Enhancing Thailand’s Durian Export Capabilities Through SCOR Model: Thailand to China
Thaniya Tongmak1, Preecha Wararatchai1*, Chotima Jotikasthira2, Suraporn Onputtha2
1 College of Logistics and Supply Chain, Suan Sunandha Rajabhat University, Bangkok, Thailand
2 Faculty of Business Administration, Rajamangala University of Technology Thanyaburi, Thailand
*Corresponding Author: [email protected] Accepted: 10 January 2023 | Published: 31 March 2023
DOI:https://doi.org/10.55057/ijaref.2023.5.1.15
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Abstract: Because there is the significance of Thailand’s durian export but obstacles from some related factors linking to the points of external and internal perspectives, this article, therefore, aims at providing the guideline to enhance Thailand's durian export capabilities through SCOR model. The SCOR model is important to business chain since it can evaluate and display related business activities from assessing customer needs, sourcing materials, creating the products and fulfilling customer satisfaction. SCOR model to enhance Thailand's durian export capabilities encompass with 6 major processes including plan, source, make, deliver, return and enable. Successfully enhancing Thailand's durian export capabilities through SCOR model can contribute advantages for durian exporters.
Keywords: enhancing, export capabilities, SCOR model
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1. Introduction
Thailand has been an agricultural nation throughout its history. Thailand has become an agricultural nation with numerous and diversified agricultural products due to its favorable location, geography, and climate for agriculture. In certain seasons, the output is so high that farmers are unable to release their goods on time, while in others, it is inadequate for local and worldwide distribution. In addition, growers face the challenge of middlemen/entrepreneurs competing to distribute their goods to customers without a management structure in which fresh fruit exports are the key to conquering international markets. Thai fruit is believed to be of comparable quality to fruits that are difficult to replicate in Thailand, such as those from Vietnam, the Philippines, and India. Vegetables and fruits that have been processed in Thailand are regarded an industry that adds significant value to Thai agricultural goods and a product of Thailand's agricultural sector, which is a major exporter on the global market.
Durian is a key economic fruit of Thailand, creating revenue and employment for farmers, producers, and exporters owing to its high consumption both domestically and internationally, as well as its great market potential. Thailand is the leading producer and exporter of durian in the world. More than 90 percent of Thailand's entire export is sent to the People's Republic of China in the form of fresh durian, its primary market. In addition, the expansion of durian exports to Vietnam is enormous and has increased the amount dramatically. Possibly as a result of tax exemptions, Thailand exports fresh durians via Vietnam to the Chinese market.
The Chinese government and a trade agreement on free trade area (FTA) engaged in trade discussions in 2003, which resulted in a move to eliminate the tariff on fruits and vegetables between Thailand and China to zero percent by October 1, 2003. Due to the signing of this agreement, "durian" has been categorized as a category of economically significant crops that provide revenue for the nation. With this, the National Agricultural Commodity and Food Standard (Durian) for 2003 was developed as a guideline for the development of export goods by farmers and significant exporters. In addition to requiring the establishment of National Agricultural Commodity and Food Standards as a condition of negotiation, it is also used to control production quality under GAP standards (Good Agricultural Practice: GAP) and export standards, which stipulate that durian must be graded and packed in a GMP-certified packing facility (GMP).
The labeling indicates the quantity of pollutants and pesticide residues present in durian fruit.
The manufacture of standardized products enables farmers to sell their goods at a premium price, and exporters are also approved by the government to export their goods without difficulty. During the initial phase of the Chinese market trade agreements, more than 130,000 tons of durian were imported from Thailand via airfreight, which was quick but expensive (Tawat Mahitpong, 2012). Currently, fresh durian exports may be separated into three categories: by ship, by truck, and by aircraft valuing about 90.28, 9.71, and 0.01 percent, respectively (Thai Customs, 2017). However, ship exports are popular but need six to seven days to reach the Guangzhou port through the Hong Kong port. Meanwhile, truck shipments to southeast China travel the R12 road to the Youyuguan checkpoint in Pingxiang city.
Compared to the railway that would connect China, the per-vehicle logistics costs are higher.
The transportation time is projected to be shorter than that of ships, and the average logistical cost is anticipated to be cheaper than that of trucks.
