Vinamilk Pasteurized Milk Production Company is a large business and production unit, with a wide variety of products. A strategic material requirements planning will make a crucial contribution to the improvement of the company’s operating ability and capital efficiency. Hence, this paper chooses Vinamilk as a case of the research topic: MRP at Vinamilk Pasteurized Milk Production Company.
CIVIL AVIATION UNIVERSITY OF CHINA 中国民航大学 BUSINESS LOGISTICS AND SUPPLY CHAIN MANAGEMENT 企业物流与供应链管理 TOPIC: MRP in Production Logistics A Case of Vinamilk in Vietnam 教师：沈丹阳老师 学生：蓝静玉 - Ngoc Thanh Thu Doan 学号：206140005 December 2022 Made by 蓝静玉 - 206140005 Abstract In the current market economy, effective production plans and business strategies are vital elements for the survival and development of every business In order to update and improve product quality, save input factors, and lower production costs, the planning of the demand and the ability to supply raw materials is considered an important task of each enterprise To manufacture each type of product requires a varied number of parts, components and raw materials Moreover, the amount of materials needed at different times often changes Therefore, good management of Material Requirements Planning (MRP) will provide timely and accurate supplies to managers and functional departments in the industry Vinamilk Pasteurized Milk Production Company is a large business and production unit, with a wide variety of products A strategic material requirements planning will make a crucial contribution to the improvement of the company’s operating ability and capital efficiency Hence, this paper chooses Vinamilk as a case of the research topic: "MRP at Vinamilk Pasteurized Milk Production Company" The content of the thesis is divided into chapters: Chapter 1: Basic theoretical issues about MRP at enterprises Chapter 2: Actual situation of MRP at Vinamilk Company Chapter 3: Proposing some solutions to improve the MRP at Vinamilk Key words: logistics and supply chain management; MRP in production logistics; MRP; Vinamilk; material requirements planning Made by 蓝静玉 - 206140005 CONTENTS Abstract CHAPTER 1: BASIC THEORETICAL ISSUES ABOUT MRP AT ENTERPRISES Concept and characteristics of materials - Several basic theoretical issues about MRP 2.1 Concept 2.2 Objectives of MRP - 2.3 Basic elements of MRP 2.4 Method of MRP CHAPTER 2: ACTUAL SITUATION OF MRP AT VINAMILK PASTEURIZED MILK PRODUCTION COMPANY - General introduction of the enterprise Production process of pasteurized milk of Vinamilk 11 Actual situation of MRP at Vinamilk enterprise -11 3.1 Characteristics of materials 11 3.2 Principles of material supply applied at Vinamilk -12 3.3 Input factors of Vinamilk's MRP - 14 3.4 Actual situation of applying MRP method of Vinamilk - 15 CHAPTER 3: PROPOSING SOME SOLUTIONS TO IMPROVE THE MRP AT VINAMILK 18 Personal opinions about Vinamilk’s MRP: Overall Assessment 18 1.1 Strengths -18 1.2 Weaknesses 19 Proposing some solutions to improve the MRP at Vinamilk 20 CONCLUSION -21 REFERENCES - 22 Made by 蓝静玉 - 206140005 CHAPTER 1: BASIC THEORETICAL ISSUES ABOUT MRP AT ENTERPRISES Concept and characteristics of materials Concept: Raw materials are the main objects of labor and are expressed in materialized form Characteristics: In the production process, raw material is one the basic elements for the formation of new products The production process creates a new product, the materials are completely consumed and change in the initial physical form to form the product entity, they only participate in production cycle In terms of value, material is fully converted into the value of the newly created product Several basic theoretical issues about MRP 2.1 Concept MRP is a system of planning and scheduling of raw materials and components required for production in each stage, based on the division of material needs into independent and dependent needs MRP is a basic content of production management, built on the basis of the help of computer technology that was discovered and put into use for the first time in the US in the 70s The MRP approach is to determine the stock of raw materials, materials that not need to be stocked much but are available when needed This requires very precise and tight planning for each type of material, for each detail and for each material In addition, the use of computer technology is implemented to maintain orders or production schedules of raw materials so that they are available just in time Thanks to the expansion of computer applications into production logistics activities, the MRP method has helped enterprises perform accurately with close planning, accurate and faster tracking of materials, ease the daily calculation tasks and update Made by 蓝静玉 - 206140005 information regularly, ensuring the right quantity and the time to respond The method of MRP is proved to be very effective, so it is constantly being improved and extended to other areas of the business 2.2 Objectives of MRP - To meet the needs of raw materials, details, and product parts for production activities of enterprises in terms of quantity, quality, type, timeliness - Minimize raw material inventory - Reduce production and supply time MRP determines the right level of inventory at the right time, reducing wait times and obstacles to production - Create satisfaction and trust for customers - Create conditions for departments to closely coordinate with each other, promote the synthesis of production capabilities of the enterprise - Increase the efficiency of production and business activities 2.3 Basic elements of MRP The MRP model can be represented by the following diagram: Figure: Inputs and Outputs of MRP (Stevenson, 2015, 496) Made by 蓝静玉 - 206140005 a Basic Inputs factors - The number of products according to the forecast demand or the quantity of products to order is the key factor to determine the demand for materials - Product design and changes in product design form the product structure profile: an important factor, necessary to determine the demand for materials in terms of structure, type, and design - Materials inventory record: shows the amount of resources, parts and components for making the product currently in stock and provides information about the product b Basic Output factors - What kind of components and spare parts should be ordered to produce goods? - How much quantity? - When is the time? c Requirements of the MRP - There are enough computer systems and software programs to calculate and store information on the software - Prepare a contingent of staff and managers who are capable and qualified in using computers and with basic knowledge in building MRP - Ensure accurate and continuously update new information in: Production schedule, Invoice of raw materials, Material reserve records - Ensure completeness and record keeping of necessary data 2.4 Method of MRP The material requirements planning process is carried out in three main steps: Step 1: Analyze product texture MRP is carried out based on the classification of needs into independent needs and dependent needs The product structure analysis is the first step in material requirements planning Made by 蓝静玉 - 206140005 The product structure usually has a tree structure, each item corresponds to each detail and component of the product We have a general diagram of the tree structure: - Levels in structural diagram: As a general rule, level is the level corresponding to the final product Each time we analyze the composition of a part, we move to a level - Relationships in the structural diagram: Those are the connection lines between the two parts in the tree structure diagram The upper part is called the integral part and the lower part is the component part The relationship is recorded with time period (production cycle, procurement ) and multiplier The number of detail types and relationships in the diagram represents the complexity of the product structure The more complex the product, the more details and parts and the greater the relationship between them To manage, track and accurately calculate each type of material, it is necessary to use a computer to systematize and encode them according to the structure diagram of the enterprise product design Made by 蓝静玉 - 206140005 Step 2: Calculate the total demand and the actual demand of the parts and details constituting the final product - Total Demand: the expected quantity of each type in each period without taking into account existing reserves or the amount to be received - Real Demand: the total amount of raw materials, additional details needed in each period This quantity is calculated as follows: Real Demand = Total Demand - Available Reserves + Safety Reserves + Available reserves: total reserves available at the beginning of each period Planned available reserves is the expected amount of stock that can be used to satisfy production needs + Safety reserves: the amount of stock of raw materials, details to prevent some arising cases such as slow delivery by supplier Step 3: Determine when to issue orders or production orders To supply or manufacture raw materials, the part takes time in waiting, preparing, unloading, transporting, arranging or manufacturing It is the delivery time or supply time, production of each part Therefore, from the time when products are needed to meet customer needs, they will have to calculate backwards to determine the time required for each detail and part Time required to order or produce in-house is calculated by the lead time subtracting supply time or production time required to supply the required quantity Made by 蓝静玉 - 206140005 CHAPTER 2: ACTUAL SITUATION OF MRP AT VINAMILK PASTEURIZED MILK PRODUCTION COMPANY General introduction of the enterprise Vinamilk is the abbreviation of Vietnam Dairy Products Joint Stock Company, a company that manufactures and trades milk and dairy products as well as related equipment and machinery in Vietnam - Full name: Vietnam Dairy Products Joint Stock Company - Short name: VINAMILK - Logo: - Head office: No.10 Tan Trao Street, Tan Phu Ward, District 7, Ho Chi Minh City On August 20, 1976, Vinamilk was established on the basis of taking over milk factories left by the old regime, including: - Thong Nhat Dairy Factory (formerly Foremost factory) - Truong Tho Dairy Factory (formerly Cosuvina Factory) - Dielac Powdered Milk Factory (formerly Nestle') (Switzerland) So far, Vinamilk has been ranked in the Top 10 leading brands in Vietnam with more than 200 diversified products, 13 factories and more than million tons of products delivered to consumers every year * Business philosophy Wish to become a favorite product in all regions and territories Therefore, we keep in mind