(Tiểu luận) the importing process of lubricant products byhoa khanh general services and tradingcompany limited

Trang 1 FOREIGN TRADE UNIVERSITYHOCHIMINH CITY CAMPUS---***---MID-COURSE INTERNSHIP REPORTMajor: Logistics and Supply Chain ManagementTHE IMPORTING PROCESS OF LUBRICANT PRODUCTS BYHOA KH

FOREIGN TRADE UNIVERSITY

HOCHIMINH CITY CAMPUS

-*** -MID-COURSE INTERNSHIP REPORT

Major: Logistics and Supply Chain Management

THE IMPORTING PROCESS OF LUBRICANT PRODUCTS BY HOA KHANH GENERAL SERVICES AND TRADING

COMPANY LIMITED

Student: Tran Cao Anh Ngoc Student ID: 1915535332 Class: K58CLC6 Supervisor: Vuong Thi Bich Nga

Ho Chi Minh City, August 2022

FOREIGN TRADE UNIVERSITY

HOCHIMINH CITY CAMPUS

-*** -MID-COURSE INTERNSHIP REPORT

Major: Logistics and Supply Chain Management

THE IMPORTING PROCESS OF LUBRICANT PRODUCTS BY HOA KHANH GENERAL SERVICES AND TRADING

COMPANY LIMITED

Student: Tran Cao Anh Ngoc Student ID: 1915535332 Class: K58CLC6 Supervisor: Vuong Thi Bich Nga

Ho Chi Minh City, August 2022

TABLE OF CONTENT

CHAPTER 1 INTRODUCTION TO HOA KHANH GENERAL SERVICES

AND TRADING COMPANY LIMITED 1

1.1 General Company Information 1

1.2 Formation & Development 2

1.2.1 Development Process 2

1.2.2 Business Strategies 3

1.2.3 Business Portfolio 4

1.2.4 Organizational Structure 5

1.2.5 Business Performance 7

1.3 Internship Duties & Experience 9

1.4 Summary of Chapter 1 11

CHAPTER 2 ANALYSIS OF THE GLOBAL LUBRICANT SUPPLY PROCESS FOR DOMESTIC DISTRIBUTION BY HOA KHANH 12

2.1 The ordering process from foreign lubricant suppliers 13

2.2 The payment process for foreign lubricant suppliers 14

2.3 The delivery process from foreign lubricant suppliers 15

2.3.1 Seller's obligations in the delivery process 15

2.3.2 Hoa Khanh's obligations in the delivery process as a buyer 22

2.4 Summary of Chapter 2 29

CHAPTER 3 EVALUATION & RECOMMENDATION FOR THE GLOBAL LUBRICANT SUPPLY PROCESS OF HOA KHANH 30

3.1 The SWOT Analysis of Hoa Khanh Current Lubricant Procurement Process 30

3.1.1 Strengths 30

3.1.2 Weaknesses 32

3.1.3 Opportunities 33

3.1.4 Threats 34

3.2 Recommendation for Improving the Efficiency of the Current Supply Process34

3.2.1 Innovate warehouse management system (WMS) and supplier relationship

management (SRM) process 34

3.2.2 Build the training and development plan for employees to deal with the international working process 37

3.3 Summary of Chapter 3 39

REFERENCES 40

APPENDICE 41

TABLE OF FIGURES Figure 1-1 Basic profile of Hoa Khanh Co., Ltd 1

Figure 1-2 Critical milestones in the formation and development of Hoa Khanh 2

Figure 1-3 The vision, mission, and core values of Hoa Khanh Company 3

Figure 1-4 The organizational structure of Hoa Khanh Company 5

Figure 1-5 The subsidiary list of Hoa Khanh 5

Figure 1-6 The branch list of Hoa Khanh 6

Figure 1-7 The income statement of Hoa Khanh over the last 3 years 7

Figure 1-8 Summary of internship duties at Hoa Khanh 9

Figure 2-3 The overview of supply part in the global lubricant procurement process 12 Figure 2-4 The commodity details in the PO sample for SPC branded lubricants 13

Figure 2-5 The procedure of TT remittance before shipment between SPC and Hoa Khanh 15

Figure 2-6 The sequence of operational steps in customs clearance and on-carriage of Hoa Khanh 23

Figure 3-1 The SWOT overview of Hoa Khanh current lubricant supply process 30

Figure 3-2 The fields in the SWOT matrix led to the first solution 34

Figure 3-3 The fields in the SWOT matrix led to the second solution 37

TABLE OF APPENDICES Annex 1 - Lubricants Supply Agreement between Singapore Petroleum Company and Hoa Khanh Trading and General Service Company Limited 33

Annex 2 – Purchase Order (PO) Form of Singapore Petroleum Company (SPC) 39

Annex 3 – Pro Forma Invoice issued by Singapore Petroleum Company (SPC) 40

Annex 4 – The Printed Single Customer Credit Transfer 41

Annex 5 – Commercial Invoice 42

Annex 6 – Packing List 43

Annex 7 – Certificate of Analysis (COA) 45

Annex 8 – Insurance Certificate 48

Annex 9 – Import Export License 53

Annex 10 – Certificate of Origin (CO) form D 55

Annex 11 – Port-to-port or Combined Transport Bill of Lading (BL) 57

Annex 12 – Customs Declaration on ECUS5-VNACCS system 58

Annex 13 – Statement of Importing Tax Payment 60

Annex 14 - The registration for quality inspection on Vietnam National Single Window 61

Annex 15 – The customs declaration for goods clearance 62

Annex 16 – Report of quality inspection for imported lubricants 67

CHAPTER 1 INTRODUCTION TO HOA KHANH GENERAL SERVICES AND TRADING COMPANY LIMITED

1.1 General Company Information

Established in 1994, Hoa Khanh General Services and Trading Company Limited has

so far become one of the leading trading companies in the industry of petroleumimport and export in Vietnam The trading activities of Hoa Khanh are specialized inenergy and raw materials of gasoline, oil, and lubricants

Figure 1-1 Basic profile of Hoa Khanh Co., Ltd

Legal name (English) Hoa Khanh General Services and Trading Company Limited

Hoa Khanh Co., Ltd

Business address 14 Nguyen Tri Phuong Street, Chinh Gian Ward, Thanh Khe

District, Da Nang City, Vietnam

-Logistic và

vận tải… 100% (6)

24

English for Logistics

- For practice, read…

Logistic và

vận tải… 100% (4)

95

Tax code 0400124881

Legal representative Nguyen Van Phuc

1.1 Formation & Development

12 gas stations License to import and export petroleum Distributor of Eni Lubricant

15 gas stations.

