104

Int. J. Business and Systems Research, Vol. 5, No. 1, 2011

Application of knowledge management systems in

Malaysian oil palm plantations supply chain
Nitty Hirawaty Kamarulzaman
Faculty of Agriculture,
Department of Agribusiness and Information Systems,
Universiti Putra Malaysia,
Serdang 43400 UPM, Selangor, Malaysia
Fax: +60 3 8946 4142
E-mail: nitty@agri.upm.edu.my

Mohd Ghazali Mohayidin*

Faculty of Business and Management,
Open University Malaysia,
Jalan Tun Ismail,
Kuala Lumpur 50480, Malaysia
Fax: +60 3 2697 8850
E-mail: mohd_ghazali@oum.edu.my
*Corresponding author
Abstract: Vertically integrated firms are streamlining activities in their supply
chain by using knowledge management systems (KMS). Effective KMS need
suitable combination of organisational and managerial initiatives and the use of
suitable information technologies. Malaysian oil palm plantations have been
recognised as leaders in technology development and adoption. KMS in the
plantations started with the use of computerised inventory management
systems. Subsequently, the plantation companies applied KMS to integrate
various functions, including sourcing raw materials, production and support
activities. This paper explores to what extent oil palm plantations have used
KMS in managing their supply chain primary and support activities and how
effective it is in increasing performance. Results of the study showed the
plantation managers agreed that KMS have contributed significantly in
improving the plantations performance. However, greater use of existing KMS
and adopting a more advanced IT will further improve performance at all stages
of the supply chain.
Keywords: supply chain; knowledge management systems; information
technology; primary activities; support activities; oil palm plantations.
Reference to this paper should be made as follows: Kamarulzaman, N.H. and
Mohayidin, M.G. (2011) Application of knowledge management systems in
Malaysian oil palm plantations supply chain, Int. J. Business and Systems
Research, Vol. 5, No. 1, pp.104121.
Biographical notes: Nitty Hirawaty Kamarulzaman is a Senior Lecturer in the
Faculty of Agriculture of the Department of Agribusiness and Information
Systems at the Universiti Putra Malaysia. She received a PhD in Management
Science from Lancaster University, UK. Her research interests include logistics

Copyright 2011 Inderscience Enterprises Ltd.

Application of KMS in Malaysian oil palm plantations supply chain

105

management, supply chain management, e-supply chain, supply management,

e-procurement and knowledge management.
Mohd Ghazali Mohayidin is a Professor in the Faculty of Business and
Management at Open University Malaysia (OUM). Before joining OUM, he
was a Professor at Universiti Putra Malaysia (UPM). He obtained his PhD
(Agric Econ) at the University of Hawaii. While in-service, he received several
academic grants and attended several training programmes such as the
Agribusiness Short Course in Singapore and Sustainable Agricultural
Development Course at Newcastle, UK. He is deeply involved in conducting
research and consultancy as well as writing papers, books and reports in the
areas of agribusiness, sustainable agricultural development and knowledge
management.

Introduction

A rapid development of information technology (IT) in Malaysia has enabled firms in

manufacturing, agro-based and food-based industries improved their knowledge
management systems (KMS) initiatives to produce more value-added products. KMS are
applications of the organisations computer-based communication and information
processing systems to support specific knowledge management (KM) processes (King,
2007). KM processes consist of the generation, acquisition, storage and dissemination of
knowledge (Mohayidin et al., 2007). According to Marwick (2001), efficient and
effective KM typically requires a suitable combination of organisational, social and
managerial initiatives and the use of suitable technologies using IT as an enabler. KM
and IT have been recognised as a strategic tool to increase competitiveness and
productivity of a firm. Even though KM is a relatively young topic in Malaysia, it has
attracted many researchers. Most of these researchers (Hoon et al., 2004; Tehraninasr and
Raman, 2009; Wong, 2008) focused their works, either on information technologies or
management information systems in public organisations or industries. Studies on the
application of KM in the agricultural sector especially in the area of supply chain
management (SCM) have been very scarce.
Malaysian firms are also transacting using their capabilities of KMS and IT
aggressively along their supply chain to enhance their competitiveness. The Malaysian
palm oil industry (MPOI) is considered as one of the pioneers in this endeavour. Since its
beginning, the success of the MPOI has been the result of the ideal climate, efficient
milling and refining technologies, research and development (R&D), effective use of
management tools and marketing strategies. The Malaysian Government has been fully
committed to expand the palm oil industry and encouraged global expansion of palm oil
production. Being competitive and profitable, the oil palm industry has continued to seek
ways to improve performance by using better production and marketing strategies. This
has contributed significantly to the growth of the agricultural sector, which has recorded a
growth rate of 3.04.0% per year. Effective and reliable management tools and strategies,
however, are needed to manage challenges and to preserve stability and competitiveness
of the MPOI in the global market. To preserve the dominant position in the regional and
international markets, the MPOI is striving to improve its productivity and
competitiveness through continual technology innovation. The MPOI is finding effective

