From farm to China: A case study of Malaysian frozen whole durian export supply chain
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Economic and Technology Management Review, Vol. 16(2021): 1 – 20
Suhana Safari, Nur Azlin Razali, Wan Mahfuzah Wan Ibrahim and Mohd Sukri Abdul Rahim
From farm to China: A case study of Malaysian frozen whole
durian export supply chain
(Dari ladang ke China: Kajian kes rantaian bekalan eksport durian sejuk beku
Malaysia dan bentuk biji)
Suhana Safari*, Nur Azlin Razali**, Wan Mahfuzah Wan Ibrahim** and
Mohd Sukri Abdul Rahim***
Keywords: Malaysian durian export, supply chain analysis, whole frozen durian, market potential,
China’s durian import
Abstract
Malaysia has substantially enjoyed rapid export growth of durian pulp and paste
since the country gained the market access to China in 2011. In 2018, a new
export protocol for frozen whole durian was promulgated and signed between
Malaysia and China. The new protocol enables a promising market avenue
for frozen whole durian, thereby consolidating Malaysia as China’s important
trading nation. However, ambiguities have arisen among the Malaysian durian
exporters in understanding the frozen whole durian export supply chain to China
following the recently signed new protocol. Therefore, understanding the export
supply chain is imperative for an informed decision making. A case study of
frozen whole durian export supply chain from Malaysian farms to retailers in
Shenzen, China was therefore carried out and analyzed based on the Supply
Chain and Cost Mapping Toolkit (SCCMT). The study revealed that processing
and outbound logistics were highly important nodes in the frozen whole durian
export supply chain. Both stages spent the most amount of time and constituted
the highest cost fraction in the supply chain combined. All stages were integrated
through the establishment of cross-functional working team with trust and full
commitment. Overall, this real case study is expected to encourage the spike of
Malaysian durian export in future.
Introduction the largest segment in the entire retail
As the world’s largest population, China and food and beverage category (Direct
represents a potentially attractive market China Chamber of Commerce [DCCC]
for emerging exporters. The rapid economic 2017). Growing transport networks and
growth combined with increasing disposable technologies enable the Chinese consumers
income in China allows Chinese consumers to buy more fruits and vegetables as there
to spend more on household products. For are ample choices and varieties in the
example, food and beverage expenditure market. The increased value in money,
in 2018 accounted for around a quarter of awareness of a healthy diet, and the
the urban household expenditure (Textor public concerns of food safety are the key
2020). Fruit and vegetable market represents factors to the enhanced market growth in
*Socio-Economy, Market Intelligence and Agribusiness Research Centre, MARDI Headquarters,
Persiaran MARDI-UPM, 43400 Serdang, Selangor
**Horticulture Research Centre, MARDI Headquarters, Persiaran MARDI-UPM, 43400 Serdang, Selangor
***Export development department, Federal Agricultural Marketing Authority
E-mail: suhanasafari@mardi.gov.my
©Malaysian Agricultural Research and Development Institute 2021
1
China (Produce Marketing Association that can officially supply the frozen durian
[PMA] 2016). In today’s China’s market, to the Mainland China market. Fresh whole
distribution does not only happen in the durian is classified under the HS code of
traditional market, but also increasingly 081060 (fresh durian) while pulp and paste
become more diversified in virtual are classified under the HS code of 210690
marketplaces (Fung Business Intelligence (food preparations not elsewhere specified
2018). The changing consumers’ needs or included). However, the HS code is
and preferences have upgraded their taste jointly grouped with a wide variety of food
experience to tropical fruits, which bring products including durian as an exotic
durians to the consumers. processed fruit.
Durian has become increasingly Malaysian durian export has increased
popular in southern and eastern China significantly in value (Figure 1). From
partly due to its high nutritional value and 2002 – 2011 to 2011 – 2019, durian export
widespread popularity of its derivatives, grew by 172% in constant dollar terms upon
for instance ice cream, moon cakes, and gaining market access to China, increasing
dumplings (ChinaAg 2017). According to by 151% from USD 8.8 million (2011) to
the Ministry of Agriculture and Rural Affairs USD 22.3 million (2019).
of the People’s Republic of China (2019), Export destinations of durian are
the country imported USD 963 million or mainly to the Asian and some non-Asian
358,000 tonnes of durian in the first half of markets (e.g. Australia, United Kingdom and
2019, more than doubling the values in the Canada) (Suhana et al. 2018). Singapore and
current and previous years combined. Within Hong Kong remain as the main traditional
China, the cities of Guangzhou, Shenzhen, export destinations prior to adding China
and Hong Kong have since emerged as the to the list of export destinations for durian.
largest markets for selling durian while In 2017, China and Hong Kong contributed
Beijing and Shanghai recorded the highest 48% to the durian export market share,
consumption in durian, highly focusing followed by Singapore (46%). Malaysia’s
on supplying the durian to the high-end most popular trade varieties are ‘Cat
hotels and eateries (Oriental Daily 2016). Mountain King’ or ‘Mao Shan Wang’ or
Historically, Thailand has been the major ‘Musang King’ and ‘D24’ mainly grown in
durian supplier to the Chinese market and Peninsular Malaysia particularly in the states
it currently holds a monopoly (90% of of Pahang, Perak, Johor, and Kelantan. In
market share) on fresh exports to Mainland Thailand, the bulk of export-orientated fresh
China. Thai durian has established a strong durian production takes place near the Gulf
reputation in China’s market for over 30 of Thailand in the south eastern provinces of
years (Yuhuan 2015). Durian export can be Chanthaburi, Rayong, Trat, and Prachinburi.
