LV Thạc sỹ_Enhancing efficiency of logistics management in manufacturing enterprise

Chapter 1: Introduction In this chapter, the authors briefly present the background introduction related to the subject of the research which is logistics management enhancing efficiency in manufacturing enterprises. The problem statement and definition also are mentioned in this chapter, this chapter also provides a focus on limitation, validity and reliability of the research. ======== Chapter 2: Theoretical background That is chapter author focus on framework theoretical analysis in terms of logistics management, including definition, explanation, the analysis study relating to all factors of logistics process, the knowledge in logistics industry application in manufacturing enterprises. ========= Chapter 3: Analysis of EuroWindow logistics management This is chapter relating to case study, after performing theoretical framework analysis as presented in chapter 2, in this chapter author take all of you to the study in practice, application practice study is done in Eurowindow Holding Company, that is outstanding typical example about manufacturing enterprise in Vietnam. Logistics management process in typical one due to its material and supply characteristics, after reading this study, author do hope it will be useful for all readers in enhancing efficiency of logistics management in a course of cost down program especially the readers who are working in logistics and manufacturing industry. Also in this chapter author mainly mention the suggestion, recommendation as conclusion of chapter after taking this research, the author also point out what are suggestion and recommendation to enhance logistics management in Eurowindow. ========== Chapter 4: Recommendation: In this chapter we suggest some recommendations in order to enhance efficiency of logistics management in Eurowindow after undertaking the research and pointed out the weaknesses presented in this system.

Master Thesis : enhancing efficiency of logistics management in manufacturing enterprise Subject: enhancing efficiency of logistics management in manufacturing enterprise Chapter INTRODUCTION 1.1 Background Logistics actually took part in the activities of people’ life very long time ago, logistics has gone from a military matter to being one of the key business issues today However, the concept of logistics is rarely understood fully especially in developing country like Vietnam In the aspect of business, logistics has been coming long with every development stage of economy and is indispensable part to speed up the business Logistics is a work required to move and position inventory throughout a chain of participants From initial purchase of materials or components, the system of logistics adds value by moving inventory when it is needed and where it needed Materials and components gain value at each step of their change into finished inventory Nowadays, the internationalization of the world economy has substantially increased the border-crossing activities between companies Consequently, logistics has become a strategic weapon for the success of many global firms By minimizing the costs in the value chain or providing customers/consumers with differentiated service, logistics acts as a major source of competitive advantage In spite of significance of cost factors, the environmental consideration have become another key element in the development of logistics strategy, and this role will possibly increase in the future A better logistics management system could help company reduce cost, increase quality and improve its customer service Why author focus this research on manufacturing companies: Manufacturing enterprises or manufacturers that author focus the research on are understood to be an enterprise producing a visible product or manufacturing industry The main reason that make author undertake this research is the logistics process in manufacturing enterprise are complicated, with many process and crossed, matrix, further more, the logistics cost in manufacturing enterprises often account for a significant part in Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU Master Thesis : enhancing efficiency of logistics management in manufacturing enterprise total manufacturing cost and product cost In relation with this kind of business, logistics management for manufacturers become more important than ever, it involving transportation of materials and finished products, warehousing, inventory and its management As soon as a company expands its activities to other countries, the logistics management herewith will be taken into careful consideration and importance 1.2 Problems statement In the past few years, t h e r e h a v e b e e n a lot of studies that have been made on the logistic management However, in this research, we are going to focus on main logistics process management of manufacturing enterprise that include both inbound and outbound logistic activities and it’ enhancing efficiency leading to lower inventory and capital tie-up that will gain higher competitive advantage for manufacturers The whole logistics process at Eurowindow basically can be generally divided into two parts, inbound logistics which is from the suppliers to factory this including material input flows such as profile, steel, glass….,and outbound logistics which is from factory to customers or even to end consumers through the distribution channels, this is finished product flow, in addition to this process, logistics system in Eurowindow also consists of information flow, the inter-department communication and feedback, the logistics system in Eurowindow is complicated with overlap management between sections and departments, in not effective way that leading to high inventory and capital tie-up during production process that we call as weakness, or Business Improvement Area (BIA), such as unclear information of warehouse, material planning, production planning and obsolete stock, these are root reasons for high inventory that leads to low business efficiency i n their activities 1.3 Research Question 1) What is the main logistics system currently in manufacturing enterprise in general and in Eurowindow in particular? And what are weaknesses? 