TABLE OF CONTENTS ACKNOWLEDGEMENT 1 TABLE OF CONTENTS 2 ABBREVIATION 4 List of figures 5 EXECUTIVE SUMMARY 6 Chapter 1: Introduction 8 1.1 Rationale 8 1.2 Research Question 8 1.3 Research Objectives 9 1.4 Research Methodology 10 1.4.1 Secondary Data 10 1.4.2 Primary Data 10 1.5 Research Scope Limitations 11 1.6 Research Structure 12 Chapter 2 Theoretical background of Logistics Management 14 2.1 Logistic concepts and attribute 14 2.1.1 Logistics and logistics management concepts 14 2.1.2 Logistics attributes 16 2.1.3 Logistics Systems in manufacturing firm 17 2.2 Logistics management in manufacturing enterprise 23 2.2.1 Implementing Effective Logistics Strategies 24 2.2.2 Establish supplier relationships 24 2.2.3 Increase customer responsiveness 25 2.2.4 Build a competitive advantage for the product oriented channel 26 2.2.5 Introduce SCM solutions and enabling information technology 26 2.3. Logistics system management Analysis 26 2.3.1 Objectives 27 2.3.2 Principles 28 2.4 Logistical Measurements 31 2.4.1 Leadtime 32 2.4.2 Tiedup Capitals 33 2.4.3 Logistical Cost 33 Chapter 3: Case Study of Eurowindow Logistics Management System 35 3.1 Business Structure and Operation in Eurowindow., JSC 35 3.1.1 About Eurowindow., JSC 35 3.2. Current situation of Eurowindow logistics management 37 3.2.1 Logistics management system procedure and responsibilities at Eurowindow 37 3.2.2 Physical material flows and control points 38 3.2.4 Operation Assessment Index (KPI) 42 3.2.5 Department 57 3.2.7 Inventory Management 57 3.2.8 Inventory data 58 3.3 FINDINGS 61 3.3.1 Unclear information of inventory 62 3.3.2 Material planning problem 62 3.3.3 Production planning problem 63 3.3.4 Obsolete and slow moving stock 63 3.3.5 Impact, analysis and focus on Business Improvement Area 64 3.3.6 Impact support data (Business Improvement Area) 64 3.3.7 Business Improvement Area (BIA) analysis 65 3.3.8 Business Improvement Area (BIA) Analysis matrix calculations 66 3.3.9 Expected Financial Impact 67 Chapter 4 : Recommendation 68 4.1 Trends in logistics management of Manufacturing enterprise 68 4.2 Recommendation for Logistics management systems in Manufacturing enterprise 68 4.3 Recommendation for Eurowindow., in lowering inventory 69 4.3.1 Improving and Developing Strategy 70 4.3.2 Systematical improvement 72 4.3.3 Improving Processes 73 LIST OF REFRENCES 74 Guideline OF depth – Interviews 76 LIST OF APPENDICES 78
1 ACKNOWLEDGEMENT Working in logistics industry, author of this research understand the complexity of logistics process and logistics management, in order to finish this research, it required much effort, and it take me much time in daily busy working life With my continuous efforts, in the end, my research has been finished successfully To reach this achievement, firstly I would like to express my great thanks to my supervisor, Dr …, for his invaluable advice and support during my whole study I also am grateful to all of my classmates from …, they are really supporter to me, they have give me the power and determination to finish this research, their support is encouragement for me to get today achievement I also would like to express my sincere thanks to my close friend, Mr …, the Aluminum Procurement Department managers in Eurowindow for his support in aspect of information, I also would like to thank my parents, my wife, who are really my another supporters in finishing my research I also would like to express my great thanks to the NEU Business School, where has given us a chance to finish my Master of Business Administration course Finally, I also would like to express all may staffs who are give me their real sympathy so that I have enough time to finish my this writing Science is immense, With my limited knowledge and working experience, I have shown it all on this writing, also as I stated above, the logistics industry is vast sector that consist of complexity, my this research may not make readers, especially my teachers, lecturer and my supervisor satisfy With limited time I have spent on this research, the missing ore mistakes are unavoidable in this study Thus also by this acknowledgement, I really expect a sympathy from readers, especially from my teachers, lecturers and supervisor for the final purpose of finishing my Master of Business Administration With many thanks … TABLE OF CONTENTS ACKNOWLEDGEMENT TABLE OF CONTENTS ABBREVIATION .4 List of figures EXECUTIVE SUMMARY Chapter 1: Introduction 1.1 Rationale 1.2 Research Question 1.3 Research Objectives 1.4 Research Methodology .10 1.4.1 Secondary Data 10 1.4.2 Primary Data 10 1.5 Research Scope & Limitations 11 1.6 Research Structure 12 Chapter Theoretical background of Logistics Management 14 2.1 Logistic concepts and attribute 14 2.1.1 Logistics and logistics management concepts 14 2.1.2 Logistics attributes 16 2.1.3 Logistics Systems in manufacturing firm .17 2.2 Logistics management in manufacturing enterprise 23 2.2.1 Implementing Effective Logistics Strategies 24 2.2.2 Establish supplier relationships .24 2.2.3 Increase customer responsiveness 25 2.2.4 Build a competitive advantage for the product oriented channel 26 2.2.5 Introduce SCM solutions and enabling information technology .26 2.3 Logistics system management Analysis 26 2.3.1 Objectives .27 2.3.2 Principles 28 2.4 