SERVICE QUALITY THROUGH EMPLOYEE

KNOWLEDGE, SKILLS AND ABILITIES (KSAs): A

STUDY AMONG THIRD PARTY LOGISTICS IN
ISKANDAR MALAYSIA

NOR ATIQAH AIMA BINTI ROSLAN

UNIVERSITI TUN HUSSEIN ONN MALAYSIA

SERVICE QUALITY THROUGH EMPLOYEE KNOWLEDGE, SKILLS AND
ABILITIES (KSAs): A STUDY AMONG THIRD PARTY LOGISTICS IN
ISKANDAR MALAYSIA

NOR ATIQAH AIMA BINTI ROSLAN

A thesis submitted in

fulfilment of the requirement for the award of the

Degree of Master of Science in Technology Management

Faculty of Technology Management and Business

UniversitiTun Hussein Onn Malaysia

DECEMBER 2016
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DEDICATION

I dedicate this thesis to

Almighty ALLAH S.W.T,

My father (Roslan Bin Khairuddin), my mother (Nor AishahBintiYahya) and

siblings,

For your love, care and encouragement.

My supervisor and co-supervisor,

For your help, encouragement and guidance to ensure the success of this thesis.

Friends,

For your help and encouragement.

And everyone who involves directly and indirectly in the process of completing
this thesis.

Thank you.
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ACKNOWLEDGEMENTS

All praise to God, the Greatest that gives perfection and facility in applying all tasks
and responsibilities.

I would like to acknowledge the generous contribution of individuals and

organisations to this research, without them this research would not have been
successfully completed.

First and foremost, I would like to express my gratitude to my supervisor, Prof

Madya Dr Eta BintiWahab and my co-supervisor, Prof Madya Dr NorHazanaBinti
Abdullah for providing me with invaluable guidance, inspiration, encouragement for
my research and for being a mentor and supporter with their constant inspiration.

I would also like to express my gratitude to Office of Research, Innovation,

Commercialisation and Consultancy (ORICC), UTHM, for supporting this research
under the Fundamental Research Grant Scheme (FRGS), Vote No. 1225. I would
also like to thank organisations, which participated in this research.

Finally, I would like to thank my parents, brother, sisters and friends for all the love,
understanding, and encouragement throughout the research period.
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ABSTRACT

Logistics in Iskandar Malaysia has been one of the identified growth nodes and has
been contributing high revenue through wholesale and retail trade (42.2%) and
transport and related (12.7%). The main objectives of this study are to identify the
necessary service quality dimensions that customers expect from the logistics service
providers, to identify the gaps between customers’ satisfaction and desire, and to
explore knowledge, skills and abilities (KSAs) required for employees of logistics
service providers to provide excellent services. Hence, this study is aimed to examine
the service quality provided by third party logistics in Iskandar Malaysia. The scopes
of this study are the customers from three pillars of Iskandar Malaysia that outsource
their logistics activities, and human resource representatives from third party
logistics service providers. This study used both quantitative and qualitative
methods. The sampling method used for quantitative is quota sampling. The data
obtained answered all three objectives of this study. There are six dimensions of
service quality which they are tangible, reliability, responsiveness, assurance,
empathy and service cost identified that are perceived to be necessary in third party
logistics’ service. There are positive gaps for all six dimensions of service quality
between the expectation of the customersbefore receiving the services and the
perception of the customers after they receive the services. Lastly, there are 7
variables identified to be under knowledge factor, 12 variables for skills factor, 9
variables for abilities factor and 4 variables for other factors that are required for
employees of logistics services. The findings are expected to help third party
logistics service providers to enhance their service quality in order to ensure the
satisfaction of their customers.
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ABSTRAK

Logistik di Iskandar Malaysia telah menjadi salah satu daripada nodus pertumbuhan
yang telah dikenalpasti dan telah menyumbang pendapatan yang tinggi melalui
perdagangan borong dan runcit (42.2%), dan pengangkutan dan yang berkaitan
(12.7%). Objektif utama bagi kajian ini adalah mengenalpasti dimensi kualiti
perkhidmatan yang pelanggan harapkan daripada pembekal perkhidmatan logistik,
mengenalpasti jurang di antara keinginan dan kepuasan pelanggan, dan meneroka
pengetahuan, kemahiran dan kebolehan (KSAs) yang diperlukan pada pekerja-
pekerja pembekal perkhidmatan logistik dalam memberikan perkhidmatan yang
cemerlang. Sehubungan itu, kajian ini adalah bertujuan mengkaji kualiti
perkhidmatan yang disediakan oleh pihak logistik ketiga di Iskandar Malaysia. Skop
bagi kajian ini adalah pelanggan daripada tiga tunggak Iskandar Malaysia yang
menggunakan khidmat luar bagi aktiviti logistik mereka, dan wakil sumber manusia
daripada pihak ketiga pembekal perkhidmatan logistik. Kajian ini menggunakan
kedua-dua kaedah iaitu kuantitatif dan kualitatif. Kaedah persampelan yang
digunakan untuk kuantitatif adalah persampelan kuota. Data yang diperoleh telah
menjawab kesemua objektif kajian. Terdapat enam dimensi kualiti perkhidmatan
yang telah dikenalpasti iaitu nyata, realibiliti, maklum balas, keyakinan, empati dan
kos perkhidmatan yang dilihat sebagai penting dalam perkhidmatan oleh pihak ketiga
logistik. Terdapat jurang kepuasan yang positif bagi kesemua enam dimensi kualiti
perkhidmatan di antara harapan pelanggan sebelum menerima perkhidmatan dengan
persepsi pelanggan selepas menerima perkhidmatan. Akhir sekali, terdapat 7
pembolehubah yang dikenalpasti di bawah faktor pengetahuan, 12 pembolehubah
bagi faktor kemahiran, 9 pembolehubah bagi faktor kebolehan, dan 4 pembolehubah
bagi faktor lain-lain yang diperlukan pada setiap pekerja perkhidmatan logistik.
Dapatan kajian ini dijangkakan dapat membantu pihak ketiga pembekal
perkhidmatan logistik dalam memajukan perkhidmatan mereka bagi memastikan
kepuasan pelanggan.
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TABLE OF CONTENTS