quantified in two ways: (1) trade in fruit Other durian production zones include the
form; and (2) durian-based end products northern province of Uttaradit, the southern
(MK Durian Harvest n.d.). provinces of Yala, Narathiwat, and Surat
Following a positive demand outlook Thani. Thailand’s most popular varieties are
for durian in China, Malaysia has negotiated ‘Golden Pillow’ or Monthong and ‘Chanee’
with China to obtain durian export access (ChinaAg 2017). In terms of fruit taste and
into the country. On 12th May 2008, the quality between Malaysian and Thai durian,
export protocol of frozen durian pulp and industry players generally find the taste and
paste was signed between the two trading quality remarkably different. Malaysian
nations. The export officially began on 11th durian is at its best due to its harvesting
May 2011 onwards (Federal Agricultural technique, which is fully ripened at 100%
Marketing Authority [FAMA] 2014). maturity instead of early harvest as practiced
Malaysia is the only country after Thailand in Thailand (Freshplaza 2019).
2
Suhana Safari, Nur Azlin Razali, Wan Mahfuzah Wan Ibrahim and Mohd Sukri Abdul Rahim
Source: International Trade Centre (2020)
Figure 1. Malaysia’s export of durian, 2002 – 2019 (in USD ‘000 and Mt)
Traditionally, importation of durian export protocol recently signed between the
into China is done by transiting in Hong two countries. Thus, this study generally
Kong via legal, illegal or grey distribution intended to identify frozen whole durian
channel, thus bypassing Hong Kong and export supply chain from Malaysian farm
exporting directly to the Mainland China to China market. Specifically, this study
(Malaysia External Trade Development identified activities involved in the export
Corporation [MATRADE] 2016). Durian supply chain, evaluated time taken to
trade is estimated to increase, particularly distribute the frozen whole durian from
for Malaysian durian which has already Malaysia to China, and estimated the cost
established a foothold in Guangdong for enumerated from all activities throughout
the distribution at wholesale market further the supply chain. The rest of the paper
inland (ChinaAg 2017). On top of that, is organised into several sections. The
another export protocol for frozen whole literature review briefly delves into the
fruit durian was promulgated and sealed on basics of agri-supply chain and cryogenic
20th August 2018 between Malaysia and freezing technique, followed by agri-supply
China. The export activity later started in chain of fresh produce in China. Next,
2019 upon approval and premise auditing methodology briefly explains the sources
by the General Administration of Customs of data and analytical tool to examine
of the People’s Republic of China (GACC). the frozen whole durian export supply
At present, five companies have fulfilled the chain. Results and discussions present and
criteria and qualified by GACC to export deliberate on the findings, challenges and
frozen whole durian to China by using a opportunities, followed by recommendations
new technique known as cryogenic nitrogen and strategies. Finally, conclusion is
freezing. The technique aims to retain its presented at the end of the paper.
freshness for long shelf life up to 18 months.
Nevertheless, little is known and
understood about the frozen whole durian
export supply chain following the new
3Literature review as customs and biosecurity regulation at
Agri-Supply Chain borders. Figure 2 illustrates a simplified
Aramyan (2007 p.5) cited Bijman (2002) agri-supply chain.
to define agri-food supply chain as “a
supply chain where an agricultural product Van der Most (2000) has observed that agri-
goes through different stages of production food supply chain is complex to understand
and distribution before reaching the final because it differs from other supply chains
consumers”. The agri-supply chain is in such aspects as:
subjected to more stringent regulations 1. shelf life constraints for raw materials
and closer monitoring related to human and perishability of products;
consumption (Ahumada and Villalobos 2. long production throughput time;
2009). Food and Agriculture Organization 3. seasonality in production;
[FAO] (2007) adds that the supply chain 4. physical product features like sensory
not only includes the producer and its properties such as taste, odor,
suppliers, but also depends on the logistics appearance, color, size, and image;
flows, transporters, warehouse, retailers, 5. requires conditioned transportation and
and consumers themselves. In a broader storage;
sense, supply chain includes new product 6. product safety issues; and
development, marketing, operations, 7. natural conditions affect the quantity and
distribution, finance, and customer service. the quality of farm products.
Supply chain principally exists
in two forms: viz. domestic or cross- Aramyan (2007 p.g 5) revealed that
national borders (Rozhan 2015). The agri-supply chain was more challenging
former refers to the flow of agricultural in distinguishing daily fresh products
products from the stakeholders to the end (vegetables and fruits), chilled products
users in the domestic market while the (salad, dairy products etc.), frozen products
latter may extend to overseas markets via (fish, ice etc.) and non-perishables as sugar
export. In addition to that, there are many and coffee. For fresh fruits, uncertainties
stakeholders constituting an agricultural in supply and demand will lead to longer
supply chain, ranging from producers to supply chain with relatively thin margin
transport providers, sorting/processing (Verdouw et al. 2010) apart from short
facilities, wholesaler, distributors, retailers product lifetimes (Ralf 2017). Furthermore,
and consumers (Staples et al. 2017). For the quality of agricultural products is
an international supply chain, there are strongly determined by nature.
additional stakeholders involved, such
Source: Staples et al. (2017)
Figure 2. Stakeholders in a simple agricultural supply chain
4Suhana Safari, Nur Azlin Razali, Wan Mahfuzah Wan Ibrahim and Mohd Sukri Abdul Rahim
Based on these facts, it is noteworthy Cryogenic freezing technique
to appreciate the crucial roles of food quality Freezing is one of the best techniques to
and environmental issues (e.g. weather supply and preserve the quality of durians
condition) in determining agri-food supply all year round. Through freezing, the
chain performance. Thus, when developing excess of durian during peak season can be
a performance measurement system for controlled and supplied during off season.