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N.H. Kamarulzaman and M.G. Mohayidin

ways in handling its supply chain activities, thus increasing performance of oil palm
production and reducing costs related to production and manufacturing of palm oil
products along its supply chain activities.
With the availability of appropriate and affordable technologies, the question is
whether the MPOI is able to manage its supply chain activities effectively using KMS
and IT. The use of advanced databases, computer software and communication systems
is important for developing a cost-effective supply chain. The purpose of this study is to
explore to what extent the Malaysian oil palm plantations supply chain have used KMS
and IT to manage their supply chain activities, particularly those related to sourcing of
raw material, production and support activities. The study also aims to determine whether
the use of KMS and IT in supply chain activities has contributed to improving
performance. Following this introduction, we will discuss in separate sections the
concept of SCM followed by a short reviewed of KM, research methodology and
discussion of the results. In the last section, we will conclude this paper with possible
recommendations.

Supply chain management

Understanding SCM has become important to companies in an increasingly competitive

global market. It is an enormous topic covering multiple disciplines deploying many
quantitative and qualitative tools (Johnson and David, 1999). Supply chain refers to a set
of three or more entities (organisations or individuals) directly involved in the upstream
and downstream flow of products, services and information from suppliers to customers.
On the other hand, SCM is defined as the planning and control activities of physical
movement of materials, resources and information used in the supply chain process from
raw materials to finished products. Specifically, Simchi-Levi et al. (2003) defined
SCM as
a set of approaches utilized to efficiently integrate supplies, manufacturers,
warehouses and stores, so that merchandise is produced and distributed at the
right quantities, to the right locations, and at the right time, in order to
minimize system-wide costs while satisfying service level requirements.

A more recent SCM definition was by Handfield and Bozarth (2006). They defined SCM
as the active management of supply chain activities and relationships to maximize
customer value and achieve a sustainable competitive advantage. Nowadays, SCM has
received greater attention from companies and has become a successful strategy to link
effectively all trading partners and to ensure cost-effective and timely movement of
materials from suppliers to producers and finally to customers (Premkumar, 2000).
According to Dreyer (2000) and Kumaraswamy et al. (2000), many companies are
implementing SCM to remain competitive because they are able to reduce time to market,
improve product quality, slash production costs and lead times. They constantly adjust
their supply chains to increase efficiency, control costs and improve customer
satisfaction. Sunil and Peter (2001) agreed and said this would enable firms to achieve
maximum profit.
As customers are the major consideration in implementing SCM, creating value based
on customers needs has become an important source of competitive advantage, creating
a shift from push to pull strategies for bringing products to the customers.

Application of KMS in Malaysian oil palm plantations supply chain

107

Coordination of activities and management of relationships in the supply chain can be a

significant source of competitive advantage and bring added value to customers.
Companies that challenge and improve the entire supply chain will eventually improve
customer satisfaction. This is done by sharing information with their suppliers, which will
lead to reduction in costs of inventory, higher inventory turnover, increased sales, reduce
product defects and improve relationships, and more importantly, happier customers
(Beamon, 1999; Borade and Bansod, 2008; Brelin, 1998; Sahay et al., 2006; Soni and
Kodali, 2008). Since companies are looking for competitiveness in the global market, the
primary objective of SCM is to improve internal efficiency (Poirier, 1999). Similarly,
Ricks et al. (1999) supported that the objective of SCM is to improve the coordination
and performance of production and marketing systems. Besides, to preserve the
effectiveness of the supply chain, communication at all levels and all entities and between
trading partners involved in the supply chain must be effective and timely.
Development in SCM is consistent with recent changes in the MPOI. With increasing
competition from other players in other countries, we believe that it is critical for the
MPOI to continue improving its SCM to sustain the competitive edge which it currently
enjoys in the global market. Adding values through supply chain activities will increase
the chances of higher customers satisfaction.