01 petroleum warehouse

Distributor

of Singapore Petroleum Company (SPC).

In the 1990s, Hoa Khanh was formerly a gas station in the Hoa Khanh Area, LienChieu District, Da Nang City Over 30 years of continuous development andexpansion, Hoa Khanh has become one of the leading companies in distributing gas,petroleum, and lubricants in the Central Region of Vietnam

The year 2015 was a notable year as it saw the initial involvement of Hoa Khanh ininternational trade activities The license to import and export petroleum, passed by theMinistry of Industry and Trade, was the turning point for Hoa Khanh to gain muchhigher competitive power in the market Over and above, with the milestone ofbecoming the distributor in the Vietnam market of Eni Lubricant, which is one of thewell-known Italian lubricant brands, Hoa Khanh has taken the opportunity to establishbusiness relationships with foreign partners as well as innovate the negotiation processand contract performance to international standards at the same time

By 2020, Hoa Khanh had constructed a total of 15 gas stations across Vietnam'sCentral Region With the larger scale and more diversified trading activities, thecompany has decided to build one wholly owned petroleum warehouse in Tho Quang

2

Oral test Logistics Questions

-Logistic vàvận tải… 100% (4)

13

Trả lời bộ đề thực tế vấn đáp Logistics b…

Logistic vàvận tải… 100% (3)

30

Ward, Son Tra District, Da Nang City With a capacity of 3500 tons, this warehousecould not only store all of Hoa Khanh's petroleum before distribution but also providerental space

Furthermore, in 2020, the Ministry of Industry and Trade and related authorizedagencies of Quang Nam Province passed the license to build the Hoa KhanhCentralized Petroleum Warehouse, wholly invested by Hoa Khanh Co., Ltd in the ChuLai Open Economic Zone (OEZ) The centralized warehouse was inaugurated in themiddle of 2022 with a total capacity of 36,000 cubic meters This warehouse has beenidentified as Hoa Khanh's primary location for international trade activities Currently,Singapore Petroleum Company (SPC) branded lubricants are the main products whichare stored and traded in Hoa Khanh Centralized Petroleum Warehouse

1.1.2 Business Strategies

Figure 1-3 The vision, mission, and core values of Hoa Khanh Company

VISION The leading private company in the Vietnamese market for

petroleum and lubricant import, export, and distribution

MISSION

Provide the best energy sources for the Vietnamese people, as well as the best services and the highest levels of corporate social responsibility, with a focus on human rights and environmental protection

With the above-mentioned vision, mission, and core values, Hoa Khanh has appliedIntegrative Growth Strategies horizontally

Firstly, the company focuses on innovating the operation process, supply chain, andsales management through technological implementation Since 2022, Hoa Khanh has

3

been running the enterprise resource planning (ERP) software to enhance businessreporting with real-time information as well as improve business processes With thenew ERP system, all information about orders, invoices, and payments is transparentfor all functional departments, so there is no longer miscommunication between sales,supply chain, and finance departments It then improves the effectiveness in managingthe cash flow, product flow, and customer service level.

Secondly, Hoa Khanh aims to expand its distribution network and retail chainsnationwide So far, the company has been targeting the Central Region first byestablishing gas stations on every key road route in the Central Region At the sametime, the company has been investing in a warehouse system and a fleet of petroltankers to be capable of expanding distribution on a nationwide scale and attractingmore foreign business partners

Thirdly, the company has a huge investment in human growth and sustainable energysources Regarding human growth, Hoa Khanh prioritizes attracting the pool of talentsthrough remuneration, bonuses, standardized training programs, and other extensiveemployee benefits Regarding sustainable growth, in addition to the commitment to taxand social responsibilities, Hoa Khanh has great support for scientific research on how

to enhance the sale and usage of environmentally friendly energy such as LPG, LNG,and CNG in developing countries

1.1.3 Business Portfolio

The business portfolio of Hoa Khanh is divided into 7 broad groups: petroleum,lubricant, mixed bioethanol, gas and gas products, fuel delivery, real estate, andwarehouse

For petroleum, Hoa Khanh is capable of import and export as well as distributionnationwide The key types of petroleum that Hoa Khanh is trading are mineral spirit,RON-95, bioethanol, diesel, and kerosene

In terms of lubricants, in addition to importing, Hoa Khanh is the exclusive distributor

of Italian Eni Lubricant as well as the key distributor of Singapore PetroleumCompany (SPC) in Vietnam Hoa Khanh's lubricants are primarily used in machinery,industrial manufacturing, and maritime transportation

4

Regarding mixed bioethanol, Hoa Khanh has invested in automated bioethanol mixing

to provide such high-quality products as E5 and E10

In terms of gas and gas products, Hoa Khanh aims to enhance the sales of suchliquefied gasses as Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG)

to reduce the impact of emissions on the environment

Regarding fuel delivery, real estate, and warehouse, they are both supportivesupplements to the main business line of Hoa Khanh With a diversified system oftankers, gas stations, offices, and warehouses, the supply chain of Hoa Khanh is highlyresilient, stable, and can cover many different places across Vietnam

1.1.4 Organizational Structure

Figure 1-4 The organizational structure of Hoa Khanh Company

Each department of level 4 in the organizational structure is assigned to one managerand two deputy managers to control and report to directors in the upper level With thefunctional hierarchy structure, Hoa Khanh finds it helpful to specialize the scope ofwork for employees and to control the efficiency of work more effectively