2) What m a i n e l e m e n t s we will use to measure the effectiveness and efficiency of the logistic system in manufacturing enterprise? Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU Master Thesis : enhancing efficiency of logistics management in manufacturing enterprise 3) During undertaking the research in Eurowindow, what should be recommendations that author can suggest the BIA to enhance efficiency on logistics management? 4) What experiences in terms of logistics management we can get from undertaking this research that should be applied to manufacturing enterprise in enhancing efficiency of logistics management to upgrade the its standing in the market? 1.4 Purpose of the Thesis The purpose of my study is to explore a logistics system management in manufacturing enterprise and improve it’ management to make manufacturing enterprise get more competitive advantage With case study of Eurowindow holding company, as an outstanding example of manufacturing enterprises as well as it logistics system management in this company the purpose of our study will be shown clearly The purpose of study specifically can be shown as following contents: 1) Systematizing the basic theory about logistics and it’ management 2) We will review the logistics management in manufacturing enterprise 3) Application recommendations to enhance efficiency in logistics management, supply chain as well to increase competitiveness for products in the competing market 1.5 Scope & Limitations The scope of our study thesis is that we mostly pay attention to logistics process of manufacturing enterprises, basing on logistics management’s concept to reduce cost With the thesis name is enhancing efficiency of logistics management in manufacturing enterprise, it will be missing if author not take practical study, we can call this practical study here as case study, in this case, author refer readers to explore logistics management in Eurowindow, that is company specializing in aluminum and plastics doors, with 03 factories located in North, South and the Central of Vietnam, along with material warehouse system, Eurowindow surely will be a typical example for “manufacturing enterprise” that author want to focus, with complexity of material sources and wide list of suppliers, operation from procurement, planning , production and distribution, enhancing efficiency of logistics management in Eurowindow also is Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU Master Thesis : enhancing efficiency of logistics management in manufacturing enterprise complicated and therefore it required the all efforts from author as well as supporters in finish this research 1.6 Research Methodology In this thesis, we undertake the research in two parts, the part one is to present what is main theoretical framework used to carry out the research, and the part two is to state logically how this study has been implemented 1.6.1 Theoretical frame work In this part, author wants to focus the readers on the theoretical study, including general study on logistics systems and logistics process management The basic parameters are also used to support analysis in undertaking this research; it is to measure the logistics efficiencies, logistics cost and logistics management applicable in manufacturing enterprise 1.6.2 Data collection and analysis 1.6.2.1 Secondary Data The data from the library, target companies and through Internet, textbooks, journals, articles are important for author to undertake this research, and is indispensable part in this research, the types of these data has been collected including basic definition, the typical logistics process model and basic parameters in logistics cost for reference, and are useful for us in writing this theoretical analysis of this research Beside company document, records, files and reports have provided author with basic information about business operation and logistics process efficiencies such financial report, inventory report and calculation 1.6.2.2 Primary Data In order to get primary data, it was performed through undertaking both personal interviews and direct observations As a person working in logistics sector, we have many chance to meet and work with logistics companies and with Eurowindow Holding Company leaders, managers, these gave us the opportunity to ask many questions as they arose We have also been going through an introduction of the company background, the Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU Master Thesis : enhancing efficiency of logistics management in manufacturing enterprise organizational structure and the Simulation Modular, from which we got a clear picture of their originations structures and general information of different business processes In this research, the author undertook the interviews with many department leaders and managers, including factory directors, through this interview; we can get lot information about logistics management system in Eurowindow as well as the weaknesses in this system