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According to https:/www.suntorypepsico.vn/., the raw materials will be shipped to the three major manufacturing facilities factories in Hoc Mon, Ho Chi Minh City, O Mon, Can Tho, and Bie

UEH UNIVERSITY BUSINESS COLLEGE

FACULTY OF INTERNATIONAL BUSINESS - MARKETING

UEH

UNIVERSITY

FINAL ESSAY WITHOUT PRESENTATION Subject: ERP

Lecturer: Trinh Huynh Quang Canh Student: Ha Chi Mai

Major: International Business Student ID: 31201025984

Class: IBCO2 Course: K46

December, Ho Chi Minh

Table of Contents 1, Innẹi0100 An aas 1

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PA 00 on 14 1 Present your basic EOQ model for your 2™ scenario — mainly annual demand, lead time,

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1.1 Situation creation: According to Pepsico's 2020 financial report (via https:/Awww.msn.com/), the company expects its 2020 sales to decline by around $ 70372 million, with operating expenditures making up $

60517 million and income from remaining operations making up $9855 million Accordingly,

Pepsico's net income is around USD 7120 million after paying taxes and unusual charges For the ultimate financial gain, PepsiCo receives the raw materials needed for manufacturing at the factories and then distributes the finished goods to authorized distributors Some well-known PepsiCo goods include Tropicana, Sting, and Pepsi Cola

According to https:/(www.suntorypepsico.vn/., the raw materials will be shipped to the three

major manufacturing facilities (factories in Hoc Mon, Ho Chi Minh City, O Mon, Can Tho, and

Bien Hoa, Dong Nai), and the final goods will subsequently be shipped by truck to four

authorized distributors in the South (distributor Hoang Tam, Binh Thuan; distributors Duyet Phat, Binh Duong; distributor Tri Quyen, Tay Ninh; and distributor Hoa Hung, Ba Ria-Vung

Tau) 1.2 Application: 1 Present your currency shipping plan in your 1.1 scenario

An estimate of each factory's output for the upcoming week's manufacturing was produced, and each distributor was given a certain quantity The two tables below provide specific information:

Factory Quantity

Can Tho 375 Ho Chi Minh 625

Dong Nai 500

Total quantity 1500 Distributors Amount of distribution

Tay Ninh 400

Binh Duong 325 Vung Tau 350

Binh Thuan 425 Total amount of distribution 1500

Over the past several years, the strategy the company has used to determine the amount of finished product that needs to be shipped from each factory to meet the needs of each official

distributor has been:

Since the Can Tho factory is far from the distributors, it should send all of its finished goods to

the Tay Ninh distributor, who is the closest If there is a surplus, the Tay Ninh distributor will receive the remainder, and if there is still an excess, the Binh Duong distributor will receive the

remainder Due to the distributor's distance from the producing facilities, the nearest factory (in Dong Nat)

sends all of its finished goods to the distributor in Binh Thuan; if there is a surplus, the

distributor in Binh Thuan will get the remaining balance supplier in Vung Tau Utilize the plant in Ho Chi Minh City to meet the official distributors' remaining demands The shipping plan is arranged in the following table:

Distributors

Factories Tay Ninh Binh Duong Vung Tau Binh Thuan

Can Tho 375 0 0 0

Ho Chi Minh 25 325 275 0

Dong Nai 0 0 75 425

2 Determine what is the transportation problem of your scenario (cost or profit?)

Finding a different, more effective strategy for the distribution and transportation of goods is the challenge to be solved for PepsiCo's transportation dilemma The revised plan should achieve the following goals: minimum overall transportation costs; delivery of all supply to all locations; and fulfillment of all demand at all destinations

3 Create a table of unit cost/ unit profit for your scenario

Table of unit cost of this problem:

From/ To Distributors Factories Tay Ninh Binh Duong Vung Tau Binh Thuan

Can Tho $322 $431 $573 $782 Ho Chi Minh $212 $281 $434 $657

Dong Nai $295 $376 $324 $597

The price for PepsiCo to transport the items under this shipping arrangement is: Total shipping cost = 375($322) + 25($212) + 325($212) + 275($434) + 75($324) + 425($597) = $614,750