Figure 1-5 The subsidiary list of Hoa Khanh

Right Capital Contribution

5

Single Shareholder

Limited Company

Son Tra District, Da Nang City

Hoa Khanh Nam

Single Shareholder

Limited Company

National Route 1A, Binh Hiep Ward, Binh Son District, QuangNgai Province

Figure 1-6 The branch list of Hoa Khanh

Ward, Lien Chieu District, Da Nang City

2 Hoa Khanh 2 Branch 419 Ton Duc Thang Street, Hoa Khanh Nam

Ward, Lien Chieu District, Da Nang City

Lien Chieu District, Da Nang City

Lien Chieu District, Da Nang City

5 Hoa Khanh 5 Branch National Route 1A, Mieu Bong Hamlet, Hoa

Phuoc Ward, Hoa Vang District, Da Nang City

Thanh Khe District, Da Nang City

7 Hoa Khanh 7 Branch 396 Cach Mang Thang Tam Street, Hoa Tho

Dong Ward, Cam Le District, Da Nang City

8 Hoa Khanh 8 Branch The Northern Residential Area of Da Nang

Rubber Factory, Khue My Ward, Ngu Hanh SonDistrict, Da Nang City

Lien Chieu District, Da Nang City

District, Da Nang City

Tho Quang Lock, Tho Quang Ward, Son TraDistrict, Da Nang City)

6

Ward, Hoa Vang District, Da Nang City

13 Hoa Khanh 16 Branch A2 Land Area, National Route 1A, Hoa Tho

Dong Ward, Cam Le District, Da Nang City

Services and Trading

Company Limited, Quang

Nam Branch

Tam Hiep Port Logistics Industrial Zone, TamHiep Ward, Nui Thanh District, Quang NamProvince

Services and Trading

Company Limited, Gia

Net revenues from sales

and services rendered 2.303.830.211.950 1.779.209.080.326 3.105.749.125.993

Gross profit from

merchandise and service

Current business income tax

Remarkably, the gross profit margin of Hoa Khanh increased to nearly 6% in 2020 Itwas the result of the decrease in purchasing prices due to the unprecedented globaldecline in crude oil prices in 2020 Specifically, on March 20, 2020, the spot price forWest Texas Intermediate (WTI) crude oil fell by 65% compared to the price on January

6, 2020 This event has led to a fall in oil prices for other benchmark markets all overthe world This unprecedented decline happened because of two main market events

To begin with, as a result of the COVID-19 pandemic, global demand for oil fell asgovernments shut down businesses, mandated stay-at-home mandates, and imposedtravel restrictions As a result of the oversupply of oil in April, the price of oil fell to anall-time low Secondly, an oil price war between Saudi Arabia and Russia, which began

in March when the two nations failed to agree on oil production levels, has added tothe freefall in oil prices Despite the lower purchase price, petroleum demand in thisperiod was highly volatile due to several changes in anti-coronavirus regulations andpublic perceptions of the economy's recovery and "new normal" expectations

8

Therefore, 2020 was a challenging year for Hoa Khanh to deal with its suppliers andcustomers Fortunately, because of the strong storage capability, Hoa Khanh was able

to seize the opportunity to profit from the low oil price as soon as possible

Currently, it appears that businesses will be able to resume all trading activities in the

"new normal" situation, as the COVID-19 epidemic has been better controlled thanks

to vaccination effectiveness However, Russia's launch of a "special militaryoperation" in Ukraine has caused gasoline prices to soar, having a "double impact" onbusiness recovery momentum and placing businesses in an unprecedented position Sofar, Hoa Khanh has been attempting to follow oil price stabilization policies in order tooffer the best retail price for customers and maintain a profitable level

1.2 Internship Duties & Experience

The author’s 5-week internship from July 4 , 2022, to August 5 , 2022, is at theth th

Import-Export and Purchasing Department of Hoa Khanh General Services andTrading Company Limited, specializing in lubricant import and purchasing The twomain work locations are the main office at 14 Nguyen Tri Phuong, Chinh Gian Ward,Thanh Khe District, Da Nang City, and the centralized petroleum warehouse in theChu Lai Open Economic Zone (OEZ), Quang Nam Province

Figure 1-8 Summary of internship duties at Hoa Khanh

-09/07/2022

Absorbing

Learn about the lubricant

products (e.g., specifications,

benefits, applications,

packaging conditions)

Learn about the process of

lubricant purchasing and

importing

Understand important terms used in the lubricant trade.Clearly define the differences among lubricant types

Remember the elements in the full set of import documents and the process of purchasing

9

02 11/07/2022

-23/07/2022

Import & Purchasing

Prepare and follow up on PO

Keep track of the shipment

status, especially departure

and time of arrival, and

relevant documents (e.g

electronic delivery order, BL)

during the carriage period

Support in completing import

documents and procedures

both online and offline (e.g.,

customs clearance, CO, CQ)

Follow the sample form of PO accurately Familiar with platforms for shipment trackingfrom shipping agencies

Be able to coordinate with governmental authorized agencies on different platforms

to complete import documents

Be able to prepare periodic purchasing reports with visualization tools for managers

-06/08/2022

Inventory Management

Follow up and update

inventory stock in the ERP

system

Observe how the lubricant is

received, put away, and

stored in the centralized

warehouse

Familiar with inventory management systemLearn more about the storage conditions of lubricants.Understand the practical warehouse working process

Without a doubt, this internship period provided a wealth of practical knowledge oftrading activities in the petroleum industry, particularly the international lubricanttrade The full set of import documents in both Vietnamese and English and proceduresrelated to lubricant import are the valuable references for further occupation Besides,the author also had a chance to work in the professional and structural businessenvironment Meeting and working online with foreign business partners were a greatchance for the author to not only improve English usage in a business environment butalso practice communication skills What is more, the author would better adapt to

10

official job positions after graduation The author has benefited greatly from thecompany's alumni support and the standardized process, as most of the colleagues andmanagers the author worked with had several years of experience in the petroleumindustry and the import-export field in particular.