2.1 Value-added strategy along the supply chain

A value can be determined by the utility combination of benefits delivered to the
customer less the total costs of receiving the delivered benefits (Walters and Lancaster,
1999). The value of any product or service is the result of its ability to meet customers
priorities. According to Slywotzky and Morrison (1997), value opportunities can be
distinguished by understanding customers priorities and monitoring the priorities for
change. Value comprises all those activities involved in delivering the product and
service attributes that are considered to be necessary to create customers satisfaction and
to preserve a current, long-term relationship with customers, thus increasing competitive
advantages. It includes the value-adding activities undertaken to bring a product or
service from raw material to provide final customer service and support.
Keeping end customers loyalty are likely the interests of companies. However, many
companies struggle to add value to their products and services. As explained by Kanji
and Wong (1999), various processes can be improved and thus adding value to the
products and finally, pass on the added value to the customers. As a company focuses on
its core competency, its operations can start with the highest value-added activities.
Similarly, Webb and Gile (2001) suggested that companies management should add
values in all activities to improve the companies competency. Lin et al. (2008) also
found that collaborative procurement systems and supply chain maturity had a significant
influence on business performance by adding values along the supply chain. By adding
values in the activities and processes, companies could efficiently push products and
services to market and offer more value to customers. Adding value along supply chain
activities would ensure a close and long-term relationship among supply chain players.
This would encourage them to work together towards a common goal of meeting
customers needs. These ideas were also highlighted by Prahalad and Ramaswamy
(2004). However, they stressed the information infrastructure must be centred on the
customers. The customers are encouraged to participate actively in information search,

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N.H. Kamarulzaman and M.G. Mohayidin

products and services configuration, fulfilment of business processes and feedback from
customers consumption of products and services.

2.2 Adoption of internet technologies for supply chain improvement

Many companies may introduce product and service innovations to the market by
strengthening supply chain activities and meet customers needs for value-added
products. Johnson and Wood (1996) found an essential step to achieve efficiency of the
supply chain is to provide a network of facilities and distribution options that performs
the functions of procurement of materials, transformation of these materials into
intermediate and finished products and distributing these finished products to customers.
Bowersox et al. (2000) argued that to increase effectiveness and to be competitive, supply
chain players must work together and increased coordination in carrying out various
operations. Supply chain integration will create profit, increase market share, strengthen
competitive position and increase value of the company. The integral part of SC
integration is information sharing (Lee, 2000).
While many strategies and approaches could be used to improve performance of the
supply chain, rapid growth in the internet has increased its importance as a tool to
improve supply chain activities. The availability of the latest internet technologies in the
market helps companies to achieve the efficiency of their supply chain activities and
remain competitive in the industry where they operate. Lankford (2004) described that to
explore the effect of internet technologies on the supply chain is to examine the impact
the technologies have on the efficiency, responsiveness, effectiveness and overall
performance of the supply chain. Increasing the speed of supply chain activities promoted
by internet technologies may be the best opportunity to reduce costs, improve
productivity, decrease order cycle time and increase profits. Internet technologies can
offer several benefits in supply chain activities, namely creating fast and accurate
information, adjusting inventory, production and transport systems and reacting quickly
to market changes (Lancioni et al., 2000). Therefore, using internet technologies would
lead to increased customers satisfaction and better companies performance.
When firms are conducting business supply chain activities electronically, managing
relationships will become an important factor in ensuring the success of the business.
According to Alshawi (2001), supply chain players must be transparent in providing
relevant and accurate information along supply chain activities. They must also be
flexible in offering business partners to make changes in their operations or products
when necessary. Bradley (2000) also supported the notion that if internet technology is
applied correctly, it should be able to link all business partners in a supply chain and they
can benefit from information sharing, promoting speed, efficiency and collaborative
planning. So, advanced information technologies are becoming important management
tools in SCM, where organisations are changing the way they do business to gain
competitive advantages (Chan and Chan, 2008).

2.3 KMS in SCM

Knowledge has long been recognised as a valuable resource for organisational growth
and sustaining competitive advantage (Gottschalk and Karlsen, 2008). And, KM has been
widely practiced by many organisations as one of the most promising ways of achieving
success in the information age (Malone, 2002; Pillania, 2007). KM provides new

