes from acquiring valuable and rare resources and capabilities that competitors cannot easily acquire or reproduce [7]. In logistics literature, RBV has been applied. Much logistics literature has direct or indirectly explain about resources and capabilities which can be broadly divided into tangible and physical resources such as logistics and IT equipment, and facilities and technology resources [11,12]; and intangible resources such as human resources [13,14]; relational resources [15] and organizational resources [16,12]. Some scholars focus on just one particular group of resources and capabilities, for example, relational resources [15], information technology capability [17,18], physical resources [19] and human capital [20]. Others divide logistics resources into tangible resources (e.g. equipment, plants, fleets, hardware), intangible resources (e.g. organizational processes, skills, know-how, reputation), and capabilities required to create or deploy resources [21,11]. As far as authors are aware, halal logistics resource and capability have never been studied before. 3 Methodology The research conducted a case study involving two halal 3PL firms in Malaysia. Case study is an appropriate method for gathering rich empirical data and thereby to gain a deep understanding of the phenomenon in question. The objective of it was to gain more insights into resources and capabilities which are acquired by halal 3PL firms to achieve halal of logistics services and sustainability. This research selected case companies (ABC and XYZ companies) with different operations cover from haulage, distribution, warehouse, and container. Case companies were selected because they have been recognized as Halal logistics providers and attempting to become a successful halal player. The research set out to answer the two questions: (1) what resources and capabilities are accessed by 3PL firms? and (2) How are these resources and capabilities accessed by 3PL firms? In each case, we interviewed three to five people in 2 to 4 meetings involving those in charge of halal logistics strategy, process and operations. 4 Results 4.1 Question 1: What resources and capabilities are accessed by 3PL firms? The research unearthed abundance of verifications of the application of resource-based ISBN: 978-1-61804-273-6 207

theory by the 3PL firms in practice. 3PL firms resources and capabilities are segregated into: physical, technology, knowledge, relational and organizational. The following are the main findings from this research. 4.1.1 Physical These 3PL firms have decided the asset-based strategy because they have acquired more specialized physical resources for halal food and products such as segregation buildings of halal and non-halal foods and products, infrastructure, haulage, halal port, hub, transportation, warehouses, lands and containers. They distinguished physical resources as one of the most essential resources for the reason that it is acquired to support the network coverage advantage, without it they could not tender a wide selection of halal service portfolios and coverage. Lack of accessibility to halal physical resources could be an obstacle to gain halal service. For example, 3PL firm generated its profits mainly from halal certified warehouse, transportation or containers but due to these limited physical resources these 3PL firm experienced disadvantages. Manager C confirmed that "For the logistics operations, 70% of equipment requirement is a must but 30% of equipment is depending on situation which acquires certain halal logistics resources" 4.1.2 Technology These 3PL firms have made an effort to access to technology resources and continuously upgrading their information resources such as they have presented significant technology and maintenance resources which allow tracking and traceability of halal logistics. Another effort in strengthening halal logistics resources is the integration of the geographical positioning system (GPS) to transportation management system. They have been busy integrating radio frequency identification to warehouse management system (WMS) and transportation management system. For example ABC firm integrates GPS for halal tracking and tracing halal food and products; and WIMS to capture halal requirement of their clients. For example Manager A claims that With the system, the storage of information will become more systematic and well organized "Technology would speed up our halal operations due to the fact that it cut unnecessary work, time, and cost, and was paperless." 