UNIVERSITI PUTRA MALAYSIA THE USE OF ...psasir.upm.edu.my/id/eprint/8157/1/GSM_2002_4_A.pdfSdn....
Transcript of UNIVERSITI PUTRA MALAYSIA THE USE OF ...psasir.upm.edu.my/id/eprint/8157/1/GSM_2002_4_A.pdfSdn....
-
UNIVERSITI PUTRA MALAYSIA
THE USE OF INFORMATION TECHNOLOGY IN MANAGING THE SUPPLY CHAIN OF MALAYSIAN
PALM OIL INDUSTRY: THE CASE OF FELDA
NITTY HIRAWATY KAMARULZAMAN
GSM 2002 4
-
THE USE OF INFORMATION TECHNOLOGY IN MANAGING THE SUPPLY CHAIN OF MALAYSIAN PALM OIL INDUSTRY:
THE CASE OF FELDA
By
NITTY HIRA WATY KAMARULZAMAN
Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of Master of Science in the Graduate School of Management
Universiti Putra Malaysia
November 2002
-
Abstract of thesis presented to the Senate ofUniversiti Putra Malaysia in partial fulfillment of the requirements for the degree of Master of Science.
THE USE OF INFORMATION TECHNOLOGY IN MANAGING THE SUPPLY CHAIN OF MALAYSIAN PALM OIL INDUSTRY:
THE CASE OF FELDA
By
NITTY HIRA WATY KAMARULZAMAN
November 2002
Chairman: Professor Mad Nasir Shamsudin, Ph.D.
Faculty: Graduate School of Management
This study was carried out to investigate the use of information technology (IT) and
information systems (IS) by Malaysian palm oil industry in managing their supply
chain. This study focused on Felda's palm oil supply chain which comprised of its
subsidiary companies namely Felda Plantations Sdn. Bhd., Felda Palm Industries
Sdn. Bhd., Felda Vegetable Oil Products Sdn. Bhd., Felda Transport Services Sdn.
Bhd. and Felda Marketing Services Sdn. Bhd.. Investigation was also made to
examine the extent of these palm oil companies in managing their primary and
support activities and how IT and IS support those activities to improve the
company's supply chain. In addition, the study was also done to investigate the
utilization of IT and IS in all levels and activities ofthe company's supply chain.
Data for the study were obtained through close-ended questionnaires that were
mailed to the respondents comprised of managers from Felda's companies that were
involved along supply chain. Data collected from the s\lrvey were analyzed using
descriptive analysis, regression analysis, correlation analysis and reliability analysis.
11
-
Result showed that Felda has effectively managed its primary activities particularly
in estates, palm oil mills and refineries. Felda also has managed its inbound and
outbound logistics as well as its marketing activities effectively. However, the
results revealed that IT has not been fully used to effectively support certain primary
and support activities, particularly in estates operations. However, while IT has
made a lot of contribution to support palm oil mills support activities, it has made
less contribution to support their primary activities. Further, IT has contributed
significantly to support refineries' primary and support activities. At the same time,
the results revealed that IT has effectively support distribution and marketing
activities.
From the findings, several recommendations are given to assist Felda and other palm
oil based companies to enhance the management of their activities along their supply
chain and help them to be more competitive in the industry.
111
-
Abstrak tesis yang dikemukakan kepada Senat Universiti Putra Malaysia sebagai memenuhi sebahagian keperluan untuk ijazah Master Sains.
PENGGUNAAN TEKNOLOGI MAKLUMAT DALAM MENGURUSKAN RANTAIAN BEKALAN BAGI INDUSTRI KELAPA SA WIT MALAYSIA:
BAGI KES FELDA
Oleh
NITTY HIRA WA TY KAMARULZAMAN
November 2002
Pengerusi: Profesor Mad Nasir Shamsudin, Ph.D.
