Felda Group Company

Transportation and Distribution Management

Felda Group Company

Introduction

Report overview

            This report will base its argument on the efficiency of three elements of carriage that involves incoterms choice consideration, carrier assortment criteria and transporter relationship management. Supply chain management is one of the important aspects in Felda Group Company that needs to be managed well so as to ensure that all the operations that involve the transportation in the company are effective. This paper will therefore analyze the effectiveness of the transportation ability, transportation objectives of the organization and some of the recommendations that can be implemented in the company so as to enhance continual improvement and development.

            Company background

            Felda Group Company is one of the global largest companies that is involved in the production of the crude palm oil and operates the oil palm plantation. The company is incorporated in Malaysia and is a private company and it primarily operates under the profit-making division of Federal Land Development Authority (Hai 2002). The business’s vision is to be the prominent worldwide expanded cohesive agri-business and its aim is to globally set a pace as they lead in creating value through the human capital. Also their mission is to champion in their locally invested culture and to build an integrated value chain as well as cultivating diversification in products and in geography.

 Their values are respect, partnership, integrity, dynamism and enthusiasm. Their operations are in more than ten states across Asia, Europe and also ion North America (Belai et al 2011).

Their strategy is to continually improve on their operations such as the reduction in cost in their operations so as to offer services and quality products that will enable them to be competent among their competitors. Competition is one of the great challenges that they are facing as they are trying to become the largest plantation corporation worldwide hence they have to continually improve on their strategies so as to be able to compete effectively with their competitors (Ramasamy et al 2005).

Carrier Selection Criteria

            Transportation is one of the key elements for the felda group company as it enhances the supply of goods to their customers and hence a proper and efficient transportation strategy is quite relevant as it requires a clear articulation of the targeted consumer segments suppliers and carriers (Lawrence 2005). There are several different modes of carriage that are used in the transportation of products as they are being moved from one place to another. All these modes are quite relevant as they have unique qualities and also some unique setbacks (Meixell et al 2008).

            Currently the Felda group company uses the road and sea mode of carriage and this selection of the carrier are dependent on the urgency of the delivery and the consumers’ requirements. The arrangement and the control of the tank farm management is part of the felda group company’s services.  There is the easy access to the raw materials from the multiple processing companies that are strategically located in Malaysia and Indonesia.

 However, the products that are manufactured by the company are relatively bulky hence the modes of transportation that are frequently used include the shipping and road transportation (Meixell et al 2008).

            Shipping is basically used in the transportation of the company’s products to longer distances that is the distant customers (Kapoor et al 2003). This carriage mode of transportation is essential as it enables the transportation of the products using containers that are different in size hence meeting the varying customers’ specification. However, the delivery leads time is quite longer than the other modes and the transportation cost is comparatively low as compared to the other means of transportation. This mode also includes the use of better packaging requirements that prevent the destruction of the goods (Meixell et al 2008). Hemat Marine Company has an experience in the formation of a shipping company with the Felda Company through a joint venture. Trucking is also another frequently used mode of transportation as it involves the transportation of goods to shorter distances for instance the delivery of products locally that is within Malaysia (Kapoor et al 2003). This allows the door to door services within the business as the trucks and Lorries are able to make several stop overs to make deliveries to their customers. This selection of carriage has a lower transit time as compared to the other modes and is highly flexible in relation to transport job and the altered plans (Lambert et al 2001).

            It is therefore recommended that the company ought to find more trucks and ships with more containers that would enhance the company to transfer their palm crude oil products all over the world without restrictions. This will enable them to expand their company as the supply chain will be diversified to m any regions (Mentzer et al 2000). The company will also be able to deliver goods at an appropriate time to the customers basing on the customers specification and thus satisfying the needs of the customers (Global value chains 2011).