4.1.3 Knowledge Both firms relied heavily on halal knowledge resources which provide customized one-stop halal management solution. They have made an effort to acquire human resources with halal expert knowledge, i.e. skilled people and integrated teams with distinctive halal technical, halal knowledge and halal experience. The XYZ firm has appointed halal experts to give awareness and education to all staff. XYZ even get all employees participate and involve in halal and halal logistics. For example employees performed jobs as promised and deliver what they have promised to customers and the drivers are recruited with safety skills and knowledge. Manager B claims that We can train workers for halal logistics operations if they don t have any experience, skill or knowledge" Halal has high impact to humankind as it is regarded to safety, hygiene, quality, clean and nutritious 4.1.4 Relational These two 3PL firms have attempted to develop collaborative relationship with their suppliers of suppliers and customers of customers. Manager F confirmed that In halal logistics business, networking and contact should be the priority... It requires us to establish good rapport with clients and always attend our clients The acquisition of relational resources is not only to access customers, it is another quick means to access physical, knowledge, technology resources. The cooperation and collaboration with halal logistics parties such as suppliers, manufacturers and retailers may enhance high commitment on halal and sharing information; further enhance better understanding on halal requirements. Stronger relationships allow these 3PL firms to coordinate halal networks and share information and interact and communicate with customers and halal suppliers more effectively. Relational resources are supporting resources support effective and interactive participation and management of Halal contracts. This suggests that relational resources might reduce risk and greatly improve efficiency of the halal logistical process. 4.1.5 Organizational Both 3PL firms have competency in providing halal logistics service because of their halal ISBN: 978-1-61804-273-6 208

strategy, objective, planning and business process. They have made an effort to have competency in the development of the halal logistics service by focusing on leadership, management process, customer demand, information, and innovation capability. These 3PL firms have reinforced further in employee involvement and participation in halal decision making and empowerment. These 3PL firms have competence in managing halal routines, practices, strategy and/or processes which interface with customers to meet their demand requirements. According to Mr G Fulfilling all customer requirements is our commitment and it is part of the halal logistics business. These 3PL firms need organizational resources to understand their customer needs and manage customer halal service delivery processes that truly draw the right technology and knowledge resources together to innovate. Technology and physical resources may be valuable resources but 3PL firms need appropriate organizational capability to take advantage of these resources and make them rare and inimitable. The above verifications show that these 3PL firms have been acquiring diversity of resources and capabilities together with physical, technology, knowledge, relational and organizational resources mainly in the emerging or new advances halal logistics service. They have been aggressively in acquiring these resources; these 3PL firms are also leaders in halal logistics services. It is suggested that 3PL firms need to access and acquire to the above resources and capabilities successfully. If firms fail to access some of the above resources, thus they did not have possible halal network coverage and lack of scale in halal logistics system and process. 4.2 Question 2: How are these resources and capabilities accessed? The results prove that these 3PL firms have been aggressively acquired resources and capability by asset-based and outsourced strategy. These 3PL firms have acquired halal port, halal transportation and warehousing; and Samak (Ritual cleansing) services for containers and transportation. They have been uncompromising trade up all resources by devoting in halal services, training and education of halal knowledge, continual improvement and assessment. Another effort in strengthening halal logistics resources is the integration of the geographical positioning system (GPS) for tracking and tracing halal containers, training and education towards awareness and enrichment on halal knowledge, development and maintenance for infrastructure and physical resources; and management efforts, commitment and continuous improvement towards halal services. For example 3PL firms follow Shariahcompliant in every aspects of documents, activities, process and operations such as loan and investment sources, salary payment, standard of safety: drivers attending contractor safety system and renewing license yearly; acquired natural gas vehicles or transport with high-end specification. Possession is not the only instrument to access to resources, therefore these 3PL firms have outsourced some of its physical and knowledge resources. It is a popular instrument of acquiring resources by the assetlight firms. With this access to physical and knowledge resources (the halal logistics space), 3PL firms managed to provide halal logistics service. This explains that it is not necessary for 3PL firms to possess their physical resources. Although this research triggers what and how resources and capabilities are acquired, it would be interesting to know if and how these halal logistics resources would be acquired in a different context. There are still justifications suggesting that most 3PL firms are stressed for halal logistics acquisition. These halal 3PLs verified that they had found very hard to integrate diverse resources in organizational and knowledge resource since it takes investment in time and fund to build up. There are justifications signifying that these halal 3PL firms are under pressured in integrations diverse resources and sometimes become difficult to integrate. 