4 Construct and solve your problem using SOLVER and QM

- Building problem models on Excel Solver:

PEPSICO TRANSPORTATION PROBLEM Unit transportation cost

Distributors Factories Tay Ninh | Binh Duon vi

7 4691240914 = 38124414

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- Building problem models on QM for Windows:

Otyectove Stating method Indnachon

a [ing ttateg nerod =

5 Explain your result

Building the problem on Excel Solver and QM for Windows, we get two similar results With the above result, we can see that the total new transportation cost is $601,000 < $614,750 (old plan) Thus, the transportation plan based on the near distance that PepsiCo is applying is not optimal in minimizing transportation costs

With the results obtained, we have a new transport plan as follows:

- The factory in Ho Chi Minh City will send 25 transshipments of completed goods to the distributor in Tay Ninh, 325 transshipments of final products to the distributor in Binh Duong, and 275 transshipments of final products to the distributor in Binh Thuan

- The factory in Dong Nai will supply 150 completed product transport vehicles to the distributor in Binh Thuan and 350 finished product transport vehicles to the distributor in Vung Tau

PART 2 Inventory problems:

2.1 Scenario creation: On the basis of combining Ha Tien 2 Joint Stock Company (HT2) into Ha Tien 1 Cement Joint Stock Company, Ha Tien 1 Cement Joint Stock Company was founded in 2010 (HT1) In 1964, Ha Tien Cement Factory, today known as Ha Tien 1 Cement Company, was established

Ha Tien 1 Cement Joint Stock Company, which preceded Ha Tien Cement Factory, was founded

in 2010 Throughout its inception and growth, Ha Tien 1 has consistently been regarded as Tong Cong Vietnam Cement Company's premier division in the South Products from the business are primarily used in the south 65% of the company's entire cement output comes from just Ho Chi Minh and Dong Nai (http://vnr500.com.vn/)

According to Ha ‘Tien 1 Cement Company's 2020 financial report (found at https://finance.vietstock.vn/), the company's income would only amount to VND 7963 billion in 2020, of which the cost price Total revenue was 6607 billion VND, while operating costs came to roughly 574 billion VND So, after paying taxes and unusual expenses, Ha Tien 1's net income

is around VND 608 billion

Ha Tien Cement Company keeps cement and clinker in its warehouses while also conducting local sales and purchases, with some of it going overseas The business will let the warehouse management unit to get in touch with the manufacturer to request additional finished goods when the number of finished goods left in the warehouse falls below a certain level From the time the warehouse makes contact with the plant that specializes in distribution, it takes 6 days for the final product to be trucked there

According to statistics currently available, the firm has produced and used 7,000,000 tons of cement annually during the past four years (starting in 2016), according to Nhan Dan) The manufacturer will get in touch with them when the inventory in the warehouse is close to run out

and ask them to carry 1,750,000 tons of goods every three months To ensure that the warehouse

is completely vacant when the final product arrives, the interaction with the production machinery is arranged in advance With imports like this, the labor cost (including bonuses) for each time of placing and receiving products into the warehouse is $900,000; transportation,

gasoline, supervision, and management expenditures total around $18,000 Thus, the total cost

for each import of finished products is $108,000 Ha Tien 1's earlier calculations indicate that the needed capital cost per unit is 13% Additionally, around 7% of the value of each unit of the product is spent on the costs of leasing warehouses, paying custodians, and insuring items The cost of holding shares for the corporation is 20%*($5), or $1.2 per unit, at a selling price of $6 per unit

In addition, sometimes due to an unexpected increase in demand or because of some problems,

the delivery of goods is delayed, which results in additional costs of loss due to lack of stock In addition, there are opportunity costs such as slow revenue, reduced demand, warehouse labor,

etc Therefore, the cost of loss due to lack of inventory is estimated to be around $5 per unit of product The company's full year working time is 250 days

