Issue 2: High Oil PilferageSummary of The CasePalm Haul Sdn Bhd was established in 2002 in Taiping, Perak.SMe company in the CPO transportation businessPHSB managed by En.Rossly, as CEO which is also the son in law of PHSBs founder, Datuk S. NajeedPHSB faced problems with its drivers embroiling in oil piracy same like other transport companies

INTRODUCTIONTransport companies will responsible for such theft and bound to compensate the refineries for such lossesThe culprits involved usually tanker driver, depot operator and transporter

INTRODUCTIONOilene one of major customer of PHSB complaint about the quality of the CPO delivered by PHSB and impact on Oilenes failure to fulfill their customer orders.INTRODUCTIONThe practice of siphoning CPO & adulterating the consignment with water, used oil or sludge was uncontrolled and PHSBs customers have threatened to change their custom to other realiable transport company

INTRODUCTIONApart from that, profit for the 1st quarter of 2009 had drastically decrease compare to the same period on the previous year due to increase compensation expenses and maintenance costThese matter worried Datuk Najeed and then insisted En. Rossly inspect the matter and report to him within one week with possible solutionProblems :RecommendationsImplementation of Fleet Management System (FMS)Fleet Management System (FMS)Implementation of Fleet Management System (FMS)Dispatch and Scheduling

Fleet management allows you to schedule deliveries and pick-ups more accurately. You can redirect resources by being able to see where any vehicle is located at any time, so you can alert the driver that is closest to your customer

Routes are therefore optimized and any last minute changes can be easily implemented. This will not only improve customer satisfaction, but the speed of delivery will also increase the speed of the cash flow to your business.

Vehicle Tracking

By using GPS tracking, fleet management systems provide you with the ability to track a particular vehicle or driver. They also allow you to track groups of vehicles. Driver routes are clearly mapped out to avoid unnecessary detours and dispatchers can alter the routes if there are any problems such as road works or traffic accidents.

Driver Productivity

Fleet management can indicate whether a driver is running late or on time. It reduces the amount of time that is wasted at customer locations and stops employees from taking unnecessary detours or long breaks. Not only can driver location be monitored, but so can speed and driving habits; for example, if they push too hard on the brakes.

Safety and Maintenance

Another benefit of fleet management is improved safety. Vehicles are carefully maintained and serviced regularly. If they show signs of age, they can then be replaced.

You will have immediate access to the service history of the vehicle and can instantly tell when maintenance was last carried out. If something goes wrong with a vehicle, some fleet management systems can link to the closest repair shop and check for the availability of parts.

ISSUE 2 : High Oil PilferageIncrease of insurance premiumsIncrease of insurance premiumsQuality of cpo can possibly be compromisedProblem statementQuality of cpo can possibly be compromisedrecommendationTemperature rangeProblem statementPHSB is insured against good-in-transit by their insurer, Allianz Insurance.

Since PHSB are facing problems of abandoned tankers, the insurer claim that they will not be responsible with that problem. So, Allianz Insurance decided to increase the insurance premium to be paid by PHSB

It is the responsible of PHSB at first to ensure that every tankers to reach their destination and left abandoned.

Since insurance premium is getting higher, definitely the cost of sale would increase and finally affect the final profit of PHSB.

recommendationSince many cases of tanker left abandon by the drivers, Allianz Insurance has threatened PHSB to increase the insurance premium

Hence, a serious punishment should be imposed toward irresponsible drivers. For Example:conduct investigationreduction of ex-gratiasuspend staff from duty (with or without paid)issued show caused letter for them to explainTermination of service

This method might not improve the financial statement immediately.

However, it can reduce abandoned tankers issues and impliedly, in future, insurer will reduce the insurance premium to be paid by PHSB.

To pump out the oil from the tankers, there must be required temperature and it is only possible if the oil has been kept in a liquid stage during transportation.

loading, travel and pumping temperatures have to be precisely complied with. Any changes in consistency occurs during transportation might compromise the quality of the CPO.

When the CPO solidifies, it could not liquefied again. However it will be melt, scorched, discolor and rancid. CPO requires particular temperature condition.