Logistical Measurements 31 2.4.1 Lead-time 32 2.4.2 Tied-up Capitals 33 2.4.3 Logistical Cost 33 Chapter 3: Case Study of Eurowindow Logistics Management System 35 3.1 Business Structure and Operation in Eurowindow., JSC 35 3.1.1 About Eurowindow., JSC 35 3.2 Current situation of Eurowindow logistics management 37 3.2.1 Logistics management system procedure and responsibilities at Eurowindow 37 3.2.2 Physical material flows and control points .38 3.2.4 Operation Assessment Index (KPI) 42 3.2.5 Department 57 3.2.7 Inventory Management 57 3.2.8 Inventory data 58 3.3 FINDINGS 61 3.3.1 Unclear information of inventory 62 3.3.2 Material planning problem 62 3.3.3 Production planning problem 63 3.3.4 Obsolete and slow moving stock .63 3.3.5 Impact, analysis and focus on Business Improvement Area 64 3.3.6 Impact support data (Business Improvement Area) 64 3.3.7 Business Improvement Area (BIA) analysis 65 3.3.8 Business Improvement Area (BIA) Analysis matrix calculations 66 3.3.9 Expected Financial Impact 67 Chapter : Recommendation .68 4.1 Trends in logistics management of Manufacturing enterprise 68 4.2 Recommendation for Logistics management systems in Manufacturing enterprise .68 4.3 Recommendation for Eurowindow., in lowering inventory 69 4.3.1 Improving and Developing Strategy .70 4.3.2 Systematical improvement 72 4.3.3 Improving Processes .73 LIST OF REFRENCES 74 Guideline OF depth – Interviews .76 LIST OF APPENDICES 78 ABBREVIATION No 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ABBV 2PLs 3PLs 4PLs B.O.M B.O.M BRAVO CIF CLM D.C DC ERP ERP EW FOB IT L/T ME OEM SCM SKU VIFFAS VLR VMI WMS XNT (I.O.I) Explanation/Definition Second Party Logistics Provider- Capacity Provider Third Party Logistics Provider Forth Party Logistics Providers- Integrated Logistics Bill of Materials Board of Management Inventory management software Cost, Insurance and Freight The Council of Logistics Management Leaf over materials from production Distribution Center Enterprise Resource Planning Inventory management software Eurowindow Free On Board Information Technology Lead Time Manufacturing Enterprise The Original Equipment Manufacturing Supply Chain Management Stock Keeping Unit Vietnam Freight Forwarders Association Vietnam Logistics Review Vender Management Inventory Warehouse Management System Output-Input-Inventory LIST OF FIGURES Figure No Figure 1: Material & information logistics flow Figure 2: A manufacturing logistics network, Figure 3: Product structure of Eurowindow Figure 4: Organization Chart of Eurowindow Figure 5: Material flow and urgent Material flow Figure 6: North Branch Organization chart in Quang Minh IP Figure 7: Material Forecasting Method Figure 8: The fluctuation for procurement time of an order Figure 9: The fluctuation for procurement time of an order, the positive value Figure 10: Fluctuation Extent for procurement time in each stage Figure 11: This diagram showing average ration among inventory items Figure 12: Inventory Cost Low-Major main materials of plastics-2009 Figure 13: Inventory value from Sep,2008 to Sep, 2009 in different location Figure 14: Inventory Cost From Balance Sheet Figure 15: Inventory Cost From Balance Sheet Figure 16: Material Inventory Rotation Extent Figure 17: Findings and Business Improvement Area Figure 18: Inventory turn & Financial Impact in Eurowindow Figure 19: Benchmarked company used for comparison in Eurowindow Figure 20: Diagram showing the complexity of BIA and Impact value Figure 21: BIA Analysis matrix calculassions Figure 22: Inventory turn & Financial Impact in Eurowindow Page 16 27 36 37 38 39 45 49 49 50 54 54 58 59 59 60 61 64 65 65 66 67 EXECUTIVE SUMMARY In recent years, along with development of international trade, logistics increasingly play an important role in business activities of each company and manufacturers Under the competitive pressures in the market, and requirement to down cost to improve competitive position for products, many companies and manufacturers have paid their much attention to enhancing efficiency of logistics management, and as you can see the logistics and supply management cost increases day by day due to unreasonable management of materials flow and product flow in manufacturers, the requirement to improve of logistics management therefore will be set first priority than any other With objectives of pointing out the weakness and disadvantage of logistics system in manufacturing enterprises, the author has explored all aspects of logistics system in manufacturing enterprises, review the basic characteristics of logistics management in business activities, systematizing the basic theory about logistics and it’ management with case study of enhancing logistics management in Eurowindow, as an outstanding example for manufacturing enterprise, author has pointed out some existing weaknesses and fixing these weaknesses by recommending reasonable solutions that may lead to lowering inventory value and capital tie-up, enhancing the efficiency of capital usage in manufacturing enterprise by increasing the material cycle, and capital rotation Undertaking a research on logistics and logistics management in manufacturing enterprise is complicated work, it requires author an intensive knowledge on expertise, working experience and practical