The significance of durian export and channels to boost durian exporters' export potential is evident from the preceding discussion. In order for Thailand to be able to export durian, the researcher is interested in examining the increase of Thai durian export capabilities via the use of the SCOR model. In the past, there were few research on the export of durian in Thailand using the idea of supply chain operation (SCOR model). This time, it will be important for government agencies to plan the export production of durian and to enhance exporters' distribution channels. In order to draw conclusion to guidelines to enhance durian exporters' export potential, this article was aimed to reveal the situation of durian export, problems and obstacles to export durian and SCOR model. At the end of this article, suggestion to boost durian exporters' export potential using SCOR model will be portrayed and discussed.
1.1 Durian Export to China
Rittila (2011) discovered that since the People's Republic of China became a member of the World Trade Organization, it has amended several laws, hence elevating the significance of food safety laws and other food standards. In addition, China has evaluated them and mandated that they be implemented by agencies at all levels, including state standards established by the federal government as safety standards and phytosanitary requirements, such as pesticide residues. In addition, China has modified the ministry-issued standards for various pollutants.
The federal government and agencies' standards are regarded as generally applicable in all fields.
For the manufacture, trading, and certification of intra-provincial and inter-provincial items, only local standards established by local governments are relevant. In order to protect the health and hygiene of consumers, the Establishment of Agricultural Commodity and Food Standards
of the People's Republic of China are used as reference criteria in production, trade, export, import, and certification audits. There will be both voluntary standards and applicable standards. The use of the given standards may be advantageous as follows. To begin with the production side, the regulation serves as a production practice, whose strong production practices and standards may assist producers in enhancing the quality of their produce and agricultural goods and classifying them accurately.
Regarding the commerce aspect, it is evident that the regulation of items with quality features would aid in establishing a common standard for the nation of buyers and sellers in order to promote fairness and facilitate trade.
For the certification system inspection, the certification agency of the People's Republic of China will apply the declared standards to encourage manufacturers to adopt them, as well as provide a manual methodology and an evaluation format for auditors to follow.
For international talks, the country's AQSIQ standards aid in negotiating acceptance from trading partners by referring to the standards that have been established in the area of agreement and acceptance of standards that are equivalent to those of trading partner nations. People's Republic of China standards conform to worldwide standards such as Codex, IPPC, OIE, etc.
Concerning the subject of import laws for fruits of the People's Republic of China in the importation of Chinese fruits, the system is regarded a Positive List, which specifies which fruits are permitted to be imported from any nation in advance. China has categorized imported fruit into three categories:
The first is about the fruits that are forbidden to be imported. This set of fruits is severely restricted from being imported. It is a fruit that may have infections or insect pests, or originates from imported sources that may carry pathogens/pests that might be harmful to Chinese farmers. However, some restricted fruits may still be imported if the exporting nation certifies or inspects them, or if other requirements are met in line with the exporter's agreement with the People's Republic of China.
The second is about the conditionally importable fruit. This is an imported fruit for which China has defined requirements, i.e., it can only be imported if it fulfills plant quarantine standards established by the Chinese Ministry of Agriculture. After discussions and agreement between exporters and China's Plant Quarantine Division, Thai durians are included in this category for which an importation procedure is required.
The third is about the other fresh fruits designated for importation: For the safety criteria established in line with plant protection methods. It includes identifying the source of production, passing inspection from the exporting country, confirmation from the plant quarantine from the inspection department in detail, compliance with packaging and transportation procedures, and passing protection standards against the destruction of pathogens and pests.
However, the importation of these forbidden fruits must be properly adhered to and inspected for any prohibited diseases and/or pests. The process of imported products found by Chinese authorities will be returned or destroyed, and transit will be suspended until the reason of the damage is established.
The methods and requirements for importing durian for the Chinese public, however, include the following features. Only Chinese companies are permitted to import Thai fruit, and they must be registered as importer-exporters and acquire authorization to import fruit (import permit) from the Beijing AQSIQ agency or AQSIQ in the provinces prior to negotiating contracts or fruit trading agreements with Thai exporters. Once approved, AQSIQ has no restriction on the number of imports; nevertheless, the quantity of imports cannot exceed the quantity that is permitted to be imported. Although the restrictions for importing durians into the People's Republic of China are basic guidelines, regional customs may vary. Due to limits on the quantity of work and the rate of personnel of the relevant departments, as well as variables such as familiarity and personal relationships, the gap to eliminate durian export- import challenges and hurdles remains relatively big.
