3.

3 KTMB Current Supply Chain (SC) & Logistic Situation

3.3.1 KTMB’s Strength

3.3.1.1 Electrified Double Track Project

The completion of the electrified double-track project from Ipoh to Padang Besar
extended the railway network to 774km at the percentage of 47% (AJTP, 2015). This
makes the rail more efficient on the freight service. It reduced the fuel consumption
which become more eco friendly and decline the pollution of environment. By using the
electrical, KTMB not only shorten customer travel time but also being safer. The double
track speed up the transportation of cargo with 6 times which is greater efficient
compared to the road based transport. As an example, the rail trains fuel consumption is
lower 80% by comparing with trucks. Currently, Malaysia government provides the
subsidy 20% to the fuel price that sold to the public. Since the purchase of fuel by KTMB
is reduced, it helps the government annually save the average RM710 on fuel subsidy.
The project is obtaining the energy from the national grid. Natural gas is using to power
over 70% of grid; it is much cleaner than by using diesel or petrol for train freight.

Electrified Double Track Project transforms the freight service which allowing them to
compete with their competitors by offering better freight services time, frequency,
reliability, quality and safety. For instance, the heavier loading by using modern trains
may run 160kph of the speed on the straight alignment. Over 60% of cargo traffic is
accounting by Kedah Line which include KTMB’s landbrigde service plying Bangkok to
or from Port Klang. From Southern Thailand to Penang Port, KTMB haul extensive
cargoes such as rubber for the purpose to export to the Far East. In nature, for the purpose
of export, Southern Thailand not only geographically but also economically suitable by
using rail via Penang Port.

3.3.1.2Increment of Cargo Transported by Rail

Even that Malaysia rail freight system constructed the volume of container is far smaller
than road freight, but it is still using for carry cement, containers, petrol, processed food
and other minerals from the departure place to another destination. The 3 trends
determine the Malaysia railway cargo transported such as increase, decrease and stagnant.
The positive flow is on the haulage of cement and clinker, as well as processed food and
drinks which the cargos volume had increased from 2004 to 2013. In contrast, KTMB
reveals the sharply decrease and stagnant on the haulage of petrol, mineral oil, containers
and chemical as well as ore and other minerals from 2004 to 2013. Initially, the rail
increase the loading volume in the year between 2004 and 2008, then it started to decline
the volume onward to 2012. Currently, the rail cargoes transport volume is showing an
increment from 2013.

3.3.1.3 Joint Venture

MMC Corporation Berhad form a joint venture with KTMB by entering the shareholders’
agreement to address rail freight transport business and other correlated business regard
in rail cargo sector. The joint venture is known as KTMB MMC Cargo Sdn Bhd in the
statement. KTMB IS holding 51% of equity interest and MMC group get the remaining
of equity within the company. Noh (2015) reveal that the incorporation within the
company is timely as the KTMB MMC will raise the rail inter-terminal transfer (RailTT)
frequency among the ports. It offers an efficient and reliable RailTT service by
synchronizing the vessels arrival and departure at the relative ports. Through the
proprietorship or stake within the Port of Tanjung Pelepas Sdn Bhd, Johor Port Bhd,
Northport (M) Bhd and Senai Airport Terminal Services Sdn Bhd, MMC has an existence
in the transportation segment established under its port and logistic (P&L) division. The
KTMB MMC Cargo’s provide the complement to the transportation chain subordinate its
port and logistic division. KTMB able to utilize MMC’s strength to increase market share
through the established of KTMB MMC Cargo, MMC offerS the needed synergy impetus
to the joint venture (Tijian, 2015). The joint venture have access to KTMB’s rail network
connecting to major seaports in Peninsular Malaysia, such as Port Klang and Penang Port,
and other seaports owned and operated by the MMC group.

3.3.2 KTMB’s Weakness in Supply Chain

3.3.2.1 Lack of Infrastructure

Rail freight is less important compare to road freight. This is because the road freight
transport the container with the proportion is 19 times which greater than transporting by
rail freight (MOT, 2013). The model shifting from seaport to the hinterland is
comparatively insignificant affected by the imbalance of freight transportation within
road and rail. Highly dependent on a single mode of transportation will influence the just
in time deliver and just in sequencing delivery, distracting from the process of container
consolidation and deconsolidation. The low frequency of the rail freight affects the
production efficiency. All Malaysian seaports connected with rail network. However, rail
fright is insufficient efficiency due to the lower frequency by comparing the road
transportation. Referring to world mean capacity, 66TEUs per trip, Malaysia rail fright
carry 60 TEUs per trip consider as lower capacity (Woodburn, 2011). During the
interview sections, Malaysia rail system conducted as a factor that affects stakeholders to
neglect this mode when transporting containers.

3.3.2.2 Lack of Flexibility

Other than that, the availability and quality of rail connectivity also conducted as a key
factor for greater share of rail in the ports (Ghaderi et al., 2015a) Current transport
development unable to match with the country current development and urbanization,
especially mass forms of transport like rail transport. KTMB has not yet to develop a
railway network comprehensively which able to act as a backbone to transport freight
especially when transporting larger amount of products or deliver to rural places. There is
no inclusive inter-urban correlation by rail between various towns and cities such as
Teluk Intan, Gopeng and so on (Roza et al., 2013). KTMB does not provide the door to
door delivery to such rural places where does not has the station.

