An essay on inventory management subject describe vinamilks inventory management modeland analyze its benefits and weaknesses

In order to survive and develop, domestic enterprises are forced to change their management methods to improve product quality, lower product costs, and minimize production costs to ensu

MINISTRY OF EDUCATION AND TRAINING

HCMC UNIVERSITY OF TECHNOLOGY AND EDUCATION

AN ESSAY ON INVENTORY MANAGEMENT SUBJECT

DESCRIBE VINAMILK'S INVENTORY MANAGEMENT MODEL AND ANALYZE ITS BENEFITS AND WEAKNESSES.

Instructor: M.Econ NGUYEN HOANG LONG

Class time: Monday | Periods 10-12

Course Code: INMA321506E_22_1_02CLC

Ho Chi Minh City, October 2022

LIST OF MEMBERS

Name Student ID Responsibility

NGUYEN PHAM KIEU DUYEN 20124215 Describe model + Presentation

NGUYEN PHUONG NHI 20124193 Strengths of model + Presentation

NGUYEN THI THANH HUYEN 20124186 Weaknesses of model + Presentation

VO DUC HUY 20142216 PPT + Presentation

LAM TRUC PHI 20124195 Format Essay + PPT + Presentation

Lecturer's comments:

_ _ _ _ _ _ _ _ _ _ _ Score: _

TABLE OF CONTENTS

LIST OF ABBREVIATIONS 4

I INTRODUCTION 5

II CONTENTS 6

1 Overview of Vietnam Dairy Products Joint Stock Company (Vinamilk) 6

1.1 About Vietnam Dairy Products Joint Stock Company 6

1.2 Functions, Objectives, Mission, Vision and Core Values of Vinamilk 8

1.2.1 Function 8

1.2.2 Objective 8

1.2.3 Mission 9

1.2.4 Vision 9

1.2.5 Core Values 9

2 Describe the inventory management of Vinamilk 9

2.1 Classification of the company’s inventory 10

2.2 Inventory management activities 10

2.3 Vinamilk’s inventory management model 12

2.3.1 Analysis of EOQ inventory model of Vinamilk 12

2.3.2 Arrangement of types of inventory 13

3 Advantages and Disadvantages of Vinamilk’s inventory management model 14

3.1 Advantages 14

3.2 Disadvantages 15

REFERENCES 17

LIST OF ABBREVIATIONS

WTO World Trade Organization

RGV Rail guided vehicle

EOQ Economic Order Quantity

FIFO First In, First Out

ERP Enterprise Resource Planning

I INTRODUCTION

In the current trend, Vietnam's extensive accession to The World Trade Organization (WTO) has made the competitive environment of domestic enterprises very exciting with many opportunities and challenges consciousness In order to survive and develop, domestic enterprises are forced to change their management methods to improve product quality, lower product costs, and minimize production costs to ensure product competitiveness products of your business

For manufacturing enterprises as well as commercial enterprises, the management of raw material inventory is a very important issue and has special meaning because the management of raw materials inventory is carried out Good quality will help businesses reduce costs for storing raw materials, avoid occupying a lot of capital for inventory, reduce costs for renting premises and renting warehouses

to store materials, and at the same time ensure a sufficient supply of raw materials for production, avoiding the shortage of materials leading to production line stagnation, shortage of supply components for the market leading to reduced profits, or loss of customers, loss of market lost market share

Currently, inventory management is considered to be a very important step in corporate governance but sometimes it is not really valued and paid due attention in domestic enterprises in general and those in domestic enterprises business in the dairy sector in particular Because of that, we decided to choose the topic: "Inventory management at Vinamilk" to somewhat have an overview of the inventory management of a business enterprise from there, it is possible to propose solutions to improve the efficiency of this management

II CONTENTS

1 Overview of Vietnam Dairy Products Joint Stock Company (Vinamilk) 1.1 About Vietnam Dairy Products Joint Stock Company

Vinamilk is the short name 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

Established on August 20, 1976, up to now Vinamilk has become the leading company in Vietnam in processing and supplying dairy products, ranked in the Top 10 strong brands in Vietnam Vinamilk not only owns 75% of the domestic milk market share but also exports its products to many countries around the world such as the United States (US), Canada, France, etc Commitment to international quality, quality Vinamilk has affirmed its aim Vinamilk's goal of conquering everyone regardless of national borders Actively integrating, Vinamilk has prepared from human resources to facilities and business capabilities to enter the market of the World Trade Organization (WTO) countries firmly with a mark bearing the Vietnamese Brand

