Supplier selection for recycled plastic bag of vietnam ajinomoto company by using ahp approach

VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY LAM TU PHUONG SUPPLIER SELECTION FOR RECYCLED PLASTIC BAG OF VIETNAM AJINOMOTO COMPANY BY USING AHP APPROACH Major: Business Administration Major code: 8340101 MASTER’S THESIS HO CHI MINH CITY, July 2022 ii THIS RESEARCH IS COMPLETED AT HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY – VNU – HCM CITY Instructor: Dr Nguyen Thi Duc Nguyen Examiner 1: Dr Do Thanh Luu Examiner 2: Dr Phan Trieu Anh Master’s thesis is defended at HCM city University of Technology, VNU- HCM City on 22/07/2022 The board of the Master’s Thesis Defense Council includes: Chairman: Assoc Prof Pham Quoc Trung Secretary: Dr Le Thanh Xuan Reviewer 1: Dr Do Thanh Luu Reviewer 2: Dr Phan Trieu Anh Member: Dr Nguyen Thi Duc Nguyen Verification of the Chairman of the Master’s Thesis Defense Council and the Dean of faculty of Industrial Management after the thesis being corrected (If any) CHAIRMAN OF THE COUNCIL DEAD OF INDUSTRIAL MANAGEMENT iii VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY SOCIALIST REPUBLIC OF VIETNAM Independence – Freedom - Happiness THE TASK SHEET OF MASTER’S THESIS Nhi m v lu n v n th c s Full name: Lam Tu Phuong Student code: 2070608 Date of birth: 05/08/1998 Place of birth: Tien Giang province Major: Business Administration Major code : 8340101 I THESIS TOPIC : Supplier selection for recycled plastic bag of Vietnam Ajinomoto company by using AHP approach TÀI LU N V N : L a ch n nhà cung c p bao bì nh a tái ch cho cơng ty Ajinomoto Vi t Nam b ng ph ng pháp AHP II TASKS AND CONTENTS : - To set the priority of main criteria and sub-criteria in choosing the plastic bag provider based on the Vietnam Ajinomoto company’s requirements - Apply this criteria list to choose the plastic bag supplier for Ajinomoto by AHP approach and expert choice 11.0 software - To propose supplier managerial implication for Ajinomoto Vietnam company III TASKS STARTING DATE: 01/03/2022 IV TASKS ENDING DATE: 30/06/2022 V INSTRUCTOR : Dr Nguyen Thi Duc Nguyen HCM City, 20/06/2022 INSTRUCTOR (Full name and signature) DEAN OF DEPARTMENT (Full name and signature) DEAN OF INDUSTRIAL MANAGEMENT (Full name and signature) iv ACKNOWLEDGMENTS Firstly, looking back to the Master program of Business Administration at Technology University with a gratitude and confidence, I recognize that I have gained useful knowledge that can help my future career I would like to take this opportunity to thank all lecturers in this program who have conveyed knowledge to me with the enthusiasm and responsibility in teaching area In addition, I am extremely thankful to my supervisor, Dr Nguyen Thi Duc Nguyen I would never have completed this thesis without her helpful guidance, priceless contribution, and consistent patience During this thesis, I have learnt much from her about the research, critical thinking, and career orientation Moreover, I also would like to express my gratitude to those who made their research on this topic From that I can learn different effective method to solve the problem and develop my ideas to compete this thesis Besides, I would like to thank my college, managers from departments at Ajinomoto Vietnam for giving me supports during this thesis Finally, I would like to send a deep thank to my family, who has always been a solid spiritual prop for me so that I can concentrate on this MBA study Ho Chi Minh City, June 2022 v ABSTRACT Recently, COVID-19 has affected global supply chains, causing disruptions in supply, production, and distribution Like most manufacturing companies, Vietnam Ajinomoto Company, one of the top popular MSG producers, has also been faced with the material shortage problem during the COVID-19 period, and because of the supply interruption, a significant reduction in production has been anticipated To improve the situation, the company is seeking the innovative best practices in supply chain risk management The revision of supplier selection criteria is urgent currently as a part of supply chain strategy By using the Kraljic model, plastic bag was defined as the strategic item of Ajinomoto and chosen for application in this study Therefore, this thesis focuses on building a main and sub-criteria list for choosing plastic bag suppliers AHP has been chosen as an approach for supplier selection with the support of data collection