investigation and survey In order to finish this research successfully, author did outline scientific and practical research methodology that include collecting secondary data in historic research, publication, books, reports, … as well as the primary data through investigation in logistics company, survey at manufacturing enterprises especially in Eurowindow as case study applied in this research Logistics system is complicated, the existence of weakness or disadvantage is unavoidable, most of weakness in logistics system are existing in inventory, material and product flows, in procurement management and purchasing process and sometime arising in connection with manufacturer’s location, the weaknesses here also different from different manufacturers and basing on product and materials categories In this research, with it’s obligation, the author mainly focuses on pointing out these weaknesses and from that make some recommendation to enhance efficiency in whole logistics systems for manufacturers and this factors will be clarified in case study of logistics management systems in Eurowindow As any other manufacturing enterprise, basing on it’s research, the author has pointed out that Eurowindow logistics management also are facing some weakness in its logistics systems, those are high inventory and capital tie-up, that the root reason here are some problems, such as unclear information of stock, material planning, production planning and Obsolete stock, these will be called as BIA (Business Improvement Area) as surveyed by author, these factors are weaknesses in logistics management that leading to high inventory and capital tie-up at Eurowindow that should be improved to enhance the efficiency of business activities in this company, Recommendations or solutions for weaknesses that is pointed out is an indispensable part in any research, basing on analysis in first part of this research, author will suggest some solution to implement strategy of enhancing efficiency in logistics management of Eurowindow, the suggestion and recommendation here will focus improving the weaknesses in logistics systems management of Eurowindow, the solution group here consists of 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; setting up the systems (unifying the information format and material transaction language); setting up and improving the process that including materials procurement process, production management process, internal control process CHAPTER INTRODUCTION 1.1 Rationale 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 1.2 Research Question In the past few years, there have been 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, undertaking this research to answer the following questions: 1) What is the main logistics system currently in manufacturing enterprise in general and in Eurowindow in particular? And what are weaknesses? 2) What main elements we will use to measure the effectiveness and efficiency of the logistic system in manufacturing enterprise? 3) During undertaking the research in Eurowindow, what should be recommendations that author can suggest 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? 1.3 Research Objectives 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 10 3) Application recommendations to enhance efficiency in logistics management, supply chain as well to increase competitiveness for products in the competing market 1.4 Research Methodology 1.4.1 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 1.4.2 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 chances to meet and work with logistics companies and with Eurowindow Joint Stock 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 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 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 64 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 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 Impact, analysis and focus on Business Improvement Area 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 Figure 28: Inventory turn & Financial Impact in Eurowindow 65 Source: Eurowindow reports, 2009 3.3.6 Impact support data (Business Improvement Area) The benchmarked companies are all from the SEA region and produce plastic and aluminum products for construction Figure 19: Benchmarked company used for comparison in Eurowindow 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 • Using the advised WACC level of 17% • Inventory level is the average of Jan-Nov 2009 • COGS is accumulated January through November 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 Source: Eurowindow reports, 2009 3.3.7 Business Improvement Area (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 20: Diagram showing the complexity of BIA and Impact value Data Source: Eurowindow 66 Source:calculations Eurowindow reports, 2009 3.3.8 Business Improvement Area (BIA) Analysis matrix 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 Figure 21: BIA Analysis matrix calculations Source: Eurowindow reports, 2009 67 3.3.9 Expected Financial Impact Figure 22: Inventory turn & Financial Impact in Eurowindow Source: Eurowindow reports, 2009 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 68 CHAPTER RECOMMENDATIONS 4.1 Trends in logistics management of Manufacturing enterprise As far as