CHAPTER CONTENTS PAGES

TITLE i
DECLARATION ii
DEDICATION iii
ACKNOWLEDGEMENT iv
ABSTRACT v
ABSTRAK vi
CONTENTS vii
LIST OF TABLES xi
LIST OF FIGURES xii
LIST OF ABBREVIATION xiii
APPENDIXES xiv

CHAPTER 1 INTRODUCTION PAGES

1.1 Introduction 1
1.2 Research Background 1
1.3 Problem Statement 3
1.4 Research Questions 6
1.5 Research Objectives 7
1.6 Research Scope 7
1.7 Thesis Structure 8
1.8 Conclusion 9

CHAPTER 2 LITERATURE REVIEW

2.1 Introduction 10
2.2 What is Quality? 11
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2.3 Total Quality Management 12

2.4 Service Quality 14
2.4.1 Logistics Service Quality 15
2.4.2 SERVQUAL Model 17
2.5 Theory of Customer Behaviour 23
2.5.1 Customers’ Satisfaction 23
2.6 Relationship between Service Quality and
Customers’ Satisfaction 24
2.7 Human Capital 26
2.7.1 Knowledge, Skills and Abilities 27
2.8 Elements of Knowledge, Skills and Abilities
(KSAs) Needed to Increase Service Quality 30
2.9 Iskandar Malaysia 30
2.10 Logistics 32
2.11 Third Party Logistics (3PL) 33
2.12 Final Conceptual Framework 34
2.13 Conclusion 35

CHAPTER 3 METHODOLOGY
3.1 Introduction 36
3.2 Research Approaches 36
3.2.1 Mono Method 37
3.2.1.1 Quantitative Method 38
3.2.1.2 Qualitative Method 38
3.2.2 Multiple Methods 39
3.2.2.1 Multi-Methods 39
3.2.2.1.1 Multi-Methods Quantitative
Study 39
3.2.2.1.1 Multi-Methods Qualitative
Study 40
3.2.2.2 Mixed Methods 40
3.2.2.2.1 Mixed Methods Research 40
3.2.2.2.2 Mixed Model Research 41
3.2.3 Mixed Method Research Approach for The Study 41
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3.3 First Phase (Quantitative)

3.3.1 Research Population 43
3.3.2 Sampling Frame 44
3.3.3 Sampling Method/Technique 44
3.3.4 Data 45
3.3.5 Data Collection Procedure 45
3.3.6 Research Questionnaires 46
3.3.6.1 Format 48
3.4 Second Phase (Qualitative)
3.4.1 Sample Selection 49
3.4.2 Research Interview Questions 50
3.4.2.1 Format 50
3.5 Data Analysis 51
3.5.1 Description Analysis 51
3.5.2 Multiple Response Analysis 51
3.5.3 Mean Score 52
3.5.4 Paired T-Test 52
3.5.5 Gap Analysis 52
3.5.6 Quadrant Analysis 53
3.5.7 Analysis of Qualitative Data 53
3.6 Pilot Study 54
3.7 Reliability Test of Research Instrument 54
3.8 Conclusion 55

CHAPTER 4 DATA ANALYSIS

4.1 Introduction 56
4.2 Reliability Test of Research Instruments 56
4.3 Survey Response Rate 57
4.4 Descriptive Analysis
4.4.1 Demographic 58
4.5 Mean Score 60
4.6 Paired T-Test 61
4.7 Gap Analysis 61
4.7.1 Result of Gap Analysis 62
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4.7.2 Quadrant Analysis 64

4.8 Qualitative
4.8.1 Interview Analysis 68
4.9 Conclusion 74

CHAPTER 5 FINDINGS AND DISCUSSION

5.1 Introduction 75
5.2 Discussions on Research Objectives
5.2.1 Service quality dimensions do customers perceive
to be necessary in Iskandar Malaysia’s 3PL service
companies to meet customers’ satisfaction. 76
5.2.2 Gaps of customers’ satisfaction towards service
quality of 3PL importance-performance 77
5.2.3 KSAs required for employees of logistics service
providers to provide excellent service 79
5.3 Suggestions for Improvement 83
5.4 Contribution of Study
5.4.1 Practical Contribution 83
5.4.2 Theoretical Contribution 84
5.5 Research Limitations 85
5.6 Recommendation for Further Research 86
5.7 Summary 86

REFERENCES 87-95
APPENDIXES
VITAE
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LIST OF TABLES

NO. TITLE PAGES

1.1 Logistics performance index (LPI) global ranking score for
Malaysia and Singapore 4
2.1 Ten Determinants of Service Quality 17
2.2 Definitions of SERVQUAL Model’s Dimensions 18
2.3 Frequency of Service Quality’s Dimensions 19
2.4 Relationship between Service Quality and Customers’
Satisfaction 26
2.5 Elements of Knowledge, Skills and Abilities (KSAs) 28
3.1 Derived Questions of Service Quality’s Dimensions 46
3.2 Cronbach’s Alpha Value for Pilot Test 54
3.3 Value Number of Internal Consistency Range 55
4.1 Cronbach’s Alpha Value for Real Test 57
4.2 Result of Respondents of the Survey 57
4.3 Demographic Analysis 59
4.4 Mean Score 60
4.5 Ranking of Mean Score for Each Dimension of Service Quality 60
4.6 Gap Value Paired T-Test 61
4.7 Gap Analysis 62
4.8 Ranking of Performance of Service Quality’s Dimensions 62
4.9 Quadrant Analysis 65
4.10 Respondents for the Interview Sessions 68
4.11 Results of Knowledge, Skills and Abilities 69
5.1 Knowledge, Skills and Abilities for Logistics Service Sector 81
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LIST OF FIGURES

NO. TITLE PAGES

1.1 Logistics Performance Index (LPI) 4
2.1 Dimensions of Service Quality 19
2.2 Descriptions of Service Quality’s Dimensions 22
2.3 Relationship Service Quality and Customers’ Satisfaction 25
2.4 Five Flags of Iskandar Malaysia 31
2.5 Pillars in Iskandar Malaysia 32
2.6 Final Conceptual Framework 34
3.1 Types of Research Approach 37
3.2 Mixed Method Approach Adopted for this Study 43
4.1 Scatter Plot of Gap Analysis 63
4.2 Quadrant Analysis (Original) 64
4.3 Quadrant Analysis (Amended) 65
4.4 Quadrant Analysis of the Research 67
 xiii

