Measuring Supply Chain Using SCOR Model In Palm Oil .

Proceedings of the World Congress on Engineering 2014 Vol II,WCE 2014, July 2 - 4, 2014, London, U.K.upstream to downstream. In the upstream sector, Malaysiahas a plantation area of palm oil covering 5.076.929 hectarescomprising of 50.39 % hectares Peninsular Malaysia andSarawak-Sabah of 49.61% hectares. In addition, the area hasproduced 85.74% and approximately 14.26% of the rest arewaiting for the harvest. The actors in the Malaysian palm oilindustry involve public, private sector and independentsmallholders [12]. Fresh fruit bunch (FFB) is the mainproduct in palm oil plantation which it will be brought to themilling process. This process produces some derivativeproducts that can be developed to give added value to thecustomer. Furthermore, milling process can be elaborated tobecome several products such as Crude Palm Oil (CPO),Kernel, Empty Bunch, Shell and Fiber [13], [14].In the downstream sector, the yield of oil palm from themilling process is later taken for processing industries.According to Belai et al. [15], Palm Kernel is processed bycrushing industry to produce Crude Palm Kernel Oil(CPKO) and other byproducts such as Palm Kernel Cake canbe directly sold as animal feed. Then, the yield of oil such asCPO and CPKO are processed in the refining industry toproduce Refined Bleached and Deodorized Palm Oil(RBDPO). Refinery industry also produces RBDP Stearinand RBDP Olein. On the other hand, RBDPO is processedby Oleochemical industry to produce Palm Fatty AcidDistillate (PFAD). Not all CPO products were produced byrefineries, but part of them through the fractionationprocesses that produce Crude Palm Olein and Crude PalmStearin.Export and import of palm oil derivatives products useshipping services [16]. Thus, there are a number ofcompanies that used the port distribution center for theexport of palm oil derivative products to the marketinternationally. In addition, Malaysia is not only targetingthe international market, but also palm oil derivativeproducts are traded in the local market to stimulate localindustry. These products will be processed by the developedcountries to retail businesses such as food products,chemical industry, personal care products, animal feed,cleaning products and several sources of energy [17].B. Stage Two: Developing Supply Chain StructureSupply chain structure is built based on the sequenceprocess that occurs in the palm oil industry. The structuresare arranged into the block diagram and assisted by arrowsthat show the direction of the relationship of activity in thesystem. In addition, the arrows indicate the flow of productsthat describe the movement from one operation to anotheroperation. Furthermore, block diagrams that have beenlinked to the business processes will be compiled with theattributes of the data.On the other hand, Malaysian palm oil industry more usesmotor transportation than other facilities in domestic market.Infrastructure like the road is used to ship goods into severalareas. However, motor shipment across multinationalboundaries involves a number of different importregulations. Another facility of shipping on logisticinfrastructure is ocean transportation that is used to activityof export and import. Malaysia has some bigger ports thatwill support on shipping activity to other countries. In thisISBN: 978-988-19253-5-0ISSN: 2078-0958 (Print); ISSN: 2078-0966 (Online)case, an arrow which notes in red line is transportation usingocean. While, motor transport will be shown using blackline. Shipping uses other transportations such as air and railon the palm oil industry in Malaysia just a few cases.Consequently, these transportations are ignored within theprocess mapping.C. Stage Three: Data Collection of Supply ChainThese data depend on forecasting of palm oil demand inthe local market and international. Entities on businessprocess in palm oil industry involving plantations, millings,crushings, refineries, oleochemicals, and distribution to themarket. It also describes that Malaysia has six categories ofplayer in palm oil industry. Private estates have the highestland