methods like depth-interview, analysis methods such as 5W1H, Pareto; and the software Expert Choice 11.0 Finally, a focus discussion group was conducted to propose a procurement strategy based on the sensitive analysis The thesis has defined six main criteria, including quality, delivery, price, warranty, reliability, and service; and 15 sub-criteria for choosing plastic bag suppliers for the Ajinomoto company The results showed that supplier is the best option in general This study helps Ajinomoto company to have a procurement strategy for plastic bags in the short term and long term Besides, other companies in the food industry can also apply the built criteria model from this study for plastic bag supplier selection The plastic bag suppliers can also refer to this built criteria model to prepare their resources and make the suitable supply proposals to the buyers This study also contributes a list of criteria to researchers who need to study the supplier selection topic Keywords: Supplier selection; AHP vi TÓM T T LU N V N TH C S G n đây, COVID-19 nh h ng đ n chu i cung ng toàn c u, gây s gián đo n cung ng, s n xu t phân ph i Gi ng nh h u h t công ty s n xu t khác, Công ty Ajinomoto Vi t Nam, m t nh ng nhà s n xu t b t ng t ph bi n hàng đ u, c ng ph i đ i m t v i v n đ thi u nguyên li u giai đo n COVID-19, ngu n cung b gián đo n, s n l công ty tìm ki m ph ng s n xu t gi m đáng k c i thi n tình hình, ng pháp c i ti n t t nh t qu n lý r i ro chu i cung ng Vi c s a đ i tiêu chí l a ch n nhà cung c p c p thi t hi n nh m t ph n c a chi n l tái ch đ c chu i cung ng B ng cách s d ng mơ hình Kraljic, bao bì nh a c xác đ nh m t hàng chi n l c c a Ajinomoto đ c l a ch n đ ng d ng nghiên c u Vì v y, lu n v n t p trung xây d ng danh m c tiêu chí tiêu chí ph đ l a ch n nhà cung c p bao bì nh a tái ch AHP đ tr c a ph c ch n làm ph ng pháp ti p c n đ l a ch n nhà cung c p v i s h ng pháp thu th p d li u nh ph ng v n sâu, ph ng pháp phân tích nh 5W1H, Pareto; ph n m m Expert Choice 11.0 Cu i cùng, m t nhóm th o lu n t p trung đ c ti n hành đ đ xu t m t chi n l c mua hàng Lu n án xác đ nh sáu tiêu chí chính, bao g m ch t l ng, giao hàng, giá c , tính b o đ m, đ tin c y d ch v ; 15 tiêu chí ph đ l a ch n nhà cung c p bao bì nh a tái ch cho công ty Ajinomoto K t qu cho th y nhà cung c p l a ch n t t nh t Nghiên c u giúp cơng ty Ajinomoto có chi n l c mua bao bì nh a tái ch ng n h n dài h n Bên c nh đó, cơng ty khác ngành th c ph m c ng có th áp d ng mơ hình tiêu chí xây d ng t nghiên c u đ l a ch n nhà cung c p Các nhà cung c p bao bì c ng có th tham kh o mơ hình tiêu chí xây d ng đ chu n b ngu n l c đ a đ xu t cung c p phù h p cho ng T khóa: L a ch n nhà cung c p; AHP i mua vii DECLARATION FROM HORNOR I confirm that I have conducted and written the thesis “Supplier selection for recycled plastic bag of Vietnam Ajinomoto by using AHP approach This is my own study with the guidance from my instructor Dr Nguyen Thi Duc Nguyen The contents from the sources are explained in the thesis as a citation or narration This thesis has not been published in other researches previously Ho Chi Minh City, June 2022 Lam Tu Phuong viii TABLE OF CONTENTS ACKNOWLEDGMENTS iv ABSTRACT v DECLARATION FROM HORNOR vii TABLE OF CONTENTS viii LIST OF FIGURES x LIST OF TABLES xii LIST OF ABBREVIATIONS AND SYMBOLS xiii CHAPTER INTRODUCTION 1.1 Rationale of the study 1.2 Problem statement 1.3 Objectives of the study 1.4 Significances of the study 1.5 Scope of thesis 1.6 Process of implementation 1.7 Information need analysis 11 1.8 Thesis structure 13 CHAPTER LITERATURE REVIEW 15 2.1 Multiple-criteria decision making (MCDM) 15 2.2 Supplier selection 17 2.2.1 Supplier selection as a decision-making problem 17 2.2.2 Supplier selection criteria 17 2.3 Supplier selection techniques 26 2.4 Analytical Hierarchy Process (AHP) 31 2.4.1 Steps for AHP 31 2.4.2 Checking for consistency 34 2.5 Interview techniques 35 2.5.1 In-depth interview 35 2.5.2 Focus group interview 35 2.6 Supporting tool 36 2.6.1 Pareto analysis 36 2.6.2 Systematic questioning technique - 5W1H 36 2.6.3 Kraljic model technique 36 2.6.4 Expert choice software 37 CHAPTER DEFINDING MAIN AND SUB-CRITERIA FOR RECYCLED PLASTIC BAGS SUPPLIER SELECTION AT AJINOMOTO VIETNAM 38 3.1 Overview of Ajinomoto Vietnam 38 3.1.1 Company introduction 38 3.1.2 Organizational structure of Ajinomoto Vietnam 38 3.1.3 Plastic bag material planning, ordering and receiving