3.3.3.3 High Maintenance Cost

Railway equipment is necessary for safety needs, else, once the malfunction occurs, it
may cause collisions. KTMB infrastructure manager is responsible to check through and
make sure that the track equipment is finely installed by following with the design, safety
and operational requirements. Even though millions of such railway device are installed
in the worldwide, but the maintenance cost is conducted as a serious issue that weaken
the logistical firm. Once the planned or unplanned malfunctions, the railway track
equipment express more than asset which permit to use alternative routes or specific
route in an opposite direction to ensure a safe transport. But, the budget allocated for
track maintenance at the percentage of 20 to 40 is used on inspection, maintenance and
track equipment renewal. The expense spending amount is mainly due to the nature of the
devices, such as the device from Korea is more durable compared with those made in
China, whose maintenance cost more than that of straight or curve railway track. These
devices are deployed with special components that exposed to the forces of static and
dynamic causes a serious level of wear and tear, the mobile components such as greasing
are required to inspect frequently to prevent the decrement of reliability. Furthermore,
railway track equipment indicates a potential risk due to these mobile components which,
once malfunction, may cause severity accidents. No matter there is only a single switch
or a complex system of device, the track equipment have to satisfy the same safety
requirement to grant the greater level of continuity on the train running, lowers wear and
tear and better of the traffic flow.

3.3.3 KTMB Current Logistic/Supply Chain Problems

3.3.3.1 Insufficient Railway Trucks

The insufficient railways track is the issue that facing by KTMB. Even though KTMB
offer sufficient wagons but there is insufficient to transfer the containers from dry ports to
seaport and vice versa. Because of the increment of inbound cross border containers,
therefore Perai Bulk Cargo Terminal (PBCT) faces the space constraint. The containers
from Southern Thailand are getting increase which PBCT need to faster clearances and
movement towards the containers for allocating extra space to the additional containers.
But, by carrying a high volume of containers to Penang Port from PBCT, the single
railway track is inefficient. Other than that, Nilai Inland Port (NIP) is without providing
the railway network service to seaport by KTMB. The volume of container at NIP is not
sufficient to be transported by rail but road haulage. Due to the short distance between
NIP and Port Klang, therefore containers are transported through haulage. NIP currently
contain a sufficient capacity such as 500 of trucks for coordinating the road transported
toward the containers.

3.3.3.2 Lack of Container Management

From dry ports to seaports, the containers on railway deck are not organized followed the
vessel schedule. Seaport personnel spend more than the average time such as 2 hour to
determine the right container to the right vessel when the locomotives reach at the seaport.
The movement of container had been delay which affects the vessel schedule integrity
due to the container inappropriate planning staking on the trains from dry ports. As an
example, there are many containers are not organized by following the railway deck plan
in PBCT. Hauliers at the Malaysian-Thailand border prevent fast clearance by customs
and dry ports personnel due to the limited customs facilities and heavy congestion.
Presently, containers are located on the railway deck for the purpose to clear the
congestion. Moreover, space and limited infrastructure in PBCT and some policies at the
border cause the condition happening. The hauliers circulating from Thailand to Malaysia
is confined to within 2km of the Malaysia border. In the case, they only can shift the
mode of haulage within 2 of the Malaysian border while the choice is limited which only
remaining railway freight. This is also one of the reasons that cause the congestion in
PBCT. As a result, the inefficiency arrangement of container on the railway deck happens.
It brings a significantly challenge to Penang Port which the seaport waste more than 2
hours to migrate and rearrange the containers from PBCT. The vessels at the seaport also
had been affected since they have to wait for the seaport personnel manage to get the
right container and load it onto the vessels. Schedule integrity affected by the delays in
rail freight from the northern region to Penang Port which causes more empty spaces on
vessels.

3.3.3.3 Imbalance of Modal Split

Regarding the landbridge train service, it is hard to use due to the poor condition and
locomotive shortage faced by SRT. Most of the cargo from the nearby provinces of
Thailand are hauling by truck to the border of Malaysia and then transfers to Penang Port
via the rail network (UNESCAP, 2013). As a consequence, the amount of landbridge
train service is deducted from an average such as 4 to 6 per month to the service with 2
times per month currently. For the cargoes volume transported had been declined from
216,000 tons in 2004 to 19,000 tons in 2013 (MITI, 2013). The lack of efficiency of
landbridge train service showed in the imbalance of transport modes that applied by
Malaysia seaport as well as the Malaysian-Thailand border and underutilization of the
inter-regional multi-modal opportunities between the two countries.

Despite KTMB connects the railway network with seaports and hinterlands, while, it is
not well utilized. It can be proved by the lower share of rail freight of container by
containing about 2%. The amount of containers hauled by rail in 2013 showed
343,395TEUs which is slightly rise from 302,736 TEUs in 2004. But, the percentage of
the total container freight declined by 1.1%, it showed 1.6% in 2013. The seriousness
imbalance of modal split in land freight transport creates challenges to KTMB.

3.3.3.4 Lack of Capability

Padang Besar Inland Dryport Railway Station contain the problem such as congestion,
poor management and lack of expertise which avoided Penang Port earn between RM75
million and RM100 million annually. Keretapi Tanah Melayu Berhad (KTMB)'s
Multimodal Freight manages the border dry port which is fraught with problems of land
scarcity and inept handling of cargos coming from Thailand. Since the dry port is without
the capability to cope with the load, therefore, the reported 500,000 TEUs cargo at the
border of Thailand which unable to come in Malaysia. Their cranes are not meeting the
criterion which KTMB only able to cope with 120,000 TEUs. Therefore, at the present,
the cargoes that failed to enter Malaysia are being hauled from ports in Phuket, Trang,
Bangkok and Singapore. This cause Penang Port only handled one million TEUs
annually even though seven Super Post Panamex cranes are up to the standard that can
cater to 8,000 TEUs per vessel.
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