an agri-food supply chain based on the Furthermore, the strong aroma of durian can
specifications of agri-food production, it be concealed along the supply chain.
is crucial to consider the whole process Liquid nitrogen at -196 °C is a
of quality (e.g. freshness, food safety, cryogenic fluid that can cause rapid freezing
environmental issues, etc.), and other upon contact with living tissue. Pressurized
financial and non-financial indicators for an liquid nitrogen is sprayed onto the product at
effective measurement system (Aramyan, high velocity to freeze it immediately. This
2007; Van de Spigel 2004). method can extract heat at a faster rate. It
Christopher (1998) described various permeates the food items’ thermal resistance
performance indicators which could be and creates an ice crust around them,
deployed by an organization to measure locking in natural flavours, nutrients, and
success or failure in the market. Van der moisture (Linde 2020). Cryogenic freezing
Vorst (2005) highlighted the main indicators has five to ten times less dehydration
on three main levels: (1) supply chain than with conventional freezers. By
level (e.g. product availability, quality, limiting weight loss, this method improves
responsiveness, delivery reliability, and product yield.
total supply chain costs); (2) organizational Besides that, freezing temperature
level (e.g. inventory level, throughput time, reduces or inhibits the growth of
responsiveness, delivery reliability, and microorganisms and decreases water
total organizational costs); and (3) process activity, thereby maintaining the quality and
level (e.g. responsiveness, throughput time, extending shelf life of many food products,
process yield, and process costs). However, for example fruits (Heldman 2006; Fellows,
failure to meet the logistical requirements 2009). Allan-Wojtas et al. (1999) found
for supply chains in the food sector would that rapid freezing by using liquid nitrogen
result in severe damage to the physical provides better quality and enhances the
products and brand reputations (Tarek, blueberries’ internal microstructure. In terms
2006). of food safety, frozen fruits are considered
Aramyan (2007) developed a safer due to reduced water activity and
preliminary conceptual framework which retarded microbial growth under freezing
focused on four main categories: viz. storage environment (De Ancos et al. 2012).
efficiency, flexibility, responsiveness,
and food quality. Management and co- Agri-supply chain of fresh produce in
ordination of the fresh produce supply chain China
have become increasingly important as China has 34 major ports and over 2,000
companies need to minimize distribution and minor ports. However, only seven ports are
inventory costs while maximizing market authorized by the Government to receive
opportunities, resulting in fundamental fresh produce from overseas. The ports
changes in consumer preference and taste are located in Ningbo, Xiamen, Nanjing,
(Safari et al. 2019; Norsida et al. 2009). Qingdao, Guangzhou, Tianji and Shanghai
(Wang et al. 2017) as indicated in Figure 3.
5to Paul (2015), China now has 106 million
m3 (cubic meters) of cold storage capacity
and 89,000 refrigerated vehicles, upgraded
from only 10 million m3 of storage and
12,000 refrigerated vehicles in 2007. This
infrastructure development is centered
around Shanghai, Guangzhou, Fujian and
Tianjin.
Figure 4 shows fresh produce
distribution model adopted by PMA (2016).
The distribution in China involves local
importers and wholesalers distributing fresh
produce to wet supermarkets, supermarkets,
and other wholesale markets in China.
However, the fresh fruit supply model has
evolved into direct importation from foreign
exporters to fresh fruit chain store and
through e-commerce.
Exporting fresh produce to the
international market involves both technical
and political issues. Pest and disease control,
and quarantine procedures are the biggest
Source: Wang et al. (2017) technical concerns by Chinese authority in
Figure 3. Shipping ports in China order to protect local agricultural industry.
In obtaining technical market access criteria,
Guangzhou is the largest destination foreign exporters should cooperate with the
for imported fruits, accounting for GACC and other related Chinese officials
approximately 70% of China’s imported fruit before exporting the products. The latter
(MATRADE 2016). Guangzhou’s Jiangnan issue requires a good bilateral relation which
market is the biggest market for imported is pivotal to gain market access in China.
fruit, serving the whole Chinese market as Nevertheless, it would turn to a rather
well as to Shenzen located in Guangdong delicate issue for exporters whose countries
Province (Shoufeng et al. 2019). have a less-than-satisfactory relationship
The two most common methods for with the Chinese government (PMA 2016).
fresh fruit exporters to gain access to the Exporters whose countries have signed a
Chinese market are by exporting either Free Trade Agreement (FTA) with China
indirectly to the Mainland China via Hong enjoy a large competitive advantage in the
Kong or directly to the Mainland China form of tariff waivers (EU SME 2015).