1.3 Summary of Chapter 1

Briefly, the first chapter is mainly about the introduction of Hoa Khanh Co., Ltd.regarding background information, development, structure, and business performance.While the business performance shows the stable growth of the company, the otherparts clarify the business portfolio, organizational structure, and market coverage ofHoa Khanh Moreover, the first chapter is also a broad overview of the internshipperiod of the author The author has provided a general description of her scope ofwork and personal experiences during the internship by summarizing assigned tasksand values gained from the internship Working in a professional atmosphere such asHoa Khanh has provided the author with several learning and experience that will bebeneficial not only to her studies at Foreign Trade University, but also to her futurecareer path

The next chapter will detail Hoa Khanh General Services and Trading CompanyLimited's global lubricant procurement process for domestic distribution

11

CHAPTER 2 ANALYSIS OF THE GLOBAL LUBRICANT SUPPLY PROCESS FOR DOMESTIC DISTRIBUTION BY HOA KHANH

In addition to distributing Italian ENI lubricants in Vietnam, Hoa Khanh has alsoagreed to buy lubricants under the Singapore Petroleum Company brand for resale inthat country This agreement shall be for a period of one year commencing on 1st May

2022 and expiring on 30th April 2023 (Annex 1)

Since the author spent most of her internship period working on the SPC brandedlubricants procurement process, Hoa Khanh's global lubricant procurement processwill be analyzed using SPC branded lubricants as an example

Figure 2-9 The overview of supply part in the global lubricant procurement process

The supply process of imported lubricants includes three steps: ordering, delivery, andpayment After the supplier confirms the order, the contract between the supplier andHoa Khanh governs whether delivery or payment will take place For example, thepayment is made first in the case of Singapore Petroleum Company, as SPC demandsfull payment before shipment The importation procedure in the delivery phase isanother noteworthy feature Because Hoa Khanh purchases its lubricants frominternational suppliers, several steps must be taken in order to release the importinglubricant containers at the Da Nang Port before they are delivered to the centralizedwarehouse for storage

12

2.1 The ordering process from foreign lubricant suppliers

Based on the terms and conditions mutually agreed in the supply agreement, HoaKhanh would then fill in the PO form provided by SPC (Annex 2) to make an order.The PO form includes six articles

The first article covers the commodity details of the order The product name, quantity,and amount are listed in this article The amount in USD is determined based on theorder size and the mutually agreed-upon fixed unit price In an example of Annex 2,Hoa Khanh made an order for two products in three types of quantity units as shownbelow:

Figure 2-10 The commodity details in the PO sample for SPC branded lubricants

a maximum capacity of 7 gallons, areappropriate for low volume cargo, drumsare a great choice for high volume orders In the case of SPC, Hoa Khanh ordered bothpails and drums for the SDM 706 SAE 20W50 API CF/SF product to satisfy variousconsumer demands

The second and third articles are about the total value of the order for payment Theproduct's total amount constitutes the total purchase price In the case of SPC, the fulladvance payment would be made by TT The payment term is analyzed in the nextpart The next two articles cover the shipment information While the fourth article

13

shows the delivery details, including schedule, port of loading, and Incoterms applied,the fifth article lists the required documents that SPC must prepare for shipping andreceiving cargo Finally, the requirement for duplicating the POs for both parties isstated in the sixth article.

2.2 The payment process for foreign lubricant suppliers

Upon receipt of the order, the supplier would check the item quantity in stock and thensend the order confirmation with the estimated delivery time In the case of SingaporePetroleum Company, the scheduled delivery has been fixed in the PO form, which iswithin two to four weeks after receipt of the order Once the products are ready fordispatch, SPC will send a payment request via email, enclosed with a pro formainvoice (Annex 3) After verifying the consignment information, including deliveryschedule, product details, and bank information on the pro forma invoice for accuracy,Hoa Khanh would proceed to make a full advance payment without any withholding,offsetting, or deduction by Telegraphic Transfer (TT) (Annex 4) The payment process

by TT is shown in the figure 2-5

Figure 2-11 The procedure of TT remittance before shipment between SPC and Hoa Khanh

A telegraphic transfer (TT) is a type of electronic money transfer used primarily forinternational wire transfers due to major benefits for both the seller/exporter and thebuyer/importer Owing to the fact that it is electronic, TT payments are not onlyreceived quickly (1–5 business days), but also securely and safely Furthermore, it issimple to track, so there is no need to determine how much money was sent and when

14

Last but not least, TT payments could be started whenever and from anywhere TTpayment requires the involvement of four parties, including seller/exporter, seller’sbank/beneficiary bank, buyer/importer, and buyer’s bank/ correspondent bank In thecase of SPC, the beneficiary bank is DBS Bank Singapore, while the correspondentbank is JPMorgan Chase Bank, N.A., New York As Hoa Khanh is a new customer,SPC requires full payment in advance for the safety of SPC With TT payment beforeshipment, the risks are totally borne by Hoa Khanh as a buyer/importer Therefore,Hoa Khanh takes careful steps in document set requirements, trading bank, and invoiceconfirmation to avoid as many losses as possible.

2.3 The delivery process from foreign lubricant suppliers

2.3.1 Seller's obligations in the delivery process

In the case of Singapore Petroleum Company, upon receipt of full payment, SPCwould load the shipment onto vessels under the CIF term and at the same time send thedocument set to Hoa Khanh in order to take further steps in releasing importinglubricant containers at Da Nang Port The document set includes:

Commercial Invoice (Annex 5)

Packing List (Annex 6)

Certificate of Analysis (COA) (Annex 7)

Insurance Certificate (Annex 8)

Import Export License (Annex 9)

Certificate of Origin (CO) form D (Annex 10)

Port-to-port or Combined Transport Bill of Lading (BL) (Annex 11)

The CO Form D is applied to exporters to ASEAN countries In order to obtainpreferential tariffs—tariff schedules that give one or more countries lower rates orother advantages over other nations—under the ASEAN Trade in Goods Agreement(ATIGA), exporters must submit the CO Form D, which also serves as an exporter'sdeclaration Regarding the insurance certificate, it is issued by AXA Insurance Pte LtdSingapore and has minimum insurance coverage under CIF terms

15

The delivery then takes about a week to arrive at Da Nang Port on the vessel namedSinar Solo 962N by New Golden Sea Shipping Pte Ltd Within 2 days before arrival,SPC would advise Hoa Khanh of the estimated time of arrival (ETA) via email.2.3.2 Hoa Khanh's obligations in the delivery process as a buyerUpon the vessel's arrival, Hoa Khanh would prepare procedures for import customsclearance while the cargo is unloaded at Tien Sa Port, Da Nang The new importcustoms declaration would be registered on ECUS5-VNACCS (Annex 12), which isshort for Vietnam Automated Cargo Clearance System to clear the shipment before it

is delivered to the centralized warehouse of Hoa Khanh The list of operations issequentially arranged into steps and sub-steps as the figure below:

