Palm Haul Sdn Bhd (PHSB) was actively engaged in the business of transportation of crude palm oil (CPO). It was in a niche market because of high demand in delivering the CPO from the mills to the refineries. In addition, due to this reason, the industry players were rewarded with high gross profit margin which ranged on 35% - 45% with low administrative overheads. However, as PHSB involved in service industry, high cost of sales was inevitable in the operations. This issue created higher competitiveness in the market because the industry players tend to operate more efficaciously in managing cost of sales.
Besides, oil piracy was the major issue which was difficult to be ...view middle of the document...
Therefore, En. Rossly must review the operations of PHSB and necessary actions must be taken in order to secure the contract from Oilene.
2. BACKGROUND OF COMPANY
Palm Haul Sdn Bhd (PHSB) was established in 2002, in Taiping, Perak. It was a medium-sized enterprise in the CPO transportation business. It had about 200 employees, out of which, 80% was in operations, and primarily drivers of the company’s customized tankers.
Basically, PHSB was owned and chaired by Datuk S. Najeed, who was the former chief engineer of Ministry of Transport PHSB. The routine operation of PHSB was managed by En. Rossly who are the CEO and son-in-law of Datuk S. Najeed. In addition, this company was branched into three major functions which included Account cum Finance, Human Resource and Administration functions. And, they were in charged by three key personnel, Romsee Rossly, Ramli Ali and Aliah Ibrahim, respectively. En Rossly decided to engage with a management consultant who was also a friend of En. Rossly’s, to provide effective solutions for the issues endangered PHSB.
3. ISSUES AND ITS RECOMMENDATION
4.1. Rising compensation to CPO shortfall and low operating margins
Issue on compensation to the refineries
Based on the PHSB’s 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. It 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.
The compensation cost was on increasing trend which it could be seen from the compensation figures from 2006 until 2009. In 2006, the compensation that PHSB had to bear was RM345, 111 and it was increased double in 2007, RM645, 222, and then again another two-folded increased in 2008, which was at RM1.5 million.
PHSB should shoulder the differences in the amount of CPOs that were short-delivered to the refineries. The PHSB’s customer, Oilene Refineries Sdn Bhd (Oilene), claimed that the CPO delivered by PHSB’s tankers, were less than the recorded quantity in the delivery order and some of the CPO had been contaminated with water or sludge. Compared to another transporter hired by Oilene, Tiger Oils Transporter, PHSB’s consignment was the most difficult to be processed. Despite the claim by Oilene on the delivered CPO, there was also a possibility that the CPO turned into sludge because of their chemical reaction to the changes of temperatures in the tanker. Therefore, PHSB should look into this matter as well.
Nevertheless, there was a possibility of five years contract, between PHSB and Oilene, would be insecure if these issues were not amicably settled by the PHSB as soon as possible.
Issue compensation to the staff
An additional PHSB also had to cover compensation that regarding to the compensation of the staff, such as salaries, allowances and ex-gratia. The...