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NAME

NORMALA BT HAMZAH
MAR DEWI YUHANA

STUDENT ID :

2009746927
2009

COURSE

MAF 680 INTEGRATED CASE STUDY

LECTURER

MDM EMELIA A.GIRAU

THE PIRATES OF THE SILVERLAND - PALM OIL PIRACY


Summary of the case:
Palm Haul Sdn Bhd (PHSB) established in 2002 at Taiping Perak. It was a small and
medium sized enterprise in crude palm oil (CPO) transportation business. PHSB was
managed by En.H.Rossly and son in law of its founder, Datu S. Najeed. PHSB was
facing the same problems likes others transportation companies which is drivers
embroiling in oil piracy. The transportation companies will bear the responsibilities of
compensation of the refineries if there any hijacking or piracy happened. The
involved culprits most probably are the tankers driver, deport operators and the
transporters.
One of the major customer of PHSB, Oilene Refineries Sdn Bhd (Oilene) was
complaining to Datuk Najeed on the poor quality of CPO delivered by PHSB and it
has caused them in big losses in their business as failed to fulfill the requirement of
their customers. Oilene will not renew the contract if PHSB does not improve the
situation in one month. Besides that, Datuk S. Najeed has reviewed the first quarter
result of 2009 and noticed that the profits has dropped significantly compared to the
same period of last year. If Oilene could not placated and, as a consequence, decide
to leave their custom, PHSB would run into the trouble to return profits for the coming
financial year.
Datuk Najeed was very happy and insisted Rn.Rossly to investigate on these matters
and report to him within one week with possible solutions. En.Rossly invited his
universitys friend, Mukhiz Mohd who was from a management consultancy firm to
assist on this.
Problem 1:
There are some problems happened in Palm Haul Sdn Bhd (PHSB) as below:
1)
The clients of PHSB might not renew the contract with PHSB because of
shortage of delivered of CPO and contamination of CPO with water of sludge. In
facts, the tankers are loaded with the amounts stated in the delivery orders but, the
shortages of delivered CPO continue to happen over the year when it has received
by customers. The drivers of the palm oil tankers might sell them to syndicates to
earn the extra money. Thus, as a transportation company, PHSB will need to
compensate to the shortage of delivered CPO or poor quality of the CPO to their
customers, and also, bearing the losses of the missing of the tankers. PHSB also
faced the problem that the tankers found abandoned by the roadside and empty with
the missing driver.
The discontinuing of the contract with PHSBs client and compensation to their clients
will bring the impact on the income statement of the company i.e. decrease on the
revenue and increase on the expenses.From the income statement (appendix A), the
turnover (revenue) of PHSB has increased by RM 4.4 m i.e. 2.17%. But, the expense
on compensation has increased drastically up to 31.69% which is RM 496,779.
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Recommendation:
1)
Implement Fleet Management System
In order to solve the problem of hijacking or missing tankers, FHSB can implement
the Fleet Management System (FMS), which introduced by Sidhu Brother Group to
track on tankers. The FMS is a modified system from Malasyia Company which
located at Petaling Jaya Selangor.
FMS device installed in the cab of a CPO tanker which allow the company to track
rogue drivers. The system marks the date and time the tankers enter a hot spot and
how long they stop at rest areas and eating shops. The system also allowed the
company to locate more than 70 hot spots in peninsular where CPO siphoning was
rampant. With this, PHSB might allocate any hot spots of their drivers by using FMS.
One of the advantage of the PMS is enables the drive to alert headquarter if the
tankers are hijacked or experiencing of any difficulties.
By using FMS device, PHSB can save thousands of ringgit because they can track all
of their tankers, avoid from missing of tanker and terminate any rogue drivers that
involve in theft activity.
Problem 2:
2)
The quality of delivered CPO is not accordance to required pumping
temperature which will affect the quality of the CPO. The temperature has to be
precisely to maintain during loading, travel and pumping. The can compromise on the
quality of the CPO if there any changes in consistency of temperature. If the oil
solidifies in the tankers, it cannot be liquefied again, even by forced heating. If forced
heating is attempted, the oil can end up melted, scorched, discoloured and rancid.
With this problem, PHSB will lost the clients due to the poor quality of the CPO and
the revenue (income statement) will be reducing as well. Meanwhile, PHSB might
need to compensate to their clients on the claimed of poor quality of CPO. Thus, the
expense of the company will be increasing.
Recommendation:
Train the driver on how to monitor on the temperature of CPO. There are 4 stages of
CPO which is loading, travel, solidification and pumping. Each stage has different
temperature requirement. The changes of the temperature will compromise the
quality of CPO. Thus, to overcome on this, the driver must need to monitor on the
temperature while traveling to mills or sending to customers in order to minimize the
oxidation processes. Below is the temperature ranges:
Designation Temperature Range
Loading temperature 40C
Favorable travel temperature 30 - 35C, not < 25 C
Approx 35 C
Solidification temperature 41 - 31C
Approx 35 C
Pumping temperature 49 - 50C, not > 55C
Approx 50 C
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Problem 3:
3)
PHSB also faced the problem of shortage of the driver and high absenteeism
of the driver. There are other transportation companies might offer different
remuneration with higher pay to the driver, thus, the drives might accept their offer
and work as part time job to earn the extra money while working at PHSB.
Recommendation:
Improve on remuneration packages
The compensation cost of 2009 has increased 31.69% compared with 2008. The
reason of high pilferage might due to attractive of pay by syndicates which the drives
can earn the extra money. Besides that, other transportation companies offer
lucrative packages to the drivers, thus, it has caused shortage of drives in PHSB.
To solve the problem, PHSB need to relook into the offer remuneration packages to
drivers. PHSB might review on the remuneration package of the drivers. PHSB offer
the salary to the drivers based on the salary guide from Malaysian Industrial
Development Authoritys (MIDA).
Based on the income statement of 2009, the expenses of salary is RM 8,033,421. If
PHSB offer the maximum salary of RM 1,770 (refer to salary guide of MIDA), PHSB
can save the salary cost by RM 5,484,621.
RM 1,770 * 160 drivers * 9 months = RM 2,548,800
RM 8,033,421 RM 2,548,800 = RM 5,484,621
Besides, PHSB also include others benefits included medical, social security, annual
bonus, accident protection, pension scheme and Employer Contribution Fund (EPF).
The annual increment is based on percentage of the basic salary and performance.
Problem 4:
4)
PHSB did not send the tankers for services and repairs regularly. PHSB only
sent the tankers to repair after the driver feedback or broke down which has incurred
the higher vehicles maintenance cost.The expenses (income statement) will increase
due to higher maintenance cost.
The maintenance cost has been increasing 82.87% which is around RM 2.5 M.

Reccomendation:
Improve on the maintenance service of the tankers. As Aliah has tight up with their
workload, PHSB can improve the system, to computerize and monitor on the tanker
maintenance service via the system with the proper schedule. Besides that, Aliah
also can plan the drivers schedule and allocation via the system. With this, it will be
more systematic and prevent from miss-sending the tankers for service.
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Conclusion
With the recommended solutions to En Rosly, we believe that the faced problems by
PHSB will be solved in the near future and the Yearly Financial Statement will
continue to show the positive result.