Figure 2-12 The sequence of operational steps in customs clearance and on-carriage of Hoa Khanh

It is noted that in each step of the aforementioned import customs declaration process,

a certain sub-step shall be taken simultaneously to complete customs clearance andcargo on-carriage

16

Fill in all the required information on the import declaration paper

The first actions are in “1 Extract information from previous declarations (IDB)” onthe list of operation codes The ECUS5-VNACCS system enables companies to createnew declarations using information on goods that have already been declared toCustoms via Temporary Declarations (IDA), Declare Shipping (Manifest), and DeclareInvoice (IVA) Therefore, Hoa Khanh can use the system function with IDB code toget the information of declared goods into the new import declaration paper since HoaKhanh has declared goods to Customs through the operations above Then, theregistered information will be automatically filled in the corresponding criteria,including information about the exporter, importer, and customs agency For example,

in the case of SPC Petroleum, the in-charge customs agency is the Customs Branch at

Da Nang Port Border Gate

Then, the rest of the fields on the “Thông tin chung" tab, which have not auto filledyet, would be filled manually It includes trading type, code of transportation mode,and shipment information (BL, number of batches, consignment weight, vessel, arrivaltime, port of loading, and port of discharge) For example, in the case of SPCPetroleum, the customs code is “A11: Enter the consumer business” and thetransportation mode code is “2: Sea Freight (Container)” The Bill of Lading (BL)code is 240522COAU7238424480, which means that the date loaded on board wasMay 24th, 2022 with the BL number COAU7238424480

Next, on the “Danh sách hàng" tab, it requires input about item specifications Thedata of item name, HS Code, origin, quantity, and unit could be entered manually orimported from Excel files

Finally, the fields on the “Thông tin chung 2” tab are filled in after completing the step A1 below When the total charges and total taxable value are entered, theVNACCS system will automatically allocate them to calculate the taxation and returnsfor the business In addition, the import license number of Hoa Khanh and thecommercial invoice with SPC are entered as well

sub-17

Sub-step A1.i Importing tax payment

In order to receive the statement of tax payment (Annex 13), Value Added Tax (VAT)and Environmental Protection Tax are the two types of taxes that Hoa Khanh must pay

on imported lubricant products In the case of SPC, the formula for tax is as follows:

Environmental Protection Tax = Tax Rate * Total Quantity = 1,000 VND/liter

* 25,000 liters = 25,000,000 VND

Since January 1st, 2019, the environmental protection tax rate for oil has been 2,000VND/Liter However, with the government's socio-economic recovery anddevelopment program, the National Assembly has recently calculated a tax reductionpackage and applied the tax rate of 1,000 VND/Liter from April 1st, 2022

VAT = Tax rate * (Total invoice amount + Import tax + Environmental

protection tax) = 10% * (745,437,560 + 0 + 25,000,000) = 77,043,756 VNDThe value-added tax rate is 10%, and the exchange rate is 23,060 VND/USD Underthe ASEAN Trade in Goods Agreement (ATIGA), Vietnam cut 669 tariff lines to zeropercent in January 2018 As a result, CO form D functions as the declaration for HoaKhanh to have the zero percent of import tax to imported lubricant

Step 2: Declare the returns in advance (IDA)

After completing data entry, move to “2 Temporary Declarations (IDA)” on the list ofoperation codes to send the return to the Customs system Then, the DeclarationNumber is provided for further steps It is considered a temporary return, and editing

by IDB operation as presented above is possible before registering the officialdeclaration (IDC) There is no time limit for declaring and editing; however, each draftversion is stored on the VNACCS system for 7 days only

Sub-step A1.ii Get a certificate of imported quality inspection

This sub-step is applied to internal combustion engines in lubricant import and can betaken only after the Declaration Number is provided The registration for qualityinspection (Annex 14) would be done on the Vietnam National Single Window withoutphysical travel to state authorities With this innovation, inspection documents and

18

documents to be included in a dossier are reduced and consolidated in order to avoidoverlapping of specialized documents in the same dossier

In the case of SPC, the information required to complete the registration formincludes:

Authorized examiner: Central-region branch of the Directorate of Standards,Metrology, and Quality (STAMEQ), which is the agency under the Ministry ofScience and Technology (MOST)

Importer's information: Hoa Khanh Co., Ltd and its relevant informationStorage location

The estimated time of arrival (ETA)

Standardized benchmark code

Inspection organization: Quality Assurance and Testing Center 2 (QUATEST 2)The customs declaration number

Besides, the set of documents required to be enclosed includes the following ones:Sales of Goods Contract

Certificate of Analysis (COA)

After submitting a registration form for quality inspection, the Directorate ofStandards, Metrology, and Quality (STAMEQ) would examine and provide thecertificate of import quality inspection if no error occurs

Step 3: Get the official customs declaration (IDC, IDD, and IID).

After using the IDA operation, select the “3 Khai chính thức tờ khai (IDC)” function

to send an official return to Customs If the process is successful, this declaration will

19

be used in the next clearance step After successful registration, Customs will respondwith the flow report and clearance status in the following cases:

Green Lane : the consignment is cleared and able to move straightforward to IIDoperation code for printing customs declaration for further usage

Yellow Lane : subject to Customs’ document review in IDD code, then updateand fix problems before moving to IID operation code

Red Lane : subject to both Customs’ document review and on-site customsinspection before clearing consignment

Sub-step A1.iii Pay full shipping charge to receive Electronic Delivery Order(EDO) from a forwarder

Under CIF terms, the costs arising from the port of destination are for the account ofthe seller In the case of SPC, it was agreed by both parties that SPC would enter into

a contract of carriage with a shipping forwarder, which would cover the movement ofthe goods from the point of delivery to Hoa Khanh's central warehouse At the sametime, only up until the point at which the goods are delivered to Da Nang Port does theseller (SPC) cover all associated costs As a result, in order to get the consignment out

of the port, the buyer (Hoa Khanh) must cover all expenses associated with on-carriage

to get an Electronic Delivery Order (EDO) from the carriage forwarder

Step 4: Deliver the Consignment from the Port to Storage Location to Put Away

The shipment will be prepared for delivery from the port to Hoa Khanh's storagefacility if the customs declaration is on Green Lane or Yellow Lane (problems alreadyfixed) (Annex 15) and the Electronic Delivery Order (EDO) is successfully received.Specifically, Hoa Khanh must pay a deposit to take the empty clean container totransport the cargo from Tien Sa Port to Hoa Khanh's central warehouse in QuangNam Province Not to mention, the container is arranged by a freight forwarder undercontract with SPC

As soon as the container arrives at the warehouse, the receiving process will start.Unloading and checking are two separate steps that make up the receiving process.Firstly, the received goods are unloaded from the container onto the dock floor by thewarehouse staff for proper checking After that, senior associates who have a thorough

20

understanding of the products perform the checking process Making precise productcounts and gathering additional data are both parts of the checking process Then, thegoods would be put away at the warehouse for sale.