Beside undertaking interviews, we also make directly survey at factory, warehouse sites what author can understand and found out the real situation in this logistics management of Eurowindow as well as the weakness that lead to high inventory in this company, from these analysis, the author will make out a report about recommendation and suggestion to enhance efficiencies in this logistics management of Eurowinow  Personal Interview Due to the size of Eurowindow Holding Company and the complexity of the Logistic operational process, It is very difficult to find an accumulated information resource for all operations process We decided the personal interview would be preferable in our production and procurement area, as we can talk face to face with the person who is in charge of the procurement, production, warehousing section and export import section about material planning, production planning and organization, the some main costs in inventory costs, we are interested in and instantly follow up the questions It helped us to acquire the just-in-point information and precise pictures of what and how the business works Personal interviews can be done in different ways The main two are structured interview and unstructured interview In case of unstructured interview, there is no schedule Our unstructured interviews are mainly with logistics operators in logistics, production, procurement, planning and material department in Eurowindow Holding Company, in Third Party Logistician and usually occurred in a relaxed environment such as coffee breaks when people were relaxed In our structured interviews, we prepared a particular order of questioning before the interviews; this then meant that we could be flexible with regard to questions raised in relation to our research problems Some of our interviews had to be done along with site visits where what we heard was instantly confirmed by what we observed Our interviewees of course are people who have good concept of logistic or at least they Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU Master Thesis : enhancing efficiency of logistics management in manufacturing enterprise are working in logistics field, some of them are even specialists Our interviewees, most of them have been working in the Eurowindow Holding company for years and some of them used to work for Eurowindow Holding Company and some of them are now working in Third Party Logistics Company Such experienced persons thus shall provide us intensive knowledge  Observations (Site visits) Theoretically, observations can be both qualitative and quantitative In observations, it is important to avoid taking part of the things observed Since we are in the process of mapping their work process, all of our observations are qualitative And when being careful and listening to people with respect to their knowledge, it can be useful to participate in the observations The participating observations are unstructured, and we shifted from looking, listening, asking questions, and acting 1.7 RESEARCH STRUCTURE & DISPOSITION Chapter 1: Introduction In this chapter, the authors briefly present the background introduction related to the subject of the research which is logistics management enhancing efficiency in manufacturing enterprises The problem statement and definition also are mentioned in this chapter, this chapter also provides a focus on limitation, validity and reliability of the research Chapter 2: Theoretical background That is chapter author focus on framework theoretical analysis in terms of logistics management, including definition, explanation, the analysis study relating to all factors of logistics process, the knowledge in logistics industry application in manufacturing enterprises Chapter 3: Analysis of EuroWindow logistics management This is chapter relating to case study, after performing theoretical framework analysis as presented in chapter 2, in this chapter author take all of you to the study in practice, application practice study is done in Eurowindow Holding Company, that is outstanding Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU Master Thesis : enhancing efficiency of logistics management in manufacturing enterprise typical example about manufacturing enterprise in Vietnam Logistics management process in typical one due to its material and supply characteristics, after reading this study, author hope it will be useful for all readers in enhancing efficiency of logistics management in a course of cost down program especially the readers who are working in logistics and manufacturing industry Also in this chapter author mainly mention the suggestion, recommendation as conclusion of chapter after taking this research, the author also point out what are suggestion and recommendation to enhance logistics management in Eurowindow Chapter 4: Recommendation: In this chapter we suggest some recommendations in order to enhance efficiency of logistics management in Eurowindow after undertaking the research and pointed out the weaknesses presented in this system TABLE OF CONTENTS ACKNOWLEDGEMENT ……………………………………………………………… ABBREVIATION ……………………………………………………………………… List of figures ……………………………………………………………………….6 EXECUTIVE SUMMARY ………………………………………………………………7 Chapter 1: INTRODUCTION 1.1 Background ……………………………………………………………………………8 1.2 Problems statement ………………………………………………………………… 1.3 Research Question ……………………………………………………………………9 1.4 Purpose of the Thesis ……………………………………………………………… 10 1.5 Scope & Limitations …………………………………………………………………10 1.6 Research Methodology …………………………………………………………… 11 1.6.1 Theoretical frame work ………………………………………………………… 11 1.6.2 Data collection