Fakulti: Sekolah Pengajian Siswazah Pengurusan
Kajian ini dijalankan bertujuan untuk menyelidik penggunaan teknologi maklumat
(IT) dan sistem maklumat (IS) oleh industri kelapa sawit Malaysia dalam
menguruskan rantaian bekalan mereka. Kajian ini difokuskan kepada rantaian
bekalan kelapa sawit Felda yang terdiri daripada anak syarikatnya iaitu Felda
Plantations Sdn. Bhd., Felda Palm Industries Sdn. Bhd., Felda Vegetable Oil
Products Sdn. Bhd., Felda Transport Services Sdn. Bhd. dan Felda Marketing
Services Sdn. Bhd. . Penyelidikan juga dijalankan untuk memeriksa sejauh mana
syarikat kelapa sawit ini menguruskan aktiviti utama dan sokongan mereka dan
bagaimana IT dan IS menyokong aktiviti tersebut untuk memperbaiki rantaian
bekalan syarikat. Tambahan lagi, kajian ini turnt dijalankan untuk menyelidik
penggunaan IT dan IS di semua peringkat dan aktiviti rantaian bekalan syarikat.
Data untuk kajian diperolehi melalui soal-selidik tertutup yang dihantarkan melalui
pos kepada responden yang terdiri daripada pengurus-pengurus syarikat Felda yang
terlibat di sepanjang rantaian bekalan. Data yang dikumpulkan daripada kajian
IV
-
dianalisis menggunakan analisis diskriptif, analisisi regrasi, analysis korelasi dan
analisis kebolehpercayaan.
Hasil kajian menunjukkan bahawa Felda telah menguruskan aktiviti utama mereka
dengan efektif terutamanya di ladang kelapa sawit, kilang kelapa sawit dan kilang
penyaring kelapa sawit. Felda juga telah menguruskan logistik masuk dan keluar
serta aktiviti pemasaran dengan berkesan. Walaubagaimanapun, hasil kajian
mendedahkan bahawa IT tidak digunakan sepenuhnya untuk menyokong aktiviti
utama dan sokongan secara berkesan terutamanya bagi operasi ladang. Namun
begitu, IT telah membuat banyak sumbangan untuk menyokong aktiviti sokongan
kilang kelapa sawit, serta sedikit sumbangan untuk menyokong aktiviti utama.
Seterusnya, IT tumt menyumbang secara bererti untuk menyokong aktiviti utama
dan sokongan kilang penyaring kelapa sawit. Pada masa yang sama, hasil kajian
mendedahkan bahawa IT telah menyokong secara efektif aktiviti pengagihan dan
pemasaran.
Daripada penemuan ini, beberapa cadangan telah diberikan untuk membantu Felda
dan lain-lain syarikat yang berteraskan kelapa sawit untuk meningkatkan pengurusan
aktiviti mereka di sepanjang rantaian bekalan serta membantu mereka untuk lebih
berdaya saing di dalam industri kelapa sawit.
v
-
ACKNOWLEDGEMENTS
All praise to Allah S.W.T. who has blessed me with patience, strong will, courage
and consistent good health during the course of my preparation of the thesis. I
would like to take this opportunity to express my gratitude to many people who have
helped me to complete this thesis. First and foremost, I would like to express my
deepest thanks and appreciation to Professor Dr. Mohd. Zain Mohamed, Chairman
of the Supervisory Committee, for his sincere guidance and advise, valuable
suggestions, encouragement and constructive comments throughout my thesis
writing which subsequently made the thesis a reality. My sincere appreciation also
goes to the other members of the committee, Prof. Dr. Mad Nasir Shamsudin and
Dr. Jamil Bojei who have helped me greatly by giving suggestions on the analytical
framework and offering proactive and insightful comments.
My appreciation is also extended to Encik Arif Simeh from MPOB, Kelana Jaya; all
officers and managers of Felda Group; all staffs of Universiti Putra Malaysia and
Pusat Maklumat MPOB, Bangi. I also would like to express my gratitude and
thanks to my close friends and course mates for their help throughout my study.