LIST OF ABBREVIATION

3PL - Third Party Logistics

IDR - Iskandar Development Region
IM - Iskandar Malaysia
IRDA - Iskandar Regional Development Authorities
JSIC - Johor State Investment Centre
CS - Customers’ Satisfaction
KSAs - Knowledge, Skills and Abilities
SPSS - Statistical Package Social Science
SQ - Service Quality
TQM - Total Quality Management
 xiv

LIST OF APPENDIXES

Survey Questions
Interview Questions
Result
 1

CHAPTER 1

INTRODUCTION

1.1 Introduction

This chapter introduces research background, problem statement, research questions,

research objectives, research limitations, research significance, and thesis structures;
followed by the conclusion of this chapter. Research background focuses on Iskandar
Malaysia, logistics activities and human capital development. The problem statement
is based on the impact of knowledge, skills and abilities (KSAs) among employees of
logistics service providers‘ in Iskandar Malaysia in delivering best service quality in
order to gain customers‘ satisfaction to gain competitive advantages. The objective
of this research is identifying KSAs that is required from logistics‘ human capital and
the relationship between logistics service quality and customers‘ satisfaction. This
chapter discusses further information of this research.

1.2 Research background

Malaysian fourth Prime Minister, Tun Dr Mahathir bin Mohamad came out with
Vision 2020 during the tabling of Sixth Malaysia Plan in 1991. The vision is targeted
to be the achievement of self-sufficient industrialized nation by the year of 2020 and
to gain eightfold Gross Domestic Product (GDP) from RM115 billion in 1990 to
 2

RM920 billion (Muhammad, Sulaiman & Sanusi, 2012; Eleventh Malaysia Plan (11th
MP), 2015). In order to achieve the vision, five regional corridors have been initiated
in order to propel the economic growth. These five regional economic corridors are
Northern Corridor Economic Region (NCER); East Cost Economic Region (ECER);
Sarawak Corridor of Renewable Energy (SCORE); Sabah Development Corridor
(SDC); and Iskandar Malaysia (Muhammad et al., 2012). These five corridors were
initiated during the Ninth Malaysia Plan by Malaysia fifth Prime Minister, Tun
Abdullah Ahmad Badawi and it embarked a number of initiatives to promote
balanced regional development and accelerate growth in designated geographic areas
(Tenth Malaysia Plan (10th MP), 2010).
In realizing the importance of the human capital development, Dato Seri
Najib Tun Abdul Razak, current Prime Minister, pursued a strategy which is called
as Economic Transformation Programme (ETP) that focused on human capital
development and it is predicted that business growth are based from human capital.
Human capital is the most crucial factor in economic growth and it is critical to the
success of economic growth in Malaysia (Muhammad et al., 2012). Therefore, the
rapid growth of economy in global market does take human resource as a key role in
maintaining competitive business in industry.
The Human Capital Development Strategic Reform Initiative (SRI) in ETP
has two key areas, which they are Education National Key Economic Area (NKEA)
and National Key Reformation Area (NKRA), both focused on the future
generations, and it is a critical enabler for this nation to transform the workplace as
well as the workforce (Muhammad et al., 2012). Malaysia‘s economy will undergo
significant changes similar to other developed nations if the implementation of ETP
succeeded. The most required changes will be the enhancement of human capital
investments to support a high-skilled, knowledge-based and innovation-intensive
economy (Muhammad et al., 2012). Furthermore, in 11th Malaysia Plan (2015)
human capital development is a critical enabler for driving and sustaining the
Malaysia‘s economic growth which the 11th Malaysia Plan will continue to push the
agenda of producing human capital that is equipped with the right knowledge, skills
and attitudes to growth in a globalised economy.
Furthermore, in order to compete, strong emphasis on human capital
development will sustain and ensures a steady and sufficient supply of skilled and
semi-skilled manpower to meet the needs of the expanding industrial and service
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sectors. Skilled workforce is vital for the economic development especially in these
fast-changing requirements in identifying the future supply and demand for human
capital. In addition, to sustain the economic growth in an increasingly competitive
business environment is to have skilled and knowledgeable workers as one of the
important factors (Muhammad et al., 2012).
A skilled, knowledgeable, and able to provide best service workforce leads to
high quality of service, hence, keep the customer happy and satisfied with the
services. The original SERVQUAL model used to evaluate service quality is from
Parasuraman et al. (1988) that has five dimensions, consist of tangible, reliability,
responsiveness, assurance, and empathy. However, according to Banomyong and
Supatn (2010), for logistics service sectors, the SERVQUAL model needs to add
service cost as additional dimension to the five dimensions earlier.
This study is focuses on Iskandar Malaysia, one of the economic corridors.
Iskandar Malaysia is located in southern peninsular Malaysia and it covers a land
size of 2,217 sq km (221,634 hectares). In 2005, Iskandar Malaysia was estimated to
have 1.35 million people or in 43% of Johor‘s population with the workforce of
approximately 66% of the population (Iskandar Development Region, 2007).

1.3 Problem statement

Based on latest Logistics Performance Index (LPI) for 2014, Malaysia is at

the 25th rank in the world with range index of 3.59compared to Singapore, which is
currently at the 5th rank in the global logistics activity with range index of 4.00 (The
World Bank, 2015). There are six core dimensions that contribute to the average
index of LPI. Those dimensions are customs, infrastructure, international shipments,
logistics competence, tracking and tracing, and timeliness. The data obtained from
The World Bank (2015) are as shown in figure 1.1.
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Figure 1.1: Logistics Performance Index (LPI) global ranks year 2014 from The
World Bank.

