CASE STUDY
MALAYSIA
Traceable and Sustainable Palm Oil Value Chain Design
Malaysia is one of the major palm oil exporting countries
Background
Palm Oil is widely used globally in cooking oils, spreads, confectionary and pastry applications as well as in cleaning materials and cosmetics. In the food industry, palm oil as an edible vegetable oil plays a major role in the production of spreads while also being widely used as a cooking oil specifically for frying. Palm oil crop yields from an oil produced per hectare perspective far outstrip traditional oilseed crop yields like sunflower and soya and is thus regarded as a low-cost alternative to these oils as well as certain animal fats.
Challenge
The Southern African palm oil import value chain is largely controlled by a few major importers. Given the vertically integrated nature of these large importers, the need existed to understand and redesign these value chains. An end-to-end, facts first approach was required to understand the dynamics & cost drivers in the value chain.
This involved rigorous in country and empirical analysis from farm level where harvesting of the Fresh Fruit Bunch (“FFB’s”) takes place through to palm mill primary processing facilities, refineries, shipping lanes, local port storage facilities, right up to the point where the palm oil is commercially processed for use in food applications.
Brief/Request
A large Southern African buyer of palm oil requested VCS to do a comprehensive analysis of the Palm Oil value chains from the major palm oil producing countries. The analysis included a redesign and execution of sustainable palm oil imports into Southern Africa.
Approach
A comprehensive Palm Oil value chain analysis was done focusing on palm oil originating from Malaysia and Indonesia. The first step was to map the existing supply chain and value chain and do an “As-Is” study of the current value chain to understand the key drivers of cost and sustainability. The structure of the global palm oil industry and the concentration of plantations and production/refining facilities in Malaysia and Indonesia necessitated a detailed in country analysis from where the FFB’s are harvested at farm through to the refined end-product facilities. This approach ensured a detailed understanding of the value chain and the respective cost drivers as well as a deep understanding of what sustainable palm oil sourcing entails. Through this process, various role players in the industry as well organisations promoting sustainable palm oil were engaged. By following this process, VCS was able to design and implement a sustainable palm oil value chain while also unlocking significant cost and traceability benefits for our customers.
Outcome
Our end-to-end facts first approach identified significant levels of productivity and cost reduction in the value chain but also achieved enhanced levels of traceability back to Farm level which enabled an all-inclusive sustainable value chain.