Last but not least, I would like to express my heartfelt thanks to the most important
man in my life, my dear husband, Yahya Bazlan Ismail, who shares my burden and
continuously gives full support, encouragement and love during my study. To my
beloved sons, Muhamad Naqib and Muhamad Hakimi, mother, father, sister and
brother thanks for always cheering up my life and giving me happiness.
VI
-
I certify that an Examination Committee met on 30th November 2002 to conduct the final examination of Nitty Hirawaty Kamarulzaman on her Master of Science thesis entitled "The Use of Information Technology in Managing The Supply Chain of Malaysian Palm Oil Industry: The Case of Felda" in accordance with Universiti Pertanian Malaysia (Higher Degree) Act 1980 and Universiti Pertanian Malaysia (Higher Degree) Regulations 198 1 . The Committee recommended that the candidate be awarded the relevant degree. Members of the Examination Committee are as follows:
Syed Abd. Kadir Syed Long Alsagoff, Ph.D. Associate Professor Faculty of Economics and Management Universiti Putra Malaysia (Chairman)
Mad Nasir Shamsudin, Ph.D. Professor Graduate School of Management Universiti Putra Malaysia (Member)
Jamil Bojei, Ph.D. Lecturer Graduate School of Management Universiti Putra Malaysia (Member)
Mohd Zain Mohamed. Ph.D. Lecturer College of Business and Economics UAE University United Arab Emirates (Member)
Vll
...... '-"�1. SALLEH, Ph.D. As ociate ProfessorlDeputy Dean G aduate School of Management Universiti Putra Malaysia
Date: �1--/1 {tl"3
-
This thesis submitted to the Senate ofUniversiti Putra Malaysia has been accepted as partial fulfillment of the requirements for the degree of Master of Science.
viii
ZAINAL ABIDIN KIDAM Associate ProfessorlDean Graduate School of Management Universiti Putra Malaysia
Date: �'itl , 10'3
-
DECLARATION
I hereby declare that the thesis is based on my original work except for quotations and citations which have been duly acknowledged. I also declare that it has not been previously or concurrently submitted for any other degree at UPM or other institutions.
NfITY 4� KAMARULZAMAN Date: \" JQ"'\A(WO ;'oc�
IX
-
TABLE OF CONTENTS
ABSTRACT ii ABSTRAK ACKNOWLEDGEMENTS APPROVAL DECLARATION
iv vi vii ix xiv xvii xviii
LIST OF TABLES LIST OF FIGURES LIST OF ABBREVIATIONS
CHAPTER I: INTRODUCTION 1
1 . 1 Malaysian Palm Oil Industry 1 1 . 1 . 1 Planted Area 2 1 . 1 .2 Production 2 1 . 1 .3 Exports 3 1 . 1 .4 Competitiveness of the Malaysian Palm Oil Industry 4 1 . 1 .5 Contribution of Palm Oil Industry to the Malaysian
Economy 5 1 . 1 .6 Strengths and Challenges 6
1 .2 Supply Chain Management Concepts 9
1 .3 Adoption of IT for Supply Chain Improvement 1 1
1 .4 Supply Chain in the Malaysian Palm Oil Industry 1 5
1 .5 Federal Land Development Authority (Felda) 1 7 1 .5 . 1 Establishment and Objectives of Felda 17 1 .5 .2 Felda's Palm Oil Industry Supply Chain 18
1 .6 Problem Statement 2 1
1 .7 Objectives of the Study 22
1.8 Significance ofthe Study 23
1.9 Organization ofthe Thesis 24
CHAPTER II: LITERATURE REVIEW 26
2. 1 Defining Supply Chain Management 26