Incoterms Selection Consideration

            Incoterms refers to the international Commercial Terms. These terms are primarily recognized as internationally accepted standard trade terms that are used in the sale agreements. There are different incoterms that deals with three aspects that is who is responsible for making the payments of the insurance, tax and duties  for the transportation facilities, who is responsible for the transportation  services as included in the price and where should the products be picked from to their destination (Besson et al 2015).

            The company uses the Ex works incoterm where  they make the goods available to the consumers at their destinations while the company and the consumer are both responsible for the risks, the transportation costs as well as taxes and duties and they mainly use this term in their process of quoting their price. They also use the free carrier term where the company gives the products which are cleared for exportation to the consumer’s carrier at a stated location. The consumer is responsible for the delivery of the goods from the specified locality to the actual final destination (Besson et al 2015). The company uses this incoterm in cases where the containers are being transported using more than one, mode of transportation.

            The carriage paid to incoterm is used by the company as they pay the transportation fee for the delivery of the goods to the specified destination. The responsibility is then shifted to the consumer the moment the products are passed to the first carrier.

The company also implements the use of the carriage and insurance paid where they are responsible for the payment of the insurance and the transportation fee to the customers’ specified destination where the responsibility is transferred from the company to the customer (Besson et al 2015).

 This is commonly used in the company as it is involved in the transportation by use of containers by more than one mode of transportation. Cost insurance and freight where the company is responsible for payment of insurance and the cost of transporting the goods to the stated port. They are also responsible for the risks that are involved in loading of the goods onto the ship.

            It is therefore recommended that the company should actually implement the incoterms that favors the customers so as to meet their goal of customer centric system. This therefore calls for the company to take full responsibility on the cost of insurance, taxes and duties and carriage and this will help attract more customers into the business (Christopher et al 2016). For instance the company needs to re-modify the FOB term that states that the customers should be fully responsible for the risks and all the costs. The company should also focus on computerizing all their export and import operations as this will help in making the supply of products in and out of the company efficient and fast. This will also reduce the number of human resource that would be required in monitoring of the palm oil to be exported (Besson et al 2015).

 

            Carrier Relationship Management

            In most cases most of the companies use third party to outsource for the delivery facilities. Outsourcing transportation therefore involves the use of a common carrier rather than using the company’s own private taskforce. This may also include use of the goods in transit forwarder instead of the in-house group for the purpose of exporting of products (Moreira et al 2015).

 

            Felda Company is one of the organizations which use the outsourcing facilities so as to outsource for the transportation of their products since there is no separate internal logistic department. It is through this outsourcing transportation system to the third party logistic company that the company is able to be at peace with the gas prices, truck size, truck maintenance, purchasing of new vehicles or trucks. Moreover, the freight documentation is not necessarily required to be prepared by the company. There are numerous strengths that accrue from this kind of business such as the increase in the opportunities where the company is able to receive more discounts. The company is also able to make changes and improve on the logistics services without the current challenges. The company is also able to increase the customers’ satisfaction through the delivery of the goods to the customers’ doorstep. The company is also able to share risks with the service provider hence in case of any loss or damage of the goods the company will not undergo too much loss (Turner 2011).

            Felda Company should have a long term agreement with the third party logistics organization so as to allow more shipment of bulky as well as heavy items to other nations. Through the establishment of the long-term relationship with the carriers, the company will be able to get more discounts for the delivery charges. For instance, the joint venture shipping corporation owns some handy size tankers and bulkers that play a route from the Malaysian as well as the rest of the Asian ports that are geographically located in the Middle East, Far East and also in the European Union Ports (Kok et al 2003). The outbound cargo from the Malaysian port transports palm oils from the felda company in Malaysia. The merchandising team in the company therefore arranges for regular shipping programs through the use of bulk vessels and tankers that are used to deliver the bulk oils to their customers located in China, India, Africa, USA and Middle East.

There is also the use of pipelines that are responsible for the transportation of the felda company products through the deep water jetty that is located at the Kuatan port whose coverage is RM35 MIL. It will also be easy to communicate for the planning of the delivery services (Moreira et al 2015).  The company will also be in a position to have the knowledge on how well to handle the products for loading and offloading due to the value of the products and their heavy and bulky nature.