that quality and creativity are Vinamilk's companions Vinamilk considers customers as the center and is committed to meeting all needs of customers * Mission Committed to providing the community with top-class nutrition and quality with its own respect, love and high responsibility for human life and society Made by 蓝静玉 - 206140005 Made by 蓝静玉 - 206140005 10 Production process of pasteurized milk of Vinamilk Actual situation of MRP at Vinamilk enterprise 3.1 Characteristics of materials Vinamilk pasteurized milk is a product aimed at children, so every step of preparation, purchase of raw materials, and production is extremely important The main raw materials for the production of products include fresh cow's milk, paper boxes, and straws, in addition to some others such as refined sugar, vitamins, minerals, and synthetic flavors Made by 蓝静玉 - 206140005 11 3.2 Principles of material supply applied at Vinamilk a About the paper box Vinamilk has cooperated with two of the world's leading packaging suppliers, Tetra Pak of Sweden and Combibloc of Germany, to provide top quality packaging Although these two types of packaging are different in size, color and packaging, both have the same capacity and meet international standards to help keep the freshness of milk for months without using any preservation chemicals The following characteristics of each type of packaging will help consumers feel secure when choosing to buy Vinamilk dairy products: Firstly, the Tetra Pak box is tall and slim, the Combibloc box is lower and has a wider width Secondly, the Combibloc canister straw position is in the middle of the box, while the Tetra Pak canister is in the corner of the milk carton Made by 蓝静玉 - 206140005 12 Thirdly, the bottom of each type of packaging has the logo of the packaging manufacturer b About fresh cow’s milk Since 2006, Vinamilk has started investing in dairy farming directly through the construction of industrial dairy farms with a total starting capital of more than 500 billion VND Currently, the total herd of cows supplying milk to the company is approximately 150,000 cows (at Vinamilk's farms and agricultural households sign contracts to sell milk to Vinamilk), providing more than 1,000 tons of raw fresh milk per day to serve the needs of production Besides its own farms, fresh milk purchasing centers established by Vinamilk Corporation also play the role of purchasing raw milk materials from farmers and cow farms After purchasing, the staff will weigh and measure the milk weight, check the quality of the milk, apply the preservation process and transport it to the factory The center plays the role of providing information to farmers about the quality, price and demand for raw materials, and at the same time making payments to farmers and ranchers Made by 蓝静玉 - 206140005 13 c About the straws Use Tenpack straws All products of Tenpack printing are tested and certified for food hygiene and safety by the US FDA, certifying the quality of plastic materials in contact with food of the European community 3.3 Input factors of Vinamilk's MRP - Production schedule: The arrangement of work in the optimal order in production to ensure the completion of the production plan of the enterprise Building a production schedule is the process of determining the quantity and time that each detail, component, or product must be completed - Structure diagram of Vinamilk's pasteurized fresh milk product: The analysis of this product structure helps to determine the needs of each type of raw material, detail, and component of Vinamilk's pasteurized milk such as cow milk, packaging, etc… - Raw material suppliers of Vinamilk + Fresh milk suppliers: Vinamilk's dairy farms Local farmers + Packaging suppliers: Persima Vietnam Co., Ltd for steel box Tetra Pak and Combibloc for paper box Made by 蓝静玉 - 206140005 14 - Materials stocking at Vinamilk: + Regular stock: Used to ensure that the materials for the production of the enterprise are carried out continuously between two consecutive periods of the supply department + Safety stock: Applied in cases: Average material consumption in a day is actually higher than planned The actual quantity of materials imported between two successive supply periods is less than planned (while consumption and material quantity remain the same) The supply cycle between two consecutive supply periods is actually longer than planned 3.4 Actual situation of applying MRP method of Vinamilk Currently, Vinamilk is applying the MRP model in an adjusted form in order to suit the company's conditions a Planning process diagram: - Input: Vinamilk company has a profile of the correlation level of input factors to reflect the forecast of the ability to meet demand as well as the compatibility level of output factors - Processing process: Vinamilk company uses MRP computer program such as: Bill of materials (BOM) records, raw materials records and records of correlation of input factors controlled by programs like Word access, Powerpoint, Excel manager The production schedule is done using Eras management software - Output: the company applies the forecast of material demand every weeks for production activities b MRP process: Construction of the MRP started from the production schedule of Vinamik's final product - pasteurized milk, and then converted to the demand for the detailed parts Made by 蓝静玉 - 206140005 15 and the necessary raw materials: the pasterized milk production department and the packaging production department The milk production will be in different stages From the final product, the expected need for smaller parts is determined, the lower level of the packaging department includes the paper box and straws unit MRP calculates the number of parts for each department, from straws, cartons to milk and packaging departments, parts in each stage for each type of product in stock Then it determines exactly when to issue orders or produce for each type of component The MRP seeks to determine the relationship between the production schedule from the input of raw materials to the production of finished products, orders, receipts, and product demand This relationship is analyzed for the time period from when a product is brought into the workshop until it leaves that workshop for another department In order to ship a product within a specified number of days, it is necessary to manufacture parts, components or order dairy materials, packaging, and external components before a certain deadline The process of determining MRP is carried out according to the following steps: Illustrative example: Vinamilk produces 200ml of pasteurized milk (A) consisting of 200ml of fresh milk (B) and packaging (C) Packaging includes paper box (D) and straw (E) Product demand is 200,000 boxes, stocking 2000 boxes, buying raw materials E is day, D is days, processing and assembly C is day, B is day, completion of A is day Step 1: Analyze product structure Vinamilk's pasteurized milk products are made up of milk and packaging materials, so there is a demand for milk and packaging From there, the raw material needs will be planned First of all, a general diagram of the tree structure of pasteurized milk products: level is the finished pasteurized milk product, followed by level including pasteurized milk production and packaging components Finally, level includes paper boxes and straws Here is a tree diagram: Made by 蓝静玉 - 206140005 16 Time required to deliver or produce parts: Components (parts) A B C D E Supplying time (Production time) day day day day day The diagram of product A over time is as follows: Step 2: Calculate the total demand and the actual demand of the parts and details constituting the final product Total packaging = 200,000 (packages) Total demand for straws = 200,000 (pcs) Total demand for paper boxes = 200,000 (boxes) Total demand for milk = 200,000 × 200ml = 40,000,000ml = 40,000 (liter) Made by 蓝静玉 - 206140005 17 Categories Total demand Amount received according to progress Inventory available Real demand Straw (pcs) 200.000 5.000 10.000 195.000 Paper box (box) 200.000 5.000 10.000 195.000 Packaging (box) 200.000 5.000 10.000 195.000 Amount of milk (liter) 40.000 2.000 3.000 39.000 Step 3: Determine when to issue orders or production orders Order delivery confirmation time Paper box: days Straw: days Fresh cow's milk: days CHAPTER 3: PROPOSING SOME SOLUTIONS TO IMPROVE THE MRP AT VINAMILK Personal opinions about Vinamilk’s MRP: Overall Assessment 1.1 Strengths - Building a suitable production schedule, determining the exact production time of components, arranging the work in the optimal order to ensure the completion of the enterprise's production plan, meeting the deadlines for orders - In designing product structure: Vinamilk has determined accurate product structure, which accurately determines the details that make up each part to the main components to make up its products - In material supplier planning: + Vinamilk is proactive in the source of raw materials as well as well controlling the quality of raw materials, and at the same time reducing purchasing costs + Vinamilk actively seeks for reputable packaging suppliers, branded as Tetra Pak company (Sweden) and Combibloc (Germany) to provide top quality packaging These two types of packaging have the same capacity and meet international Made by 蓝静玉 - 206140005 18 standards to help keep the freshness of milk for months without using any preservatives - About material reserve: The company offers regular stocking policies and insurance reserves for all main materials, auxiliary materials, labor tools, in order to avoid risks in the production and supply process of raw materials, ensuring a continuous process In addition, the company's storage system is built quite well, suitable for production scale, helping the preservation process to be better - About the preservation of raw materials: raw materials are carefully preserved throughout the process from production to packaging, the company always adheres to and ensures the principles of quality in production - About MRP method: The company uses the MRP model with adjustments to suit the company's specific conditions It helps the company to accurately determine the quantity of materials and the exact time to supply materials, avoiding insufficient materials as well as storing materials in the warehouse for too long; simultaneously helps to minimize storage and handling costs 1.2 Weaknesses - The update level of information in production logistics is incomplete: since the company does not apply the daily raw material demand report, but instead it make the report every weeks while the supply and demand for materials takes place every day This may result in lower or higher material