area in Malaysia around 62 %. Then, several numbersof industries in Malaysia are 429 millings, 46 crushings, 54refineries, and 17 oleochemicals. Processing industry in theexport sector is supported by the port as shipping service. InMalaysia, there are the big five ports such as Butterworth,Port Klang, Pasir Gudang, Lahat Datu and Sandakan. Mostdestinations exporting of oil palm products are delivered todeveloped country such as China, India and Netherlands.D. Stage Four: Developing Whole Chain into a MapThe data of the entire operation drafted into a map afterthe mapping structure of the business processes is done. Thismap shows the overall business activity from upstream todownstream. Then, each entity is given data attributesinvolving data of industry capacity, area plantation, and typeof product in the processing industry. The overall operationof the supply chain will be described in the form of a richpicture diagram. The results of process mapping produce aset of activities that are interlinked in a business chain. Thefinding of this process mapping in the Malaysian palm oilindustry for the year 2012 can be shown in figure 1.E. Stage Six: Identify Issue and CompetitivenessFinal map can be used as tools to identify problems thatare happening in the business chain. Several issues areobtained from this method. The results of the processmapping showed that Malaysia still focuses on upstreamindustries. The two main islands in Malaysia involvingPeninsular Malaysia and Sarawak Sabah are used as area forpalm oil plantation. Almost all states planted palm oil treeswhile the number of palm oil downstream industries inMalaysia is still limited. In addition, Malaysia exportedmore palm oil to several countries that could transform oilinto finished goods to retail businesses. Then, it also showsthat some industries in Malaysia are still imported fromvarious countries. It means there is a shortage of palm oilfeedstock.In the future, downstream industry in Malaysia cancompete in the global market because industries of palm oilderivative products have been clustered into specific productand produce into final products. For instance, many localindustries produces cooking oil. As known, Malaysia has alot of product cooking oil circulating in the market thatcomes from other sources than oil palm. It is also necessaryto answer the question of how measure supply chainperformance in Malaysian palm oil downstream industry.WCE 2014

Proceedings of the World Congress on Engineering 2014 Vol II,WCE 2014, July 2 - 4, 2014, London, U.K.Crude Palm Oil4.642.171 TonEXPORT BY PORTPlantationMature : 4.352.872 Ha (84.74%)Immature : 724.057 Ha (14.26%)Total : 5.076.929 HaMilling Capacity Utilization :90.56 %Number & capacity milling :429 factory & 101.958.400 TonFFB Receive(93.265.094 Ton)FFB Yeild(18.89 Ton/Ha)FFB Process(92.328.847 Ton)OIL Yeild(3.84 Ton/Ha)AMTRESWNDOSabah &Sarawak18.639.958 seedsPeninsularMalaysia56.634.583 seedsPalm Kernel(4.705.900 Ton)CPO(18.785.030 Ton)AMRETSUPCrude PalmKernel Oil(CPKO)2.164.024TonPK Crushing Capacity Utilization : 64.68 %Number & capacity Crushing Plant:46 factory & 6.946.950 Ton( Processing 4.709.802 Ton )FractionationRefinery Capacity Utilization : 62.95%Number & capacity Refinery :54 factory & 24.795.400 Ton( Processing CPO : 14.141.492 Ton)( Processing CPKO: 1.468.420 Ton)RBDPO13.255.277 TonOleochemical Capacity Utilization : 75.90%Number & capacity OleoChemical:17 Factory & 2.598.971 TonPalm Kernel Cake2.399.204 TonPalm Oil1.391.483 TonPalm Kernel Oil366.684 TonPalm FattyAcid Distillate659.083 TonRefinery (Refined Bleached andDeodorized Palm Oil)RBDP Stearin2.540.904TonCrude PalmStearin49.753 TonRBDP Olein9.538.403 TonCrude PalmOlein207.828 TonPalm Kernel50.275 TonIMPORT BY PORTMeatIndustryMeatProductsFoodIndustryPastry, Icecream,margarine,cooking oil paint icityandbiofuelproducersSoap,detergents,lipstick andshampooElectricityand biofuelProcessed Palm Oil12.933.316 TonBiodiesel28.983 TonPalm kernel Oil1.084.618 TonOleochemicals2.601.377 TonEXPORT BY PORTMARKET(CUSTOMER)Palm kernel Cake2.473.732 TonFig. 