(PMA 2016). The selected distribution
channel may vary depending on the products Methodology
and market segmentation. The primary This paper generally aimed to understand
advantage of using grey channel via Hong the frozen whole durian export supply chain
Kong is the tariff structure. However, one from Malaysia to China. A case study was
major disadvantage is the lack of robust cold conducted to profile supply chain activities
storage facilities needed, especially for the involved in exporting frozen whole durian,
exported frozen durian. Exporting directly to evaluate the time taken to distribute
to the Mainland China will be supported the frozen whole durian from Malaysia to
by improvements in China’s cold chain China, and to estimate cost enumerated
infrastructure (ChinaAg 2017). According from all activities throughout the supply
6Suhana Safari, Nur Azlin Razali, Wan Mahfuzah Wan Ibrahim and Mohd Sukri Abdul Rahim
Source: Produce Marketing Association (2016)
Figure 4. China’s Imported fresh produce distribution model
chain. These were achieved by gathering The data collection began on 19th
information derived from primary and July 2019 and ended on 15th August 2019.
secondary data. Primary data were collected In the beginning, farm and premise visits
right from the first stage of supply chain i.e. were conducted with growers, and five
farm harvesting to the end stage i.e. retail in local exporters, who were predominantly
China (in this case, retail shop in Shenzhen). approved for whole durian fruits export to
Shenzen has a relatively large demand for China underwent a focused group discussion
durian among the Chinese consumers. Apart and in-depth interview. Another round
from that, Shenzen has some of the largest of in-depth interview was subsequently
regional wholesale markets for imported conducted involving China’s counterparts
tropical fruits (e.g. Buji Fruit) and Vegetable e.g. importers, wholesalers, and retailers.
Wholesale Market. Secondary data, on the Additionally, in-store observation at various
other hand, were retrieved from durian categories of grocery outlet (e.g. wet
trade data pooled from various sources market, supermarket, hypermarket and fruits
(e.g. Trade Map, UNCOMTRADE), annual stores including Walmart, Ole, Pagoda,
reports published by the Department of Aeon, Hema Fresh, Xin Fa Di market and
Agriculture (DOA) Malaysia, Ministry of Carrefour) were also carried out to obtain
Agriculture and Food Industries (MAFI) or more relevant information of durian market
formerly known as Ministry of Agriculture in China.
and Agro-based Industry (MOA), Ministry
of Agriculture of the Republic of China, and
other publications.
7Supply chain and cost mapping toolkit inbound logistics, processing, and outbound
analysis logistics are integrated accordingly. Figure 5
The frozen whole durian export supply chain shows the process map of the frozen whole
was analyzed based on the Supply Chain durian export supply chain. Fresh durians
and Cost Mapping Toolkit (SCCMT). The were harvested from drop-ripen fruit in
analysis has been developed by the Supply the farm. The fresh durians were usually
Chain Cost Effectiveness and Swift Service collected twice a day i.e. early in the
(SUCCESS) team and successfully used by morning and evening. The durian collection
leading global food manufacturers, including was done manually by farm workers. A
Masterfoods UK Ltd, Bernard Matthews mature durian tree (i.e. grafted cultivars
Ltd and McCormick UK Ltd (Tarek 2006). start bearing at 4 – 6 years; seedlings start
The analysis provided visibility of time bearing at 7 – 10 years) could produce 100
in the supply chain. It involved seven – 200 durians per season (Shunyam 2019).
interlinked stages viz. (1) identifying project; Durian varies in size and shape depending
(2) process mapping; (3) cost collection; on varieties and completeness of pollination.
(4) time-based analysis; (5) translation Its average weight ranges between 1.5 and
cost matrix; (6) cost-time analysis; and (7) 4.0 kg per fruit but occasionally 8.0 kg per
scenario evaluation. fruit. For export purpose, durians weighing
The Supply Chain and Cost Mapping between 1.5 kg and 2.0 kg from Musang
Toolkit (SCCMT) began with process King, Mao Shan Wang or D197 cultivars
mapping which created an accurate visual were selected for freezing. The durians were
activity and captured the use of time and subsequently loaded into the pickup truck
resources. Next, activity-based cost was and directly transported to packing house for
estimated in the cost collection stage. In processing, quality check, and other post-
this stage, accurate estimation or exact harvest export requirements.
information was needed for calculation. Cost According to Nur Azlin (2020), the
enumeration incentivized the local exporters post-harvest processing at the packing house
to maneuver their businesses more aptly by was carried out in the processing area. The
monitoring their cost of doing business and cleaning process of durian is done by using
strategizing an effective cost minimization. high-pressure air jet to remove any debris
This strategy would benefit the exporters in from the fruit. The optional sanitation of
mitigating business and financial risks across durian was conducted through automated
borders. washing system fitted with overhead
Next, time-based analysis, translation sprayers to clean and wash the fruit. First,
cost matrix, and cost-time analysis involved the workers gently placed the durians in the
a process of identifying wastes and benefits trays fitted onto the conveyor belt, which
in the supply chain. The process was useful conveyed the fruits to the automated water
for exporters to minimize or eliminate spraying platform, wherein the fruits were
waste/slack resources in the supply chain showered with a clean water of potable
and assessing the (un)intended impact of the quality mixed with 500 ppm sodium
supply chain on the organization. hypochlorite. The water was maintained at
room temperature throughout washing.
Results and discussions Upon treatment, the fruits were passed
The export supply chain structure for through a drying section at the end of the
Malaysian frozen whole durian conveyor to reduce moisture on the surface
Description of a supply chain structure of the fruits. Prior to cryogenic freezing
depicts the processes and activities involved treatment, the fruits were transferred to the
from input (farm) to output (retail). In order shelves. The shelves were subsequently
to connect the chain, other processes like
8Suhana Safari, Nur Azlin Razali, Wan Mahfuzah Wan Ibrahim and Mohd Sukri Abdul Rahim
placed in the cryogenic chamber. The to three days. Then, the consignment was
freezing treatment was set between -80°C to transported to the importer’s warehouse for
-110°C for not less than an hour. subsequent distribution to the retail market.