Application of KMS in Malaysian oil palm plantations supply chain

109

opportunities to create and retain greater value from supply chains based on core business
competencies (Tiwana, 1999). According to Hult et al. (2004), capitalising on knowledge
can create superior performance in supply chains but only if the relative emphasis on
various knowledge elements such as tacitness, accessibility and responsiveness matches
strategy. KMS can be used in decision making that will lead to improved SCM
competence. Wadhwa and Saxena (2005) believed that KM has great potential to offer
opportunities to create and retain greater value within the supply chain players. This,
however, required that the implementation of KMS in the supply chain be enriched by the
judicious use of IT which will result in improved flow of information.
Lau and Lee (2000) explained that almost all companies would need to have a better
information flow for easier and quicker access to required information across
organisational and geographical boundaries. Rapid flow of information on products
particularly on the status of orders and deliveries are important for a smooth transaction
between customers and companies. Hill (1999) showed that customers prefer to do
business with companies who can provide quicker order turnaround, more frequent
shipment, special packaging, labelling, pallet builds and other value-added services.
Therefore, companies must quickly implement KMS which focus on technologies and
systems that support all activities and the flow of information along the supply chain.
Good KMS help companies to maintain their competitiveness by building strong relations
with employees, customers and upstream and downstream suppliers and partners
(Thomas et al., 2004). Wu (2001) described that the principles of applying KM in the
supply chain are for coordination, information and knowledge sharing among the supply
chain players. Besides, these principles allow companies to develop good strategies,
methods, policies, cooperation mechanism and technologies on KM in SCM (Dwivedi
and Butcher, 2008).
Most supply chain systems such as vendor managed inventory (VMI), collaborative
planning, forecasting and replenishment (CPFR), enterprise resource planning (ERP) and
e-procurement can easily implement timely and effective knowledge sharing among the
supply chain players. KMS can also provide tools to manage vast amount of data that
exists across the supply chain, conduct sophisticated analysis on these data and develop a
better understanding of supply chain performance and opportunities. In a complex supply
chain networks, it is important that organisations understand how knowledge is created
and shared around their core business processes and thus it will improve their
performance significantly (McLaughlin, 2009). Flexibility in the KMS is also important.
Fantazy et al. (2009) found that strategic decision making and information systems
flexibility had positive impact on supply chain performance.

Theoretical framework

Prahalad and Ramaswamy (2004) discussed the importance of providing new

infrastructure capabilities and new functional and governance capabilities to create values
for customers. The performance enhancement in Figure 1 measures value-added supply
chain activities, measured using several indicators such as cost-effectiveness, better
transportation decisions and better communication with suppliers and others. Tables 1
and 2 (as shown in Section 5) show the list of items used to measure performance
enhancement for sourcing of raw materials and production activities, respectively. The
main independent variable of this study focuses on the effectiveness of KMS application.

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N.H. Kamarulzaman and M.G. Mohayidin

Referring to previous studies (Borade and Bansod, 2008; Michael et al., 2002; SimchiLevi et al., 2003), this variable includes items such as the effects of providing IT
infrastructure capabilities (see Table 3 for details). The other independent variables which
are deemed to be relevant in this study include number of field and administrative
workers, and qualification of the managers.
Figure 1

Factors affecting performance enhancement

Methodology

4.1 Data collection

The research instrument used in this study comprised a structured close-ended
questionnaire. A structured questionnaire is flexible because useful and practical
questions about a given topic can be asked, thus allowing for flexibility in the analysis
(Babbie, 1995). The questions focused on the respondents agreement or disagreement
regarding the plantations strategies in enhancing performance. The structured closeended questionnaire with a list of answer choices based on a four-point scale (1 =
strongly disagree, 2 = disagree, 3 = agree and 4 = strongly agree) was designed to get
data from respondents. As described by Sekaran (2000), a closed-ended questionnaire
helps respondents to choose among several alternatives and helps researchers to code the
information easily for subsequent analysis. The questionnaire also included questions
pertaining to companys profile, respondents profile and current infrastructure.
The questionnaire was validated with the help of personnel from the Malaysian Palm
Oil Board (MPOB) and academic staff from Universiti Putra Malysia (UPM). Further
validation was made through a pilot test whereby ten questionnaires were sent to oil palm

Application of KMS in Malaysian oil palm plantations supply chain

111

managers for their feedback. The sampling frame for the study was obtained from the list
of plantations compiled in the MPOB directory. Only those with internet connections
were included as the sampling frame. This gave a total number of 550 oil palm
plantations, which was about 40.0% of the total population. A large number of oil palm
plantations were in the rural areas; IT facilities and infrastructure in these areas were
limited.
The study used a stratified random sampling, where the population was divided two
strata, Peninsular Malaysia (West and East Coast) and East Malaysia (Sabah and
Sarawak). The sample from Peninsular Malaysia and East Malaysia was taken at the ratio
of 70:30. Questionnaires were mailed to the respondents who were the managers of the
selected oil palm plantations. Follow-up calls were made a month after the questionnaires
were sent out. Out of 196 questionnaires sent out, 80 responses were returned and usable
for further analysis giving a 41.0% response rate.