1. Rich picture diagram of process mapping Malaysian palm oil industryIII. MEASURING SUPPLY CHAIN PERFORMANCENowadays, there are several approaches that have beenused by researchers in measuring supply chain performance.This paper will try to review supply chain performancemeasurements on several case studies that have investigatedsuch as Balanced Scorecard (BSC), Total QualityManagement (TQM), Economic Value Analysis (EVA),Activity-Based Costing (ABC) and Supply Chain OperationsReference (SCOR).ISBN: 978-988-19253-5-0ISSN: 2078-0958 (Print); ISSN: 2078-0966 (Online)The balanced scorecard framework was made by Kaplanand Norton in 1992. This method aims to measureperformance based on four perspectives: financial, customer,internal business and innovation and learning. Several casestudies empirically in the different system showimplementation of BSC relevant financial and non-financialindicators. Then, it can also achieve the vision and missionof the organization's strategy in order to run the businessmore measurable [18], [19]. Nevertheless, several caseWCE 2014

Proceedings of the World Congress on Engineering 2014 Vol II,WCE 2014, July 2 - 4, 2014, London, U.K.studies concluded that the indicators were not suitable to begeneralized in other case studies, although someextrapolations can be made [20]. In addition, the method ofmeasuring performance using the BSC does not have astandard in business process reengineering. Therefore, thismethod is much more being applied to measure theperformance of the overall system which includes not onlystrategic in the supply chain.Total quality management was adopted by the JapanCompany, which focuses on performance measurementbased on quality of product and customer satisfaction. Allentities within the organization will be pushed to implementcontinues improvement into a supply chain quality thatbegan from design to manufacturing, then factory to retailersand to deliver to end customers [21]. Moreover,Measurement of the supply chain using TQM aims tomeasure, analyze and improve the goal of the businessprocess in form products, services, and processes by creatingvalue for customers [22]. TQM in supply chain considers itsapplication in real life. Applying TQM and SCM seem to beclear, but the results are somehow unclear and difficult tofigure out. Based on a case study in Indian cementmanufacturing, it shows very weak correlation between SCMand TQM. This indicates that it has not leveraged these toolseffectively and efficiently [23]. Therefore, TQM focuses onquality of product and customer satisfaction thus thedifficulty in implementing this method.There is other approaches focus on financial data, such asEconomic Value Added (EVA) and Activity Based Costing(ABC). Based on a case study in packaging industry usingEVA, accounting data were required in order to achievemore accurate results and contribute to measure performancewithin the value-based management approach. This methodmeasure the overall financial value of supply chainperformance in a company. Nevertheless, EVA shouldaccount the capital markets, which shareholders as well asinvestors because it is important to justify investments insupply chain management with the company value. Thus,senior executives’ base their decisions not only on financialdata [24]. In other hand, ABC considers the cost driverwhich the method is not suitable for non-financialmeasurement. This technique more time consuming incollecting cost data and disruption of management decisionmaking [25]. The strength of ABC method can determine thecosts of operations and pursue the objective of providingdesired customer service at the least total cost [26].Supply Chain Operations Reference (SCOR) was built bythe Supply Chain Council (SCC) as a tool to diagnose thebusiness activities in supply chain management. This methodis used to investigate the relationship between suppliers,manufacture and customers. So, this method is not suitablefor use in simple business process [27]. Based on research inoil producing company in Iran, SCOR models canreengineering and improve the effectiveness of supply chainthat includes business process, metrics, best practices andtechnology [28]. However, improving the system inmeasuring performance needed some suitable metrics orindicators in representing the real system. In addition, thereengineering process is based on of the stages that havestandardized on Plan, Make, Source, Deliver and ReturnISBN: 978-988-19253-5-0ISSN: 2078-0958 (Print); ISSN: 2078-0966 (Online)[29]. Comparison of methods for measuring the supply chainperformance is necessary to determine the appropriatemethod in solving the problem in the palm oil downstreamindustry.IV. DISCUSSIONAccording to process mapping in palm oil supply chain, itshows that downstream industries involve crushings,refineries and oleochemicals. This industry has feedstockdependence of the milling process and use of port facilitiesto deliver the final products. Profit from the final products indownstream industries affected by the industry's ability totransform the oil into products that has high value of thegoods. Currently, palm oil downstream industry exportprocessed oil palm in developed countries. It is an openquestion whether the local industry in Malaysia capable ofproducing final products that is acceptable in theinternational market. It makes the business of palm oildownstream industry has become more complex. Thus, itrequired to propose a method to measure downstreamindustry based on supply chain performance. Performancemeasurement will be based on the relationship of businessprocess in the downstream industry that is classified into thecategories of suppliers, manufacturing and customers. Then,this relationship will be elaborate become indicators that willbe measured.All of the above methods have outlined some approachesin measuring supply chain performance based on strengthand limitations in implementing into a case study. When thismethod is compiled in the case study in the palm oildownstream industry, there are some considerations that willbe taken to measure the supply chain performance. Thesuitable approach to measure supply chain performance inthe palm oil downstream industry is using the SCORmethod. Therefore, this method can be measured when theyare represented by several indicators based on activitybetween suppliers, manufacturer and the customer. Then,selection of indicators can be clustered into basicperformance measurement. In addition, these entities havethe similar process within crushing, refineries andoleochemical that include business process reengineeringinto the Plan, Source, Make, Deliver and Return.The plan represents the planning activities that used inachieving corporate targets for balancing supply and demandof products. Palm oil downstream industries have the mainraw material from milling process which will produce CPOand kernel as palm oil derived products. Source representssuppliers that will supply raw material to the industry. Then,process transformation of raw materials into finishedproducts will be represented by Make. It is identical toenhance the value added product. Deliver is a process todistribute and deliver finished products to the customer. Ifthere is customer complaints about product of reject, defect,and repair, the product will be returned to the industry. Thisprocess is represented by Return. Application of SCORModel in the palm oil downstream industry can be seen infigure 2.WCE 2014

Proceedings of the World Congress on Engineering 2014 Vol II,WCE 2014, July 2 - 4, 2014, London, U.K.Port to ExportRefineryMillingCrushingOleochemicalFig. 2. Application of SCOR model in palm oil downstream industryV. CONCLUSIONThis paper described supply chain in the palm oil businessthrough process mapping from upstream to downstream. Inaddition, it summarizes the result of literature review onmeasuring supply chain performance using five existingmethods. The main contribution of this paper proposes atechnique for measuring supply chain performance in thepalm oil downstream industry involving industry ofcrushings, refineries and oleochemicals. This researchjustifies that SCOR model more suitable to implement in thiscase. Therefore, SCOR model can be reengineering ofbusiness processes based on relationships among entitiessuch as