BA IN PORT AND LOGISTICS MANAGEMENT UNIT: Supply Chain Management A1/ICA: GROUP PRESENTATION Supply Chain For Vietnamese Products Scenario For the purpose of this in class activity, you
ACKNOWLEDGEMENTS
Chapter 1: Literature review of supply chain management
Definition of Supply Chain A supply chain is a network of partners who collectively convert a basic commodity (upstream) into a finished product (downstream) that is valued by end-customers, and who manage returns at each stage (Alan Hrrison and etc, 2014)
Definition of Supply Chain Management Supply Chain Management encompasses the planning and controlling of all processes involved in procurement, conversion, transportation and distribution across a supply chain
SCM includes coordination and collaboration between partners, which can be suppliers, intermediaries, third party service providers, and customers In essence, SCM integrates supply and demand management within and between companies in order to serve the needs of the end- customer (Council of SCM Professionals-CSCMP, 2010)
Role of Supply Chain Management Supply chain management is crucial since it may aid in achieving a number of corporate goals Controlling production procedures, for example, may enhance product quality while lowering the likelihood of recalls and legal action and assisting in the development of a powerful consumer brand Controls over shipping processes can also enhance customer service by preventing expensive shortages or periods of inventory overproduction Overall, supply chain management gives businesses a number of chances to increase their profit margins, and it is especially crucial for big, global businesses. l=C STEP IN IEC, STEP OUT INTO THE WORLD
Chapter 2: Overview the company profile: background, competence, core business, supply chain, business results/market position
O Background Vietnam Dairy Products JSC (Vinamilk), a business with operations in Vietnam, specializes in the manufacturing and trade of milk and dairy products The dairy firm Vinamilk has the HOSE stock code VNM Vinamilk's CEO is Mrs Mai Kieu Loan, who has been in control of the company for more than 25 years (since 1992 until present) Vinamilk was included in Forbes Vietnam's list of the top 50 most valuable brands in Vietnam in 2020 (Vinamilk, 2020)
Vinamilk has experienced three major stages of development over the course of its more than 40 years of operation: the initial Vinamilk establishment phase, which lasted from 1976 to 1986; the renovation phase, which lasted from 1986 to 2003; and the equitization phase, which lasted from 2003 to the present In 1976, Vinamilk was created as Southern Coffee Dairy Company, 100% state owned firm with 3 milk plants The business was equitized in 2003, and it subsequently adopted the name Vietnam Dairy Products JSC and became a joint stock company (Vinamilk, 2019). l=C
STEP IN IEC, STEP OUT INTO THE WORLO eT cela) Dairy Farm
Figure 1 Farm systems of Vinamilk ( Vinamilk, 2019) The business has developed 14 manufacturing facilities, 2 logistics businesses, 3 sales office branches, a dairy plant in Cambodia (Angkor Milk), and a representative office in Thailand up to this point As a result, Vinamilk is able to continue holding the top spot in the market for important dairy products (Vinamilk, 2019). l=C
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Figure 2 Mrs Mai Kieu Lien (Vinamilk, 2021) O Competence
One of the top dairy producers in Vietnam, VINAMILK has experienced rapid and sustainable growth, holding the largest market share in the liquid milk industry, which accounts for 51.3% of total production (more than 45% of the domestic milk market, more than 85% of the yogurt and condensed milk markets, and over 30% annual growth in the two staples milk and yogurt) (Vinamilk, 2019)
O Core business Vinamilk processes, manufactures, and trades fresh milk, powder milk, UHT milk, nutritious flour, soy milk, beverage and other products from milk; farming, feeding and etc (Vinamilk, 2021)
O Supply chain The supply chain of the leading maker of diaries is a model that many other businesses should take note of The design demonstrates the effectiveness of linked modes in taking raw materials and tuming them into completed goods, as well as continuous and scientific processes, such as: l=C STEP IN IEC, STEP OUT INTO THE WORLD
Purct a enters eg } say a HS, iad manufacturing plants Factori Distribut eu “a lon 1—_-ằ| Retail stores centers End users
Figure 3 General view of Vinamilk’s supply chain (ALS, 2020) Input materials chain:
Both domestic and international vendors make up the firm's supply chain for raw materials Regarding overseas suppliers, the business concentrates on those from high-quality standard-providing countries including the US, New Zealand, and Europe Powdered milk, milk cartons with internal lighting, and paper milk cartons are the most often imported input materials Through the importation of milk from national farmers and cow farm businesses, the company also helps domestic suppliers The buying centers are formed with the duties of acquiring from producers, consulting, and advising them how the most acceptable techniques to rear the cows to have the greatest quality milk (ALS, 2020),
Fonterra (SEA) Pte Ltd Milk powder
Hoogweet International BV Milk powder
Perstima Binh Duong Steal milk cartons Tetra Pak Indochina Paper milk cartons l=C STEP IN IEC, STEP OUT INTO THE WORLD
Table 1 Top providers of Vinamilk and their products (ALS, 2020)
The milk is stored in tanks and supplied straight to the companies after the price has been agreed upon by the two parties, based on the seasons, quality, and quantity
Vinamilk uses manufacturing techniques from the most developed nations in Europe, including Germany, Italy, and Switzerland, which can accommodate high standards for quality, quantity, milk production methods, and other associated goods The company now owns the Niro spraying method from Denmark, which has never been owned by any other companies (ALS, 2020)
To make sure the manufacturing processes are undisrupted, the firm manage to operate 13 plants and labs that specialize distinguished qualities across the nations, one of which is the mega factory located in Binh Duong, and many other offshored plants in the US, Poland and New Zealand (ALS, 2020)
The company manages to run 13 factories and labs that specialize in distinctive characteristics throughout the countries, one of which is the mega factory located in Binh Duong, as well as many other offshored plants in the US, Poland, and New Zealand, to ensure that the production processes are uninterrupted (ALS, 2020),
More than 40 countries across the world, including Cambodia, Thailand, Japan, Taiwan, Russia, the United States, Canada, and Australia, have happily received the final product and other associated commodities (ALS, 2020)
From the high North to the lower South of the nation, the firm's distribution and consumption are concentrated, including:
Oi Distributing partnership system (General Trade channel) Distributing supermarkets system (Moder Trade channel) (| Introducing and retailing stores of the firm
Oi Other distribution center (school canteen for children, amusement parks, etc.)
| Business results/ Market position The enterprise's total assets are estimated to be 51,199 billion VND, and its profit l=C
STEP IN IEC, STEP OUT INTO THE WORLD before tax is 2,859 billion VND, according to the firm's financial report for the third quarter of 2022 Since equitization 10 years ago, average sales have risen by more than 20% annually, profit has increased by 15% annually, and the average contribution to the state budget is more than 3,500 billion VND yearly
The Green Farm system, which consists of the three dairy farms Thong Nhat Thanh Hoa, Quang Ngai, and Tay Ninh, was introduced by Vinamilk in 2021 This farm model was created using already-operational farms that adhere to Global G.A.P criteria b2) The farm has an ideal ecological environment with //” natural groundwater and a lake to keep the air on the farm cool and fresh c@ Dairy cows are purebred of foreign origins, with stable genetics and milk yield eh)
| By The farm has natural sources of forage, rich in nutrients for cows, such as corn, Mombasa, Ruzi, Oats, and Stylo
WA There is absolutely no use of chemical fertilizers and pesticides in the whole farming process
Figure 4 Special features of the Green Farm system (Vinamilk, 2021)
Chapter 3: Apply Fishbone diagram to find any bottleneck from company supply chain and suggest solutions for improvement company supply chain and suggest solutions for improvement
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Low productivity of Collection Centers
Milk from knowledge ond vorious source nsufficient equipment collected ond storage see mixed in tanks facilities se ba noppropriơ Failin selection of spe controlling the management skills quality of milk
Collection Poor time management Formers point for from the plant connot Bs
Somple milk randomly selected follow ce [ 7 giving the average results for the Unprofessionalism = testing = whole week e nstobility during process transferring Poor selection of transportation ond storage tonk esting of milk quality is criteria for fixing purchase price
Poor management Unclear quality during delivering testing results
Figure 5 Fishbone diagram of Vinamilk's bottleneck in supply chain (Own, 2022) The main bottleneck in the supply chain of Vinamilk is “Failure in controlling the quality of milk collected from local farming” There are 4 major reasons leading to this bottleneck: Low productivity of collection centers, Low breeding efficiency, Poor management during delivery, Unclear quality testing results