2.2 Is Supply Chain Management A Relevant Strategy? 29 2.2. 1 The Concept of Value-Added in Supply Chain 31 2.2.2 Building Strategic Relationships and Coordination 32 2.2.3 Performance Measurements 34
x
-
2.2.3 . 1 Measuring Delivery Activities 2.2.3 .2 Infonnation Quality 2.2.3.3 Customer Service and Satisfaction
35 36 36
2.3 ITIIS Systems and Supply Chain Advantages 37 2.3 . 1 Relevant Data and Infonnation 40 2.3.2 The Internet and Web Technologies As A Tool for SCM 40 2.3.3 Various Systems Used 42
2.4 Conclusion 45
CHAPTER III: CONCEPTUAL FRAMEWORK 46
3 . 1 Value Added Strategy Along the Supply Chain 46
3.2 Porter's Value Chain Model 48
3 .3 Activities Along Palm Oil Industry's Supply Chain of Felda 50 3.3 . 1 Oil Palm Estates 52 3.3.2 Palm Oil Mills 52 3.3.3 Palm Oil Refineries 53 3.3.4 Pam Oil Transportation and Distribution 53 3.3.5 Palm Oil Marketing and Services 54
3.4 Infonnation Technology and Information Systems Deployed Along the Palm Oil Industry's Supply Chain 54
CBAPTER IV: METHODOLOGY
4. 1 Research Site
4.2 Sampling Design
4.3 Research Instrument
4.4 Data Collection
4.5 Data Analysis 4.5. 1 Descriptive Analysis 4.5.2 Regression Analysis 4.5.3 Correlation Analysis
4.6 Reliability Analysis 4.6. 1 Primary Activities 4.6.2 Support Activities
CHAPTER V: ANALYSIS AND DISCUSSION
5 . 1 Plantation 5 . 1 . 1 Plantation Profiles
Xl
57
57
57
58
60
61 61 62 63
64 64 66
67
67 67
-
5.1.2 Primary Activities in Estates 69 5. 1.2. 1 Sourcing of Raw Materials Activities 69 5 . 1 .2.2 Relationship with Suppliers 71 5 . 1.2.3 Production Activities 74
5 . 1 .3 IT Support on Primary Activities in Estates 75 5. 1 .4 The Influence of IT on Primary Activities in Estates 77
5.1.4. 1 Sourcing of Raw Materials Activities 77 5 .1.4.2 Production Activities 78
5. 1.5 Relationship Between IT and Primary Activities in Estates 79 5 . 1.6 IT Infrastructure and Estates' Performance 80 5. 1.7 Use ofIT in Estates' Support Activities 8 1 5 . 1 .8 Information Systems Used in Estates 82
5.1 .8. 1 Reasons for Using IS in Estates 83
5.2 Palm Oil Mill 85 5.2. 1 Palm Oil Mill Profiles 85 5 .2.2 Primary Activities in Palm Oil Mills 86
5 .2.2. 1 Procurement of Raw Materials Activities 86 5.2.2.2 Relationship with Suppliers 88 5 .2.2.3 Processing and Production Activities 90
5 .2.3 IT Support on Primary Activities in Palm Oil Mills 92 5.2.4 The Influence ofIT on Primary Activities in Palm Oil Mills93
5 .2.4. 1 Procurement of Raw Materials Activities 93 5 .2.4.2 Processing and Production Activities 94
5.2.5 Relationship Between IT and Primary Activities in Palm Oil Mills 95
5.2.6 IT Infrastructure and Palm Oil Mills' Performance 96 5 .2.7 Use ofIT in Palm Oil Mills' Support Activities 98 5.2.8 Information Systems Used in Palm Oil Mills 99
5 .2.8. 1 Reasons for Using IS in Palm Oil Mills 100
5.3 Palm Oil Refinery 102 5.3 . 1 Refinery Profiles 1 02 5.3.2 Primary Activities in Refineries 103
5.3 .2. 1 Procurement of Raw Materials Activities 103 5.3 .2.2 Relationship with Suppliers 104 5.3 .2.3 Processing and Production Activities 106
5.3.3 IT Support on Primary Activities in Refineries 108 5 .3.4 IT Infrastructure and Refineries' Performance 1 1 0 5.3.5 Use ofIT in Refineries' Support Activities III 5.3.6 Information Systems Used in Refineries 1 1 3