cycle at Ajinomoto Vietnam 41 3.1.4 Cause analysis of plastic bag shortage 44 3.1.5 Current procedure for supplier selection at Ajinomoto Vietnam 45 ix 3.2 Defining main and sub criteria for supplier selection of recycled plastic bags at Ajinomoto Vietnam 47 3.2.1 Quality 50 3.2.2 Delivery 51 3.2.3 Price 51 3.2.4 Warranty 51 3.2.5 Reliability 51 3.2.6 Service 52 3.3 Determining weight for each criterion 52 CHAPTER AHP METHOD APPLICATION FOR PLASTIC BAGS SUPPLIER SELECTION AND THE MANAGERIAL IMPLICATION AT AJINOMOTO VIETNAM 57 4.1 Application of AHP method for choosing provider of plastic bags at Ajinomoto Vietnam 57 4.2 Result validation 60 4.2.1 Consistency indicator 60 4.2.2 Sensitive analysis of the result 60 4.3 Focus group discussion and recommendation for supplier priority of recycle plastic bag at Ajinomoto 65 4.3.1 Discussion on the current company problem of plastic bag material shortage 65 4.3.2 Discussion on the company target of fiscal year 2022 66 CHAPTER CONCLUSION 68 5.1 Summary of key findings 68 5.2 Thesis managerial contributions and recommendations 69 5.2.1 For Ajinomoto company 69 5.2.2 For suppliers 70 5.3 Limitation and future study direction 70 5.3.1 Thesis limitation 70 5.3.2 Future study directions 71 REFERENCES 72 APPENDIX A: RAW DATA 81 APPENDIX B: SURVEY TO BUILD THE KRALJIC MODEL 83 APPENDIX C: SURVEY TO DEFINE THE CURRENT CRITERIA 88 APPENDIX D: DEPTH-INTERVIEW TO DEFINE AND SCORE THE MAIN AND SUB CRITERIA 90 APPENDIX E: FOCUS GROUP INTERVIEW TO DEFINE THE PROCUREMENT STRATEGIES 116 x LIST OF FIGURES Figure 1-1: Demands per month in 2020 and 2021 at Ajinomoto Vietnam Figure 1-2: Stages of purchasing sophistication Figure 1-3: Kraljic’s supply matrix of packing materials Figure 1-4: Study framework 10 Figure 2-1: Paper distribution of the application areas for MCDM methods 16 Figure 2-2: Top three MCDM methods of considered supply chain functions 16 Figure 2-3: Summary the proportions of the individual methods used for supplier 27 selection between 2001 to 2014 Figure 2-4: Sector-based distribution of the methods used in supplier selection 27 Figure 3-1: Material planning, ordering and receiving cycle 43 Figure 3-2: 80/20 chart of reasons of plastic bag shortage 45 Figure 3-3: Ajinomoto’s supplier selection process demonstration 46 Figure 3-4: Main and sub criteria from depth interview 48 Figure 3-5: Ranking on main criteria for supplier selection 52 Figure 3-6: Ranking of sub criteria with respect to main criteria “quality” 53 Figure 3-7: Ranking of sub criteria with respect to main criteria “delivery” 54 Figure 3-8: Ranking of sub criteria with respect to main criteria “pricing” 54 Figure 3-9: Ranking of sub criteria with respect to main criteria “service” 55 Figure 3-10: Ranking of sub criteria with respect to main criteria “reliability” 55 Figure 3-11: Ranking of sub criteria with respect to main criteria “warranty” 56 Figure 3-12: Ranking of sub criteria with respect to the goal “Best supplier” 56 Figure 4-1: The tree view in expert choice 11.0 58 Figure 4-2: Ranking of suppliers with respect to the goal “Best supplier” 59 Figure 4-3: Sensitivity analysis chart 59 Figure 4-4: Focus more on quality criterion 59 Figure 4-5: Focus more on delivery criterion 61 Figure 4-6: Focus more on price criterion 62 Figure 4-7: Focus more on service criterion 62 105 Supplier Use for quality audit production process quality Service Fast responsiveness Follow up Warranty Supplier response Need to have as the historical issue record for under quality product Supplier response Need to have as the historical issue record for under quantity product D.4.3 Interview with respondent 3: Ms T T Tin – Quality management – 10-year experience of quality management Criteria Capability Sub-criteria Explanation Production capability Technological capability Delivery Flexibility Delivery capability On time delivery Important for operation Lead time Helpful for production planning MOQ Helpful for production planning Ability to add new product Availability Need to have back up lot when there is quality issue Delivery response change Can solve the material shortage problem due to quality issue or sale increase 106 Management Financial status and organization Geographical location Reputation Price Discount price Useful for competitive price Payment term Product price Lower price is better when the same quality Transportation cost Useful for competitive price Protection