Low productivity of collection centers is resulted from Inadequate management skills and Insufficient storage facilities For example, milk from various sources are collected and mixed in tanks during delivering to the collection centers
Low breeding efficiency is caused by farmers’ overusing and collecting methods to increase the milk yield; Inappropriate selection of species; Lack of certain knowledge, equipment and investment
Collection point far from the plant, Instability during transferring, poor time management, unprofessionalism and poor selection of transportation are the major causes leading to Poor management during delivery
Farmers can not follow and check the testing process, random samples collected giving the average results and testing milk quality affecting the price are the main reasons for l=C STEP IN IEC, STEP OUT INTO THE WORLD
Applying strict procurement procedure by:
(| Employing an independent quality control agency who will carry out regular checks at farms, collection centers and processing factories
O Analyze milk quality analysis 7 days/week to get average results instead of once/week as before
Li Dairy households are allowed to closely participate in the sample listing process before sending it to the factory
Li Farmers must follow the technical process of taking care of dairy cows to ensure quality according to the Company's standards
Before entering the factory, a quality inspection should be performed following by these steps:
LI Temperature control of raw milk before transporting to the factory by specialized means
LO) Regularly and unexpectedly checking the specialized tank trucks Li Employees from the factory take samples and perform the quality check after the arrival of raw milk
Build a system of farms in the chain linked with 13 factories Actual survey, assessment of rearing conditions, barn hygiene, environment, full vaccination of livestock households
Upgrade and modernize milk collection stations complying with hygiene and food safety
Annual training employees Focus more resources and capability to nurture the development of family-run cow farms
Elaborate contract farming relations with smallholders so that it shows the credible signal of long-term commitment to the selling farmers
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— Supporting system, transferring technical training and providing information to farmers
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With widespread distribution, Vinamilk is still the most popular brand of fresh milk in Vietnam as of right now Numerous high-quality dairy products have also been exported and marketed in other countries One of the key variables that have substantial influence on Vinamilk's successes is Supply Chain Vinamilk has several bottle-necks to deal with, mainly preserving the quality of milk gathering from local farmers therefore the most acceptable answer is to increase quality testing system, transmit technical training and offer information to farmers By looking into and assessing Vinamilk's supply chain We are educated about Vinamilk's supply chain management and the potential growth of other Vinamilk aspects that might aid the company in overcoming obstacles and thriving in the future
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Reference Alan Hrrison and et (2014), Logistics management and strategy competing through the supply chain (fifth edition), Pearson
ALS., 2021, 7ìm hiểu về chuỗi cung ứng của Vinamilk Retrieved December 10, 2022, from https://als.com vn/tim-hieu-ve-chuoi-cung-ung-cua-vinamilk
Group 02-K22CLCG, Banking Academy ,2021, Environment Analysis of Vinamilk Jason F., 2022, Supply Chain Management (SCM): How It Works and Why It Is
Important Retrieved December 10, 2022, from https://www.investopedia.com/terms/s/scm.asp#:~:text=Ke
Logistics, E., 2022, Phan Tich Về Chuỗi Cung Ứng Cua Vinamilk Tai Viét Nam (MOI) Ego Express Retrieved December 10, 2022, from https://egoexpress.vn/chuoi- cung-ung-cua-vinamilk/
Luc Thi Thu Huong, 2016, Vinamilk’s Supply Chain and the Small Farmers’
Involvement Quan The , 2020, Chudi Cung ving vinamilk va nhitng van dé xudt Hién Trong Chuối Cung Ung Share and Discover Knowledge on SlideShare Retrieved December 10, 2022, from https://www.slideshare.net/ThQun4/vinamilk-supply-chain
SGS-2.G13 ,2020, Vinamilk Marketing Analysis Vinamilk, 2019, Vinamilk Annual report 2021 Retrieved December 10, 2022, from https://www.vinamilk com vn/en/mobile/annual-reports/
Vinamilk, 2020, Vinamilk Annual report 2021 Retrieved December 10, 2022, from https://www.vinamilk.com.vn/en/mobile/annual-reports/
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What are the top 3 popular products of Vinamilk?
LI Top 3 popular product are Cheese, Condensed milk and Fresh milk
What are the strengths of Vinamilk?