5.3.6. 1 Reasons for Using IS in Refineries 113
5 .4 Palm Oil Transportation and Distribution 1 15 504 . 1 Palm Oil Transport Profiles 1 15 5 .4.2 Distribution Activities 116 5.4.3 Delivery Performance 118 5.4.4 IT Support on Distribution Activities 119 5.4.5 IT Infrastructure and Transport Branches' Performance 120 5 .4.6 Use of IT in Transport Branches' Support Activities 121
xu
-
5.4 .7 Information Systems Used in Transport Branches 123 5.4.7 .1 Reasons for Using IS in Transport Branches 123
5 .5 Palm Oil Marketing and Services 125 5.5.1 Marketing Company Profiles 125 5.5.2 Marketing Activities 125
5.5.2.1 Marketing Strategies 126 5.5.2.2 Promotion Activities 127 5 .5 .2.3 Products Quality 128 5.5.2.4 Products Prices 129
5.5 .3 Services Activities 130 5.5.4 IT Support on Marketing Activities 132 5.5.5 IT Infrastructure and Marketing Company's Performance 133 5.5.6 Use of IT in Marketing Company's Support Activities 134 5.5.7 Information Systems Used in Marketing Company 136
5.5.7.1 Reasons for Using IS in Marketing Company 137
5.6 Discussion on the Felda's Supply Chain 138 5.6.1 Discussion on the Status of IT Along Felda's Supply Chain 139
5.7 Summary on Support of IT and IS along Felda's Palm Oil Industry Supply Chain 141
5.8 Recommendations for Felda to Manage Its Supply Chain 143
CHAPTER VI: CONCLUSION AND SUGGESTIONS
6.1 Summary and Conclusion
6.2 Limitations of the Study
6 .3 Suggestion for Future Research
REFERENCES
APPENDICES Appendix A Appendix B Appendix C Appendix D Appendix E
BIODATA OF THE AUTHOR
Xlll
146
146
150
151
153
161 162 163 170 178 186
195
-
LIST OF TABLES
Table Title Page
Table 1 . 1 Planted Area of Oil Palm, Production of CPO, Export and 1 Export Value of Palm Oil
Table 1 .2 World Major Producers of Palm Oil: 1995-2000 ('000 tonnes) 5
Table 1 .3 Matching Goals to Information Systems Along Supply Chain 14
Table 4. 1 Companies' Major Activities 58
Table 4.2 Breakdown of Respondents 61
Table 4.3 Reliability Analysis 65
Table 5 . 1 Plantation Profiles 69
Table 5.2 Sourcing of Raw Materials Activities in Estates 71
Table 5.3 Relationship with Suppliers in Estates 73
Table 5.4 Production Activities in Estates 75
Table 5.5 IT Support on Primary Activities in Estates 76
Table 5.6 Regression Analysis for Sourcing of Raw Materials in Estates 77
Table 5.7 Regression Analysis for Production in Estates 79
Table 5 .8 Correlation Between IT and Primary Activities in Estates 80
Table 5 .9 IT Infrastructure and Estates' Performance 8 1
Table 5 . 10 Use of lT in Estates' Support Activities 82
Table 5 . 1 1 Information Systems Used in Estates 83
Table 5 . 12 Reason for Using IS in Estates 84
Table 5 . 1 3 Palm Oil Mill Profiles 86
Table 5 . 14 Procurement of Raw Materials Activities in Palm Oil Mills 88
Table 5 . 1 5 Relationship with Suppliers in Palm Oil Mills 90
Table 5 . 1 6 Processing and Production Activities in Palm Oil Mills 92
XIV
-
Table 5 . 17 I T Support on Primary Activities in Palm Oil Mills 93
Table 5 . 1 8 Regression Analysis for Procurement of Raw Materials in Palm Oil Mills 94
Table 5 . 19 Regression Analysis for Processing and Production in Palm Oil Mills 95
Table 5 .20 Correlation between IT and Primary Activities in Palm Oil Mills 96