Environmental protection system Safety Quality Audit report Useful for quality assessment at the beginning Continuous quality Keep the continuous supply for production Defect rate Useful for quality assessment at the first lots Product quality Must have for quality assessment at the beginning Supplier Must have for supplier assessment at the certification beginning Supplier Must have for quality assessment at the production process beginning quality Service Fast responsiveness Follow up Warranty Supplier response Can solve the material shortage problem for under quality due to quality issue product 107 Supplier response Need to have to avoid material shortage for for under quantity production product D.4.4 Interview with respondent 4: Mr H.T.Tam– Sales Manager – 10-year experience in sales Criteria Capability Sub-criteria Explanation Production capability Technological capability Delivery Delivery capability On time delivery Critical since it impacts to production and sales Lead time Must have since it impacts to material planning MOQ Must have since it impacts to disposal cost when sales cannot reach MOQ amount Flexibility Ability to add new Useful when having new product product development Availability Useful for products which have the fluctuation in sales Delivery change Useful when there is the request in change response Management Financial status and organization Geographical location Reputation sales 108 Price Discount price Useful for sales estimation about the ability of using higher MOQ Payment term Product price Very important for benchmarking Transportation cost Useful for competitive price Protection Environmental protection system Safety Quality Audit report Continuous quality Critical since it impacts to production and sales Defect rate Product quality Critical since it impacts to production and sales Supplier Critical to prove the supplier ability certification Supplier Critical to prove the supplier ability in production process long-term quality Service Fast Helpful for urgent request responsiveness Follow up Warranty Supplier response Very important to keep production for under quality product Supplier response Very important to keep production for under quantity product D.4.5 Interview with respondent 5: Ms T.T Ha– Logistics manager – 9year experience in import and export logistics 109 Criteria Capability Sub-criteria Explanation Production capability Technological capability Delivery Delivery capability Useful for shipment arrangement On time delivery Very important to meet the production schedule Lead time Critical for planning, especially for imported products MOQ Flexibility Critical to estimate the shipment type Ability to add new product Availability Very helpful for any urgent request from sale and production Delivery change Very helpful for any urgent request from response sale and production Management Financial status and organization Geographical location Reputation Price Discount price Base on this factor for price benchmarking Payment term To define extra cost and shipment responsibility Product price Base on this factor for price benchmarking Transportation cost Base on this factor for price benchmarking Protection Environmental protection system Safety 110 Quality Audit report Continuous quality Very helpful to avoid the supply stopping Defect rate Product quality Must take the sampling assessment at the beginning Supplier To check the supplier capability and food certification safety requirement Supplier To check the supplier capability and food production process safety requirement quality Service Fast responsiveness Follow up Warranty Supplier response Must have in contract for compensation for under quality product Supplier response Must have in contract for compensation for under quantity product D.4.6 Interview with respondent 6: Ms N T Dien– Planning control manager – 11-year experience in operation management Criteria Capability Sub-criteria Explanation Production capability Technological capability Delivery Delivery capability Very important factor in the contract to ensure the shipment schedule 111 On time delivery Very important factor in the contract to ensure the production and define compensation if any impacts Lead time Very important factor in planning, factor in planning, inventory control MOQ Very important inventory control, disposal cost Flexibility Ability to add new Useful for new design launch product Availability