Last but not least, Hoa Khanh would cover the costs of cleaning and returning theempty container to Da Nang Port When the empty container is successfully deliveredback, Hoa Khanh will get the deposit and the import lubricant supply process will befinished

is advance payment in full by TT

The worldwide lubricant procurement process has nine steps that are organized intotwo primary parts: sourcing and importing Each stage contains differentdocumentation and processes While the former involves procedures that occur onlywhen a fresh supply requirement develops and is more strategic in nature, the latter is acycle of processes to obtain lubricant orders for distribution and is more operational innature Whereas the negotiating stage is the most important in the Sourcing Process,the customs declaration is the most difficult and plays an important role in the SupplyProcess, particularly in the delivery process

The last chapter would use a SWOT model to evaluate Hoa Khanh's present lubricantprocurement process before making recommendations for process improvement based

on the findings

21

CHAPTER 3 EVALUATION & RECOMMENDATION FOR THE GLOBAL LUBRICANT SUPPLY PROCESS OF HOA KHANH

3.1 The SWOT Analysis of Hoa Khanh Current Lubricant Procurement Process

Figure 3-13 The SWOT overview of Hoa Khanh current lubricant supply process

STRENGTH

1 Commitment of regular orders and large

order quantities for suppliers

2 Excellent financial health

3 Talented management team to look

forward to a positive outlook

WEAKNESS

1 Language barrier of employees to deal with English documents and communication

2 Low level of technological penetration among long-serving employees

OPPORTUNITY

1 Favorable national legislation in the

trading and distribution of petroleum for

local businesses

2 Lower tariff rates and non-tariff barriers

with several free trade agreements (FTAs)

3 Technological applications for improving

supplier relationship management (SRM)

and inventory management

THREAT

1 Heavy dependence on suppliers regarding cargo carriage due to thelimited capacity of local shipping firms

2 Reduce competitiveness due to theshortage of containers at port

3.1.1 Strengths

The greatest and most important strength of Hoa Khanh in the process of supplyinglubricants internationally is its solid reputation, which has helped it win the respect andloyalty of its suppliers Nothing is more crucial to the supply process than having aconcrete supply network to guarantee the supply source even in the most dire andunforeseen circumstances Hoa Khanh's strong reputation is based on three keyelements

First off, Hoa Khanh ensures regular orders and large order quantities for its suppliersdue to the high and consistent demand from customers With nearly 20 years of

22

development, Hoa Khanh is one of the largest private companies in the oil and gassector, particularly in the Central Region in terms of both market density and marketshare The system of 15 gas stations in strategic locations has created a huge base ofloyal customers for Hoa Khanh over the years due to its high convenience and servicelevel Hoa Khanh has also consistently been one of the retailers and distributors thatgives customers the best deal, regardless of COVID-19 or any fluctuation in oil prices.Not to mention, Hoa Khanh continuously expands its line of products for customersthanks to its license for petroleum import and export That is why Hoa Khanh hasbecome a top-of-mind petroleum trading company for customers Hoa Khanh's 36,000cubic meter central warehouse gives it an advantage over many other distributors interms of storage capacity The more storage space is available, the more Hoa Khanhcan order from its suppliers.

Second, Hoa Khanh has excellent financial results Financial performance is one of themost important factors in determining a company's reliability and potential Bymaintaining a gross profit margin of about 5% even in the event of a COVID-19pandemic, Hoa Khanh has demonstrated its operational stability and sound financialstanding Furthermore, Hoa Khanh's low leverage ratio (total debt divided by totalassets) is a strong indicator of the company's financial stability and long-term growth

On the basis of strong financial performance, Hoa Khanh is in a good position tobargain with its suppliers about payment terms and to guarantee high liquidity forthose suppliers throughout the course of the business relationship

Thirdly, Hoa Khanh displays a positive outlook for development under the direction of

a creative and talented management team While older managers bring a wealth ofexperience, younger managers bring innovation to the Hoa Khanh management team.The long-serving managers of Hoa Khanh have developed strong relationships withkey clients who buy in large quantities and frequently as a result of their extensiveexperience in the petroleum industry Additionally, thanks to their deep understanding

of political dynamics and governmental policy, Hoa Khanh is better able to adaptswiftly and successfully to changes in the domestic market and in global oil pricessince the petroleum industry is subject to particular government regulation andinterference The young managers, on the other hand, seem to be a breath of fresh air

23

with their innovative mindset and high level of globalization For instance, to developpremium product lines and diversify the product portfolio, the young managementteam is very proactive in looking for international supply sources They also takecustomer service into consideration by cooperating with MoMo to offer the onlinepayment method in every gas station With the drive of young managers and the strongbacking of more experienced ones, Hoa Khanh has a great chance to grow its retailchains and distribution network in the coming years

3.1.2 Weaknesses

As a long-standing local business, Hoa Khanh undoubtedly encounters difficulties inbridging the generational gap and implementing global standards for all employees inorder to work with foreign business partners effectively as well as innovating theoperation

First of all, the language barrier is the biggest challenge for staff to deal with Englishdocuments and emails Young managers have, up until now, been solely responsiblefor emailing or holding virtual meetings with foreign suppliers The main cause is thatthe majority of the current staff have limited English proficiency, making itchallenging for them to communicate and work in English When it comes toimporting procedures, for instance, current employees are becoming more accustomed

to the support provided by their line managers, but they are still not very successful atcompleting these procedures because the majority of the necessary documents are inEnglish