Table 5.21 IT Infrastructure and Palm Oil Mills' Performance 97
Table 5 .22 Use ofIT in Palm Oil Mills' Support Activities 99
Table 5.23 Information Systems Used in Palm Oil Mills 99
Table 5.24 Reasons for Using IS in Palm Oil Mills 101
Table 5 .25 Refinery Profiles 102
Table 5.26 Procurement of Raw Materials Activities in Refineries 104
Table 5.27 Relationship with Suppliers in Refineries 106
Table 5.28 Processing and Production Activities in Refineries 108
Table 5.29 IT Support on Primary Activities in Refineries 1 1 0
Table 5 .30 IT Infrastructure and Refineries' Performance 1 1 1
Table 5.3 1 Use ofIT in Refineries' Support Activities 1 12
Table 5 .32 Information Systems Used in Refineries 1 1 3
Table 5.33 Reasons for Using IS in Refineries 114
Table 5.34 Transport Company Profiles 1 1 6
Table 5 .35 Distribution Activities 1 1 8
Table 5.36 Delivery Performance 119
Table 5.37 IT Support on Distribution Activities 1 20
Table 5.38 IT Infrastructure and Transport Branches' Performance 121
Table 5.39 Use ofIT in Transport Branches' Support Activities 122
Table 5.40 Information Systems Used in Transport Branches 123
xv
-
LIST OF FIGURES
Table Title Page
Figure 1. 1 Export Volume by Countries 4
Figure 1.2 Systems Approach in Palm Oil Industry 8
Figure 1.3 Supply Chain Management: Areas of Opportunity 11
Figure 1.4 Felda's Supply Chain 19
Figure 3 . 1 Porter's Value Chain Model 49
Figure 3.2 Model of Activities Along Palm Oil Industry's Supply Chain of Felda 51
Figure 3.3 Model of Competitive Position of Felda's Palm Oil Industry Supply Chain 56
Figure 5.1 Information Systems Deployed 143
XVll
-
ADC
APS
CAD
CAM
CAPP
CIM
CPFR
CPO
DRP
EDI
ERP
FFB
GDP
IS
IT
JIT
MES
MH
MIS
MPR
OMS
POS
PPO
R&D
LIST OF ABBREVIATIONS
Automated Data Collection/Captured
Advanced Planning and Scheduling
Computer-Aided Design
Computer-Aided Manufacturing
Computer-Aided Process Planning
Computer-Integrated Manufacturing
Collaborative Planning, Forecasting and Replenishment
Crude Palm Oil
Distribution Resource Planning
Electronic Data Interchange
Enterprise Resource Planning
Fresh Fruit Bunch
Gross Domestic Product
Information Systems
Information Technology
Just In Time
Manufacturing Execution Systems
Automated Materials Handling Systems
Marketing Information Systems
Manufacturing Production Report
Order Management Systems
P oint-of-S ales
Processed Palm Oil
Research and Development
XVlll
-
RML
SCM
TMS
VMI
WMS
WWW
Rangkaian Maklumat Ladang
Supply Chain Management
Transportation Management Systems
Vendor Managed Inventory
Warehouse Management Systems
World Wide Web
XIX
-
CHAPTER I
INTRODUCTION
This chapter presents the background of the Malaysian palm oil industry, the
discussion on the supply chain management concepts and the supply chain in the
Malaysian palm oil industry. This chapter also presents the problem statement,
objectives of the study, significance of the study and organization of the thesis.
1 .1 Malaysian Palm Oil Industry
The Malaysian palm oil industry has witnessed tremendous growth during the last
four decades as reflected in the continuous expansion in the planted area of oil palm,
and the production and exports of palm oil (Table 1 . 1) .