2.1 Problems and Obstacles to Export Durian to China
Currently, the export of fresh Thai durian to the People's Republic of China faces various obstacles in many aspects. The issues and impediments in the trading of Thai durian with the People's Republic of China have been summed up as follows (Department of Foreign Trade, 2009; Krasachat, 2012; Somsri, 2015; Tantrakonnsab, et al., 2018; Sutthisorn et al., 2019;
Sukloet, 2021; Thongkaew, et al., 2021).
Firstly, China complicates fruit import processes, such as requiring importers to confirm the sort of fruit that Chinese authorities permit for importation prior to exportation. Herewith, importers must possess an import license from the Entry-Exit Inspection and Quarantine Bureau (CIQ) of the port city of importation. For authorization, the importer must provide supporting documentation, such as a purchase contract or invoice. If previously requested, importers must obtain a new license and provide the prior license with the new application.
After completing customs procedures, fruits must undergo a (extremely stringent) sanitary inspection by the CIQ at the importation port before entering the market. China has stringent inspection procedures for overdue pesticides / plant disease, insects and fruit contaminants.
The next difficulty is associated with transportation. There are only two ports where Chinese fruits may be imported, one in Guangzhou and the other in Shanghai. When the fruit reaches these two locations, it must be carried by automobile, a very long journey. Occasionally, vehicle drivers attempt to save money by shutting off the cooling system of the containers overnight and only opening them during the day, resulting in an unstable temperature that might cause fruit quality to deteriorate. From Bangkok, international shipping routes at each stop take a long time and need unloading produce. Five days are required to enter the southern Guangzhou market through Hong Kong. Therefore, Thai perishable fruits have trouble accessing the market of the People's Republic of China.
The seasonal nature of the fruit necessitates that natural elements dictate the fruit's quantity and quality. Products that are launched for a limited period on the market. The amount is variable, and the quality is inconsistent and very variable. As a consequence, it is impossible to manage the quantity and quality in line with market demand. Importantly, tropical fruits are perishable and must be sold quickly, resulting in a lack of negotiating leverage, low pricing, and a loss of expected revenue.
Production is characterized by tiny farmers. Lack of integration into cooperatives or farmer's groups to improve production efficiency and trade negotiating power; there will be a limited number of groupings. Lacking in strength and often failing. When there are difficulties with marketing and dishonesty in financial management, farmers are careless for product quality,
such as rushing the harvest to increase their revenue. In addition, excessive use of chemicals or spraying of pesticides by farmers might result in residual issues that are dangerous to consumers, independent of the long-term effects. Furthermore, durian growers lack developed- level technology in both production and post-harvest packing, as well as adequate transportation, resulting in high production costs. The product is flawed and its quality does not meet market demands, due in part to the absence of centers for collecting products and cold storage facilities that cannot preserve product quality. There was a concern with post-harvest loss owing to temperature fluctuations during packing and transit. It impacts the pricing and presents a marketing challenge.
2.2 SCOR Model Implemented to Enhance Thailand's Durian Export Capabilities The SCOR Model, also known as the Supply Chain Operation Reference Model, is a supplementary tool designed to characterize and illustrate all business activities in the supply chain that contribute to customer satisfaction in order to solve problems in the work cycle to develop and enhance supply chains. The SCOR Model is comprised of six essential components: planning, sourcing of raw materials, manufacturing, delivery, returns and enable requiring consistent procedures (Liu et al., 2014; Susanty, Hidayatika& Jie, 2016; Kusrini, Rifai, & Miranda, 2019; Ikatrinasari, Harianto, & Yuslistyari 2020). Each section will have a selling point that must be used as follows:
Firstly, planning is involved with determining supply and demand. Managing this part include analyzing the capacity of raw materials resources, collecting and prioritizing demand requirements, planning inventories, distribution needs, manufacturing, raw materials, and determining the total capacity of goods and channels. Planning can also assist with decision- making in custom purchasing or manufacturing, shaping the supply chain, long-term resource and capacity planning, business planning, deciding to produce new products or cancel the production of existing ones, and defining production lines for different products. Before it can be applied in subsequent sections, planning operations will determine the supply chain's overall structure. In implementing to enhance Thailand's durian export capabilities, the related durian exporters must well determine supply and demand analyzing from the capacity of raw materials resources to manufacturing, distributing and servicing.