suppliers, manufacturing and customers. In addition,supply chain performance will be measured using the step asPlan, Source, Make, Deliver and Return to develop keyperformance indicator.Further research will test into a case study with collectingthe data that related to business process reengineering in thepalm oil downstream industry. Furthermore, it would bebuilt several indicators to measure supply chain performanceinto a model. Finally, the models will be validated in orderto determine whether indicators represent the real case.ACKNOWLEDGMENTThe authors thank to the Amanah Pelalawan Foundationfor giving PhD Degree Scholarship EFERENCES[1][2]A. Ellinger, H. Shin, W. M. Northington, F. G. Adams, D. Hofman,and K. O’Marah, “The influence of supply chain managementcompetency on customer satisfaction and shareholder value,” SupplyChain Manag. An Int. J., vol. 17, no. 3, pp. 249–262, 2012.S. Z. Omain, A. B. Abdul Hamid, A. R. Abdul Rahim, and N. MdSalleh, “Supply chain management practices in Malaysia palm oilindustry,” in The 11th Asia Pacific Industrial Engineering andManagement Systems Conference, 2010.ISBN: 978-988-19253-5-0ISSN: 2078-0958 (Print); ISSN: 2078-0966 (Online)[15][16][17]Malaysian Palm Oil Board, Overview of the Malaysian Oil PalmIndustry 2012. Selangor: Economics & Industry DevelopmentDivision, 2012, pp. 1–5.P. Jayaratne, “Sustainable supply and supply chain mapping - SriLankan tea supply chain,” in SBS HDR Student Conference, 2011,pp. 1–15.E. Alfonso, D. Ferrucho, A. Roldán, M. Vargas, and F. González,“Scenario analysis for reverse logistics implementation case study ofthe palm oil supply chain,” in Proceedings of the 2009 WinterSimulation Conference, 2009, pp. 2310–2319.Z. Ismail and A. Khamis, “Neural network in modeling Malaysian oilpalm yield,” Am. J. Appl. Sci., vol. 8, no. 8, pp. 796–803, 2011.A. Deveshwar and R. Rathee, “Challenges for supply chainmanagement in today’s global competitive environment,” Int. Rev.Bus. Res. Pap., vol. 6, no. 2, pp. 194–203, 2010.W. S. Chow, C. N. Madu, C.-H. Kuei, M. H. Lu, C. Lin, and H.Tseng, “Supply chain management in the US and Taiwan: Anempirical study,” Omega, vol. 36, no. 5, pp. 665–679, Oct. 2008.D. Mollenkopf and G. P. Dapiran, “World-class logistics: Australiaand New Zealand,” Int. J. Phys.Distribution Logistic Management.,vol. 35, no. 1, pp. 63–74, 2005.S. Jharkharia and R. Shankar, “Supply chain management: somesectoral dissimilarities in the Indian manufacturing industry,” SupplyChain Manag. An Int. J., vol. 11, no. 4, pp. 345–352, 2006.S. E. Fawcett, G. M. Magnan, and M. W. McCarter, “Benefits,barriers, and bridges to effective supply chain management,” SupplyChain Manag. An Int. J., vol. 13, no. 1, pp. 35–48, 2008.A. K. A. Rahman, R. Abdullah, F. Mohd Shariff, and M. A. Simeh,“The Malaysian palm oil supply chain : the role of the independentsmallholders,” Oil Plam Ind. Econ., vol. 8, no. 2, pp. 17–27, 2008.O. Chavalparit, W. H. Rulkens, a. P. J. Mol, and S. Khaodhair,“Options for environmental sustainability of the crude palm oilindustry in Thailand through enhancement of industrial ecosystems,”Environ. Dev. Sustain., vol. 8, no. 2, pp. 271–287, Mar. 2006.E. Lau, Y. Man, and A. Baharum, “A Qualitative approach ofidentifying major cost influencing factors in palm oil mills and therelations towards production cost of crude palm oil,” Am. J. Appl.Sci., vol. 8, no. 5, pp. 441–446, 2011.A. Belai, D. Boakye, J. Vrakas, and H. Wasswa, The Malaysian PalmOil Cluster. Institute for Strategy and Competitiveness, HarvardBusiness School, 2011, pp. 22 – 26.G. van Duijn, “Traceability of the palm oil supply chain,” LipidTechnol., vol. 25, no. 1, pp. 15–18, 2013.Proforest, Mapping and Understanding the UK Palm Oil SupplyChain, April. London: Department for Environment, Food and RuralAffairs, 2011, pp. 27 – 88.WCE 2014

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Measuring Supply Chain Using SCOR Model in Palm Oil Downstream Industry: A Review . Fitra Lestari, Kamariah Ismail, Abubakar Abdul Hamid,Eko Supriyanto,Hisbunnazar,Wahyudi Sutupo . P . Proceedings of the World Congress on Engineering 2014 Vol II, WCE 2014, July 2 -