Table 1 .1: Planted Area of Oil Palm, Production of CPO, Export and Export Value of Palm Oil
Year
1960
1970
1980
1990
1995
1996
1997
1998
1999
2000
Planted Area of Oil Palm (hectares)
54,638
261,199
1,023,306
2,029,464
2,540,087
2,692,286
2,819,316
3,078,116
3,313,393
3,376,664
Production of CPO
(tonnes) 91,793
431,069
2,573,173
6,094,622
7,810,546
8,385,886
9,068,728
8,319,682
10,553,913
10,842,095
Source: Malaysian Oil Palm Statistics, 2001
I
Export of Palm Oil
(tonnes) 97,568
404,198
2,749,752
6,105,300
8,459,700
9,322,900
9,607,866
9,901,039
11,847,487
12,365,849
Export Value of Palm Oil
(RM million) 61.23
273.6
3,212.3
5,983.8
12,378.2
11,678.1
12,894.3
21,348.6
19,210.5
14,928.6
-
2
1.1.1 Planted Area
Oil palm cultivation in Malaysia has expanded rapidly as a result of the conversion
of target tracts of private rubber holdings to oil palm estates as weB as large-scale
cultivation by federal and state governments in new land areas. This happened when
the government undertook the agricultural diversification program in the 1 960s, to
reduce the country's economic dependence on rubber and tin. In 1 960, the total
planted area under oil palm cultivation was 54,638 hectares. Two decades later, in
1 980s, the total area planted under oil palm reached 1 ,023,306 hectares (PORLA,
1 980). Since then, the total planted area increased marginally and in 2000, the total
planted area reached 3,376,664 hectares (Table 1 . 1).
1 .1 .2 Production
Production of crude palm oil (CPO) has increased dramatically over 40 years. In
1 960, Malaysia produced only about 9 1 ,793 tonnes of CPO, but by the year 1 970s,
production increased to 43 1 ,069 tonnes. Output continued to increase rapidly to
2.57 million tonnes in 1 980 and 6.09 million tonnes in 1 990 (Table 1 . 1 ) . Based on
the Table 1 . 1 , production of palm oil increased significantly from 1 990 up to 1 999.
However, production dropped from 9.07 million tonnes in 1997 to 8.32 million
tonnes in 1 998. The decrease in production was most probably due to the impact
from the worldwide economic and Asian currency crises in 1 997, resulting in
deflated demand for industrial products. Nevertheless, production started to increase
again in 1 999 at 10.55 million tonnes from 1 998. In 2000, the production of CPO
reached 1 0.84 million tonnes.
-
3
1.1.3 Exports
Total export of palm oil products recorded increases over the last 40 years. Palm oil
exports have increased tremendously since the 1960s. Exports of palm oil products
in 1 960 were 97,568 tonnes but the expanding output, which was increasingly
channeled to overseas markets, saw total exports rising to 6. 1 1 million tonnes in
1 990 (Table 1 . 1 ). In 2000, total exports of palm oil increased two-fold to 12.37
million tonnes. Total export value of palm oil has also increased dramatically since
the 1 960s. In 1 995, the export value was RM12.38 billion, but the value fluctuated
from 1996 to 2000 due to unstable prices of palm oil and the Asian currency. The
highest export value accounting to RM21 .35 billion was recorded in 1998 and it was
then the largest foreign exchange earner of the country (MPOB, 2000).
By the year 2000, India remained the largest export market for Malaysian palm oil at
2.03 millions tonnes (22.4% of total exports) (Figure 1 . 1) . Pakistan was the second
largest export market at 1 . 10 million tonnes (12 . 1 %). The European Union, the
People's Republic of China and Egypt followed next with exports totaling 1 .04
million tonnes ( 1 1 .4%), 1 .02 million tonnes ( 1 1 .3%) and 0.43 million tonnes (4.8%),
respectively.
-
Figure 1.1: Export Volume by Countries
Egypt (4.8%)
PR of China (11.3%)
European Union
(11.4%)
Pakistan (12.1%)
1.1.4 Competitiveness of the Malaysian Palm Oil Industry
The top five crude palm oil (CPO) producers, namely Malaysia, Indonesia, Nigeria,
Colombia and Thailand contributed 1 2.54 million tonnes or 82.4% of the world
production in 1995 (Table 1 .2). In 2000, these producers contributed about 21.73
million tonnes or 90% of the world production and Malaysia remained the leader by
producing 10.84 million tonnes of palm oil or about 50% of the world production.