Secondly, the low level of technological penetration among long-serving employees isthe obstacle to implementing innovations and automated software in businessprocesses The dominance of manual work in the current operational process hascreated several postponements in correspondence and information asymmetry in thesupply process More than that, the limited application of automated software hasreduced the efficiency and service level in centralized warehouses In particular, themajority of inventory tracking and checking is done manually, which can result innumerous mistakes and an inability to control stock-in and stock-out during warehouseoperations

24

3.1.3 Opportunities

To begin with, Hoa Khanh benefits from favorable government policies in its tradingand distribution of petroleum as a local business According to the Ministry of Industryand Trade's Circular No 34/2013/TT-BCT dated December 24, 2013, announcing theroadmap for goods sales and purchase and activities directly related to the purchaseand sale of goods, foreign-invested enterprises (FDI enterprises) are not permitted toimport and distribute lubricating oil products (HS codes: 2710.19.43, 2710.19.44) HoaKhanh therefore has tremendous negotiating power with its suppliers who want tomarket their goods in Vietnam thanks to the competitive power of import licenses andadvantageous distribution policies for domestic firms

Second, more free trade agreements (FTAs) have been ratified between Vietnam andother nations to facilitate the international trade of Vietnamese companies Applyingthe Rules of Origin of Goods in the ASEAN Trade in Goods Agreement (ATIGA) with

CO Form D, for instance, will enable businesses to take advantage of preferential taxrates and control the costs associated with compliance, such as document preparationand accounting fees The ATIGA expands the scope of the Common EffectivePreferential Tariff (CEPT) Agreement and other pertinent ASEAN agreements byconsolidating and streamlining their provisions Needless to say, with the goal ofestablishing a single market and production base in ASEAN, ATIGA and other freetrade agreements (FTA) will enhance international cooperation and trade forVietnamese domestic firms

Thirdly, the processes of supply relationship management (SRM) and inventorymanagement may become more effective as a result of advances in informationtechnology Technology is crucial in creating the next generation of supplierrelationship management systems that allow for the real-time sharing of highly useful,actionable data, consumer insights for demand planning; and inventory data forreplenishment Similar to this, automated warehouse management systems (WMS) canrecord stock in real-time so that staff can easily monitor the status of stock outs,obsolesces, losses, and damages, and that warehouse managers can have an accurateplan for filling stock or writing off as well Therefore, by using technology to visualize

25

this data and giving it to supplier relationship managers, it frees them up to carry outmore strategic procurement and inventory management tasks.

3.1.4 Threats

First and foremost, due to Vietnam's shipping companies' limited capacity and lowlevel of competitiveness, domestic import and export businesses must rely heavily ontheir business partners for cargo shipping Most Vietnamese shipping companies aresmall-sized businesses and mainly transport cargo but do not provide logisticsservices, leading to low efficiency in business activities In particular, while foreignshipping companies have vessels with a capacity of more than 20,000 TEUs,Vietnamese shipping companies only have ships with a capacity of 1,800 TEUs Moreimportantly, because of its smaller capacity, Vietnam still has longer shipping timesand higher costs than other developed nations Foreign shipping lines thus control themajority of the freight transportation in Vietnam as well as on transcontinental routes.Secondly, the major issue of container shortages in Vietnam has created severalchallenges in locating goods as well as handling processes It is mainly caused by thecongestion at ports and supply chain disruption, especially in the post-pandemic Such

a lack of containers along with underdeveloped port facilities has potentially led toloss and damage during cargo storage at ports, shipping delays, and a shorter productshelf-life As a result, this threat generates a huge impact on the competitiveness ofexport import businesses

3.2 Recommendation for Improving the Efficiency of the Current Supply Process

3.2.1 Innovate warehouse management system (WMS) and supplierrelationship management (SRM) process

Figure 3-14 The fields in the SWOT matrix led to the first solution

STRENGTH - Leverage

1 Commitment of regular orders and

large order quantities for suppliers

2 Excellent financial health

WEAKNESS - Minimize

26

3 Talented management team to look

forward to a positive outlook

OPPORTUNITY - Try to make use of

Technological applications for improving

supplier relationship management (SRM)

and inventory management

THREAT - Reduce impacts

1 Heavy dependence on suppliers regarding cargo carriage due to the limited capacity of local shipping firms

2 Reduce competitiveness due to the shortage of containers at portWith the strength of proactive, young managers and strong financial health, thisapproach is supported by a solid foundation of both human and financial resources.Additionally, Hoa Khanh finds it simple to test and modify innovation practices andreceives helpful feedback from major suppliers in developed nations thanks to thefrequency and scale of orders generated by the consistent and strong consumer At thesame time, innovation acts as an initiative to make use of cutting-edge informationtechnology in supplier relationship management (SRM) and inventory management.Last but not least, Hoa Khanh will be more proactive in responding to potential issuesarising from current international cargo shipping by sea thanks to real-time stock dataand transparent communication with suppliers, which will minimize the impact ofsignificant dependence on suppliers and container shortages on the service level andproduct availability

Regarding warehouse management system (WMS), the current method is recordinginventory based on the product code This approach enables for quantity management

of stock-in and stock-out but disables track and trace on stock shelf-life Thislimitation then leads to the high risks of obsolesce as the staff tends to pick the itemswhich are nearest the shipping docks rather than follow the first-in-first-out pickingand inventory record rule

The first way is to develop a batch number system together with standards thatregulate when batch numbers are allocated Simultaneously, Internet of Things (IoT)solutions should be used in the working process since IoT devices can swiftly andcorrectly synchronize, monitor, detect, and receive information IoT system might linkportable devices such as smartphones and smart tablets to collect and share data As a

27

result, using batch number groups and an IoT system, each SKU might be assigned abatch number as soon as the procurement team generates a line on purchase orders thatincludes a product When a warehouse employee takes a physical receipt of an item orpicks up an item for shipping, this batch number has already aligned with the SKU fortrack and trace.