After more than 30 years of launching to consumers, up to now, Vinamilk has built 8 factories and 1 factory and is building 3 new factories, with a variety of products, Vinamilk currently has over 200 dairy products pasteurized, pasteurized and dairy products

The history of company's foundation:

On August 20, 1976, Vinamilk was established on the basis of taking over 3 milk factories left by the old regime, including:

Thong Nhat Dairy Factory (formerly Foremost factory)

Truong Tho Dairy Factory (formerly Cosuvina Factory)

Dielac Milk Powder Factory (formerly Nestle' milk powder factory) (Switzerland)

1985: Vinamilk was honored to be awarded the Third Class Labor Medal by the State 1991: Vinamilk was honored to be awarded the Second-class Labor Medal by the State

1995: Vinamilk officially inaugurated the first dairy factory in Hanoi

1996: Vinamilk was honored to be awarded the First Class Labor Medal by the State 2001-2003: Vinamilk inaugurated the Can Tho Dairy Factory, Saigon, Binh Dinh, Nghe An

2006: Vinamilk inaugurated its first dairy farm in Tuyen Quang

On January 19, 2006, the company was listed on the Ho Chi Minh Stock Exchange At that time, the capital of the State Capital Investment and Trading Corporation held 50.01% of the Company's charter capital On August 20, 2006, Vinamilk officially changed the company's brand logo

In 2009, the enterprise has developed 135,000 distribution agents, 9 factories and many dairy farms in Nghe An, Tuyen Quang In 2012, the company continued to change the brand's logo

In the period 2010 - 2012, the enterprise built a liquid milk and powdered milk factory in Binh Duong province with a total investment capital of 220 million USD In

2011, Da Nang dairy factory was put into operation with an investment capital of up

to 30 million USD

In 2016, inaugurated the first dairy factory abroad, which is Angkormilk Dairy Factory in Cambodia By 2017, continue to inaugurate Vinamilk Organic Dalat farm -the first organic dairy farm in Vietnam

In 2016, Vinamilk company was ranked by Forbes as a billion-dollar enterprise

in Vietnam with a brand value of more than $1.5 billion, In 2020, despite facing the Covid-19 pandemic, the company is still determined price increased by 200 million USD compared to 2019, reaching more than 2.4 billion USD

According to the financial report of Vinamilk company in the second quarter of

2020, net sales of domestic business reached VND 25,456 billion Direct exports reached VND 2,451 billion, up 7.7% over the same period last year In the first 6 months of 2020, Vinamilk's net revenue reached VND 29,648 billion, up 6.7% compared to 2019

Up to now, Vietnam Dairy Products Company has exported products to 54 countries and territories with a total turnover of more than 2.2 billion USD Vinamilk's stock is classified as a blue-chip stock in Vietnam, for businesses with stable growth and revenue

1.2 Functions, Objectives, Mission, Vision and Core Values of Vinamilk 1.2.1 Function

Vinamilk consistently provides worldwide quality nutritional solutions, fulfilling the demands of all consumers with tasty, nutritious, and healthy products associated with market leaders Vinamilk liquid milk, Vinamilk yogurt, Ong Tho and Phuong Nam Star Condensed Milk, Dielac Powdered Milk, Vfresh Fruit Juice are all popular

1.2.2 Objective

Positioning the brand as a pride of Vietnamese people

Building new emotional value of Vinamilk company_ embodiment of life Constantly developing the scale and stature, implementing the standard of covering goods to communes and wards across the country

Reaching out to the most demanding markets such as the US, Japan

1.2.3 Mission

To deliver valuable nutrition to the community with our respect, love and

responsibility

1.2.4 Vision

To become a world-grade brand in the food and beverage industry, where people put all their trust in nutrient and health products

1.2.5 Core Values

Integrity: Integrity and transparency in actions and transactions.

Respect: To have self-respect, to respect colleagues To respect the Company and

partners To cooperate with respect

Fairness: To be fair with employees, customers, suppliers and other parties.

Ethics: To respect the established ethical standards and act accordingly.