4.2 Data analysis

The study used descriptive analysis and regression model. In the descriptive analysis,
frequency and percentage were used to describe profiles of the oil palm plantations. Mean
was used to identify strategies that have contributed to enhance the performance of oil
palm plantations. Mean was also used to determine to what extent the oil palm
plantations have used KMS to manage primary and support activities along the supply
chain. The mean was calculated based on the managers responses to each of the relevant
questions about the primary and support activities. A mean score of 3.0 or above
indicated that the oil palm plantations had managed their primary and support activities
effectively.
Regression models were used to explore relationships between one continuous
dependent variable and several independent variables or predictors. The analysis would
be able to show how well a set of variables were able to predict a particular outcome of
the dependent variable. In this study, two sets of regression equations were estimated, one
for performance improvement due to sourcing of raw materials activities while the
second was for performance improvement due to production activities. The regression
equations are shown below:
Y1

f  A, SF , SA , Q, LEC , LWC 

(1)

Y2

f  A, SF , SA , Q, LEC , LWC 

(2)

where
Y1 = performance improvement due to sourcing of raw materials activities (mean score)
Y2 = performance improvement due to production activities (mean score)
A = KMS application for primary activities (mean score)
SF = field workers (number)
SA = administrative workers (number)
Q = qualification of the respondents (1 = high school, 2 = diplomas and below,
3 = degrees)

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N.H. Kamarulzaman and M.G. Mohayidin

LEC = 1 if plantation is located in East Coast of Peninsular Malaysia, 0, otherwise

LWC = 1 if plantation is located in West Coast of Peninsular Malaysia, 0, otherwise.

Results and discussions

Figure 2 shows that about 49.0% of the oil palm plantations in the study were from East
Coast region which consists of Kelantan (6.25%), Terengganu (6.25%) and Pahang
(36.25%). West coast region covered about 26.0% of the respondents which include
Johor (12.5%), Negeri Sembilan (8.75%), Selangor (1.25%) and Perak (3.75%). The
other 25.0% of the oil palm plantations were located in East Malaysia, where Sabah and
Sawarak, accounted for 21.25% and 3.75%, respectively.
The questionnaires were mostly completed by managers, which accounted for 92.5%
while assistant managers completed 7.5%. Most of the managers and assistant managers
had bachelor degrees (74.0%); whereas, the other 26.0% had diplomas and lesser
qualification. Slightly more than 36.0% of the oil palm plantations hired between 101 and
150 field workers. The highest percentage (56.3%) of the oil palm plantations had fewer
than 10 administrative staff and only 2.5% had more than 21 administrative staff.
Figure 2

Oil palm plantations based on regions

East Malaysia,
25%

East Coast,
49%

West Coast,
26%

5.1 Improving performance through sourcing of raw materials activities

Table 1 presents the mean scores of the respondents view regarding their sourcing of raw
materials activities. The result showed the highest mean score of 3.13 represents the
activity of buying raw materials in large quantities by the managers to save cost. Another

Application of KMS in Malaysian oil palm plantations supply chain

113

important mean score (3.10) was for the use of computerised inventory management
systems (CIMS) to manage raw material inventories. The use of CIMS in the oil palm
plantations was required to ensure better management of raw materials. The incoming
and outgoing of raw materials data that were recorded in a computerised system allow
managers to make better decisions. The managers were allowed to choose their own
suppliers to ensure a smooth progress of operations in the oil palm plantations (mean
score of 2.96). One of the main criteria required by the managers was that their suppliers
were able to supply quality raw materials. The managers agreed that the current method
of transporting raw materials from their suppliers was the most cost-effective method
(mean score of 2.91). The overall mean score for sourcing of raw materials activities was
2.76. This finding suggests that the performance of sourcing of raw materials activities
was moderate; nevertheless a few activities have been well managed by the plantations.
On the average, 52.0% of the respondents agreed that their plantations have taken the
appropriate sourcing of raw material activities to improve performance; however, still a
significant percentage (33.0%) did not believe that they have done so.
Table 1

Sourcing of raw materials activities in enhancing performance

Activities

Number of responses
SDA DA
A
SA
9
17
43 11

Mean
score
2.70

The company obtains raw materials from the nearest

suppliers

The company is free to choose suppliers that can best

satisfy the needs

13

39

22

2.96

The company uses own transportation to transport raw

materials

42

24

2.39

The current method of transporting raw materials from the

suppliers to the company is the most cost-effective method

15

54

10

2.91

In order to save cost, the company buys raw materials in

large quantities

14

36

28

3.13

In order to save cost, the company signs long-term contract

with suppliers

21

39

15

2.80

The company uses IT facilities (such as e-mail, the internet, 11

etc.) to communicate with suppliers
6
The company has good IT infrastructure to enable it to

35

31

2.33

35

37

2.44

12

48

20

3.10

16

54

2.89

1
11 The current method of managing inventory used by the
company is better than the methods used by the competitors
Overall mean score
Average response percentage (n = 80)
5.0

24

53

2.70

conduct the business with suppliers effectively and

efficiently
9

The company currently used CIMS to manage inventories

10 The current method of managing inventory used by the

company is the most cost-effective method

2.76
28.0 52.0 15.0

Note: SDA: strongly disagree (score = 1); DA: disagree (score = 2); A: agree (score = 3);
SA: strongly agree (score = 4).