More than that, the usage of Radio Frequency Identification (RFID) tags and sensors isencouraged to improve the efficiency of the IoT system Instead of designing andproducing a paper label that must be taken off and reapplied with every adjustment,RFID employs radio waves to transport data to or between digital tags or labels Thesetags have the capacity to hold a vast quantity of data, which is subsequently processedand read with specific scanners placed next to them to record it

RFID tags vary and update quickly, whereas batch number can offer explicit data ofreceiving date, remaining shelf-life, expiry date, and so forth Not to mention, IoTsolutions, with the function of synchronizing all changes and updates and storing alarge amount of data, would improve the effectiveness of communication amonginternal departments with much lesser time It is undoubted that the combination ofbatch number set, IoT, and RFID generates a substantial increase in stock visibility andsignificant decrease in missing goods and obsolesce

Regarding supplier relationship management (SRM), With inventory visibilityprovided by the aforementioned RFID, batch number, and IoT implementations, HoaKhanh will be more proactive in inventory optimization and aligning inventoryplanning with their suppliers to fulfill demand and prevent typical inventory concernssuch as overstocking and stockout

The third suggestion is combining the IoT system with cloud storage systems, whichthen creates efficient channels of communication that enable transparency and preventmisunderstanding with suppliers It enables real-time communication between HoaKhanh and suppliers, making the transaction process more fluid and efficient.Furthermore, the automated synchronization onto a single cloud server for both parties

to track invoices and storing payment information may streamline and alleviate thestress of the payment process Buyers and sellers can verify invoices instead of seekingreceipts or transaction details, avoiding needless contact Furthermore, operational

28

transparency — such as dual-sided pay systems — is a valuable innovation foralleviating demands and providing real-time information These automated proceduressimplify simple operations, relieving sellers and purchasers of stress and offering awindow-like channel for both parties This level of openness creates an equitablepartnership and eliminates over-dependence on one side of the transaction, which leads

to trust in a buy-sell relationship

Sourcing, communication, payment methods, and operational transparency betweenbuyers and sellers all require significant improvements It is essential to reconsiderpresent techniques and explore integrating more technological solutions into processes.Using technology not only improves procurement efficiency, but also the connectionsrequired to sustain a successful supply chain

3.2.2 Build the training and development plan for employees to dealwith the international working process

Figure 3-15 The fields in the SWOT matrix led to the second solution

STRENGTH - Leverage

1 Commitment of regular orders and large

order quantities for suppliers

2 Talented management team to look

forward to a positive outlook

WEAKNESS - Minimize

1 Language barrier of employees to deal with English documents and communication

2 Low level of technological penetration among long-serving employees

OPPORTUNITY - Try to make use of

1 Favorable national legislation in the

trading and distribution of petroleum for

local businesses

2 Lower tariff rates and non-tariff barriers

with several free trade agreements (FTAs)

THREAT - Reduce impacts

It is undoubted that working with foreign suppliers on regular orders and large orderquantities generates a variety of procedures and processes that serve as excellent

29

training materials and real-world examples for building exercises More importantly, ayoung management team that is well-versed in international business practices andknowledgeable about the company's current human resource pool is a team that has achance to develop a sensible and practical training program It goes without saying thatthe training program would lessen the negative effects of the language barrier and theemployees' low technological adoption on the effectiveness of business operations andthe efficiency of collaboration with foreign partners After taking part in the trainingseries, employees will have a better understanding of international trade andgovernmental economic policy, allowing them to apply the advantages and conditions

of Free Trade Agreements (FTAs) case by case in actual business situations andincrease the competitiveness of Hoa Khanh in domestic petroleum distribution as alocal firm

First and foremost, training on international trade policies and processes should be atop focus It ensures that processes are properly executed and tracked, allowing seniorpersonnel to focus on strategic concerns rather than day-to-day operations

The first action is creating a well-written rules and procedures manual to eliminatemuch guessing and records every step necessary to complete a certain operation.Procedures must be established to implement well-defined systems in a step-by-stepmanner that everyone can understand Any employee should be able to pick up amanual or examine a procedure and follow the directions to properly execute the work

at hand if there is good documentation Importantly, due to the language barrier ofcurrent employee, the handbook and documentation should be built in both Englishand Vietnamese

The next step is using the manual as a training material Give the employees hands-ontraining, guiding them through the processes the first time and utilizing the handbook

to guide them if they have questions afterwards The training process will expose anyshortcomings in the written material Staff can also add to the documentation bypointing out gaps or sections that require explanation Finally, any deviation from themethod should be documented and reported in writing so that any changes can beexamined, and the relevant paperwork and training materials are updated

30

Secondly, the training related to English skills and usage in business environmentshould be concerned Due to the low English level of most employees, carefulconsideration of how language courses are planned and paced is critical Receiving toomuch information at once might be daunting for employees, reducing their enthusiasmand patience for improving their English Because workers' English proficiency vary,

an assessment test is required to divide staff into different groups, and then the teachertrains them with content relevant to each group's level Furthermore, tying coursematerial to each employee's professional function is the most effective approach tokeep employees engaged Employees will comprehend how their new languageabilities may be valuable at work if lessons and exercises teach workplace etiquette,typical business terms and terminology, and use role-playing to build skills likecomposing emails and chatting on the phone People respond well to goals andincentives, and not only in the long run Not to mention that rewarding exceptionalachievement fosters healthy competition among trainees and serves as a motivationaltool Ultimately, developing the perspective that English proficiency is a priority iscritical Employees should be allowed time during the workday to complete thetraining

3.3 Summary of Chapter 3

The last chapter examines Hoa Khanh Company's existing procurement method forlubricating goods The evaluation is based on the SWOT (Strength - Weakness -Opportunity - Threat) matrix concept While the existing method has the advantage ofgaining strong trust and creditability from supplier, the key issue to be considered isHoa Khanh personnel' limited English proficiency There are benefits fromgovernment incentive policies on petroleum distribution for local enterprises, multi-national collaboration through Free Trade Agreements (FTAs), and the rapid expansion

of technology in procurement process However, Hoa Khanh continues to facechallenges of decreasing competitiveness due to its strong reliance on suppliers forinternational transportation and a lack of containers at port

Based on the findings of the SWOT analysis, two solutions are proposed to harnessstrengths, minimize weaknesses, be ready to capitalize on opportunities, and eliminatethe effects of threats One solution is connected to procurement process innovation,

31

particularly in inventory management and supplier relationship management.Meanwhile, another approach focuses on boosting the quality of current humanresources through training series in order to adapt to international procedures andworking processes swiftly and flexibly.

32

33

Annex 1 - Lubricants Supply Agreement between Singapore Petroleum Company andHoa Khanh Trading and General Service Company Limited

34