Table 1.1: Logistics performance index (LPI) global ranking score for Malaysia and
Singapore
Country LPI LPI International International Logistics Logistics
Rank Score Shipments Shipments Competence Competence
Rank Score Rank Score
Malaysia 25th 3.59 10th 3.64 32nd 3.47
th th th
Singapore 5 4.00 6 3.7 8 3.97

As shown in the table 1.1 above, even though the ranks between Malaysia
and Singapore for international shipments are at 10th and 6th in the world, however,
for logistics competence, Malaysia currently at 32nd place compared to Singapore at
8th rank. According to The World Bank (2015), logistics competence represents
competence and quality of logistics service such as transport operators and custom
brokers. From the ranking, it shows that Malaysia is still left behind especially in
logistics competencies.
Therefore, in order to compete with Singapore that use the same shipping
lane as Malaysia, Malaysia needs to improve the quality in giving the services and
have better employees‘ competencies. This problem is recognized by the government
and led to the launched of ETP. According to Muhammad et al. (2012), the two main
components in ETP are to enhance Human Capital Development Strategic Reform
Initiative that will be the critical enabler of Malaysia transformation by up-skilling
and upgrading the workforce. The strategy of ETP focuses on five regional economic
 5

corridors and one of it is Iskandar Malaysia. The current Prime Minister announced
various incentives in order to encourage human capital development to move
Malaysia‘s economy to the higher level and achieve Vision 2020 (Muhammad et al.,
2012). This encouragement is aligned with services sectors that contribute more than
half of Malaysia‘s GDP (51%), inwhich this sector needsto have competent
manpower (PricewaterhouseCoopers, 2012).
This study focuses on Iskandar Malaysia as it has been contributing a high
percentage in committed investments, and area of logistics has been one of the six
identified growth nodes besides areas of education, healthcare, finance, creative
industry, and tourism. Therefore, skilled human capital is essential for Malaysia‘s
economic growth in general, and particularly in the economic region. Human capital
is generally seen as a set of knowledge, skills and abilities (KSAs) of an individual
that are used in the activities that stimulate economic growth and development
(Muhammad et al., 2012). The other reason for this research to be conducted in
Iskandar Malaysia is because it is the nearest location to Singapore compared to
another four regions. In addition, Iskandar Malaysia is rapidly growing for the past
seven years since 2006 (Tek et al., 2013).
Logistics has become a significant role in supporting export activities in rapid
growth of global market (Banomyong & Supatn, 2011). According to IM Biz Watch
(2013), logistics sectors in Iskandar Malaysia contribute to the committed investment
by RM4.81billion. Due to the international logistics services, logistics has become
effectively as third party logistics service providers. According to Banomyonget al.,
(2011), in order to compete in the logistics market, many freight companies
rebranded themselves into third party logistics (3PL).
Logistics service quality plays a significant role in determining customers‘
satisfaction, loyalty as well as long-term relationship (Banomyong et al., 2011).
There are many researches done related to service quality in logistics sectors. For
example, Banomyong et al., (2011) is one of it. Banomyong et al., (2011) determines
that there are six dimensions of SERVQUAL model for the logistics sector. They are
tangible, reliability, responsiveness, assurance, empathy and service cost. Even
though this research was done at South East Asia countries, however, Malaysia was
not included. There are few studies were done in Malaysia about service quality.
However, most of it covers banking, and sales and marketing sector. There are lack
of researches done in logistics sector specifically in Malaysia. Furthermore, there is
 6

also lack of researches specifically in Iskandar Malaysia‘s logistics sectors in order

to improve service quality of logistics sectors in that area. Therefore, this research
aims to identify customers‘ satisfactions towards third party logistics companies in
Iskandar Malaysia in order to provide better service and retain their customers.
Previous research by Shieh et al. (2010) has identified that there is a
relationship between the performances applied based on knowledge, skills and
abilities (KSAs) and service quality. This shows that KSAs and dimensions of
service quality do have strong relation in order to determine customer satisfaction.
Furthermore, according to Hancemark et al. (2004), they stated that there is a
relationship between employees‘ competencies with the service quality, hence,
triggers customers‘ satisfactions and loyalty. The experience and the attitudes of a
person or individual who has a direct contact with customers are likely to influence
the customers‘ satisfaction and loyalty.
Thus, in conclusion, this research further study the Iskandar Malaysia‘s third
party logistics employees‘ KSAs required to deliver better service quality in order to
achieve customers‘ satisfaction.

1.4 Research questions

Based on the problem statements above, these are the research questions obtained for
this study.
i. What service quality dimensions do customers perceive to be necessary in
Iskandar Malaysia‘s 3PL service companies to meet customers‘ satisfaction?
ii. Is there any gap between service quality dimensions of 3PLtowards
customers‘ satisfaction?
iii. What are the elements of KSAs required to provide excellent service among
employees of logistics service providers?
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1.5 Research objectives

From previous research questions, this study comes out with four research objectives.
i. To determine service quality dimensions that customers perceive to be
necessary in Iskandar Malaysia‘s 3PL service companies to meet customers‘
satisfaction.
ii. To identify the gaps between service quality dimensions of 3PL towards
customers‘ satisfaction.
iii. To explore the elements of KSAs required for employees of logistics service
providers to provide excellent service.

1.6 Research Scope

This research is to evaluate service quality of third party logistics service providers in
Iskandar Malaysia by evaluating SERVQUAL model with six dimensions, which
they are tangible, reliability, responsiveness, assurance, empathy and service cost,
and to explore their employees‘ knowledge, skills and abilities (KSAs). This research
covers the area of Iskandar Malaysia (IM), which consists of Johor Bharu, Kulaijaya,
and three districts from Pontian, Johor, Malaysia.
Unit of analysis consists of two approaches, quantitative and qualitative. The
first phase is quantitative method which focuses on the customers‘ satisfaction
towards logistics service providers‘ service quality. Questionnaires were distributed
to the customers of IM logistics service providers which cover three pillars;
Electrical and Electronics, Petro and Oleo Chemical, and Food and Agro Processing.
The second phase is qualitative method in exploring employees‘ KSAs which it
involves interview sessions with HR Managers or representatives of third party
logistics (3PL) service companies of IM that provide outsourcing logistics activities
such as transportation, warehouses and distribution centres.
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1.7 Thesis structure

This thesis is structured as follows:

Chapter 1 consists of introduction about research topic, research background,
problem statement, research questions, research objectives, research scope, the
conceptual framework for this study, significance of study, and brief explanation of
thesis structure for each five chapters.
Chapter 2 consists of literature review that explains about the relevant
previous research that related with this research. The content of this chapter consists
of the explanation of the definition of logistics and third party logistics in depth, and
also its contribution to the global market. Human capital development is also
explained in this chapter. Furthermore, the background of knowledge, skills and
abilities (KSAs) is explained further as well as the connection of KSAs in logistics
sector. Previous research about the relationship between customers‘ satisfaction and
KSAs of the service providers is included in this chapter.
Chapter 3 explains the methodology of this research. This techniques and
method were used to achieve research objectives. This chapter covers the explanation
about research design, sampling method, targeted group method, content of
questionnaires, data collection procedure, controlled and statistics analysis procedure
that are used in order to achieve research objectives.
Chapter 4 explains about the data analysis from both approaches. These
questionnaires have been distributed to the clients of Iskandar Malaysia and
interviews were held with the HR Manager or representatives of third party logistics
in Iskandar Malaysia. In this chapter, the questionnaire are analysed to answer the
first two research objectives. In order to do so, there are several analyses were done
by using IBM SPSS such as descriptive analysis, multiple response analysis, gap and
quadrant analysis, and paired t-test analysis. As for the third research objective,
transcription analysis was conducted in order to explore the variables of knowledge,
skills and abilities required in logistics services sector.
Chapter 5 consists of discussion on the research findings and result whereby
it was explained further and had short summary at the end of the discussion. The
limitations and problems that encountered during the whole process of collecting
data, suggestions and further research were also included in this last chapter.
 9

1.8 Conclusion

This research aims to identify the required employees‘ knowledge, skills and abilities
(KSAs) of third party logistics companies in Iskandar Malaysia to deliver best
service quality to their customers. This research has contributes positive impact to
logistics service providers in Iskandar Malaysia to improve and upgrade their quality
of services towards their customers‘ satisfaction.
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CHAPTER 2

LITERATURE REVIEW

2.1 Introduction

Iskandar Malaysia is the closest development region to Singapore. According to

Mecometer (2014), Singapore leads on the fifth rank of global Logistic Performance
Index (LPI) whereas Malaysia is at the 25th rank. Logistics is one of the services
sectors that contribute to the GDP and services sectors are the sectors that
empowered by manpower. In order to deliver best service quality, it is essential to
first to know what are the dimensions of service quality that are crucial to gain
customers‘ satisfaction. The best service quality is initiated by the workforce itself.
Human Capital Development Strategic Reform Initiative (SRI) is one of the elements
in ETP that will initiate the transformation of the workplace as well as the workforce
(Muhammad et al., 2012). Human capital development is strongly emphasized to
ensure a steady supply of manpower with knowledge, skills and abilities (KSAs) in
industrial and services sectors.
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2.2 What is quality?

The definition of quality has evolved over the years and it varies from one person to
another and it depends heavily on the nature of the industry(Antony, 2013). He added
that:
‘We have also witnessed a change in the role of the quality function over the
years from merely inspection activities to quality control to quality assurance
to total quality management (TQM) to Six Sigma as a powerful strategy to
reduce defects at low costs and maximise customer satisfaction.’ (Antony,
2013:677).
Goetsch & Davis (2010) stated that, for people who wants to understand total
quality, must first understand what quality is. They also stated that quality can be
defined and measured because customers can define quality very clearly by using
specifications, standards, and other measures. However, there is no specific
definition of quality, but there are similarities that exist among the definitions.
There are three similar definitions of quality stated by Goetsch & Davis
(2010), and supported by other researchers, which, i) quality involves meeting and
exceeding customer expectations (Sadikoglu & Olcay, 2014; Talib et al., 2013;
Antony, 2013; Gharakhani et al., 2013; Steiber & Alänge, 2012; Boateng-Okrah &
Fening, 2012), ii) quality applies to products, services, people, processes, and
environments (Sadikoglu & Olcay, 2014; Antony, 2013; Gharakhani et al., 2013;
Talib et al., 2013; Steiber & Alänge, 2012; Boateng-Okrah & Fening, 2012; Yapa,
2012), and, iii) quality is an ever-changing state (Psomas & Jaca, 2016; Sadikoglu &
Olcay, 2014; Antony, 2013; Gharakhani et al., 2013;Talib et al., 2013; Steiber &
Alänge, 2012; Yapa, 2012). Goetsch & Davis (2010) sums the definition of quality
as:
‘Quality is a dynamic state associated with products, services, people,
processes, and environments that meets or exceeds expectations and help
produce superior value’. (Goetsch & Davis, 2010:5).
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2.3 Total Quality Management

As mentioned in the introduction earlier, to emphasize the best service provided, we

need first to know the root cause in delivering the best service quality. Total quality
management (TQM) is basically a management approach that started originally in
1950s. It has been used since, and became popular in 1980s (Padhi, 2016).TQM is
also called as management philosophy in emphasizing customer needs by improving
the quality of the product/services/processes (Gharakhani, Rahmati, Farrokhi, &
Farahmandian, 2013; Sadikoglu & Olcay, 2014; Steiber & Alänge, 2012).According
to Kantardjieva (2015), many researchers consider TQM as the leading management
philosophy that improves company‘s position and their performance.
The emergence of ISO as a quality management system standard has been
seen in 1980s which was designed to help organisations to ensure that they meet the
needs of customers and other stakeholders while meeting statutory and regulatory
requirements related to the product/service. Then, the evolution of TQM evolved in
the mid to late 1980s as a management system for a customer-focused organisation
that involves total employee participation in continual improvement (Antony, 2013).
According to Brown (1996):
‘Total Quality Management (TQM) is very much the term of the 1990s. While
much of the theory which underlines TQM is not new, the 'packaging' has
helped it assume a great deal of prominence in recent times. It is frequently
promoted as the key to business survival in an increasingly competitive,
quality and cost-conscious world. TQM has potentially significant
implications for human resource management (HRM) in
organizations.’(Brown, 1996:117).
In today‘s competitive business world it is very important to adopt TQM
principles not only for making profits but also for survival (Yapa, 2014).
Furthermore, Gharakhani et al., (2013) stated that TQM is considered as a very
important factor for the long-term success of an organization. They also stated that:
‘TQM implementation has been an important aspect for improving
organisational efficiency. The links between TQM and performance have
been investigated by numerous scholars. While examining the relationship
between TQM and performance, scholars have used different performance
 13

types such as financial, innovative, operational and quality performance.