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N.H. Kamarulzaman and M.G. Mohayidin

5.2 Improving performance through production activities

Table 2 presents the mean scores of the respondents agreement regarding the
effectiveness of various production activities in improving performance of the oil palm
plantations. The highest mean score for production activities was related to best method
of hiring labour (3.30). Being labour-intensive, hiring the right workers is usually critical
and this could affect performance greatly. Another important mean score (3.18) was for
the strategy of providing the best terms of service to the workers. Sufficient facilities,
workers welfare and attractive salary are examples of good term of service. Another
important activity carried out by the plantations was the use of the most cost-effective
processing technologies and the strategy of owned processing plant (mean score of 3.06
and 3.02, respectively). Most of the oil palm plantations used their own processing plants
to reduce costs of operation as well as overheads. Finally, the use of CIMS was another
important production activity (mean score of 2.91) in the oil palm plantations. The
overall mean score was 2.94, showing that the performance of oil palm plantations has
been increased by a well-defined production activities. Compared with the sourcing of
raw material activities, most of the plantations gave particular attention to their
production activities. Slightly more than 80.0% of them agreed that they have taken the
appropriate strategies to improve the performance of their production activities.
Table 2

Production activities to enhance performance

Activities

Number of responses
SDA DA
A
SA
2
15
54
9

Mean
score
2.88

As much as possible the company utilises machines to produce

the products (e.g. fresh fruit bunch (FFB))

For the companys operations that are labour-intensive,

the company employs the best method of hiring labours
(e.g. contract labours, part-time labour, etc.)

52

26

3.30

The labours employed by the company are highly skilled in

their job

34

38

2.60

The company tries the best to make the employees happy by

providing the best terms of service in the industry

56

19

3.18

The company uses CIMS to manage finished goods inventory

12

57

2.91

The finished goods inventory systems used by the company are

better than the methods used by the competitors

27

50

2.63

In processing the inputs into finished products, the company uses

own processing plant (e.g. palm oil mill) in order to reduce costs

11

50

17

3.02

If the company does not have own processing facilities, its will
look for the most cost-effective way at processing the products
(such as by utilising the nearest independent processing facility)

65

10

3.06

14

55

2.85

2.0

17.0

66.0

15.0

When shipping the finished goods to the customers, the company

uses the cheapest mode of transportation
Overall mean score
Average response percentage (n = 80)

2.94

Note: SDA: strongly disagree (score = 1); DA: disagree (score = 2); A: agree (score = 3);
SA: strongly agree (score = 4).

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115

5.3 Application of KMS in primary activities of oil palm plantations

Among the primary activities as listed in Table 3, the highest mean score (3.04) was
about the use of information technologies to manage inventory. This is consistent with
findings of other studies such as the one by Beierlein and Miller (2000). They found that
many firms are directing their searches for greater profit towards finding ways to reduce
their operating costs by using computerised inventory systems.
The results also revealed that KM has enabled the oil palm plantations to upgrade the
quality of products and services (mean score of 2.90). However, it is argued that KM
could not help to upgrade oil palm production because certain operations in the oil palm
plantations do not require the use of IT. However, for the activities in which IT could
play a significant role, there was an agreement by the managers that KM could upgrade
the quality of the services. The overall mean score for KMS support on the oil palm
plantations primary activities was 2.76, indicating that the oil palm plantations were not
effectively using KMS to improve the primary activities along the supply chain. The
overall result shows that 62.0% of the respondents agreed that the application of KMS in
the primary activities, both sourcing of raw material and production, has improved
performance. However, still a substantial number of them, about 29.0%, disagreed.
Table 3

KMS support on primary activities

Activities
1

The use of KM has enabled the company to reduce the

cost of transportation of raw materials from the
suppliers
2 The use of KM has speed up the delivery of raw
materials by the suppliers
3
The use of KM has enabled the company to store and
retrieve the supplies effectively and efficiently
4 The use of KM has enabled the company to manage
inventory better
5
The use of KM has enabled the company to
differentiate the products from those of its competitors
better
6
The use of KM has enabled the company to deliver the
products to customers faster
7 The use of KM has enabled the company to provide
better support service to customers
8
The use of KM has enabled the company to monitor
activities carried out by it competitors better
9
The use of KM has enabled the company to upgrade the
quality of its products or services
Overall mean score
Average response percentage (n = 80)

