Pirates of Silverland
Pirates of the Silverland
A. INTRODUCTION OF THE CASE
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.
Furthermore, oil piracy was the major issue which was difficult to be solved and avoided by the industry players. It also caused to significant impact and losses in this industry. In more serious extent, the persons committed this siphoning cases were not identified and red-handed. This was the reason contributed serious impact to PHSB, as the gross profit margin was substantially narrowed due to highly increased in direct costs. The drastic decrease of gross profit margin certainly not only caused by the single reason mentioned. PHSB was found to incur high compensation paid for CPO shortfall, inconsistency of drivers’ attendance and high expensed on maintenance. PHSB was in critical situation due to the emergence of these challenges.
In depth of analysing problem encountered by PHSB, the CPO consigned by PHSB was justified and led to the quality issue in refineries. Oilene Refineries Sdn Bhd (Oilene), one of the major customers of PHSB, criticised the CPO delivered was frequently short and contaminated with water or sludge. 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. Because of the serious impact given by PHSB, the management of Oilene decided whether not to proceed for the contract renewal,
A. INTRODUCTION OF THE CASE
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.
Furthermore, oil piracy was the major issue which was difficult to be solved and avoided by the industry players. It also caused to significant impact and losses in this industry. In more serious extent, the persons committed this siphoning cases were not identified and red-handed. This was the reason contributed serious impact to PHSB, as the gross profit margin was substantially narrowed due to highly increased in direct costs. The drastic decrease of gross profit margin certainly not only caused by the single reason mentioned. PHSB was found to incur high compensation paid for CPO shortfall, inconsistency of drivers’ attendance and high expensed on maintenance. PHSB was in critical situation due to the emergence of these challenges.
In depth of analysing problem encountered by PHSB, the CPO consigned by PHSB was justified and led to the quality issue in refineries. Oilene Refineries Sdn Bhd (Oilene), one of the major customers of PHSB, criticised the CPO delivered was frequently short and contaminated with water or sludge. 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. Because of the serious impact given by PHSB, the management of Oilene decided whether not to proceed for the contract renewal,
References: University of Michigan. Financial Operation. Retrieved October 5, 2013 from http://www.finance.umich.edu/finops/reporting/department/standar Sharman, Paul A. (2003). "Bring On German Cost Accounting". Strategic Finance (December)