Recent research on total quality management has examined the relationships
between the Total quality management and organizational performance.
TQM focuses on continuous process improvement within organizations to
provide superior customer value and meet customer needs.’(Garakhani et al.,
2013:46).
In order to meet customer needs and gain customer satisfaction, Sadikoglu &
Olcay (2014) and Steiber & Alänge (2012) highlighted that quality management is a
continuous process that contributes to the organizations‘ efficiency, effectiveness and
the firms‘ performance. Furthermore, the most notably and a recommended approach
in an attempt to improve quality is the concept of TQM, the management of quality
and continuous improvement (Brah & Lim, 2006; Talib, Rahman, & Qureshi, 2013).
According to Gharakhani et al., (2013), TQM begins with the primary assumption
that employees in organizations must cooperate with each other in order to achieve
quality for the needs of the customer. One can achieve quality by controlling
manufacturing/service processes to prevent defects. Hence, TQM focuses on
continuous process improvement within organizations to provide superior customer
value and meet customer needs (Gharakhani et al., 2013; Padhi, 2016).
Quality improvement has become one of the most important organizational
strategies for achieving competitive advantage for the past decade. It will enhance
the organization to deliver its products and services critically and compete in the
expanding global market and rapidly changing environment (Gharakhani et al., 2013;
Steiber & Alänge, 2012). According to Steiber & Alänge (2012), there will be a
partly new management paradigm needed in order for TQM to contribute both to
continuous improvement and continuous. However, if there are any changes in TQM,
the brand ‗TQM‘ is still associated with ‗quality‘ and ‗continuous improvement‘
(Steiber & Alänge, 2012).
 14

2.4 Service quality

According to Bank Negara Malaysia (2012), services sector account more than half
of GDP Malaysia‘s value with the percentage of 51. Therefore, in providing the best
service quality is essential in order to contribute to Vision 2020. However, quality is
an elusive and indistinct construct (Parasuraman et al., 1985). There are very little
researches have been done on the issue of service quality assessment (Hemmasi et
al., 2010). Thus, the developed model of service quality by Parasuraman et al. (1985,
1988) has become most used model in measuring service quality and provides better
service in the services firms (Hemmasi et al., 2010).
Quality of a product or service is essential. According to Fečiková (2004), the
customer satisfaction towards the quality of certain services will determine the
company‘s failure or success. Furthermore, it also comes to believe that the quality
service will determine loyal customer to the certain company and further gaining
profits. Hemmasi et al., (2010) stated that manufacturing firms had their own bench
mark that was used to compare their goods while service activities do not have these
form of analysis because of its inherent intangible nature. However, there are a few
opinions stated that service quality can be interpreted from the difference of
customer expectation towards experienced services and customer perception towards
received services (Munusamy et al., 2010). This is because the service quality
perceptions involve the process of service delivery as well as the outcome (Hemmasi
et al., 2010). The encouragement in increasing service quality is a continuous process
as understanding various customers wants and desires (Banomyong et al., 2011).
Basically, service quality is more difficult to measure or evaluate than the
quality of goods. However, it has come to a conclusion that service quality can be
measured by the results from the comparison of actual service performance with the
level of expected services as an equation below (Hemmasi et al., 2010). In addition,
the original model of service quality captured difference scores, or gaps, between the
customer perceptions of actual performance and the customer expectations of how
the performance should be. Below is the equation of service quality by Parasuraman
et al., (1985):

Service quality = f(Performance – Expectations).

 15

Parasuraman et al., (1985) mentioned that quality in tangible goods has been
described and measured while quality in services is largely undefined and un-
researched. Thus, they had been rectified by reporting and developing a model of
service quality because previously, few academic researchers found difficulties in
involved in delimiting and measuring the content of the model (Parasuraman et al.,
1985). Since then, there are many researchers used the same model originally from
Parasuraman et al. (1985), as they stated that this particular model is the most
precised model in determining a service quality (Rauyruen et al., 2007; Baki et al.,
2009; Banomyong et al., 2011). This is because of the overall aspect covered by
Service Quality (SERVQUAL) model are the best so far.
However, there are several researchers who modified this original model to
fit with their research objectives. Banomyong et al.(2011) claimed that there are
seven rights for logistics transportation service quality, and they are products,
quantity, time, situation, consumer, place and cost. Following of the seven rights, the
main four logistics components were developed in order to give the picture of service
quality of logistics transportation. Each of these research has been using
SERVQUAL original model and derived it to be more suitable for logistics services
sectors.

2.4.1 Logistics service quality

Outsourcing of logistics activities to the third party logistics has been most current
activity in business environment (Jharkaria et al., 2007). Banomyong et al. (2011)
stated that, due to the rapid growth of global market, freight companies had
rebranded their name into third party logistics service providers in order to compete
and to lead the market. In order to compete, the 3PL must deliver the best services.
Thus, to perform the best service quality, the organizations first needs to define the
service quality and its components which are actionable in the workplace
(Technopreneurship, 2007). They added that, employees that do not have a clear and
unambiguous definition and will be left with vague instructions on improving service
quality within the workplace.
 16

Perreault & Russ (1974; 1976) proposed that logistics activities create time,
place and form utilities, thereby enhancing product value. This was further extended
by describing the seven (7) Rs of utility creation by logistics services: delivering the
right amount, the right procuct, at the right place, in the right condition, at the right
time, with the right information, and at the right price (Coyle et al., 1992; Shapiro &
Heskett, 1985; Stock & Lambert, 1987). Logistics service quality research continues
to develop by emphasizing that delivery service quality consisted of ‗customers
service quality‘ and ‗physical distribution service quality‘ (Mentzer et al., 1989).
From the perspective of marketing, the marketing customer service component
proposed by Mentzer et al. (1989) suggested that understanding the perceptions of
physical distribution service from a customer‘s point of view was an essential input
in marketing management decisions.
Thus, Parasuraman et al. (1985; 1988; 1991) used qualitative (interview) and
quantitative (survey) method in developing and refiningtheir five-dimensional
SERVQUAL scale (tangible, reliability, responsiveness, assurance, empathy) among
retail consumers of appliance repair/maintenance, retail banking, long-distance
telephone, securities brokerage, and credit card services. Bienstock et al. (1997)
further initiate an integration of the logistics and marketing service quality research
streams. This is due to the efforts to develop a scale that could be validate and
reliable for measuring physical distribution service quality. They examined the
marketing service quality measurement literature, particularly the development of
SERVQUAL and subsequent attempts at replication of SERVQUAL‘s dimensions in
industrial service contexts.
 17

2.4.2 SERVQUAL model

SERVQUAL by Parasuraman et al. (1985, 1988) defined service quality through the
gap between customers‘ perception and expectation of company‘s service quality
performance. For the conclusion, a service quality was built from expected and
desired quality (Baki et al., 2009).
Service quality is a construct that is similar to an attitude and related, but not
equivalent to customer satisfaction. These dimensions of service quality were not
weighted in terms of relative importance that the customers of the services firms
attach to them. Thus, the new equation below proposed by Zeithaml et al. (1990)
represents the the weighted form of the measurement of service quality using the
SERVQUAL scale (Hemmasi et al., 2010).