Upon completion of freezing, the In this case study, the frozen whole
frozen durian must be immediately be durian was kept in Demao Fruits and
packed in new and clean packaging whose Vegetable Frozen Warehouse located in
materials conform to the phytosanitary Donguan, Shenzen. The process of filling
requirements, and safety and hygiene the storage rack with the frozen whole
standards. For the best quality, the frozen durian took approximately 1 – 2 days in
durian must be packed by using vacuum the warehouse. The frozen whole durian
packaging. This would contain the gas and was subsequently distributed to fresh fruit
smell of the frozen durian and prevent it chain stores known as ‘Zhen Yin Yuen
from high water loss. Xing Frozen Shop’ in Shenzen. The frozen
If using netting to pack the frozen whole durian was able to extend the shelf
durian, the foam insulated box was life up to 18 months without deteriorating
recommended to be used as a retail box. its quality e.g. original flavor, taste, golden
All sides and edges of each package must flesh color, and texture. Consumers were
be appropriately sealed with adhesives still able to enjoy its aroma and taste after 6
to prevent entry of target or non-target hours of defrosting in room temperature or
quarantine pests. Storage and transportation microwave heating accordingly.
of packed frozen durian were conducted in
at least -18°C environment. Cost collection
At this point, frozen whole durian Cost estimation for each stage of the supply
awaited customer orders and ready for chain is shown in Table 1. Farming cost was
discharge from the processing facility to be estimated based on farm price, transport
transported to China (outbound process) for and workers’ salary, RM8.00/kg, combined.
export. From farm to port of discharge, it The cost for inbound logistics could be
was estimated to take twelve days before it calculated by taking the cost of operating a
was ready for sea freight from Klang Port of pickup truck (e.g. fuel, maintenance, etc.)
Malaysia to Guangzhou Port of China. A 40- plus the driver’s salary, RM0.50/kg. The
ft container fully loaded with frozen whole pickup truck could be fully loaded with
durians was ready to be transferred from the approximately 90 kg of durian, equivalent
freight forwarding truck to the nominated to 60 fruits with an average weight of 1.50
vessel. The transfer might take a few kg/fruit. The processing cost included wage,
hours depending on customs approvals i.e. post-harvest and cryogenic treatment, utility
documentation (e.g. packing list, import or (e.g. water and electricity), and packaging. A
export permit, export forms and others) and fully loaded 40-ft container for export would
clearance by the Royal Malaysia Customs hold approximately 1,140 frozen whole
Department (RMCD) and port authorities. durians. Thus, the processing cost for the
Sea freight voyage from Malaysia to same container was estimated at RM10.50/
southern China took approximately 10 – 11 kg or RM17,850/container.
days. Next, the cost of outbound logistics
Upon arrival at the destination port, was estimated at RM8.50/kg or RM14,535
clearance and inspection process would be per load. The cost included cold storage
carried out by GACC and port authorities. warehousing, damage, transportation,
Upon satisfying the requirements and insurance, taxes, and administrative
getting approvals, the consignment was then charges for both exporter and importer.
unloaded from the vessel to the container The retail cost for the two-tier supply
loading bay. This process generally took one (inclusive wholesalers and retailers) was
910
Figure 5. Process map of frozen whole durian from farm to retailSuhana Safari, Nur Azlin Razali, Wan Mahfuzah Wan Ibrahim and Mohd Sukri Abdul Rahim
Table 1. Cost estimation (RM) for exporting frozen whole durian from Malaysia to China
Activity Cost (RM) Percentage (%)
1 Farming RM8.00/kg 24.2
2 Inbound Logistics RM0.50/kg @ RM45/load 1.5
*A fully-loaded pickup contains 90 kg or 60 durians.
**Average weight of fruit is 1.5 kg.
3 Processing RM10.50/kg @ RM17,850/load 31.8
Packaging *A fully-loaded 40-ft container contains 1,140 frozen
Cold Storage whole durians.
4 Outbound Logistics RM8.50/kg @ RM14,535 per load 25.8
*Inclusive transport to port, export charge, export
logistics, Delivered Duty Charge and VAT (9%)
5 Retail (Wholesaler RM5/kg (Wholesaler) and RM6 (Retailer) 16.7
and Retailer)
TOTAL RM33.00 100.0
Note: VAT – Value-Added Tax; kg – kilograms; RM – Ringgit Malaysia; ft - foot
purely an estimation of resources (e.g. Time-based analysis
labor and electricity) and indirect cost (e.g. Figure 6 shows the amount of time taken
management and equipment maintenance) on all activities as indicated in the process
which was approximately RM5.00/kg at map. This study found that the entire supply
wholesaler level and RM6.00/kg at retail chain of frozen whole durian export took
level. It is noteworthy to recognize that almost 26 days i.e. 12 days in Malaysia
these estimated figures were contributed and another 14 days in China. In other
and jointly validated by the individuals words, the Malaysian durian sold for export
who were involved in the entire supply market in China would possibly arrive at
chain activities. Despite the estimation, the the Chinese fresh fruit markets after 28 days
figures relatively provide a fair baseline and of farming, inbound logistics, processing,
useful insights for determining supply chain freezing, packaging, cold storage, outbound
costing in exporting frozen whole durian logistics, and retail (inclusive wholesalers
from Malaysia to China. and retailers) combined. Of these, farming
and inbound logistics took a shorter time as
Figure 6. Amount of time taken by all activities for exporting frozen whole durian from Malaysia to
China
11both activities occurred at the same place Pagoda. Being a large-scale fruit chain store,
starting from the fruit collection in the Pagoda had 4,500 outlets across China.
farm on the first day. For quality and safety At Pagoda, the frozen whole durian must
reasons, the fruits must be sourced from the be stored and retained at -18°C or below
durian farms registered with the Department to maintain fruit quality (e.g. aroma, taste,
of Agriculture (DOA) Malaysia, accredited colour and texture). Otherwise, the quality
with Malaysian Good Agricultural Practices would likely deteriorate.