LI Vinamilk's products are cheaper compared to similar dairy products of other dairy brands
U1 Wide distribution system and diverse platforms To attract more customers, what Vinamilk should do?
Li People nowadays have a tendency to lead healthier lives They like to eat more vegetables and protect the environment As a result, Vinamilk should focus on developing more plant-based products, trying to be environmentally friendly firm and expand the green farm system
Which structure of supply chain does Vinamilk apply?
Vinamilk has its own system, farms and it can runs on its own
(i Vinamilk applies the vertical supply chain Vinamilk outsources the farms ( buying fresh milk from local farmers)
| Vinamilk applies the horizontal supply chain U1 Use vertical, horizontal and combined integration Which business strategy does Vinamilk use?
Vinamilk uses the strategy “Add Value, Cost Leadership” They add more value to the products but balance or the price reasonable at the same time
Vinamilk continues to build a large and strong domestic distribution system, increase market share and maintain Vinamilk’s leading position in the market
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SUPPLY CHAIN MANAGEMENT OF VINAMILK
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BACKGROUND Vietnam Dairy Products JSC (Vinamilk) is a Vietnam-based company, the leading dairy company in Vietnam and is currently ranked 36th in the list of the world’s largest dairy companies in terms of sales size
Vinamilk dairy company has stock code HOSE:
The CEO of Vinamilk is Mrs Mai Kieu Lien, who has been in charge of Vinamilk for over 25 years (since 1992 until present)
Figure 1 Mrs Mai Kieu Lien
HISTORY 5 MAIN DEVELOPMENT STAGES OF VINAMILK
1976 - Established as Southern 2003 - Equitized and officially 2006 - Listed on Ho Chi Minh Coffee Dairy Company, 100% became a joint stock company Stock Exchange (HOSE) state owned enterprise with 3 inder the name of Vietnam milk factories Dairy Products JSC a
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CORE COMPETENCIES VINAMILK develops rapidly and sustainably, holding the largest market share in Vietnam milk, liquid milk sector which accounted for 51.3% market share of the output (>45% in the domestic milk, >85% in yogurt and condensed milk.)
CORE BUSINESS Processing, manufacturing, and trading of fresh milk, powder milk, UHT milk, nutritious flour, soy milk, beverage and other products from milk; forming, feeding v.v
Products from Vinamilk are distributed throughout 63 provinces and cities
4 Factories exported to 54 countries around the world such as rar ity the US, France, Canada, Poland, Germany, Japan, the Middle East, etc
Up to now, the company has built Factories ( elated
14 production factories XÃ 4 Dairy Farms
3 branches of sales offices ek
1 dairy factory in Cambodia (Angkor Milk) Hl jj Healthcare
1 representative office in Thailand a pict
Others Figure 2 Vinamilk at a glance
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Purchasing Centers —> manufacturing plants Factories, Kon i) Distribution centers [+——>) Retail stores —” End users
Figure 3 General view of Vinamilk’s supply chain (ALS,2021)
- Total assets of the enterprise is approximately 51,199 billion VND Profit before tax 2,859 billion VND
+ Average sales have climbed by over 20% annually since equitization ten years ago + Profit has increased by 15% annually + The average contribution to the state budget is over 3,500 billion VND annually
+ In 2021, Vinamilk launched the Green Farm system
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SUPPPLY CHAIN
Cheese Liquid milk Ice Cream
Formula Milk a es _ Plant-based Baby cereal Power Drink
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CUSTOMERS
Focus on children and teenagers because this age group has a great demand for milk anddairy products
INDIVIDUAL ORGANIZATIONAL
Has a relatively diverse product Including distributors, wholesalers, retailers, demand (good quality, reasonable shops, supermarkets who perform the price ) and accounts for a function of distribution relatively high proportion of Has requirements on discount rate, sales total sales bonus, etc related to product distribution strategy
SUPPLIER
The firm’s input materials chain consists of domestic and foreign suppliers Suppliers 5 Suppluing products 5
Foreign suppliers: the company focuses | ronterrg (SEA) Pte Ltd Milk powder on high quality standards providing Hooawent International Milk powder nations such as the US, New Zealand,
Perstima Binh Duong Steal milk cartons and Europe Tetra Pak Indochina Paper milk cartons
The company also supports domestic
- S - | Table 1 Top provider of Vinamilk suppliers by bringing in milk from the and their products (ALS, 2020) nation farmers, the cow farm companies
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Figure 4 Vinamilk procurement system from small dairy farmers
(Luc Thi Thu Huong, 2016) ines 40 quawueg