             The company should therefore base their selection of the third party company on the service proficiency, global accessibility, flexibility for the urgent products, financial status to determine whether the company can meet the long-term relationship, favorable cost and short delivery time. This will, enhance the signing of a good contract and a good relationship with the carriers (Moreira et al 2015). The use of the information technology in the supply chain process is recommended due to the globalization in the world and in doing this the company will be able to globalize its supply (Kamarulzaman 2002).

 

Conclusion

            It is quite clear that transportation is a serious issue to logistics and in the supply chain management effectiveness. It influences throughout the main issues of logistics efficiency and the worldwide supply chain. Hence to attain the dynamic requirements of the supply chain the company must have a dynamic plan. It is also essential to be responsive both in terms of services to customers and to the cost demands of the company’s customers.

 

The success of the company also relies on the strategies that are used in the company as the sale of the produced goods and the acquiring of the raw materials depends, on the efficiency of the company’s supply chain management. Felda Company has thus proved to be a company that has a good and effective supply chain management through their transportation management department that is responsible for the distribution of the palm crude oils in the company.  The selection and the carrier management being part of the sub-division of the supply chain management needs to be organized effectively so as to enhance the success of the supply chain.

 

 

 

 

 

 

 

 

 

 

 

 

 

References

            Belai, A., Boakye, D., Vrakas, J., & Wasswa, H. (2011). The Malaysian Palm Oil Cluster Final Report. Microeconomics of Competitiveness, 22.

            Besson, J., Mitasiunas, A., & Ragaisis, S. (2015). Export Process Capability Assessment Model. Applied Computer Systems, 17(1), 60-67.

Christopher, M. (2016). Logistics & supply chain management. Pearson Higher Ed.

            Global value chains. Linking local producers from developing countries to international markets. (2011). Amsterdam: Amsterdam University Press.

Hai, T. C. (2002). The palm oil industry in Malaysia. WWF, Malaysia.

            Kamarulzaman, N. H. (2002). The Use of Information Technology in Managing The Supply Chain of Malaysian Palm Oil Industry: The Case of FELDA (Doctoral dissertation, Universiti Putra Malaysia).

            Kapoor, S. K., & Kansal, P. (2003). Basics of distribution management: A logistical approach. New Delhi: Prentice-Hall of India.

            Kok, C. S., & Hong, Y. S. (2013). Liberalization of Legal Services-Embracing a World of Opportunities in the Asean Region. US-China L. Rev., 10, 141.

            Lambert, D. M., & Cooper, M. C. (2000). Issues in supply chain management. Industrial marketing management, 29(1), 65-83.

 

 

            Lawrence, F. B., Gunasekaran, S., Krishnadevarajan, P., & NAW Institute for Distribution Excellence. (2009). Optimizing distributor profitability: Best practices to a stronger bottom line. Washington, D.C.?: NAW Institute for Distribution Excellence.

            Meixell, M. J., & Norbis, M. (2008). A review of the transportation mode choice and carrier selection literature. The International Journal of Logistics Management, 19(2), 183-211.

            Mentzer, J. T., DeWitt, W., Keebler, J. S., Min, S., Nix, N. W., Smith, C. D., & Zacharia, Z. G. (2001). Defining supply chain management. Journal of Business logistics, 22(2), 1-25.

            Moreira, M. R., Andrade, S. R., & Sousa, P. S. (2015). International Outsourcing: a process approach to the apparel industry. Revista Brasileira de Gestão de Negócios, 17(58), 1444.

            Ramasamy, B., Ong, D., & Yeung, M. C. (2005). Firm size, ownership and performance in the Malaysian palm oil industry. Asian Academy of Management Journal of Accounting and Finance, 1(1), 81-104.

            Turner, R. W. (2011). Supply management and procurement: From the basics to best-in-class. Fort Lauderdale, FL: J. Ross Pub.