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Medium Operations Profitability

Erween Mills

#Manufacturing
ProHub Comment

This case tests the candidate's ability to diagnose profitability issues using cost analysis and supplier evaluation frameworks. The core challenge involves identifying root causes of declining profitability despite steady revenue, then recommending specific operational improvements with quantified financial returns.

Estimated Time 15 minutes
Difficulty Medium
Source Duke
50 / 100
Your client, Erween Mills, is a palm oil mill based out of Guatemala. The mill is facing profitability problems for the past couple of years. Erween Mills needs your help in identifying the root cause(s) and improving the mill’s profitability.

Clarifying Information

  1. What is a palm oil mill? A palm oil mill extracts crude oil from fresh palm fruit and then sells it in the commodity market.
  2. Industry/Competition information: the client competes with a nearby mill for palm fruit. The producer sells the fruit to the highest bidder.
  3. The mill has steady revenue, but capacity utilization has been decreasing YoY
  4. Product information: Palm Oil is edible vegetable oil. It trades as a commodity. Palm oil is the only product currently sold by the mill
  5. Value Chain/Revenue information: The mill buys fresh palm fruit from producers around the area, extracts the oil, and sells it in the commodity market.
  6. The mill is struggling financially and needs a solution ASAP.