As for recommendation, drivers need to be explained regarding particular temperature condition. A written heating order must be obtained from the consignor before loading is begun and has to be complied with during entire transportation.

The rate of heating should not be greater than 8C per day

The travel temperature must be complied with to minimize oxidation process

Towards the end of transportation, temperature of the soil need to be slowly raised to appropriate pumping temperature.ISSUES 3 : High Abseenteeism/ Driver ShortageRecommendationsRecommendationsRecommendationsRecommendationsProblems / AnalysisHigh Cost of Maintenanceby: Hazwani MokhyiProblem StatementHigh cost of maintenance on tankers.RecommendationsA preventive maintenance could also be one of the possible solutions as prevention is better than cure. 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.RecommendationsTo 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 and also to lessen the pressure of the administration managers jobs and to avoid any irregular services of the tankers.AnalysisAliah said that she has no time to schedule regular maintenance on the tankers.

She also said that she wait for the drivers to complain before she send the tankers for services and repairs.

Problem StatementLack of time management on duties that has to do.RecommendationsSetting GoalsHere you will find several advantages of time management. Setting short and long term goals will let you plan deadlines so you can adjust if needed. Many leaders use short and long term goals for self improvements, career growth and even projects around the house. The trick here is to incorporate short and long term goals into your daily tasks a couple times a week.RecommendationsHave a proper maintenance schedule and stick to it. Dont submit vehicles just because they reach a six week interval but sure they are maintained according to use. Conversely, dont miss or delay a service interval thats due, or faults could develop.AnalysisAliah said that her time is only to occupied with the daily need to perform vehicle and driver allocation and scheduling.

High Cost of MaintenanceHigh Cost of MaintenanceProblem StatementNo schedule regular maintenance provided by company for vehicles.RecommendationsTo 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 and also to lessen the pressure of the administration managers jobs and to avoid any irregular services of the tankers.AnalysisAliah said that she has no time to schedule regular maintenance on the tankers.High Cost of MaintenanceProblem StatementVehicles that already past its useful life still be used by PHSB.RecommendationsIn the long-term benefit, PHSB should dispose old tankers that past its useful life and buying new tankers.AnalysisMany of the transport companies operate tankers well past their useful life.High Cost of MaintenanceProblem StatementLack of assistance and staff in administration department.RecommendationsPHSB should hire new staff to help Aliah in administration department.After hiring new staff, Aliah should do segregation of duties so all work in administration department will properly managed.AnalysisOnly Aliah that responsible to do administration work.High Cost of MaintenanceProblem StatementAliah lack of knowledge about technology that can help her in preparing vehicle and driver allocation and scheduling.RecommendationsFleet management system.Fleet management software can be developed in-house by the company or organization using it, or be purchased from a third party.RecommendationsFleet management system.A standardinterfaceto vehicle data of commercial vehicles.Main function of fleet management system is to gather, store, process, monitor, report on and export information.AnalysisAliah said that she has no time to schedule regular maintenance on the tankers.

She also said that she wait for the drivers to complain before she send the tankers for services and repairs.

ISSUES LEADING TO THE INCREASE OF DIRECT COSTS IN PHSBi. Rising compensation to CPO shortfall and low operating margins.ii. High oil pilferage.iii. High absenteeism/driver shortage.iv. High cost of maintenance.ISSUE 1 : Rising Compensation to CPO Shortfall and Low Operating MarginsProblemReferred to the PHSBs two years financial reports (2008-2009), there were increasing trends of compensation being made by PHSB to the refineries due to the shortage of CPO during the transportation.

AnalysisIt showed that until March 2009, PHSB compensated about RM2 million, which already increased more than 33 % from the compensation they made RM1.5 million in 2008.

ISSUE 1 : Rising Compensation to CPO Shortfall and Low Operating MarginsProblemThe tankers are loaded with the amounts stated in the delivery orders. However, by the time the tankers arrive at the refineries, the quantities are short and some of the crude palm oil had been contaminated with water or sludge.

