A Study on the Relationship between Service Supply Chain Practices with Logistics Service Effectiveness Kavighta MOHAN Suhaiza ZAILANI Abstract - The purpose of this research is to study about the relationship and effects of service supply chain practices and logistics services effectiveness for logistic service providers operating in Malaysia. This study was conducted by distributing questionnaires to logistics service provider to gather evidence to test the above research. Based on the research conducted, service supply chain practices such as information flow, knowledge management, capacity & skill management and cash flow management variables revealed that significant relationships exist with logistics services effectiveness. The study also reveals a better understanding about the new concept of service supply chain and its application towards logistics industry. Key words: Service Supply Chain, Logistics Effectiveness, Logistics Industry, Malaysia I INTRODUCTION In 2009, Malaysia’s International Trade and Industry Minister Tan Sri Muhyiddin Yassin quoted services sector in Malaysia is expected to have a significant impact on the growth of Malaysia's economy and targeted to contribute 70% of the gross domestic product (GDP) by 2020 and the services sector currently contributing about 55% to Malaysia's GDP (17 th March 2009, BERNAMA). Importance of services industry seem to be acknowledged well by, Ellram et al. (2004) through the article entitled “Understanding and Managing the Services Supply Chain” and this author have popularized the term service supply chain. Sengupta et al., (2006) have taken a next step by differentiating between service supply chain and manufacturing supply chain. They argued that human labor forms a significant component of the value delivery process in service supply chain and while physical handling of a product leads to standardized and centralized procedures and controls in manufacturing supply chains. With regards to the performance of service sector in Malaysia, the transport sub-sector registering the highest growth of 4.5%, followed by trade, finance and utilities sub- sectors. Services sector achieved total factor productivity utilization of capital and labor. The sector is expected to grow by 2.8% in 2009 supported by broad-based expansion in all services sub-sectors (Productivity Report, 2008). From this data, it shows clearly that the transport sector which comes under logistics industry plan plays an important role in the development of services industry in Malaysia.The present trend of logistics industry in Malaysia is about outsourcing and this has increase the growth of third party logistics (3PL). This is supported by Sohail and Sohal (2006) in their study, in which they found that 67.7% companies in Malaysia use the contract logistics services, Graduate School of Management, Universiti Sains Malaysia 11800, Penang, Malaysia Email: shmz@usm.my with a primary focus on domestic operations. The significance growth logistics industry is offically recognized and underlined under the third industrial master plan (IMP3). According to Ali, Jaafar and Mohamad (2008), Malaysian government has set targets to achieve a growth of 8.6% and the GDP contribution is estimated to be 12.1% by the year 2020 under the Third Industrial Master Plan. The government has decided to increase the total marine cargo by three fold, air cargo by more than two fold and railway freight by more than fourfold by 2020. It is estimated that currently, there are about 22,000 companies in the logistics industry in Malaysia undertaking various areas of activities. Therefore, this study is interested to study about service supply chain management in the context of Malaysian logistics industry. II LITERATURE REVIEW A Service Supply Chain Baltacioglu et al. (2007) defines service supply chain (SSC) as a network of suppliers, service providers, consumers and other supporting units that performs the function of transaction of resources required to produce service followed by transformation of these resources into supporting and core services and finally delivery these services to customers. Lin et al. (2009) provided the similar explanation with Baltacioglu et al. (2007) but focuses on services as well as servitised products. Lin et al. (2009); Zhang et al. (2009) explains the key members in service supply chain are, service provider, service integrator and customers. The ultimate and most important member would be service provider. They serve as the core unit of service supply chain and service provider plays similar role as the focal company in a traditional manufacturing supply chain. The second key member in service supply chain would be service integrators and they play the role of coordinator in between service and for customers. When a customer places an order, service integrator will react to the customer request by breakdown the service request to service providers in the service chain and deliver back the required services to customer. B Service Supply Chain Practices The service model that was proposed by Ellram et al. (2004) identifies the key practices that need a careful management to ensure a effective service supply chain. Service supply chain scholars have defined service supply chain based on the nature of the service they examine, which means the key definition of service supply chain will be similar to all service sectors, but nature of the definition