Pirates of Silverland: Background
Oilene Refineries Sdn Bhd (Oilene) is company that refines Crude Palm Oil (CPO) into finished products. Oilene sourced its feedstock from mills, whereby its CPO stock is transported to the refining facility by Palm Haul Sdn Bhd (PHSB), a transport company based in Perak. Since 2006, the transport service rendered by PHSB has been facing challenges whereby its portion of its CPO cargo is sold to illegal market by its truck drivers. To compensate the missing load, the weight is being replaced with sludge, water or used oil. This has contributed to bad quality CPO thus increasing the processing cost of the refinery and inability to meet customers specification. In 2009, there are 36 palm oil refining facility in Malaysia with the annual refining capacity of 14.9 million tonnes. With total CPO production in 2009 is recorded at 17.5 million tonnes, loss due to theft is estimated at 1% of total production or 175,000 tonnes annually. At 2009 CPO average market price of RM2,244.50, Malaysian palm oil industry is estimated to lose RM392 million in that year alone.
Issue 1: Contamination and shortages of CPO
Oilene is having difficulties to ensure consistent and uninterrupted supply of CPO due to shortages and contamination to CPO transported by PHSB. These issues are affecting the process whereby refining facility had to be shut down to clean up the additional by-product build up and sludge almost weekly. As such, delivery timeline and quality of oil produced are affected. In the case of Oilene, the estimated potential loss is in Table 1 as follows: Table 1: Estimated annual potential loss due to stolen oil and plant shut down Type of loss
Estimated Value (RM)
Plant shutdown for additional maintenance work2
a. Performance Incentive to CPO truck driver
Oilene may consider giving performance incentive to every driver that sends high quality goods and without...
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