Secondly, source of raw materials is the component that oversees the acquisition of raw materials and the input of raw materials into the production system, including the acquisition of raw materials and raw materials, inspection, storage, and distribution of raw materials into the system. In addition, the source of raw materials includes a certification system for supplying raw materials and communicating operational information, quality of raw material procurement, incoming material transport, engineering systems for parts, contract for supply of raw materials to production system, payment of bills, raw material procurement, product manufacturing and testing, product packaging, storage, and ordering, product engineering specification change system, quality of the production system, sequencing and scheduling production, and determination of the actual production capacity during various periods. Herer, the durian exporters can be enhanced by emphasizing overseeing the acquisition of raw materials and the input of raw materials into the production system as well as capturing good relationships with suppliers, governmental agencies and buyers.
Thirdly, it is about manufacturing and production. In this stage, the SCOR model utilizers, which are about the durian exporters, will need to consider whether the production method including make-to-stock, make-to-order, or engineer-to-order can be implemented. The make phase consists of manufacturing operations, packing, product staging, and release. In addition,
it comprises managing the production network, equipment, and facilities, as well as transportation.
Fourthly, delivery is the function that oversees the response to client orders and the shipment of items to consumers. It includes order management, order entry, documentation of quotations, sourcing, defining of relevant product components, building and maintaining customer and product databases, accounts receivable management system, customer credit, debt collection and billing, warehouse management, product search, product packing and collection, distribution channel regulatory management, order rules, delivery quality management, etc.
Herewith, the durian exporters must well prepare and contact related agencies such as governmental units, transportation agencies and related suppliers. The best relationship maintenance among the related persons and organization can effectively strengthen and fasten delivery process. Fifthly, return is the section that oversees the product's return from the client, including the delivery of different kinds of goods back to awaiting processing, the recall of products with quality issues, the collection of things for maintenance, and the collection of items that have been over delivered. In addition, this section addresses product visual inspection, return shipping authorisation, return shipment arrangements, compliance with applicable rules, product movement, and product destruction management. In this part, the durian exporters can begin with good inspection of the quality with compliance with applicable rules and regulations.
Lastly, it is about enable. This stage focuses on management of the supply chain processes are referred to as this term. Data, resources, facilities, contracts, supply chain network management as well as regulatory compliance and risk management are all part of these processes. In line with this, the durian exporters must implement data analytics benefiting the big data to support the management of the supply chain activities in durian exportation.
Accordingly, the SCOR model is a process reference model that describes the business activities related with meeting the demand of a customer. These activities include planning, sourcing, making, delivering, and returning products, as well as enabling them. The model may be used by doing an analysis of the present status of a firm's operations and objectives, measuring operational performance, and comparing corporate performance to data from benchmarks. Here, SCOR model can enhance Thailand's durian export capabilities linking to business performance and sustainability.
3. Conclusion
Due to the fact that the durian export to China is important to Thai exporters since there are a huge demands and income generation, the durian exports are encouraged to promote their products to China markets. However, there are various problems and obstacles to export durian to China such as durian import regulation and standards from China, lack of agriculturists’
technology adoption skill and knowledge, limitations about agriculturists’ durian production characteristics as well as transportation issues. Accordingly, the academicians introduce SCOR model with 6 major activities encompassing with plan, source, make, deliver, return and enable.
It is aimed to define and show all business operations in the supply chain that contribute to customer satisfaction in order to address issues in the work cycle to create and strengthen supply chains.
3.1. Suggestions for managerial implication and future research 3.1.1 Suggestions for managerial implication
Regarding the managerial implication, the exporters must understand well about SCOR model encompassing with 6 major activities including plan, source, make, deliver, return and enable because the exporters will be able to manage related activities effectively. Next, it is also important for the exporters to build good relationship with all stakeholders or plyers in the durian supply chain including suppliers, governmental agencies, and customers in order to gain related information, collaboration, and communication related to export-import and market in order to effectively management 6 major activities from SCOR model. The good relationship will benefit the exports run their business operation effectively and efficiently. In addition, the exporters must find adoption of new technology, innovation and digitalization to facilitate the durian import-import operations. The advanced technology and digitalization today can support the business decision and strengthen effectiveness and efficiency in 6 major activities from SCOR model.
3.1.2 Suggestions for future research
The future study can apply the different research approaches from qualitative, quantitative and mixed method to explore and expand the knowledge and effective ways, mentioned in this article, to utilize 6 major activities from SCOR model to enhance the Thailand's durian export capabilities. This includes to identify whether the related external and internal factors such as relationship building, technology and digital adoption or others can facilitate or restrict the enhancement of Thailand’s durian export capabilities.
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