Delivery Useful when sales increase change Useful when sales increase/ decrease, response quality, supplier issue Management Financial status and organization Geographical location Reputation Price Discount price Very important to compare cost Payment term Useful to define the payment type and cost deduction or increase Product price Very important to compare cost Transportation cost Very important to compare cost Protection Environmental protection system Safety Quality Audit report Continuous quality Useful for continuous operation Defect rate 112 Product quality Very important factor to choose supplier and impact to the final product quality, cost, company reputation Supplier Very important factor to evaluate supplier certification quality Supplier Very important factor to evaluate supplier production process quality quality Service Fast responsiveness Follow up Warranty Supplier response Very important factor to define solution for under quality and compensation product Supplier response Very important factor to define solution for under quantity and compensation product D.4.7 Interview with respondent 7: Ms L B Tuan – Production manager – 13-year experience in production management Criteria Capability Sub-criteria Explanation Production capability Technological capability Delivery Flexibility Delivery capability On time delivery Impact to the production input Lead time Impact to the production input MOQ Impact to the production input Ability to add new product 113 Availability Delivery Useful for material shortage situation change Useful for material shortage situation response Management Financial status and organization Geographical location Reputation Price Discount price Useful for competitive cost Payment term Product price Useful for competitive cost Transportation cost Useful for competitive cost Protection Environmental protection system Safety Quality Audit report To ensure the quality standard for production Continuous quality To ensure the food safety in production Defect rate Product quality To ensure the quality standard for production Supplier To ensure the supplier quality certification Supplier To ensure the continuous supply production process quality Service Fast To support for order delay or forward responsiveness request Follow up To ensure the shipment delivered on time 114 Warranty Supplier response To ensure continuous production for under quality product Supplier response To ensure continuous production for under quantity product D.4.8 Interview with respondent 8: Ms N T X Tung – Warehouse manager – 7-year experience in operation management Criteria Capability Sub-criteria Explanation Production capability Technological capability Delivery Delivery capability On time delivery Critical for labor arrangement (loading / unloading activities) Flexibility Lead time Critical for material planning MOQ Critical for material planning Ability to add new product Availability Delivery To ensure stock for production change To ensure stock for production response Management Financial status and organization Geographical location Reputation Price Discount price Competitive factor 115 Payment term Product price Competitive factor Transportation cost Competitive factor Protection Environmental protection system Safety Quality Audit report Continuous quality To ensure stock for production Defect rate Product quality The basic factor for quality assessment Supplier To prove the supplier satisfying the quality certification requirement Supplier To ensure stock for production production process quality Service Fast responsiveness Follow up Warranty Supplier response To ensure stock for production for under quality product Supplier response To ensure stock for production for under quantity product 116 APPENDIX E: FOCUS GROUP INTERVIEW TO DEFINE THE PROCUREMENT STRATEGIES E.1 Focus group interview outline Introduction: Good morning/ afternoon/ evening Mr./ Ms…., First of all, thanks for considering request and help to agree to the meeting Based on the previous interview, I conducted summary data and calculated, the results were shown as Table E-1 The purpose of the today interview is to discuss about the results and define the strategy for procurement This conversation will be recorded for transcription if you agree turn on the voice recorder Due to the confidentiality, nothing said in this conversation can be traced back to the interviewee or the organization