Abstract
The purpose of this chapter is to assess the efficiency, effectiveness, and performance of logistics in transportation of fresh fruit bunches (FFB) in Malaysian estates, which are the growing logistics hubs in plantation management. It also identifies various factors that significantly affect the efficiency, effectiveness, and performance of the Malaysian estate logistics and proposes ways to improve their competitiveness. This study shall empirically explore the causal relationships between lean logistics and triple bottom line on sustainable logistics performance in transportation of FFB in the palm oil industry. The objective is to examine the current state of sustainability efforts within the field of value chain, more specifically logistics performance, and to identify opportunities and provide recommendations for the palm oil industry to follow sustainable performance. This study also aims to stimulate further research within the area of sustainable logistics performance.
TopBackground
The second top producer of palm oil after Indonesia is Malaysia. In 2014, the planted area is 5.39 million hectares. It has increased 3.1% against 5.23 million hectares compared to year 2013. Sabah is the largest oil palm planted state with 1.51 million hectare or 28% of total oil palm planted area. In the palm oil industry, Malaysia is successful in terms of producing and marketing the palm oil, palm kernel oil and their derivative products. There are also huge amounts of palm oil wastes generated by the industry. This included oil palm shells, mesocarp fibre and empty fruit bunches from the mills, also oil palm fronds and oil palm trunks from the field during replanting.
The oil palm is five to ten times more productive in terms of oil yield than all other oil-bearing crops. It is in the best position to meet the growing global demand for oil. It is versatile and there are demands for palm oil in the non-food sector. Oil palm also contributed in the energy sector. Its biomass and biogas can be used as fuel for boilers. Palm oil is used as feedstock to produce biodiesel by blending palm diesel with petroleum diesel. This lowers the burning of fossil fuel in the world. Statistics Malaysia Palm Oil Board (MPOB).
Misguided anti-palm oil campaigns have been a talk of the town and the burning issues in business. This has been a constant challenge for the palm oil industry. During the 1980’s the campaign were on health issues and Malaysia gather international independent experts to defend it.
Today the lobbyist turned their attacks to environmental and sustainability issues and MPOB, Ministry of Plantation Industries and Commodities (MPIC) had continued to address them. Since oil palm is grown in one of the most ecologically sensitive areas of the world, it is imperative to grow it in a sustainable manner so that people, planet and profit are all part of the equation.
Bad things can happen to good companies that fail to take a broad view of accountability, (Savitz, 2012). Certifying Malaysia Sustainable Palm Oil (MSPO) and producing Sustainable Palm Oil is important for the country’s business to promote export and sales to compete in the world market.
Even a well run company with good intentions and with a proud history of business and philanthropic achievement can stumble and fall when the principles of sustainability is ignored, (Savitz, 2012). The four areas in commitment to sustainability are land use, water, climate change and farmer livelihoods. As land is finite and human population is growing rapidly, it is important to ensure that the use of land is sustainable.
For market development, MPOB provides oil palm industry players with relevant economics and statistics. The important markets for our Malaysian palm oil are China, European Union, India, Pakistan, USA and West Asian countries. Currently, 1.29 million hectares of palm plantations in Malaysia are Round Table Sustainable Palm Oil (RSPO) certified and these contribute to 4.8 million tonnes of certified sustainable palm oil, (Datuk Amar Douglas Uggah Embas, Plantation Industries and Commodities Minister, 2015).
Key Terms in this Chapter
Fresh Fruit Bunches (FFB): It is the raw material for palm oil mills. The oil palm tree (Elaeis guineensis) originates from West Africa and was developed into an agricultural crop in Malaysa. The fruit from the tree is processed and has two main products crude palm oil and palm kernel.
Sustainable: In transporting FFB it must have minimal negative impact on the global or local environment, community, society, and economy. It must have green and triple bottom line concept.
OER: This is the Oil Extraction Rate. The extraction efficiency is affected by the percentage of oil content in FFB at the time of harvest. It is the amount of oil the mill can extract from it’s process to the 100 tonne of the FFB being processed.
Triple Bottom Line: The dimensions are profit, planet and people. 3BL is an accounting framework with three parts: social, environmental (or ecological) and financial. Lean logistics is integrated with 3BL in a framework to evaluate their performance in a broader perspective to create greater business value in addressing sustainability.
Transportation: This is the absolute means to transfer products of FFB. The act of taking the FFB from estate to mill through land and water.
Logistics: This is the routing network for transportation of FFB in the estates. Logistics is the management of the flow of FFB between the estate and the mill in order to meet.
Performance: This is the efficient and effective means to address sustainability. The accomplishment of sustainable logistics performance measured against preset known standards of lean logistics and triple bottom line.
Effectiveness: It is the degree to which objectives are achieved and the extent to which targeted problems are solved and is determined without reference to costs. Effectiveness means “doing the right thing” to address sustainability.
Efficiency: It is a measurable concept that can be determined by determining the ratio of useful output to total input. It minimizes the waste of resources such as loose fruits collection, energy and time, while successfully achieving the desired output. Efficiency means “doing things right’.
Lean: This is zero inventory on FFB and loose fruits. The core idea is to maximize FFB value while minimizing waste. It means creating more value for mills with fewer resources.