Compliance: To comply with legal regulations, the Company’s Code of Conduct and

the Company’s procedures and policies

2 Describe the inventory management of Vinamilk

Vinamilk dairy factory operates on an automatic, closed line, from input materials to product output

Vinamilk has built the leading smart warehouse in Vietnam, with an area of 6000 m2 with 20 entry and exit gates, 105 meters long and 35 meters high, including 17 shelves with a capacity of 27168 lots Import and export goods automatically with 15 RGV (Rail guided vehicle) transporting finished pallets to the warehouse and 08 Robot Crane (Stacker Crane) arranging pallets into the shelf system

2.1 Classification of the company’s inventory

Vinamilk categorized inventories by Standard No 02, one of 26 accounting standards published and notified by the Minister of Finance in Decision No 149/2001/QD-BTC on December 31, 2001

Source: The interim financial statements for the second quarter and six months ended June 30, 2022 - Vinamilk

2.2 Inventory management activities

Vinamilk inventory management has two procedures for importing raw materials, moving internal materials, and exporting completed goods Each procedure will include the cooperation of several departments

Source: Vinamilk

The production planning department and the board of directors will make production and business plans based on the objectives and goals of each year The production planning department will distribute spending to the factories based on the annual production plan Planning the production plan in line with the available production variables, maintaining it on a regular and timely basis, and immediately adapting to market variations such as demand, supply, economic condition, pricing, and so on

The buying department will be in charge of raw material purchase planning The purchasing department will utilize the client orders received by the sales department and submit them to the warehouse statistics daily to determine which raw materials are below the final safe inventory level By the warehouse’s inventory reception capacity and the priority of the items in the warehouse: which products need

to be imported to service the sales promotion in the future period to develop a strategy for raw material inventory?

The raw material warehousing plan will then be sent to the coordination department (particularly, the coordination of materials) so that this department may coordinate Vinamilk’s trucks to pick up the supplies or arrange the time so that the supplier's delivery truck may arrive without causing any congestion in the warehouse When the products are delivered to the factory from the suppliers, the security will verify the original quantity Following that, the raw materials will be checked by the quality control department to ensure that the arriving materials meet the pre-established criteria When the criteria are satisfied, items will be entered into the warehouse, where the storekeeper and warehouse personnel will check the quantity and arrange each type of material in the required location Simultaneously, it will enter

raw material inventory data into the computer system to enable information verification

2.3 Vinamilk’s inventory management model

2.3.1 Analysis of EOQ inventory model of Vinamilk

Applying the EOQ model to calculate the optimal order quantity of Vinamilk Company:

For the management of raw materials inventory Currently, the company applies the EOQ ordering model However, because the characteristics of each material are different as well as the packaging method of the manufacturer, supplier, order cycle, waiting time from ordering to delivery, etc., the quantity This optimal ordering cannot be fully compliant with the EOQ model but also from the experience

of the staff in the production planning department In some cases, the order volume is also dependent on the requirements of the export manager when there are situations where the shortage of raw materials occurs during the production process as well as on the programs of company promotions

For many years, the demand for Vinamilk’s raw milk has been rapidly growing

To meet this need, the firm has aggressively invested in industrial-scale farms

on the one hand and has steadily grown its purchase and development of raw milk from homes on the other As a result, the team decided to investigate the inventory of raw milk from families

EOQ formula:

We call:

D = Annual demand it units of a product

S = Ordering cost per order

H = Holding cost per unit of the product

The assumptions of the EOQ model are as follows:

Demand for inventory is stable (no change)

The waiting time for goods from placing an order to receiving the goods is determined and does not change

The company receives all orders from suppliers at the same time

There are only 2 types of costs: ordering costs and storage costs

No shortage occurs if the order is fulfilled on time, i.e if the order is placed after the optimal inventory is determined and the order is fulfilled on time, there will

be no status at all Inventory shortages lead to production and consumption disruptions

Assume that Vinamilk annual demand for products is 300,000 units The holding cost

is $80 per year involves keeping a product in stock and the ordering cost per order is

$50,000

So we have: D = 300,000 units; S = $50,000; H = $80

Thus, EOQ = = 19,365 units

This depicts that at the order quantity of 19,365 units per order, the company would have minimum cost with keeping the required stock in hand

2.3.2 Arrangement of types of inventory

For raw materials: Raw milk, imported milk powder 3, and spices are the primary raw materials used in Vinamilk Raw milk, in example, will be imported into cool tank