2.2 Application: 2.2.1 Basic EOQ model: 1 Present your basic EOQ model for your 2"° seenario — mainly annual demand, lead

time, holding cost, setup cost, etc

Conditions to apply the Basic EOQ model: - The quantity of goods demanded remains unchanged during the year - Goods ordered to be added to the warehouse until the goods are out of stock - There is no shortage of storage goods

| ic EOC fel includes:

- D: Annual demand rate — annual demand

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- L: Lead time — the time from contacting the factory until the finished product is delivered to the warehouse

- WD: working days - the number of working days in the year of the company - Reorder point: inventory level at the time of contact for the factory = (D/WD) *L - Q: Order quantity — maximum inventory level

- K: setup cost — setup cost each time adding goods to the warehouse - h: unit holding cost — holding cost per unit of product

- TVC: total variable cost — total marginal cost = annual setup cost + annual holding cost

- Annual setup cost = K* (number of times to add stock in the year)

- Annual holding cost = c* (average inventory level) - Average inventory level — average inventory level = Q/2

vine the i blem £ ien ‘at Stock C

- D=7,000,000 tons/year - L=6 days

- WD = 250 days - Reorder point = (D/WD) *L = 168,000 tons

- Q = 1,750,000 tons

- K = $900,000 + $18,000 = $108,000 - h = 20%*($6) = $1.2

2 Identify your inventory problems

With the Basic EOQ model (orders arrive at the right time the inventory level goes to zero), the finished product shipped will bring the inventory level from 0 to Q, in this case from out-of- stock back to 1,750,000 tons of inventory With the year's demand unchanged, the objective of

the inventory problem for Ha Tien 1 company is to find the optimal inventory level Q (Q*),

thereby minimizing the total variable cost of TVC

to be around 1,122,479 tons There, total variable expenses are the lowest ($1,346,997), which is

around $135,000 less than the previous plan Annual setup cost plus annual holding cost equals $673,498 in partial charges

Basic ROQ model ef Ha Ticn 1 Company

‘Soover Parameters x Ol Resalts New Results

D = (demandiyesr) Reorder point 168000 St Che $8 +

K h - = {anit holding coat) {setup cos!) Anmal Sctap Coct Tử om @ww ván 0x

L - By Chamaicg Variable Calls

wD - Qxorking daysyear) Total Variable Cost sco +

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HA TIEN 1 BASIC EOQ Solution Parameter Valuel | Parameter Valuel Demand rate(D) 7000000 Optimal order quantity (Q*) 1122497.0 Setup/Ordering cost(S) 108000 Maximum lnventory Level (Imax) 1122497.0 Holding cost(H) | 1.2 Average inventory 561248.6 Unit cost 5 Orders per period(year) 6.24

Annual Setup cost 673498.3 Annual Holding cost 673498 4 Unit costs (PD) 35000000 Total Cost 36347000

The graph of total costs is shown below:

HATIEN 1 BASIC E0Q Inventory costs excluding unt costs

The EOQ model with Planned Shortages

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This model is a variation of the basic EOQ model described in the preceding two sections The difference arises in the third of its key assumptions

This model has two decision variables — the order quantity Q and the maximum shortage S The objective in choosing Q and S is to

Minimize TVC = total variable inventory cost per year

This TVC needs to include the same kinds of costs as for the basic EOQ model plus the cost of incuring the shortages

Thus, TVC = annual setup cost + annual holding cost + annual shortage cost

As for the basic EOQ model:

L1 Annual setup cost = K ( L1 Annual holding cost = h times (average inventory level when positive) times (fraction of time inventory level is positive) =h(=h

To obtain a similar expression for the shortage costs, recall that: p = annual shortage cost per unit short

where the symbol p is used to indicate that this is the pelnaty for incurring the shortage of a unit Since this unit shortage cost only is incurred during the fraction of the year when a shortage is occuring, annual shortage cost = p times (average shortage level when a shortage occurs) times (fraction of time shortage is occuring)

=p(( Combining these expressions gives: TVC =K

Calculus now can be used to find the values of Q and Š that minimize TVC This leads to the following formulas for their optimal values, Q* and S*

Q* = S* = Q*

where: D = annual demand rate K = setup cost

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