AnalysisCompared to another transporter hired by Oilene, Tiger Oils Transporter, PHSBs consignment was the most difficult to be processed. The low quality of CPO affected the processing plant of Oilene and additional works had to be performed for cleaning purpose, by shutting down the plant.

ISSUE 1 : Rising Compensation to CPO Shortfall and Low Operating MarginsProblemCompensation payments to the staff, such as salaries, allowances and ex-gratia had been double in 2009.

AnalysisThe compensation amount recorded until March 2009, costing PHSB around RM8.03 million, an increase of 7.1 % compare to 2008. There is a possibility that the increased amount was due too many festive seasons during the years end.

ISSUE 1 : Rising Compensation to CPO Shortfall and Low Operating MarginsProblemLow operating margins for PHSB in 2009 compared to 2008 even though turnover for 2009 is higher than year 2008.

AnalysisOperating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. Direct cost of PHSB increased significantly until March 2009. Refer appendix A.

ISSUE 1 : Rising Compensation to CPO Shortfall and Low Operating MarginsRECOMMENDATIONS FOR ALL PROBLEMS MENTIONED :

Implement Fleet Management System

This device track the route at which the vehicle travel at anytime and anywhere with in-depth traffic reporting, satellite view and etc. This enable the company to easily monitor their drivers movement and thus reduce the risk of CPO siphoning. This system is also an added advantage as the company will be able to meet the consignors demand by temperature management of the CPO. Siphoning activity could compromise to the quality of CPO delivered as it requires a particular temperature condition to preserve its freshness. Since siphoning activity could be overcome through this system, the quality of CPO is therefore maintained. Thus, compensation costs could be reduce by using FMS.

ISSUE 1 : Rising Compensation to CPO Shortfall and Low Operating MarginsTake Serious Disciplinary Actions Against Drivers

As the increase of compensation cost was due to the irresponsible drivers, actions must be taken to penalise them. This solution is made to reduce or even eliminate such cases to be happened repetitively. Ex-gratia will be deducted for the drivers who are identified to commit on wrong-doing. In more serious extent, if the drivers ignore the disciplinary actions, termination of service will be given to the drivers and police report will be made by PHSB. This solution may not contribute to immediate financial benefits, however, this will give lessons to drivers not to be involved in oil piracy.

RECOMMENDATIONS FOR ALL PROBLEMS MENTIONED :

ISSUE 1 : Rising Compensation to CPO Shortfall and Low Operating MarginsRECOMMENDATIONS FOR ALL PROBLEMS MENTIONED :

Monthly Financial Report

By implementing the monthly financial report, PHSB could monitor their expenses on a monthly basis, thus any regularity could be taken care as soon as possible. The standard monthly financial reporting package includes the following two core reports (University of Michigan, n.d.):

Statement of Activity (SOA)

The SOA reports display the posted revenue and expense transactions for an accounting period (i.e. one month period) for the specified parameters (e.g. Project/Grant). By presenting the SOA on the monthly basis, PHSBs management could thoroughly monitor and review their activities for that particular month. If there is any unnecessary activity, the management could take corrective action before it could jeopardise their operations.

ISSUE 1 : Rising Compensation to CPO Shortfall and Low Operating MarginsRECOMMENDATIONS FOR ALL PROBLEMS MENTIONED :

ii. Gross Pay Register (GPR)

The GPR report is a record of each employee's pay check salaries and allowances. By having this report every month, the management will be able to identify the compensation made to the employees on a monthly basis. And, they will be notified on the additional or irregularities payment that the PHSB made during that particular month.ISSUE 1 : Rising Compensation to CPO Shortfall and Low Operating MarginsRECOMMENDATIONS FOR ALL PROBLEMS MENTIONED :

Reduce Direct Cost, Administrative and Operating ExpensesConclusionAs conclusion, by overcome the high maintenance upkeep, high absenteeism and shortage of drivers and also high compensation cost with the possible solutions such as the fleet management system, will automatically be solve together with the matters regarding the insurers as well as the major customers complaint on the quality of CPO delivered by PHSB.