You may stop interview upon request Question: Table E-1 show results of supplier selection and the sensitivity of the results From that, we can discuss and propose the suitable procurement strategy to improve current plastic bag material shortage situation and for the long-term application Table E-1 Summary the results of sensitive analysis Criteria focused on Supplier rank Quality Supplier > Supplier > Supplier 1> Supplier Delivery Supplier > Supplier > Supplier > Supplier Price Supplier > Supplier > Supplier > Supplier Service Supplier > Supplier > Supplier > Supplier Warranty Supplier > Supplier > Supplier > Supplier Reliability Supplier > Supplier > Supplier > Supplier 117 E.2 Interview participants Table E-2: Interview participants Name Respondent Experience Position number Mr Nguyen Linh Procurement 11 years Manager procurement years in Mr Nguyen Bang Procurement in Vy supervisor procurement Ms Tran Thi Tin Quality Manager 10 years in quality management Mr Huynh Tri Sales Manager 10 years in sales Tam Ms T T Ha Logistics Manager years in supply chain management Mr Nguyen Planning Control 11 years Thanh Dien Manager manufacturing Mr Le Ba Tuan Production 13 Manager production years in in Mr Pham Thanh Warehouse years in operation Xuan Tung management Manager E.3 Summary information from focus group interview Table E-3: Summary information from focus group interview Name Statement N.Linh – With the sales target that the sales team has set for the next procurement two years, the procurement team has suggested that the manager number of suppliers needed for plastic bag material should Mr be three 118 Ms T.T.Tin – Since the company sells food items with the goal of making quality manager a contribution to the world's food and wellness, as well as to better lives in the future, the company makes ensuring that its products are of high quality their number one priority at all times Mr N.T.Dien – With the current shortage of plastic bag material, greater production attention should be paid to two factors, namely service and control manager quality standards Mr N.T.Dien – I think to get company target of fiscal year 2022, besides production the priority of quality criterion mentioned above, company control manager targets to mitigate the disposal cost of expired material and inventory cost Therefore, quality and delivery should be paid attention more Mr N.B.Vy – According to the sensitivity table, the second potential procurement provider is the one to go with I propose the following supervisor breakdown for the distribution of business between the three suppliers: supplier receives 50 percent, supplier receives 30 percent, and supplier receives 20 percent in the first two quarter There is a possibility that the supplier allocation ratio for the last two quarters will be 40 percent, 30 percent, and 30 percent, respectively In the event that we reach an agreement, I will collaborate with these vendors to get the allocation as outlined in the proposal Having said that, it is essential for the planning team to exercise control over this ratio in order to properly align the buy requisition All experts Agree with the proposal of Ms.Vy 119 PROFILE Full name: Lam Tu Phuong Date of birth: 05/08/1998 Place of birth: Tien Giang province Address: 76/2A14 Tây Hòa, ph ng Ph c Long A, qu n 9, TPHCM TRAINING PROCESS (Starting from university to now) - 2016-2020: International University – Vietnam National University Major: Bachelor of Engineering in Logistics and Supply Chain Management - 2020-2022: Ho Chi Minh City University of Technology Major: International Master Program in Business Administration PROCESS (Starting from work to now) - 10/2020-10/2021: Colgate-Palmolive Vietnam Position: Supply network planning - 11/2021-now: Ajinomoto Vietnam Position: Production planning ... selecting supplier for plastic bag at Vietnam Ajinomoto company Build the main and sub criteria for Vietnam Ajinomoto company Main and sub criteria in selecting supplier for plastic bag for Vietnam Ajinomoto. .. method and AHP method - AHP is the chosen approach Ajinomoto Vietnam? ??s supplier selection process overview - Ajinomoto Vietnam supplier selection process - Ajinomoto Vietnam supplier selection. .. choosing the plastic bag provider based on the Vietnam Ajinomoto company? ??s requirements 8 - Apply this criteria list to choose the plastic bag supplier for Ajinomoto by using the AHP approach and