and analysis ……………………………………………………….11 1.6.2.1 Secondary Data ………………………………………………………………… 11 1.6.2.2 Primary Data …………………………………………………………………… 11 1.7 RESEARCH STRUCTURE & DISPOSITION …………………………………… 13 Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU Master Thesis : enhancing efficiency of logistics management in manufacturing enterprise Chapter 2: THEORETICAL background of LOGISTICS MANAGEMENT 2.1 Logistic concepts and attribute …………………………………………………… 15 2.1.1 Logistics and logistics management concepts …………………………………… 15 2.1.2 Logistics attributes ……………………………………………………………… 17 2.2 Logistics Systems in manufacturing firm: ………………………………………….18 2.2.1 Inbound Logistics systems ……………………………………………………… 19 2.2.2 Outbound logistics System ……………………………………………………… 20 2.3 Distribution Channel …………………………………………………………………21 2.4.1.2.2 Warehousing and Distribution Center …………………………………………23 2.4 Logistics management in Manufacturing enterprise ……………………………… 25 2.4.1 Implementing Effective Logistics Strategies ………………………………………25 2.4.2 Establish supplier relationships ………………………………………………… 25 2.4.3 Increase customer responsiveness ……………………………………………… 26 2.4.4 Build a competitive advantage for the product oriented channel ……………… 26 2.4.5 Introduce SCM solutions and enabling information technology …………………27 2.5 Logistics system management Analysis …………………………………………….27 2.5.1 The Logistics system Objectives and Principles ………………………………… 29 2.5.1.1 Objectives ……………………………………………………………………………… 29 2.5.1.2 Principles ……………………………………………………………………… 30 2.5.1.2.1 Reducing the influence of lead time variability in the productive system ……30 2.5.1.2.2 Reducing the influence of inventory variability at different stages ……… 30 2.5.1.2.3 Reducing the influence of batching effects variability … … … … … … … … 31 2.5.1.2.4 Reducing the influence of variability due to bottleneck operations … … … 32 2.5.1.2.5 Developing coordinated strategies ……………………………………………32 2.5.1.2.6 Implementation ……………………………………………………………….32 2.5.2 The Logistical Measurements …………………………………………………… 33 2.5.2.1 Lead-time ……………………………………………………………………….34 2.5.2.2 Tied-up Capitals …………………………………………………………………34 2.5.2.3 Logistical Cost ………………………………………………………………… 35 Chapter 3: ANALYSIS OF EuroWindow LGOGISTICS MANAGEMENT SYSTEM 3.1 BUSINESS STRUCTURE & OPERATION IN EUROWINDOW HOLDING … 37 3.1.1 About Eurowindow Holding Company …………………….………….…….……37 3.2 Current situation of Eurowindow logistics management ………… …… ……….39 3.2.1 Logistics management system procedure and responsibilities at Eurowindow … 39 Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU Master Thesis : enhancing efficiency of logistics management in manufacturing enterprise 3.2.2 Physical material flows and control points ……………………………………… 39 3.2.2.1 Material flows:………………………………………………………………………… 39 3.2.2.2 Finished products and semi-product flow:……………………………………………40 3.2.3 Factory and warehouse system of Eurowindow Holding Company:………………41 3.2.3.1 Factory and warehouse system in North of Vietnam:………………………………41 3.2.3.2 Factory and warehouse system in South of Vietnam:……………………………42 3.2.3.3 Factory and warehouse system in Central of Vietnam:………………………… 43 3.2.4 Operation Assessment Index (KPI)……………………………………………… 45 3.2.5 Department & Section in Eurowindow Holding Co……………………………… 45 3.2.5.1 Sales department:…………………………………………………………………45 3.2.5.2 Planning and Materials Department:…………………………………………….47 3.2.5.3 Aluminum product & materials management department:………………………47 3.2.5.4 Export import Material Department…………………………………………….50 3.2.5.5 Internal Control Department…………………………………………………… 53 3.2.5.6 Factory ………………………………………………………………………… 54 3.2.5.7 Accounting & Financial Department: ………………………………………… 59 3.2.6 Inventory Management and Payment article …………………………………… 60 3.2.7 Financial Data-Inventory ………………………………………………………….60 3.3 FINDINGS ………………………………………………………………………… 64 3.3.1 BIA 1: Unclear information of inventory……………………………………………… 65 3.3.2 BIA 2: Material planning …………………………………………………………………65 3.3.3 BIA 3: Production planning ………………………………………………………………66 3.3.4 BIA 4: Obsolete and slow moving stock ……………………………………………… 66 3.3.5 BIA impact, analysis and focus ……………………………………………………67 3.3.6 BIA impact support data………………………………………………………………… 67 3.3.7 BIA analysis:……………………………………………………………………………… 68 3.3.8 BIA Analysis matrix calculations ……………………………………………………… 69 CHAPTER4: RECOMMENDATION 4.1 Main recommendation ……………………………………………………….………70 4.1.1 Strategic: ………………………………………………………………….……… 70 4.1.2 System: ……………………………………………………………………….……70 4.1.3 Improving Processes: …………………………………………………….…….….71 4.2 Financial Impact…………………………………………………………….……… 72 Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU Master Thesis : enhancing efficiency of logistics management in 10 manufacturing enterprise REFRENCES ………………………………………………………………………… 73 LIST OF INTERVIEW QUESTION ………………………………………………… 75 APPENDICES……………………………………………………………………………76 APPENDIX NO 1: BALANCE SHEET (02PAGES) APPENDIX NO 2: PROFIT & LOSS STATEMENT - VAS APPENDIX NO 3: PROFIT & LOSS 08-09 MONTH (02PAGES) APPENDIX NO 4: INVENTORY COST IN BRANCHES AND WHOLE COMPANY APPENDIX NO : INVENTORY COST 08-09 MONTH APPENDIX NO 6: EUROWINDOW LIST OF SUPPLIERS Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 10 Master Thesis : enhancing efficiency of logistics management in 62 manufacturing enterprise inventory cost in Balanced Sheet minus finished products and semi products at beginning of term This data must be relatively equivalent to data from NXT report, except the data of April, these figures are relatively same However, there still is an average difference of Billions VND in each term Figure 18: Inventory Cost from Balance Sheet Weighted Average Cost of Capital used by Eurowindow Holding Company is: 17.3% Inventory Reduction Reserves should be understood as value reduction of materials that has expired, liquidating, and loss or damaged…, in the end of 2008 year term, this amount was 942 millions VND or accounted for 0.56% of total inventory value In 2009, this data has not been updated and this amount of 2008 year term still is used to make as reference in Balance Sheet of each month  Finance data- slow inventory rotation: The accounting & Financial Department is responsible for following materials or products that in slow moving, cycling, Planning & Material Department shall be responsible for activities of slow inventory, files that are sent from Accounting Department in order to follow slow cycling inventory just consist of all materials that were bought in financial year, and not consist of material bought in previous years, this means management method of slow cycling inventory starting yearly are applied Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 62 Master Thesis : enhancing efficiency of logistics management in 63 manufacturing enterprise According to Eurowindow, slow cycling inventory is understood as inventory without operation in period of – months 3.3 FINDINGS In this section of study, the author mainly focuses on pointing out the disadvantage of Eurowindow in inventory management after careful study in terms of basically production and business activities of the company High inventory or capital tie-up will reduce the operation effectiveness of company, the finding the main root reasons along with solution accordingly will help Eurowindow reduce products cost and increase the competitiveness for their product in the marketplace According Damco study and anlysis, the inventory and capital tie-up in Eurowindow are at high level, the main reasons leading to this situation as stated in below table: High inventory & capital tie-up Explanation in details Unclear information of 1./ Redundant materials after production is not controlled tightly inventory 2./ Mismatch between physical and system stock levels Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 63 Master Thesis : enhancing efficiency of logistics management in 64 manufacturing enterprise 1./ Different section make plans to purchase the same materials / Information boards are not used to optimize planning / Production capability is not used in planning Material planning / Forecasting method is not effective / Sourcing lead time is very volatile 6./ Many processes and levels overlap 1./ High inventory of finished products Production planning / Inaccurate Assignment in structuring materials among factories / Defective materials are not treated Slow rotation materials and products / Many materials can be used to replace for each other and without specific planning Figure 19: Findings and Business Improvement Area Basing on the above table about the scope of reason leading to high inventory and capital tie-up, in our study approach, our findings should be clarified and we call as B.I.A (Business Improvement Area) as unclear information about inventory and capital tie-up, material planning, production planning, over- due inventory, the enhancing efficiency of logistics management in Eurowindow are shown by implementing effectively and finding solution for B.I.A Also according to Damco report, if Eurowindow implement effective and successful the enhancing efficiencies of inventory, that may lead to inventory reduction of 126 billion VND and the yearly savings from this inventory reduction up to 22 billions However, in order to define the accurate reduction in this inventory and capital tie-up we need the information confirmation in details from Eurowindow because the savings also depending on inventory target of Eurowindow We hereby study and analyze the main reasons in details as follows: 3.3.1 BIA 1: Unclear information of inventory Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 64 Master Thesis : enhancing efficiency of logistics management in 65 manufacturing enterprise A lot of material left over is scrapped without control, lack of control process and regular follow up in warehouse, system not able to monitor Mismatch between physical and system stock levels: this mismatch are explained as the difference in systems between factories and within regions, especially the inventory figures in ERP system is mismatch with physical inventory at the same time On the other hand, when making material plans, Material Department often take figures from inventory in ERP system, in case of mismatch, the of course this planning is not correct The unclear information of inventory also explained in usage of different categories and codes between regions, no regular stock counts and check process, different warehouse management process between regions also lead to the lack of control 3.3.2 BIA 2: Material planning Multiple departments plan and order the same materials, lack of clear procedure and centralized coordination, as explained by Eurowindow, because of material characteristics, some materials available in market such as glass, should be bought basing on production planning in order to avoid high inventory At the same time, for 01 kind of materials, sometime are purchased in Hanoi, sometime are purchased in Hochiminh city, also as explained, this is to compare the material prices Available information not being used to optimize order planning: lack of communication between departments, in particular, sales forecast is available, but not shared with material planning or other