Service Quality = (Perceptions – Expectations) * Importance

Parasuraman et al. (1985) first came out with ten determinant of service
process quality (Technopreneurship, 2007). The ten determinants are shown in table
2.1.
Table 2.1: The definitions of ten determinants of service quality
(Parasuraman et al., 1985; Technopreneurship, 2007)

Determinants Definitions
Reliability It involves consistency of performance and dependability.
Responsiveness It concerns the willingness or readiness of employees to provide service.
Competence It means possession of the required skills and knowledge to perform the
service.
Access It involves approachability and ease of contact.
Courtesy It involves politeness, respect, consideration, and friendliness of contact
personnel (including receptionists, telephone operators, etc.).
Communication It means keeping customers informed in language they can understand
and listening to them. It may mean that the company has to adjust its
language for different consumers—increasing the level of sophistication
with a well-educated customer and speaking simply and plainly with a
novice.
Credibility It involves trustworthiness, believability, honesty. It involves having the
customer‘s best interests at heart.
Security It is the freedom from danger, risk, or doubt.
Understanding/Knowing It involves making the effort to understand the customer‘s needs.
the Customer
Tangibles It includes the physical evidence of the service.
 18

However, Parasuraman et al., (1988) then discovered that there are certain
overlaps among the determinants and they shortened the list into only five
dimensions. They also concluded that there are five essential gaps that leads to the
development of the model. They are, 1) the gap between customer expectations and
management perceptions of those expectations will have an impact on the customer‘s
evaluation of service quality, 2) the gap between management perceptions of
customer expectations and the firms‘s service quality specifications will affect
service quality from the customer‘s viewpoint, 3) the gap between service quality
specifications and actual service delivery will affect service quality from the
customer‘s standpoint, 4) the gap between actual service delivery and external
communications about the service wil affect service quality from a customer‘s
standpoint, and last but not least 5) the quality that a customer perceives in a service
is a function of the magnitude and direction of the gap between expected service and
perceived service.

Gap5 = f(Gap1, Gap2, Gap3, Gap4)

Table 2.2 shows the five crucial dimensions that leads to model of service
quality developed and concluded by Parasuraman et al (1988) and been used by other
researchers (Munusamy et al., 2010; Banomyong et al., 2011; and Ooi et al., 2011)

Table 2.2: Definitions of SERVQUAL model‘s dimensions.

(Banomyong et al., 2011; Munusamy et al., 2010)

Dimensions Definitions
Tangible Appearance of physical facilities, equipment, communication materials and
personnel.
Reliability The ability of a service provider to perform the promised service dependably and
accurately.
Responsiveness The willingness to help customers and provide prompt service.
Assurance The knowledge and courtesy of service providers and their ability to convey trust
and confidence.
Empathy Caring and individualised attention that the service provider provides to each
customer.

Figure 2.1 explains the structure of SERVQUAL model by Parasuraman et al.

(1988), and the added dimension according to Banomyong et al.(2011).
 19

Figure 2.1: Dimensions of service quality from Parasuraman et al. (1988) and used
and modified by Banomyong dan Supatn, 2011.

Based from Parasuraman et al. (1988) SERVQUAL model, many researchers

used the model and modified accordingly to their research. There are some
modification to the model regarding different field of study. For logistics itself,
research by Banomyong et al. (2011) is the most accurate modified SERVQUAL
model to be used. Below is the explanation of each dimensions according to
Parasuraman et al. (1988) and other researchers especially by Banomyong et al.
(2011).
Each service quality dimensions‘ variables are driven from past researches.
Table 2.3 shows the frequencies of each variable.

Table 2.3: Frequency of each variable for service quality‘s dimensions.

DIMENSION AUTHORS FREQUENCY

TANGIBLE

 It has information technology (IT)  Zhang, Yue and Wang(2006) 4

facilities.  Baki, Basfirinci, Cilinger and AR
Murat(2009)
 Liu, Grant, McKinnon and Feng
(2010)
 Banomyong and Supatn(2011)

 Modern and attractive physical  Zhang, Yue and Wang(2006) 3

facilities.  Baki, Basfirinci, Cilinger and AR
Murat(2009)
 Banomyong and Supatn (2011)
 20

RELIABILITY

Precisely stored record of the products.  Zhang, Yue and Wang(2006)

 Baki, Basfirinci, Cilinger and AR 3
Murat(2009)
 Banomyong and Supatn (2011)

 Baki, Basfirinci, Cilinger and AR

Transaction of the item is following Murat (2009)
schedule and as time promised. 3
 Liu, Grant, McKinnon and Feng
(2010)
 Banomyong and Supatn (2011)

Consistantly keeping up the same level 1

 Banomyong and Supatn (2011)
of service all the time.