(MyGAP) and implemented the Integrated
Pest Management (IPM). Cost Translation Matrix
These conditions would require the Cost translation matrix aims to convert the
ripe fruits to fall on the netting, which was estimated cost into a format that allows
mounted slightly above the ground where the cost of each supply chain activity
the durian trees were grown. The fruits is estimated. Table 2 summarizes the
should not be in contact with soil and plant breakdown of estimated costs for exporting
debris nor can it be damaged or bruised one frozen whole durian from Malaysia
during harvest and post-harvest treatment. to China.
Based on Figure 6, this study found Based on Table 2, farming, inbound
that outbound logistics spent the most logistics and retail can be assumed as
amount of time, thus, a critical node in operating with minimal cost. The high cost
the supply chain. Refrigerated container, was largely accumulated in the processing
also known as reefer, was used to maintain and outbound logistics. In the processing
the required temperature for the frozen stage, the cost of RM10.50/kg accounted
whole durian. During the entire sea voyage for direct and indirect costs, such as utility,
period (i.e. 10 – 11 days), the appointed water and electricity, labour, equipment
sea freight company was responsible for maintenance, and management. Besides
ensuring that the container safely arrived that, usage of nitrogen gas for cryogenic
at Guangzhou Port before transporting it to freezing treatment costed the highest which
the warehouse located in Shenzen, which was almost 23% or RM 2.40/kg. For every
was approximately 150 km away from 1.5 kg fruit, nitrogen gas required to freeze
the port. The distribution centre known as the fruit cryogenically costed approximately
Zhen Yin Yuen Xing Frozen Shop (ZYYX RM3.60.
Frozen Shop) was located in the city centre Besides that, packaging incurred
of southern Mainland China. The ZYYX high cost after usage of nitrogen gas due
Frozen Shop was also a distributor for to the vacuum packaging requirement for
Table 2. Breakdown of estimated costs for exporting one frozen whole durian from Malaysia to China
Item Cost Percentage (%)
(RM/kg)
1. Nitrogen gas 2.40 22.9
2. Packaging 2.20 21.0
3. Machinery & equipment maintenance 2.00 19.0
4. Wages 1.75 16.7
5. Transportation maintenance 1.20 11.4
6. Utility (e.g. electricity and water) 0.40 3.8
7. Rental of ISO tank 0.35 3.3
8. Administrative work 0.20 1.9
TOTAL 10.50 100.0
12Suhana Safari, Nur Azlin Razali, Wan Mahfuzah Wan Ibrahim and Mohd Sukri Abdul Rahim
export. The vacuum packaging costs RM by the buyer i.e Port arrival in China. All
2.20/fruit. Next, machinery and equipment costs would be absorbed by the retailers and
cost constituted 19% of the total cost. As subsequently reflected in the final price paid
a Good Manufacturing Practice (GMP)- by the consumers.
accredited factory, all machines must be
maintained periodically to operate optimally. Cost-Time Analysis
Maintenance cost was projected at 5% in Cost-time analysis intends to explore the
every financial year. relationship between two factors (i.e. cost
In addition to that, outbound logistics and time) of the supply chain, allowing us
also incurred a substantial cost in the to determine efficiency of the supply chain.
export supply chain. The estimated cost A graphical illustration is used to examine
of outbound logistics was approximately both factors in percentage. The Cost/Time
RM8.50/kg. The cost of outbound logistics Profile refers to a graph that compares
stemmed from two different types of price: cumulative time against cumulative cost
(1) Freight on Board (FOB); and (2) Cost for the supply chain process. This graphical
in Freight (CIF). FOB occurred when the representation is designed to highlight areas
shipment reached the port or other facility of opportunity for time and cost savings.
designated as the point of origin i.e. Klang Figure 7 illustrates the cumulative cost and
Port, Malaysia whereas CIF was until the time in percentage and graph.
good reached the port of destination chosen
Figure 7. Cumulative cost and time in percentages and graph in percentage
Activity Farming Inbound Logistics Processing Outbound Logistics Retail
Cumulative Cost (%) 24.2 25.7 57.5 83.3 100.0
Cumulative Time (%) 3.6 7.1 35.7 85.7 100.0
13Based on Figure 7, this study revealed Processing incurred 31.8% of the total
that processing and outbound logistics cost. As previously mentioned, nitrogen
spent the largest amount of time, thus they gas was used to freeze the whole durian
were considered as the critical nodes in cryogenically, incurring 23% of the total
the supply chain. Nevertheless, farming cost. The cost of nitrogen gas greatly
and inbound logistics were relatively less depends on the gas suppliers and the
critical. Processing frozen whole durian took number of local companies investing in
up to eight days while outbound logistics high technologies. Thus far, this is the most
for shipping the frozen whole durian from practical technique for freezing the whole
Malaysia to China took up to 14 days (until durian prior to exporting to China. Apart
custom clearance), respectively. In short, from freezing, vacuum packaging incurred
both processing and outbound logistics spent almost 21.0% of the total cost. Vacuum
the longest time and incurred the highest packaging is used to maintain fruit quality
cost for exporting frozen whole durian from and to prevent it from high water loss and
Malaysia to China. foul odour.