departments, sudden changes to orders are not shared across all departments Production capacity not sufficiently considered: The delivery phases of certain projects are not considered in inventory planning; production plan is not well communicated to Material planning Department Not efficient forecast method: The applied method is leading to double counting of material in the consolidated material order file, no past indication of customer type for material exported from inventory to production, the use of budget revenue to forecast volume, despite this not relating directly to value of material Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 65 Master Thesis : enhancing efficiency of logistics management in 66 manufacturing enterprise Sourcing lead time is very volatile: the lead time changes is shown on big difference in planned and actual sourcing lead time, especially in time allocated for negotiation and production, this also is due to complex approval procedure Multiple internal cross checking of department decisions: A high level of checking/sign-off of department decisions as a result of high demand for top involvement 3.3.3 BIA 3: Production planning Growing finished goods inventory: The increase of this inventory can be explained by case that sales is driven by their performance measure and availability for their customers is a main driver for their success, unclear capacity planning force sales to ensure availability through pushing production to early production Communication between production sites and inter-transfer: Changes in production contingency plan after inter-site transportation has been arranged and the lack of communication and clear procedures 3.3.4 BIA 4: Obsolete and slow moving stock High number of different material SKU gives a higher level of inventory, in particular, a high level of customization of products leads to high SKU levels and the lack of coordinated approach and communication when BOM changes Defect materials received from supplier without action, it should be explained as the lack of procedure and follow-up and the high number of SKU also leads to higher instances of ‘defect material’ 3.3.5 BIA impact, analysis and focus In the table the Eurowindow inventory turn aspiration as well as the current and two benchmarks has been illustrated The majority of the benchmarked companies have less customized production, which can lead to a higher inventory turn Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 66 Master Thesis : enhancing efficiency of logistics management in 67 manufacturing enterprise Figure 20: Current Inventory turn & Aspiration Inventory turn in Eurowindow 3.3.6 BIA impact support data The benchmarked companies are all from the SEA region and produce plastic and aluminum products for construction Company EuroWindow (2009) Chang Yih Ceramic Joint Stock Company (2008) Taicera Enterprise Co Ltd (2008) Thanh Thanh Joint Stock Company (2008) Tienphong Plastic Joint Stock Company (2008) Viglacera Thanglong Ceramic Tiles JSC (2008) Vitaly Joint Stock Company (2008) Average for industry (2008/2009 benchmark) Construction material sector analysis by Thomson Reuter Revenue Inventory EBIT % (m USD) Turn 28 21% 1.65 10 2% 1.80 70 7% 3.17 20 3% 5.22 56 14% 4.49 21 7% 2.10 19 3% 5.98 32 10% 3.57 29 7% 2.79 Figure 21: Benchmarked company used for comparison in Eurowindow • Using the advised WACC level of 17% • Inventory level is the average of Jan-Nov 2009 • COGS is accumulated January through November Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 67 Master Thesis : enhancing efficiency of logistics management in 68 manufacturing enterprise 3.3.7 BIA analysis: In the current state Eurowindow is operating with too high inventory caused by a number of processes that have been identified in this presentation It is impossible to allocate the exact solution value for each business improvement area, but we have made the below estimation identifying the complexity of the solution to eliminate/reduce the symptom as well as the value that will be created from eliminating/reducing impact of the symptom Figure 22: Diagram showing the complexity of BIA and Impact value 3.3.8 BIA Analysis matrix calculations Solution complexity criteria (1 low to high): • Number of impacted parties, Financial investment requirement, Implementation time, Complexity of change management Impact value criteria (1 low to high) : Financial impact, sustainable development Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 68 Master Thesis : enhancing efficiency of logistics management in 69 manufacturing enterprise Figure 23: BIA Analysis matrix calculations Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 69 Master Thesis : enhancing efficiency of logistics management in 70 manufacturing enterprise CHAPTER4: RECOMMENDATION Basing on study and analysis in previous chapters, author would like to suggest some solution and recommendation to implement strategy of enhancing efficiency in logistics management of Eurowindow, the suggestion and recommendation here will focus on the solutions to improve the weaknesses in logistics systems of Eurowindow, as stated above, the weaknesses here are focused on 04 B.I.A and its root causes leading to this high inventory and capital tie-up, including unclear information about warehouse or stock, material planning problems, production planning problem and obsolete stock for the purpose of reducing inventory and capital tie-up, the enhancing efficiency here can reach achievement or not also depend on the target at which Eurowindow want to lower down the inventory and its flexibility The solution group here consists