+ Vinamilk relies on smallholder farmers and intermediary collectors - Vinamilk has 86 “collecting points” throughout the country and the collecting points belong to 3rd- party companies which own chilling facilities and transportation trucks for the deliveries to Vinamilk factories
There are two types of contracts in the Vinamilk system: farmers contract directly with the processing factories of Vinamilk to sell their raw milk; and milk collectors’ contract farmers to collect and sell on oa milk to processing factories
SUPPLIER Tere can farm cool and fresh
The Vinamilk Green Farm eco-farm system oF Dairy cows are purebred of foreign origins, with stable provides raw milk for the Vinamilk Green Farm genetics and milk yield product line, which belongs to the newly launched high-end segment >
| The farm has natural sources of forage, rich in nutrients for cows, such as corn, Mombasa, Ruzi, Oats, and Stylo Green Farm system including three dairy farms: Thong Nhat Thanh Hoa, Quang Ngai ond Tau Ninh Ww) There is absolutely no use of chemical fertilizers and pesticides in the whole farming process
Figure 5 Special features of the Green oH Farm system ( Vinamilk, 2021)
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DISTRIBUTOR
Figure 6 Distribution Network of Vinamilk (Vinamilk, 2020)
COMPETITIVENESS
Vinamilk identifies its target customers as medium and low (popular and middle class)
> Vincmilks products are cheaper compared to similar dairy products of other dairy brands
Rich diverse, updated and good = quality products to meet customers’ demand Wide distribution system and _ diverse plotforms
Modern and advanced technology according to international standards
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Figure 7 Vietnam’s diary market share 2021 (Nielsen /Q 2021)
DIFFICULTIES
Due to the massive Hard to maintain the af distribution channels, > quality of the milk Ey it's complicated to “8 since not all the monitor all the J remote retailers have retailers especially the good facilities ones in remote areas
Depending on exported milk Lower livestock resources, the milk from the
@ domestic farms can only fulfill productivity comparing
20% of production demand; to foreign countries and high-cost raw milk from > The stability of suppliers and raw materials cost are domestic farms affect based on the world's supply- demand relationship
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Low productivity of Collection Centers
- Overusing feeding Lack of certain
Milk from and collecting knowledge and various source Insufficient methods equipment collected and storage mixed in tanks facilities rag a
Inadequate selection of species _ Lqckof controlling the management skills investment quality of milk
Collection point far from the plant
Poor selection of transportation and storage tank
Farmers cannot follow the testing local farming
Sample milk randomly selected giving the average results for the whole week process
Testing of milk quality is criteria for fixing purchase price
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SOLUTIONS
Farmers must follow the technical Analyze milk quality analysis 7 process of taking care of dairy days/week to get average results cows to ensure quality according instead of once/week as before to the Company's standards ©® © © @
Employ an independent Dairy households are allowed quality control agency who to closely participate in the will carry out regular checks sample listing process before at farms, collection centers sending it to the factory and processing factories
Before entering the factory, a quality inspection is performed:
Temperature control of raw O 5 milk before transporting to the factory by specialized means Employees from the factory take samples and perform
O2 the quality check after the arrival of raw milk Regularly and unexpectedly checking the specialized tank trucks
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OTHER SOLUTIONS
Build a system of farms in the chain linked with 13 factories Actual survey, assessment of rearing conditions, barn hygiene, environment, full vaccination of livestock households
Upgrade and modernize milk collection stations complying with hygiene and food safety
Annual training employees Focus more resources and capability to nurture the development of family-run cow farms
Elaborate contract farming relations with smallholders so that it shows the credible signal of long-term commitment to the selling farmers
Supporting system, transferring technical training and providing information to farmers
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Up to now, Vinamilk is still considered the No 1 brand of Vietnamese freshmilk with a nationwide coverage; Many quality dairy products has been exported and sold on foreign shelves
One of the biggest factor that have significant impact on Vinamilk’s achievements is Supply Chain
- Vinamilk has many bottle-necks to deal with, especially maintaining the quality of milk collecting from local farmers so the most reasonable solution is to enhance quality testing system, transfer technical training and provide information to farmers