RESPONSIVENESS

Prepare an effective office space for  Zhang, Yue and Wang (2006)
better and friendly user.  Baki, Basfirinci, Cilinger and AR 2
Murat (2009)

Has broad branches.  Baki, Basfirinci, Cilinger and AR

 Murat (2009) 2
 Banomyong and Supatn (2011)

Sufficient staffs for efficient on time  Baki, Basfirinci, Cilinger and AR

services. Murat (2009) 1

 Rauyruen and Miller (2007)

Willingness and commitment of their  Baki, Basfirinci, Cilinger and AR
staffs to help. 3
Murat (2009)
 Banomyong and Supatn (2011)

 Baki, Basfirinci, Cilinger and AR

Provide fast services to customers‘
Murat (2009)
needs.
 Liu, Grant, McKinnon and Feng 3
(2010)
 Banomyong and Supatn (2011)

Staffs who took care of customers‘  Baki, Basfirinci, Cilinger and AR

welfare. Murat (2009)
  Liu, Grant, McKinnon and Feng 3
(2010)
 Banomyong and Supatn (2011)

ASSURANCE

Tracking items‘ location through the  Zhang, Yue and Wang (2006) 3
internet.  Baki, Basfirinci, Cilinger and AR
Murat (2009)
 Banomyong and Supatn (2011)

Provide sufficient information to  Zhang, Yue and Wang (2006)

customers (eg: items‘ location, time  Baki, Basfirinci, Cilinger and AR 2
needed for delivery, etc). Murat (2009)

 21

Items free from any damages  Zhang, Yue and Wang (2006)
 Baki, Basfirinci, Cilinger and AR 3
Murat (2009)
 Banomyong and Supatn (2011)

 Zhang, Yue and Wang (2006)

Safety and assurance of the items  Rauyruen and Miller (2007) 5
(guarantee and customers‘ loyalty to  Baki, Basfirinci, Cilinger and AR
keep on using the same service) Murat (2009)
 Liu, Grant, McKinnon and Feng
(2010)
 Banomyong and Supatn (2011)

EMPATHY

Keep customers‘ information  Banomyong and Supatn (2011) 1

confidential.

 Rauyruen and Miller (2007)

Make customer satisfy by solving  Baki, Basfirinci, Cilinger and AR
complaints and following their desires. Murat (2009) 3
 Banomyong and Supatn (2011)

 Zhang, Yue and Wang (2006)

Consider the feeling in customers‘
 Rauyruen and Miller (2007)
service acceptance specifically to what
 Baki, Basfirinci, Cilinger and AR
they desired. 5
Murat (2009)

 Liu, Grant, McKinnon and Feng
(2010)
 Banomyong and Supatn (2011)

SERVICE COST

Affordable and reasonable price  Zhang, Yue and Wang (2006)

  Banomyong and Supatn (2011) 2

 Baki, Basfirinci, Cilinger and AR

Different promotions (coupons, Murat (2009)
discounts).  Liu, Grant, McKinnon and Feng 3
(2010)
 Banomyong and Supatn (2011)

Payment facilities  Banomyong and Supatn (2011) 1

From table 2.3, the variables for each dimension are simplified as shown in
Figure 2.2 on the next page.
 22

Have information technology facilities.

TANGIBLE Modern and interesting physical facilities.

Precisely stored record of the products.

REALIBILITY Transaction of the item is following schedule

and as time promised.

Consistantly keeping up the same level of

service all the time.

Prepare an effective office space for better and

friendly user.

Has broad branches.

RESPONSIVE-
NESS Sufficient staffs for efficient on time services.

Willingness and commitment of their staffs to

help.
DIMENSIONS OF
SERVICE
QUALITY Provide fast services to customers‘ needs.

Staffs who took care of customers‘ welfare.

Tracking items‘ location through the internet

ASSURANCE
Provide sufficient information to customers

Items free from any damages

Safety and assurance of the items (guarantee

and customers‘ loyalty)

Keep customers‘ information confidential

EMPATHY Make customer satisfy by solving complaints

and following their desires.

Consider the feeling in customers‘ service

acceptance specifically to what they desired

SERVICE COST Affordable and reasonable price

Different promotions such as discount

Payment facilities

Figure 2.2:Parasuraman et al. (1988), modified accordingly to fit for the research.
These dimensions of service quality also been used and added up by Banomyong et
al. (2011).
 23

2.5 Theory of customer behaviour

In the marketing concepts, there are 8 P‘s of services marketing which includes the
original terminology; product elements, place and time, price and other user outlays,
and promotion and education; and four elements associated with service delivery
which includes physical environment, process, people, and productivity and quality
(Lovelock et al., 2007). However, according to them, customer will be actively
involved in whole process phase.
Customer satisfaction is the individual consumers‘ perception towards
products or services‘ performance in relation to his or her expectation (Schiffman et
al., 2010). Therefore, with respect to satisfy their customers, the level of customers‘
satisfaction linked with customer behaviour according to the types of the customers
(Schiffman et al., 2010; Schiffman et al., 2007).

2.5.1 Customer satisfaction

Customers‘ satisfaction is very subjective. The theory of customer behaviour that

leads to customer satisfaction is discussed broadly by Lovelock et al. (2007). They
stated that without understanding their customer behaviour, no organization that can
creates and deliver any services that will result in satisfied customers. According to
Hansemark et al. (2004), they discussed customer satisfaction from three
perspectives, and they are, the definition of the concept, how to recognize when a
customer is satisfied, and how to enhance satisfaction. In conclusion and addition of
their statement, the strongest connection between retention and satisfaction strategies
turned out to be in terms of relationship and confidence.
Customers‘ satisfaction is very subjective that no researchers in this time
being who can precisely described the desire and need of the customers towards a
service because service itself is intangible and each customers‘ experiences differ
from others (Baki et al., 2009). A satisfied customer does not only express of a
happy customer, it is more complex than that (Munusamy et al., 2010). Furthermore,
they said that customer satisfaction is a term that explains the measurement the kind
 24

of products or services provided by the company to meet its customers‘ expectations.

According to them, to some companies, they might see this as their company‘s key
performance indicator (KPI). According to Feçiková (2004), customer who is
satisfied will come back again as if being helped and dissatisfied customer will have
the tendensy of going somewhere else next time.
Customer satisfaction can be observed or measured by looking at the loyalty
of the customers to keep on and repeatingly using the same service, and in addition,
acknowledge the product or the service to their friends (Feçiková, 2004; Huang,
2008). Furthermore, according to Feçiková (2004), loyalty of a customer is a
function of satisfaction; and loyalty of customers defined when they spend more on
your services, they feel your services are worth paying and they will encourage
others such as their family and friends to use your service too. According to
Woisetschläger (2011), interactions between customers may build social switching
barriers which they will share their service experiences and it is likely to form a
collective basis for conversation among the customers. In other word, it is called as
word-of mouth.

2.6 Relationship between service quality and customers’ satisfaction

Munusamy et al.(2010), stated that customer satisfaction and service quality are
related to each other. Their theory would be the higher the quality of service, the
higher the satisfaction of the customers. Figure 2.3 shows the relationships of service
quality‘s dimensions towards customers‘ satisfaction.
 87

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