availability in the short term - Applying information technology to material demand planning: Currently, Vinamilk is applying ERP software to production management This software requires highly trained and specialized staff Due to the characteristics of the company, the application of ERP in the production process is not really effective, costly and takes a lot of time to research and invest Made by 蓝静玉 - 206140005 19 - About material supplier system: + Packaging suppliers: High possibility of forced prices and losing bargaining power because there are only suppliers for main materials, which are straws and paper boxes + Cow's milk supply: No formal training for small dairy farmers to expand their development model, but simply to buy milk if that household's milk meets quality standards Therefore, in a long-term vision, Vinamilk has not contributed to local development, on the other hand, it also wastes time on testing milk on a small scale Proposing some solutions to improve the MRP at Vinamilk - Apply daily reports for materials demand - Expand market research and supplier selection: + Strengthen relationships with traditional suppliers of raw materials (packaging), establish relationships with new suppliers to procure high quality raw materials at reasonable prices to reduce production costs + Vinamilk uses milk materials from many sources, so the company should have a specialized supplier management section to manage the quantity and quality of milk from those farmers, be able to compare and find standard suppliers and exclude poor quality supplies to avoid costly and time consuming - Organize the storage of raw materials: Since the raw materials for the production of powdered milk are very perishable such as fresh milk, sugar, vanilla , it is necessary to have separate preservation measures to ensure the quality of those materials Thus, the company should regularly check the equipment to ensure that the environment inside the warehouse always keeps the materials in the best way - Build an information system on materials demand planning, applying MRP software in the company: Applying information technology in the process of material supply management will help planning material needs accurately, shortening planning time, reducing resource waste, thereby contributing to improving the Made by 蓝静玉 - 206140005 20 production efficiency of the factory The company should use ERP to analyze the steps in the planning process, with the construction of the production schedule, to determine the product structure in a specific and detailed way, and from there to determine the need to order - Improve the qualifications of the factory staff: The professional qualifications of the material managers have a great influence on the efficiency of the use of materials throughout the company Good expertise will help the material planning work done quickly and efficiently - Be courageous to borrow capital, enter into joint ventures, and associate with reputable domestic and foreign partners to innovate technology, improve production capacity and quality, and reduce production costs and transportation expenses CONCLUSION It can be said that raw materials are one of the indispensable inputs in any manufacturing enterprise During the production process, it is crystallized into the product and is an integral part of the product cost There are many methods of managing and planning the demand for raw materials, each enterprise can apply methods suitable to the conditions and status of their business, but any business can realize the need and the importance of the management of raw materials from the stage of purchasing, preserving, using, accounting to planning and synthesizing them In particular, well-organized planning not only contributes to improving production efficiency but also has practical significance in the process of production orientation With the above topic, this article has presented an overview of the situation of MRP at Vinamilk Pasteurized Milk Production Company On that basis, strategic analysis and assessment of the company’s MRP are made and the optimal solutions for the company are suggested Made by 蓝静玉 - 206140005 21 REFERENCES Production Logistics Management Textbook University of Commerce Food technology website “Pasteurized milk production line” Vinamilk website Green farm milk Milk production complete manual book Fresh milk supermarket website “How to use fresh milk” Vinamilk website Development history of Vinamilk Vietnam Wayback Machine “Milk price registration and regulations in Vietnam” Stevenson W.J “MRP and ERP” Operations Management Textbook Orlicky, Joseph Material Requirements Planning 10 Sawaya, William J., et al "Ten Guidelines for Implementing Manufacturing Systems." Industrial Management 11 Minty, Gordon Production Planning and Controlling 12 Docplayer “MRP inputs and outputs” The master schedule Made by 蓝静玉 - 206140005 22 ... situation of MRP at Vinamilk Company Chapter 3: Proposing some solutions to improve the MRP at Vinamilk Key words: logistics and supply chain management; MRP in production logistics; MRP; Vinamilk; ... of MRP - 2.3 Basic elements of MRP 2.4 Method of MRP CHAPTER 2: ACTUAL SITUATION OF MRP AT VINAMILK. .. material supply applied at Vinamilk -12 3.3 Input factors of Vinamilk'' s MRP - 14 3.4 Actual situation of applying MRP method of Vinamilk - 15 CHAPTER