ACC 4291 INTEGRATED CASE STUDY

TERM CASE
THE PIRATES OF THE SILVERLAND
(PALM OIL PIRACY)

NAME:
RAJA SITI AFIQAH BINTI RAJA AZMI
MATRIC NO:
0826174
LECTURER:
PROF. SHAMSUL NAHAR
SECTION:
2
DATE SUBMITTED:
26th NOVEMBER 2012
SUMMARY OF THE CASE
Established in 2002 in Taiping, Perak, Palm Haul Sdn Bhd (PHSB) was a small and medium sized enterprise in the Crude Palm Oil (CPO) transportation business. PHSB was managed by En. Rossly, the Chief Executive Officer which is also the son-in-law of PHSB’s founder, Datuk S. Najeed. Like the other transport companies involved in the business, PHSB also faced problems with its drivers embroiling in oil piracy. Transport companies are naturally will held the responsibility for such thefts as they usually take place under their watch and these companies are bound to compensate the refineries for such losses. The culprits involved frequently tanker drivers, depot operators and transporters. One of the major customer of PHSB, Oilene Refineries (Oilene) complaint about the quality of the CPO delivered by PHSB and its later impact on Oilene’s failure to fulfil their customer orders. This is because of the practice of siphoning CPO and adulterating the consignment with water, used oil or sludge was so uncontrolled that a number of PHSB’s customers have threatened to change their custom to other more reliable transport companies. Besides that, profits for the first quarter of 2009 had drastically decrease compared to the same period on the previous year due to the high compensation expenses and maintenance cost. These matters worried Datuk Najeed whom then insisted En. Rossly inspect the matters and report to him within one week with possible solutions. En. Rossly then asked his university friend, Mukhriz Mohd, a management consultant to assist him with Datuk Najeed’s task.

SOLUTIONS OF THE CASE
If you were in the position of En Rossly, what would recommend to Datuk S. Najeed?
If I were in the position of En Rossly, there are several possible solutions that I would like to be recommended to Datuk Najeed regarding the crucial matters in Palm Haul Sdn Bhd (PHSB) which are; to implement Fleet Management System, have a good compensation package for the drivers, conduct a training program for staffs regarding the knowledge on tankers’ maintenance and a preventive maintenance to reduce the maintenance upkeep.
The first possible solution is to implement the Fleet Management System (FMS) in order to overcome the issue of high oil pilferage. The issue arose when a fair percentage of CPO that is loaded into the tankers never arrived at the destinations but thousands of metric tonnes were missing, tankers were not arrived at the refineries which were found abandoned plus with the missing drivers. Hence, due to the cases of the abandoned tankers, Allianz Insurance, PHSB’s insurer, threatens PHSB to increase the insurance premiums as PHSB is insured against Goods-in-Transit. FMS is a modified system from British company, Minorplanet plc and is supplied locally by CSE Multimedia Technologies Sdn Bhd. The system provides innovative technology solutions that enable companies to gain real-time control of their distribution processes which includes customer deliveries, vehicles and drivers. Besides, customers can take back control of the traditional “black hole” in distribution. A FMS device will be installed in the cab of a Crude Palm Oil (CPO) tanker which will allow PHSB to track scoundrel drivers as the system will mark the date and time the tankers enter a hot spot and how long they stop at rest areas and eating shops. Furthermore, FMS will allow PHSB to locate more than 70 hot spots in the peninsula where CPO siphoning was rampant. Furthermore, FMS device have a “panic button” which will be installed near the driver’s seat in every oil tanker which enables the driver to alert headquarters if the tankers are hijacked or experiencing any difficulty. This means that, if the oil tankers go off the original route and head to one of the hot spots, then the system will detect them. Therefore, by using FMS, the drivers will be aware of the risks they will be taking if they work with the syndicates to steal the CPO which automatically will reduce the oil thefts as well as the compensation cost faced by the company. The second possible solution is to have a good compensation package to the drivers to earn their loyalty and to lower the driver shortage and the issue of high absenteeism. A good compensation package can includes year-end bonuses as the bonuses will be much lower than the compensation cost that PHSB is currently bearing. Besides, PHSB can also increase in driver’s salary based on Malaysian Industrial Development Authority’s salary rate for lorry and truck drivers to minimize the pilferage. Moreover, PHSB could as well include medical, social security, accident protection, pension scheme, Employer Contribution Fund and annual leave of 10 to 14 days which is normally provided together with an annual salary increment that is calculated based on a certain percentage of the basic salary and performance.
The third possible solution that can be recommended to Datuk Najeed is to conduct a training program to heighten the knowledge of the staffs in order to prevent any break down of the tankers in which will raise the maintenance cost. Increasing that awareness will prompt immediate actions from these key players and not from the administration manager only. This is to lessen the pressure of the administration manager’s jobs and to avoid any irregular services of the tankers. The training should be geared toward the basic fundamentals of the tankers maintenance. A professional training program will increase up-time in addition to reducing any unforeseeable downtime.
Last but not least, besides conducting a training program for the staffs to learn about the tankers maintenance, a preventive maintenance could also be one of the possible solutions as prevention is better than cure. Maintenance plays an important role in any effort to reduce maintenance costs. Preventive maintenance programs are pre-assigned actions which are scheduled to occur. Studies by international companies and engineering institutes have shown that industrial facilities and municipalities can save up to 10 percent on maintenance by focusing on their preventive maintenance efforts. A good preventive maintenance program focuses mainly on energy savings. When conduction inspections, lost revenue is consistently traced to the following: leaks, lubrication, misalignment, and belt slippage. Leaks are easy to find. Normally, you will find pools of liquid on the floor or dripping from the overhead. Energy is wasted since the system has to run more frequently to make up for what is lost. When bearings have excessive lubrication, energy is lost through fluid friction in the lubricant causing the bearings to overheat or run at higher than normal temperatures. Heat is generated in the flex portion of the coupling and the bearing supporting the shaft. Proper alignment is important to prevent such energy loss through coupling. From the case, Appendix E indicates the approximate temperature ranges required during the transportation chain. The rate of heating should be no greater than 8°C per day. The travel temperature must be complied with as far as possible during transport, to minimize oxidation processes. Towards the end of the voyage, the temperature of the oil must be slowly raised to the appropriate pumping temperature. Unless otherwise recommended by the consignor, heating plan shown in Table 2 of Appendix E can be used to prevent singeing which will cause the colour to darken and value to be lost due to rancidity as too great or rapid an increase in temperature entails considerable losses in quality.
In a nutshell, by overcome the high maintenance upkeep, high absenteeism and shortage of drivers and also high compensation cost with the possible solutions given above, the issue on low operating margins will automatically be solve together with the matters regarding the insurers as well as the major customer’s complaint on the quality of CPO delivered by PHSB.