YINSON
Transportation Sdn Bhd is established in 1983 as a transport agency in Johor
Bharu. The company has incorporated with YINSON Holdings Berhad in 1984. In
1997, the company expanded its services to container haulage and high-end
logistics. The company logistic network has extended to all major cities in
Peninsular Malaysia and they have more than 200 vehicles which consist of box
van, tipper, cement tanker, mobile crane/crane lorry, low loader, general cargo
lorry and pole trailer. The company has branches in Kuantan, Pahang, Port
Dickso, Terennganu, Pulau Pinang, Singapore and Negeri Sembilan. Today, the
company has over 400 employees and 200 drivers.
There are over two hundred of transportation
companies in Malaysia. International oil price keep on increasing and government
has reduced its subsidies for oil. This situation leads to national oil price
increased. It affects all industry especially transportation industry where
fuel is the main operating cost.
When YINSON increases its transportation
price, some customers will seek for other transportation company which can offer
them a lower price compared to YINSON. When this situation happens, the
quantity demanded for YINSON transport services falls.
As for the income effects, when the
price of transportation service increases, consumers who are not willing to pay
more, then the consumptions of the services will decrease. Hence, the quantity
demanded fall. Both situations have changes in demand curve as the demand move upwards
along the demand curve and the quantity demanded decreased which has showed in
the graph below.
There are some determinants of demand
which included productivity of manufacture factory and prices of related goods
and preferences.
In a manufacturing factory, if the
productivity of the factor increases, the factor will require more
transportation services to import and export their goods to their customers. It
increases the transportation service demand. Hence, the demand curve will shift
rightwards. The quantity supplied increases as it moves upwards along the
supply curve. As a result, the equilibrium price raises from P to P1and
quantity demanded increases from Q to Q1.
Besides using transportation services to
deliver goods, consumers can use air transportation or sea transportation too.
If the price of related services such as air transportation falls, consumers
will consume more on air transportations where it costs less and takse lesser
time. It decreases the quantity demanded for transportation service. So, the
demand curve shifts leftward and there is a movement down along the supply
curve as the quantity supplied decreases. According to the graph showed above,
the quantity demanded decreases from Q to Q1and the equilibrium price decreases
from P to P1.
There are some determinants of supply in
transportation industry. First, price of factors of services will affect the
quantity supplied. In transportation industry, fuel is the main factor that
affects quantity supplied.
When government announces national fuel price
increases, transportation operating cost will increase too. Transportation
companies will increase its price by approximately 10% in order to cover its
cost (martin
carvalho, 2013). Then, raising of fuel
price decreases quantity supplied and the supply curve shifts leftwards. As the
graph showed above, quantity demanded decreases from Q to Q1 as the price
increases from P to P1. In this stage, the equilibrium price raises but
equilibrium quantity decreases.
Another determinant of supply is number
of suppliers. In Malaysia, there are more than 283 transportation companies. Nowadays,
the number of transportation companies has increased compared to before. The
higher the number of suppliers, the greater is the quantity supplied. The
supply curve will shift rightwards and quantity supplied will increase from Q
to Q1while the price will fall. It is due to the market has become more
competitive. Suppliers are willing to supply their service at P1 as long as it
can cover their cost.
In the market, price elasticity of
demand in transportation industry is relatively elastic. It is because of
closeness substitute of transportation companies. When the price rises,
consumers will find another transportation company which does not change its
service price. However, if the price of transportation service charged becomes
higher, it does not affect much on the quantity demanded in YINSON. It is
because the company has its own loyalty customers. So, when the price of
transportation service rises, their customers will not seek for substitutes.
Hence, it is relatively inelastic demand in YINSON Transportation.
Economics
of scale in YINSON will be discussed at below.
As YINSON growing and expanding, it
needs “larger and comprehensive fleet of vehicles to facilitate their
transportation service”(YINSON). By getting different heavy transports, YINSON
is able to provide more transportation service. It is because different types
of lorry or trailer will be used for transporting different goods. For example,
a trailer usually will be used to transport a container.
Lorry is a heavy machinery which
requires long term on-going maintenance. It also needs to be inspected by PUSPAKOM
for every 6 months to make sure the vehicle is safe to travel on the road and to
reduce the risk of accident caused by machinery failure. In order to manage the
maintenance of a vehicle, most of the transport companies will purchase the
same brand or same line of vehicle such as FUSO, MITSUBISHI, VOLVO and so on. YINSON’s
foremans will be familiar with the cause of breakdown of a lorry’s and repair
it quickly to be ready to transport goods. Its purchasing department is able to
purchase certain spare parts and engine oil such as oil filter, side mirror,
fluorescent sticker, bulb, power steering oil and so on in bulk where it is
able to get a lower price.