5 Discussion The research represents some of the novel advancement in understanding halal logistics resources from halal 3PL firms perspective. So far this research is the first logistics research explores halal logistics resources acquired by Halal 3PL firms. The results confirmed that Halal 3PL firms have acquired resources and capabilities for offering a comprehensive range of halal services. This implies that the continuous of halal value adding services demanded by ISBN: 978-1-61804-273-6 209

global consumers have induced other 3PL firms to acquire a wide variety of resources and capabilities including physical, technology, knowledge, relational and organizational resources. Furthermore, these halal 3PL firms continue to expand and develop their resources and capabilities for halal logistics service. As far as this research is concerned, the interview findings provide very first empirical evidence for halal logistics literature. The results suggest that halal 3PL firms have acquired extensive halal logistics resources and capabilities to facilitate innovation capability in halal logistics service. Halal logistics resource and capability are perhaps a crucial clue for explaining why some 3PL firms were not able to achieve halal logistics service. In addition, the research ascertains that the asset-light strategy did enhance halal logistics services. 3PL firms used asset-light strategy achieved halal logistics service signifying that the level of resource possession might be the exact descriptive feature for halal performance. Furthermore, long-term planning for investment in human resources, technology and physical resources have assured to high levels of scale in halal services, in particular halal logistics service, less conflict and offer more extended halal logistics services. 6 Conclusion Overall, this research has important implications for RBV theory, halal, logistics and halal logistics literatures. The research extends the resource-based view theory by initiating hypothesis for classify halal logistics resources and means to assess resources. It assists to enlighten 3PL firms' halal logistics sustainability. These empirical justifications gathered so far designated that there are association between halal logistics resources and 3PL firm's halal sustainability, 3PL firms have been striving to acquire these resources by several instrument with distinct degree. The unreturned question is still how several resources and capabilities should be integrated to achieve halal sustainability. Acknowledgement: The authors gratefully acknowledge the research university grant provided by Universiti Sains Malaysia that has resulted this article. Ref no. 1001/PMGT/811216. References: [1] Shaikh, M. S. M. S, Aspects of Food Safety from the Islamic Perspective. In Shaikh Mohd S.M.S., & Azrina, S. (Ed.). Food and Technological Progress an Islamic Perspective, Kuala Lumpur, pp. 143-157, 2006. [2] Tieman, M, The application of halal in supply chain management: in-depth interviews, Journal of Islamic Marketing, 2 (2), 2011, pp. 186-195. [3] Manzouri, M., Ab Rahman, M. N., Saibani, N., & Zain, C. R. C. M, Lean supply chain practices in the halal food, International Journal of Lean Six Sigma, 4 (4), 2013, pp. 389-408. [4] Tieman, M.,& Ayub, A, Establishing the principles in halal logistics. Journal of Emerging Economies and Islamic Research, 1 (1), 2013, pp. 1-13 [5] Penrose, E. T, The Theory of the Growth of the Firm, New York: John Wiley, 1959. [6] Wernerfelt, B, A resource-based view of the firm, Strategic Management Journal, 5 (2), 1984, pp.171-180. [7] Barney, J. B. Firm resources and sustained competitive advantage. Journal of Management, 17(1), (1991) 99-120. [8] Smith, C. C. (2007). Halal logistics a fastgrowing market. Bangkok Post. [Online], [Retrieved April, 2, 2012] [9] Karia, N., & Asaari, M. H. A. H. (2013). Entrepreneurial in emerging halal-oriented economies: researching halal logistics services. ISI Proceeding IBIMA Conference, 2013, pp. 438-439. [10] Karia, N., & Asaari, M. H. A. H, Developing halal logistics framework: an innovation approach. ISI Proceeding 23rd IBIMA Conference, 2014, pp. 328-334 [11] Lai, K, Service capability and performance of logistics service providers. Transportation Research Part E, 40, 2004, pp. 385-399. [12] Yang, C. C., Marlow, P. B., & Lu, C. S, Assessing resources, logistics service capabilities, innovation capabilities and the performance of container shipping service in Taiwan. International Journal of Production Economics, 122, 2009, pp. 4-20. ISBN: 978-1-61804-273-6 210

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