of 03 main levels as follows: 1) Strategy: Setting up the logistics management system strategically suitable to the company business strategy, including: discrimination between projects and households, aluminum door with plastic doors and meeting the progress of the projects 2) Systems: Setting up the systems (unifying the information format and material transaction language) 3) Process: Setting up the process Approach to enhancing efficiency of inventory will be clarified as follows: High inventory can be improved by implementation through 03 solution as author stated above, the further analysis should be mentioned as bellows: 4.1 Strategic: Service level definition process, Review of current service level to customers and potential changes and their impact, Overall clear separation of projects and household, Across order planning and forecasting that there is a separation between customer types 4.2 System: System in this solution are implemented through systematizing sections, department in company as well as the material and product categorization in the warehouse., the inter department communication should be unified to avoid the overlap information, the responsibilities and procedures are assigned to section and department in whole company Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 70 Master Thesis : enhancing efficiency of logistics management in 71 manufacturing enterprise should be clarified to avoid situation that 01 section or department handle the same job, it appears clearly on material planning Material storage in the warehouse also should be reorganized in classification and categorization, using the unique and common communication language system such as labeling and marking for stored materials and products, one material and communication language in order to avoid the misunderstand the material categorization during handling and in production process This systematization should be implemented in all section, departments and warehouse in Eurowindow under close supervision and checked by consulting company as well as company board of directors 4.3 Improving Processes: Performance measurement, performance Indication scheme for selected departments and guidelines for full company roll-out, the next is forecasting process, new forecast procedure, currently Material Department are applying the planning method basing on usage of materials in previous terms multiple growth rate (%) In addition, when there any new projects, the additional ordering for needed materials are done As you can see in this case, there maybe an overlap in ordering materials because the growth rate already included project turnover orders Also beside, referring to past factor of material consumption currently there are not any take note activities , sometime the inventory control in the past was not reasonable, need a comparison between B.O.M at present and B.O.M in the past New processes to provide data for new forecast procedure, order control / Inventory Management, new process for order management, purchasing guidelines and supplier management processes, identification of ideal inventory level for selected SKU across categories and methodology for estimation, when materials arrives at factory, it should be put in to warehouse first, and Quality Controller (Q/C) will check later, in case finding any defective materials it will be re-exported to suppliers, by this solution the defective materials inventory will be reduced considerably Eurowindow also is on negotiation with FPT to improve, FPT also confirm that in case of Eurowindow confirm the new process, FPT will changes BOM change control and communication: Process for communication of BOM change, Process for usage of outdated BOM material Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 71 Master Thesis : enhancing efficiency of logistics management in 72 manufacturing enterprise Cross department data interchange, Process changes to optimize awareness of useful information between departments Contingency production planning, Process for planning and communication of back-up production in NM2 and NM3, Warehouse management procedure, New warehouse procedures 4.4 Expected Financial Impact Figure 24: Financial Impact after improvement Improvement of inventory turn can release from 54 to 126 billion VND in capital, Further to this the yearly savings in cost of capital is from to 22 billion VND ===========the end=========== Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 72 Master Thesis : enhancing efficiency of logistics management in 73 manufacturing enterprise REFRENCES Vietnam Commercial Law, 2005 version, published by National Assembly of Vietnam Vietnam Shipping Review, 2009 (expertise Magazine of Foreign Trade University) Vietnam Shipper Association (www.vietnamshipper.vn) International forwarding, written by Đinh Ngoc Vien, Vu Trong Lam, Đinh Xuan Trinh , issued by Transport & Communication Publishing house., 2002 Export –Import Forwarding and Case of Export Import forwarding activities of Vietnam, Written by Nguyen Quyet Chien, Hanoi Foreign Trade University, 1999 International Forwarding Operation, Written by Pham Manh Hien, issued by Ho Chi Minh Statistics Publishing House, 2004 Forwarding & logistics Activities, the Current Situation and Future, Written by Tran Trong Tuoc, Hanoi Foreign Trade University, 1999 Logistics- Application and development in forwarding and transport business of Vietnam, Written by Nguyen Nhu Tien, Hanoi Foreign Trade University, Transport & Communication Publishing House, 2006 Vietnam Shipping Forum (www.Vietship.vn) 10 Vietnam Freight Forwarders Association (Viffas), www.viffas.org.vn 11 Vietnam Logistics Review (the Magazine for Vietnam Freight Forwarders Association- VIFFAS), www.vlr.com.vn 12 Logistics And Supply Chain Management: Creating Value-adding Networks, Author: Martin Christopher, Publisher: Financial Times Prentice Hall 13 ‘Green’ Factors in Transportation: Empty Miles and Unused Trailer , Posted on Jan 07 2010 | By Christopher Timmer (http://logisticsviewpoints.com/author/ctimmer/) Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 73 Master Thesis : enhancing efficiency of logistics management in 74 manufacturing enterprise 14 Logistics Research, Editor in Chief: Peter Klaus, Executive Editorial Board: Kenth Lumsden, Chalmers University of Technology, Göteborg, Sweden, Martin Christopher, Cranfield University, Cranfield, UK, René De Koster, RSM Erasmus University, Rotterdam, The Netherlands 15 Strategic Supply Chain Management, The Five Disciplines For Top Performance AUTHOR: Shoshanah Cohen / Joseph Roussel PUBLISHER.: McGraw-Hill Released: 05/21/2005 16 Fundamentals of Logistics - LUMSDEN, K R L (2003) Fundamentals of logistics, Compendium, Department of transportation and logistics - COYLE, J J., BARDI, E J., NOVACK, R A (2000) Transportation (fifth ed.), South-Western College Publishing, Cincinnati, USA 17 Council of Supply Chain Management Professionals (http://cscmp.org/) 18 Lean Distribution: Applying Lean Manufacturing to Distribution, Logistics, and Supply Chain By: Zylstra, Kirk D Published By: John Wiley & Sons, Inc 19 Logistics and the Out-bound Supply Chain (Manufacturing Engineering Series): Written by John Meredith Smith 20 http://www.scmvietnam.com/home/node/18 Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 74 Master Thesis : enhancing efficiency of logistics management in 75 manufacturing enterprise Guideline of OF depth - INTERVIEWs Can you please describe the current logistics management systems: characteristics, Procedures, responsibilities of each department in Eurowindow? What is the supplier service level in terms of percentage of on-time delivery, percentage of late delivery and how many days? Please advise the MOQ and who is in charge of controlling the MOQ Please advise who negotiates for the MOQ with suppliers? What is the Eurowindow inventory policy for Inventory Groups and Product Groups? How to calculate safety stock? What are the target safety stock levels for the different Product Groups? The forecast: Please advise how MP forecasts the demand of each SKU from sales data? Please kindly provide the example (file current used by MP) of calculating from sales figures to material planning? Please advise how MP recognizes the case where many codes are made for item? Please advise how frequent is the update from the Top management on supplier change, material change and order quantity change Which departments are being informed of this change? Please advise the decision procedure of using material of project A for project B (due to the delay of project A), which department is informed? And how the additional order is is made for project A (as there is not enough material for project A) Please kindly advise the example? 10 Please advise from which department inventory report is sent to MP? How regular of the update? Who is the one to be in charge of temporary storage area in the factory? 11 Who is the one to be in charge of brand-new leftover sending back to warehouse? 12 Please advise how the warehouse receives in case there is many EW codes for item? How is it updated in the system later? 13 Please advise the warehouse management in Da Nang (Vinh Phuc use stock card, Binh Duong use warehouse management file updated daily)? 14 What is the applied cost of working capital to calculate cost of holding inventory? If it does not exist, please confirm that we can use 10% as approximation? 15 Is the non-moving cargo value ever written off? E.g appearing as sunk cost in the P&L and taken out of the balance sheet? 16 Can you provide monthly P&L data and potential Balance Sheet? 17 Relating to provided data, Can you provide the raw inventory data from Bravo, as discussed during site visit? Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 75 Master Thesis : enhancing efficiency of logistics management in 76 manufacturing enterprise 18 Which department/person is responsible for keeping the inventory levels down (physically and financially)? 19 Can you explain the high values of revenue and COGS at year end? (Related to outcome of yearly inventory check? Is it based on large amount accruals? Etc ) 20 From what department does the data on inventory come from? (both for the finished goods and materials) 21 How is the DC (cut leftover) calculated in the cost? Please advise where in the financial report is the cost of DC? 22 Please advise the procedure to scrap/write-off the leftover from the production? 23 Please advise how positive (+) and negative (-) discrepancy in inventory is solved after stock count or inventory check? Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU 76 ...Master Thesis : enhancing efficiency of logistics management in manufacturing enterprise total manufacturing cost and product cost In relation with this kind of business, logistics management for manufacturers... logistics process of manufacturing enterprises, basing on logistics management s concept to reduce cost With the thesis name is enhancing efficiency of logistics management in manufacturing enterprise, ... enhancing efficiency of logistics management in Eurowindow also is Author: Nguyen Ngoc Chinh Business School EMBA-4A, NEU Master Thesis : enhancing efficiency of logistics management in manufacturing