As YINSON Transport expanded since 1997,
the company has become larger as it needed specialized departments to control
the business. The organisation chart has expanded become wider and more
specialized as example showed at the below.
When YINSON is a small firm with few
management staffs and few drivers, the workers are multi-tasking and equipped with
many skills. A clerk will have to issue invoice, take orders from customers,
inform the driver the delivery location, pay EPF, SOCSO, taxes and so on. Even
a driver also must know basic repair knowledge and maintain the lorry in a good
condition. Only when there is a major break down which the driver cannot solve,
the lorry will be sent to workshop for repairment. Since YINSON expended into
many branches, it requires specialised talent to ensure the growth of the
business and each branches will share a same vision and goal to succeed the
business. Thus, YINSON’s managing director, Lim Han Weng will lead his customer
service supervisor, marketing manager, workshop supervisor, finance and
administration executive to provide a better transportation service. These specialised
talent will produce more in depth analysis in their field and thus a greater efficiency
and effectiveness can be gained.
Diseconomies of Scale
When YINSON has expanded become larger,
management problems of coordination usually occur. The relationships between
each departments become weak because they will not have many interactions with
each other as the work has been specialized. Furthermore, a non-managerial
employee will face a problem when he or she is doing his or her work if the
works need to be decided by two different managers. As a result, work progress
becomes slower. Besides that, as the company becomes larger, they will need to
hire professional employees. As usual, any employees who are professional with
years of experiences will demand for higher wages. When YINSON lacks of the
professional employees and have to retain those employees, the decision to
retain them will push up the cost of the company.
In transportation industry, government
intervention includes price floor-minimum wages. “In July 2012 the Malaysian
government announced that workers in Malaysia would receive minimum wages of RM
900[USD291] (for Peninsular Malaysia) and RM800 [USD259] (for Sabah and
Sarawak) and the announcement came into force from 1 January 2013” (IndustriALL
Global Union).
This brings a negative impact for
transportations services industry. For example, before the government imposed
the minimum wage, the YINSON company has employed 7 clerks for 7 different
branches to assist in control the transportation services. After the minimum
wage imposed, the quantity of officer that the company can afford to employ
decreases. At the same time, offer of high wage at W1 leads to quantity supplied
of labour increases. When the quantity supplied of labour greater than quantity
demanded for labour, it creates unemployment. At the same time, deadweight loss
arises. The firm’s surplus and worker’s surplus are decreased as potential loss
of job searching.
“Goods and Service Tax (GST) is a
consumption tax based on the value-added concept. GST is imposed on goods and
services at every production and distribution stage in the supply chain
including importation of goods and services” (NBC,2013). When
government imposes GST tax in this industry, the amount of tax will be shared
by both consumer and supplier. It is because there are many closeness substitutes
in this market. From the graph showed above, the firm will bear the tax more
than consumer because it wants to retain customers since the demand is elastic.
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Reference
Dr. Jean-Paul Rodrigue , Dr. Theo
Notteboom. Transport Supply and Demand.
Available from: http://people.hofstra.edu/geotrans/eng/ch7en/conc7en/ch7c4en.html
[accessed 13 October 2013]
Goh, Lian Pin (2013) Face to Face communication to Goh Sin Yi, 23 October.
Iman Atira, Leong Ming Huey, Michelle
Mondon, Yang Yaxi. Price Floor- Minimum
Wage in Malaysia. Available from: http://microarticles04.blogspot.com/2012/10/price-floor-minimum-wage-in-malaysia.html#
[Accessed 12 October 2013]
martin
carvalho, sira habibu, ivan loh
(2013). Lorry owner increases fee by 15%. Available from: http://www.thestar.com.my/News/Nation/2013/09/11/Lorry-owners-increase-fees-by-15-Rise-is-reasonable-and-justified-says-association.aspx
[Accessed 12 October 2013]
NBC Group of Companies. (2013) Malaysian Goods and Services Tax (GST). Available from: www.nbc.com.my/goods-and-services-tax-gst.html [Accessed 23 October 2013]
YINSON HOLDINGS
BERHAD. (2013) Available from: http://www.yinson.com.my/ [Accessed 13 October 2013]