Number of responses
SDA DA
A
SA
5
29
43
3

Mean
score
2.55

23

50

2.65

20

54

2.75

58

13

3.04

24

48

2.65

21

46

2.75

15

54

2.84

22

44

10

2.75

18

46

14

2.90

4.0

25.0

2.76
62.0 9.0

Note: SDA: strongly disagree (score = 1); DA: disagree (score = 2); A: agree (score = 3);
SA: strongly agree (score = 4).

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N.H. Kamarulzaman and M.G. Mohayidin

5.4 Application of KMS in oil palm plantations support activities

In the oil palm plantations, KM initiatives have also been applied to various activities
supporting the two main primary activities. Table 4 reveals that most of the respondents
carried out better analysis from the data captured by using IT (mean score of 3.01). As
indicated by Beierlein and Miller (2000), IT gave managers the ability to collect, measure
and analyse all data in the systems in a timely and cost-effective manner. The results
indicated that with the use of KMS, information obtained from various departments or
units could help management to make better decision and help managers and support
staffs to communicate with one another (mean score of 2.99). This would allow the oil
palm plantations to have better means of disseminating information (mean score of 2.98).
The result also revealed that KMS has promoted internal communication in the oil palm
plantations (mean score of 2.91). A good communication within the oil palm plantations
allowed employees to exchange ideas extensively. The overall mean score was 2.83. This
suggests the application of KMS has supported the managers to manage their support
activities. The results in Table 4 show an overwhelming percentage (83.0%) of the
respondents agreed that the application of KMS has been helpful for them to work more
efficiently and effectively in supporting the primary activities of the oil palm plantations.
Table 4

Use of KMS in oil palm plantations support activities

Activities

Number of responses
SDA DA
A
SA
2
4 40
34

Mean
score
2.70

With the IT infrastructures available in the company,

the company is able to work with headquarters and
other parties better than ever before.

Different functions within the company are well linked

electronically

18

48

11

2.74

Technology greatly facilitates communications

internally

11

53

14

2.91

Technology greatly facilitates communications

externally

15

53

10

2.69

The use of KM has enabled the company to improve

communication with all the employees

19

49

10

2.64

The use of KM has enabled the various

departments/units to obtain information for better
management decision making

56

16

2.99

The use of KM has enabled the support staffs,

executives and managers to do better analysis from
the data captured by the KMS

50

21

3.01

11

52

16

2.98

The use of KM has enabled the support staffs,

executives and managers to disseminate and share
information with the relevant parties faster
Overall mean score
Average response percentage (n = 80)

2.83
2.0 15.0

63.0 20.0

Note: SDA: strongly disagree (score = 1); DA: disagree (score = 2); A: agree (score = 3); SA:
strongly agree (score = 4).

Application of KMS in Malaysian oil palm plantations supply chain

117

5.5 The effects of KMS in primary activities on performance

5.5.1 Sourcing of raw material activities
The primary activities of the oil palm plantations comprised mainly sourcing of raw
materials activities (Y1) and production activities (Y2). These were treated as dependent
variables in the regression analyses. Performances of the major primary activities were
expected to depend on several independent variables. These include application of KMS
for primary activities (A), number of field workers (SF), number of administrative
workers (SA), qualification of the respondents (Q) and location of the oil palm plantations
(LEC, LWC). Tables 5 and 6 show results of the regression analyses.
The dependent variable in Table 5 was performance due to sourcing of raw materials
activities. Value of the R2 was 0.252, which means that the model explained 25.2% of the
variances in the performance of sourcing of raw materials activities. Among the
independent variables, only one was found to be statistically significant. The result
clearly indicated that the application of KM in the sourcing of raw materials activities
significantly improved the plantation performance. The other independent variables,
though important in carrying out the activities, were not statistically significant in
enhancing performance.
The dependent variable in Table 6 was performance improvement resulting from
production activities (Y2). The value for R2 was 0.250, which means that 25.2% of the
variations in improvement of performance due to production activities have been
considered in the regression estimation. The R2 was relatively low due to the following
reasons. Firstly, there were many factors which directly affected performance such as
land fertility, labour productivity, capital expenditure and management. Secondly, cross
sectional or survey data generally produce a relatively low R2. In this study, we
specifically focused on the effect of KMS and other human factors on performance of the
oil palm plantations.
From Table 6, only one independent variable was found to be statistically significant.
The result thus confirmed that the application of KM in production activities has had a
significant effect in enhancing performance of the oil palm plantations. The other
independent variables, though important in carrying out the various production activities,
were not statistically significant in enhancing performance.
Table 5

Factors enhancing performance of sourcing of raw materials activities

Variable
Constant
Application of KMS (A)
No. of field workers (SF)
No. of administrative workers (SA)
Qualification of the respondents (Q)
Located in the east coast (LEC)
Located in the west coast (LWC)
R
R2
Adjusted R2
SE of the estimate
Note: Dependent variable: Y1.