Next, the cost-time analysis revealed
Scenario evaluation that outbound logistics constituted almost
As previously mentioned, processing and half of the total time. This is where a good
outbound logistics were found as critical bilateral relationship between Malaysia
nodes in the frozen whole durian export and China, especially in promoting more
supply chain from Malaysia to China. efficient logistics, plays an important role
They play important roles in ensuring the in trade facilitation and trading across
functionality of the supply chain and have borders. In Malaysia, movement of goods
significant impacts on export businesses. between factories to port of discharge is
Farming and inbound logistics only generally handled by the appointed freight
accounted for approximately 3.6% and 3.5% forwarders. Sea freight transportation
of total time, respectively. These imply occasionally renders the delivery of goods
that farming and inbound logistics are not to the importing country to be considerably
high-priority areas in the supply chain. In long in duration. Delays in the delivery
the farming stage, activities such as fruit may arise from any unheralded situations,
collection, loading onto and unloading from such as weather conditions (e.g. storm)
pickup truck constituted an insignificant or technical glitch, which may inflict
fraction of time. unfavourable financial burden upon the
In the processing stage, the time-based exporters. Approval and clearance by
process map showed that it spent 28.6% of port authorities and customs at the entry
the total time. Processing of frozen whole points are extremely crucial as these would
durian began with sorting, followed by determine the onward movement of goods to
cryogenic freezing, and ended with vacuum the wholesalers and retailers. Well-planned
packaging. These activities were integrated refrigerated logistics, warehouse storage,
and automated by using conveyor-belt and retail equipment would loosen up the
production system continuous sequence bottlenecks and improve the process more
without interruptions or delays. As long efficiently. Frozen whole durian can be
as the farm bears its fruits, the automated stored for a longer period of time. Therefore,
operation will continue running accordingly. when distributing the frozen whole durian to
Cold storage follows as soon as freezing ZYYX Frozen Shop, experienced workers
completes. should be tasked to fill in the cold storage
shelves with the frozen whole durian before
the customers arrive.
14Suhana Safari, Nur Azlin Razali, Wan Mahfuzah Wan Ibrahim and Mohd Sukri Abdul Rahim
Challenges and opportunities Another challenge observed is poor
Malaysian frozen whole durian industry cold chain infrastructure in China. Whole
and exportation of frozen whole durian frozen durian requires a robust cold chain
to China are still at the infancy stage infrastructure along the supply chain.
compared to Thailand as the world’s largest The infrastructure involves refrigerated
durian exporter for decades. Challenges in warehouses, refrigerated transportation and
exporting durian to China are abundant, refrigerated equipment during the journey,
especially in complying with the sanitary producers, exporters, importers, wholesalers
and phytosanitary (SPS) measures, stringent and retailers. However, cold chain
tariff rate, quota and other non-tariff infrastructure outside major cities and import
measures (e.g. trademark, copyright and hubs in China remains underdeveloped
patent protection). where most of China’s advanced cold chain
As mandated in the quarantine transportation is located (PMA 2016).
protocol, durian destined for export must be Although air freight cold logistics is
harvested from farms registered with DOA currently available from Malaysia to China
Malaysia and fulfill the MyGAP standards and it saves almost half of the delivery
as established in the Codex Alimentarius time, refrigerated freight transportation is
Commission, specifically CODEX STAN nevertheless more practical and economical
317-2014 (FAO 2014). For frozen whole to use.
durian, the processing facility must be Due to growing awareness and concern
registered with DOA and certified with for food safety and quality issues, China has
Good Manufacturing Practice (GMP). begun regulating and promoting cold chain
Finally, the facility must pass requirements infrastructure development plan until 2020.
and inspection from the GACC. This is important for the industry to ensure
In terms of import duty, China imposes that the fruit quality is maintained in the
high tariff on the imported durian product required cold condition and to retain product
to the country. As of 2016, an import duty shelf life from deteriorating.
is levied on exported fresh durian and pulp/ Chinese consumption is forecasted
paste to China. An import duty rate of to rapidly grow and remain robust. Rising
20% at Normal Trade Relations (NTR) is disposable income, changing lifestyle
imposed on the World Trade Organization and consumer preferences lead to higher
(WTO) members. However, only 15% at consumption of tropical fruits. In China,
NTR is imposed on the WTO members for Musang King Malaysia is sold at premium
exporting frozen whole durian (General price when compared to Thai varieties
Administration of Quality Supervision, (e.g. Monthong) across wholesaler market
Inspection and Quarantine 2016). (ChinaAg 2017). Malaysian durian is
Malaysia has been a WTO member considered to be of higher quality (and
since 1995. In certain conditions, it is better tasting) than Thai durian.
challenging and burdensome for industry In addition to that, the current trend
players to fulfill the market conditions, in China has become increasingly popular
especially in complying with the SPS to give well-packaged imported fruits as
measures. As such, a new or increased risk gifts during holidays (China Yangling
from pest or disease or other food safety Agricultural Exchange 2016). Thus, it
or quality may lose the market access and represents a unique market avenue to
trade. Any disruption to trade can leave introduce the Malaysian frozen whole durian
exporters vulnerable if they do not have to the new consumers in China. Malaysian
established commercial links to other Maybank Investment Bank in Xinhua
available markets. reported that durian cultivation is targeted
to be potentially generate nine (9) times
15more revenue compared to oil palm on a chain partners to work together over an
per hectare basis while generating Earnings indefinite period is a necessary pre-requisite
Before Interest and Taxes (EBIT) margin to a significant supply chain improvement as
an excess of 50 per cent. Considering the it establishes a basis from which other lean
rising consumption and prices for domestic improvement strategies could be adopted.