Malaysia maintained the position as the world's largest palm oil producer and was
quite far ahead compared to other competitors such as Indonesia and Nigeria
(MPOB, 2000). Since Malaysia is the biggest palm oil producer in the world,
Malaysia is considered to be the major market player in the world palm oil trade and
is able to influence the supply and prices of CPO in the international market.
The Malaysian palm oil industry also contributes much to the world oils and fats
economy. Malaysia contributed 9.5% of the world oils and fats production.
Malaysia is also the world's leading palm oil exporter contributing to 60.7% of the
-
5
total world trade in palm oil. World palm oil exports constituted 42.0% of the total
oils and fats trade, out of which 72.0% is made up of Malaysian palm oil. Thus,
palm oil has relatively made a major impact on the world oils and fats market,
providing strong competition to soybean oil and other animal fats (Economic
Report, 200012001 ).
Table 1 .2 : World Major Producers of Palm Oil: 1995-2000 ('000 tonnes)
Country 1995 1996 1997 1998 1999 Malaysia 7,221 8,386 9,069 8,319 10,554 Indonesia 4,008 4,540 5,380 5,100 6,250 Nigeria 640 670 680 690 720 Colombia 353 410 441 424 501 Thailand 316 375 390 405 495 Rest of World 2,672 1,901 1,943 1,981 2,111
World 15,210 16,282 17,903 16,919 20,631 Source: i) Oil World, Statistics Update, Various Issues
ii) Malaysian Palm Oil Board, 2000
1 .1 .5 Contribution of Palm Oil Industry to the Malaysian Economy
2000 10,842
7,000
740
524
525
2,194
21,825
The latest economic indicators on Malaysia's economic performance show that
recovery measures taken by the Malaysian government have yielded positive results.
Real Gross Domestic Product (GDP) recovered to 5.4% in 1999 from -7.5% in
1 998. First quarter growth for year 2000 was -11.7%. Broad based growth rate for
certain sectors in 2000 such as manufacturing was 27.3%, services were 6.3%,
agriculture was 2.9% and construction was 1.2% (MITI, 2000). The positive
attributes of GDP from the agriculture sector which was mainly contributed by the
palm oil industry has been recognized as the major contribution to the Malaysian
GDP.
-
6
In 1 998, after the economic crisis, the palm oil industry contributed substantially to
the Malaysian economy, accounting for 9.2% of the country's GDP. This suggests
that palm oil industry will have to play a major role in sustaining maximum
contribution of the agriculture sector as well as Malaysia's economic performance in
the future. Palm oil industry contributes towards a very versatile industry, as it can
be easily included in many manufacturing activities and also able to contribute
directly to the expansion of the manufacturing sector. The palm oil industry indeed
has a great impact in meeting the challenges of the economic development of
Malaysia. In the year 2000, export earnings from palm oil and its related products
reached RM1 4.9 billion, thus maintaining its position as the second largest export
earner for the country after electrical and electronic products.
1 .1 .6 Strengths and Challenges
The success of the Malaysian palm oil industry is the result of the ideal climatic
conditions, efficient milling and refining technologies and facilities, research and
development (R&D), efficient and effective use of management tools and marketing
strategies. In addition, the Malaysian government is fully committed to the
expansion of the industry and encourages global expansion of palm oil production.
Being a highly competitive and profitable industry, oil palm will continue to expand
its planted area as well as marketing approach in the future. This will help the
agriculture sector to maintain a reasonable growth rate, projected at 3% per year. To
maintain the stability and competitiveness in the market place, palm oil industry
must be willing to face the future challenges. As pointed out by Yusof and Ahmad
( 1 994), major challenges faced by palm oil industry include increasing value added,