SE
T-statistic
Coefficient (E)
18.046
9.075
1.989
13.623
2.880
4.731
0.003
0.016
0.239
0.150
0.172
0.138
0.358
1.499
0.920
0.542
1.974
0.275
1.087
2.247
0.484
0.502
Mean of dependent var.
0.252
F-statistic
0.191
Significant of F-statistics
6.96625

Significant
0.050
0.000
0.812
0.864
0.361
0.784
0.630
48.529
4.102
0.001

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N.H. Kamarulzaman and M.G. Mohayidin

Table 6

Factors enhancing performance of production activities

Coefficient (E)

Variable

SE

T-statistic

Significant

17.385

2.179

7.977

0.000

Application of KMS (A)

3.255

0.688

4.731

0.000

No of field workers (SF)

0.001

0.005

0.223

0.824

Constant

No of administrative workers (SA)

0.005

0.048

0.099

0.921

Qualification of respondent (Q)

0.274

0.479

0.572

0.569

Located in the east coast (LEC)

0.431

0.630

0.684

0.496

Located in the west coast (LWC)

0.133

0.720

0.184

0.854

0.500

Mean of dependent var.

4.970

R2

0.250

F-statistic

4.050

0.188

Significant of F-statistics

0.001

Adjusted R

SE of the estimate

2.22929

Note: Dependent Variable: Y2.

Results of both regression analyses revealed that the oil palm plantations were focusing
on activities and strategies to improve the overall performance of their activities. Most of
the respondents agreed that the application of KM initiatives have indeed contributed
significantly to this cause. By building value-added initiatives around the primary
activities, the oil palm plantations have efficiently push products and services to market
and offer more value to their customers. Thus, adding value in supply chain activities
using KMS tends to establish a close relationship that makes it easier for the supply chain
players to work together and arrive at a common goal of meeting the needs of the
customers.

Conclusion and recommendations

SCM has become a successful strategy to link effectively all trading partners and ensure
cost-effective and timely movement of materials from raw material suppliers to final
customers of the finished products. To remain competitive, companies are constantly
faced with challenges to reduce time to market, improve product quality and slash
production costs and lead times. The introduction of information and communication
technologies and the availability of internet technologies in the market have helped
companies to achieve greater efficiency of their supply chain activities and remain
competitive in the industry where they operate. Using advanced internet-based KMS
offers a controlled knowledge sharing environment, where business data and processes
can be used effectively which is important for competing in a challenging business
environment.
Results of this study clearly supported the notion that the application of KMS with IT
as the enabler has significant and positive impacts on increasing the performance of
organisations. In the MPOI, KMS with a strong IT support has played a significant role in
supporting supply chain activities. The study revealed that most of the oil palm managers
agreed that the KMS have, to some degree, helped the oil palm plantations increased their
performance. However, the overall mean score, ranging from 2.76 to 2.94 out of 4.0, was

Application of KMS in Malaysian oil palm plantations supply chain

119

relatively low. This shows that current activities and strategies undertaken by the
plantations have not completely achieved the potential improved performance they hoped
for. One reason is that the oil palm plantations have limited access to IT facilities and
infrastructure, which tend to limit the application of KM initiatives. Based on the
findings, the oil palm plantations could further improve performance of their supply
chain activities by applying KM practices more vigorously using the available IT
infrastructure. Increasing the skills of managers and staffs in effective KM application is
important and this can be done by conducting more training sessions and ensuring that
they use it as part of their routine work process. The existing IT infrastructure and
accessibility to internet facilities should be upgraded so that KMS can be applied more
effectively to improve performance at all stages of the supply chain of the oil palm
plantations. The findings are also useful to other researchers, IT companies and policy
makers to design a better IT infrastructure capabilities and policies. Findings of the
current study relied heavily on the returned mail questionnaires. The percentage of
returned questionnaires was lower than expected. The managers responses were also not
verified. For future studies, we would suggest the number of responses and usable
questionnaires be increased by conducting personal visits and interviews with
respondents.

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