and export market, there is an immense As mentioned earlier, frozen whole durian
opportunity for Malaysia to increase the requires cold chain infrastructure which
market share. Realising the significant consists of refrigerated logistics, storage,
growth potential, the Ministry of Agriculture and equipment. Close collaboration and
and Food Industries Malaysia has provided cross-functional team in the supply side
immense support for the large-scale farming will necessitate significant investment of
of durian, hoping to achieve 50 per cent time and money. Trust is the key element
jump in export by 2030, thereby boosting to a successful supply chain relationship.
the country’s declining agricultural industry However, building trust is a long-term
(The Business Times, 2019). process, requiring a substantial amount
Other than physical market, China of time spent on interactions between
has also seen a rapid development in the the individual companies. In fostering
virtual marketplaces. Major online retailers, and galvanizing the trust, mutual linkage
such as Alibaba, Taobao, Tmall, Jindong, between managers at farm and processing
Yihadoan, and Womai provide food and facility must be established. This would
beverage platform for online shopping help producers develop important key
(EU SME Centre 2015). Other than that, performance indicators (KPI) and lay out
digital marketing through social media is clear agreement and commitment among the
also increasingly popular in China. Despite managers in the supply chain.
China’s telecommunication and network Building networks and strengthening
security protocol over Western-born social bilateral trade between Malaysia and China
media platforms (e.g. Twitter, Facebook, are crucial to avoid poor product handling,
and YouTube), there are other equivalent processing, cold chain management,
social media applications in China, such and retail execution. As refrigerated
as RenRen (similar to Facebook), Weibo infrastructure is one of the important
(micro-blogging site akin to Twitter), elements in ensuring the quality of frozen
WeChat and Youku (similar to YouTube). whole durian, Malaysian exporters are
These applications are widely used among suggested to forge partnership with
the Chinese consumers (Gemma 2013) to established export specialists, international
buy various products online. Realising the retail chains (e.g. Walmart, Carrefour, China
opportunities in the virtual marketplace, Resources Vanguard (CRV)), and fruit
Malaysian durian producers are encouraged retailers (e.g. Pagoda). Both strategies would
to market their produce through these virtual expedite integration of the supply chain of
marketplaces to reach out to more Chinese frozen whole durian, thereby mitigating the
consumers. risks of navigating China market.
Despite the above strategies, it is
Recommendation and strategy already known that China imposes stringent
Supply chain integration laws and protocols in enforcing trade
For an efficient export supply chain of regulations. Strong support and constant
frozen whole durian, the main strategy is effort from exporters and government
to integrate and manage all activities with are needed to keep close with General
trust. According to Tarek (2006), as cited in Administration of Quality Supervision,
Taylor (2006), establishment of a dedicated Inspection and Quarantine of the People’s
value stream with commitment of supply Republic of China (AQSIQ), its exports,
16Suhana Safari, Nur Azlin Razali, Wan Mahfuzah Wan Ibrahim and Mohd Sukri Abdul Rahim
and other Chinese customs officials for a represents good avenue for the Malaysian
beneficial trade relationship in the future. frozen whole durian as well as pulp and
Likewise, this case study has observed that paste. Durian plantation has become the
exporters have been accompanied by ZYYX next profitable investment in Malaysia for
Frozen Shop, which is one of the distributors about 50% margin excess compared to oil
for Pagoda in the southern Mainland China. palm plantation. Among the challenges
At present, Pagoda has 4,500 outlet-stores identified in the frozen whole durian export
across China and it owns an online platform, supply chain are complying with stringent
known as Pagoda Xinxiang (a mini-program trade protocol enforced by China e.g. SPS
within WeChat), for selling fresh food requirements, high tariff rate and other
(Cheng 2019). Overall, the integration of non-tariff measures and local requirements
supply chain activities offers enormous cost- for registering with DOA; getting MyGAP
saving benefits, an efficient supply chain, certification for farms and GMP certification
and elimination of waste. for processing facility; the delay in delivery
of container to the importing country; and
Conclusion the lack of cold storage infrastructure in
The goal of this paper was to gain better southern Mainland China.
understanding in the export supply chain In view of vast opportunities arising
of frozen whole durian from Malaysia to from the new protocol, supply chain
China following the new export protocol integration is highly anticipated for a more
recently signed between the two countries. efficient functionality of supply chain.
The frozen whole durian export supply chain All stages are integrated through the
from Malaysia to China began with farming, establishment of cross-functional working
inbound logistics, processing, outbound team with trust and full commitment. Next,
logistics and retail. Processing involved the Malaysian exporters are encouraged
cleaning, drying, cryogenic freezing, and to consider forging partnerships with
packaging. Based on the SCCMT, this export specialists and international chain
study found that the total duration taken to stores, domestically and abroad. On top
complete all stages in the supply chain was of accessing physical market in China,
28 days. Processing and outbound logistics the exporters are encouraged to market
were the critical nodes in the export supply their frozen whole durian via virtual
chain. Both stages spent the most amount marketplaces. In the long run, Malaysia and
of time and incurred the highest cost in China would enjoy substantial bilateral trade
the entire supply chain. Long duration and benefits by reducing unnecessary regulatory
high cost of processing were attributable burden for trading across borders.
to the usage of nitrogen gas for cryogenic
freezing of whole durian, vacuum packaging
technology, and machinery and equipment
maintenance. In terms of outbound logistics,
sea freight voyage took about 10-11 days
to reach the port of China. The distribution
of frozen whole durian to the wholesalers
and retailers relied on the approvals and
clearance from the port authorities and
customs in China.
Durian market to China is predicted
to increase significantly in new future due
to the rising of disposable income, lifestyle
and preference among Chinese. This
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