we talk about the logistics system in manufacturing enterprise, as analysis in previous chapters consists of many components, inbound logistics flow, outbound logistics flow and outbound is in relation with customer service, now industrial manufacturers are realizing that their customers need more than product quality, their customers need reliability, punctuality and other customers service Talking about tendency of logistics management systems in manufacturing enterprise, it said that under existing competitive pressure, currently manufacturers pay their attention both to improving product quality, customer service and product price, that therefore will be certainly a very difficult question in stead of resolving many different issues at the same time, now manufacturers will find answer for each question, they can pay their much attention to improving product quality and customer service under condition unchanged product costing or pay their attention to lowering product cost Those are the trends that are applied in almost industrial manufacturing enterprises With limited scope of this research, author almost focus readers on tendency of lowering product cost through improving logistics management systems, lowering inventory and capital tie-up for the find purpose of improving standing in the market for their products When manufacturing enterprises facing increasingly competitive pressure in the market, and in the context of high material cost, lowering cost pressures will put on management process to improve the product position in the market against rivals and competitors In the case that input cost of materials could not reduce, the manufacturing enterprise have tendency to enhance efficiency of logistics management systems through improve the weaknesses and disadvantages in systems, 4.2 Recommendation for Logistics management systems in Manufacturing enterprise Logistics system in manufacturing enterprise often include different processes such as inbound material flows, production process, outbound product flows or distribution process and weakness will occurs in each process, it will requires us to have a overall view of 69 whole process to find out the weakness and recommend a right solution to improve, also according to author, in order to enhance the efficiency of logistics systems and lower further logistics cost, manufacturers should divide in to different process independently and manage, find solution to lower cost in even this process, clarify the products and materials categories with reasonable storage management, ordering systems for input materials should be performed basing on input request and production needs, combining with market research to produce a product in conformity with market request and advantage of manufacturers As you know, a finished product is composed by different kind of materials and parts, and these parts and materials are imported or purchased from different suppliers in different locations, a research on production capability and warehouse space should be done to have a reasonable procurement plans and to avoid unnecessary inventory that may lead to high capital tie up and increasing product cost 4.3 Recommendation for Eurowindow., in lowering inventory Basing on study and analysis in previous chapters, author will 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 Business Improvement Area (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 contents as follows: 1) Recommendation in relation to 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) Recommendation in Systems: Setting up the systems (unifying the information format and material transaction language) 70 3) Recommendation in Process improvement: Setting up the process Approach to enhancing efficiency of inventory will be clarified as follows: High inventory can be improved by implementation through 03 solutions as author stated above, the further analysis should be mentioned as bellows: 4.3.1 Improving Strategy: Firstly, as author stated in this research about weaknesses or disadvantage that leads to high inventory, currently almost sales executives not understand well about the products, this shortage leads to situation that sales team only sell what customer need other than sell what are stored in and available in company and almost sales team is not able to advise and persuade clients to buy what Eurowindow are available to sell, almost products are sold that need importing from other countries other than from locality, this procurement shall take long time during the remaining materials that composed in products are stored awaiting for production, an example for unreasonable inventory in Eurowindow, a products ordered by customers are not available in warehouse and need a new production batch, the materials needed for this products consists of Material A, material B, material C, material D, in this case, materials A, B, C are available in warehouse and ready for production, but material D need importing from China, the procurement time for this material D take 20days, thus the material A, material B, material C are stored at least 20 day and only coming into production once material D arrives factory This inventory shows that it can be avoidable when sales team indeed operates professionally and are able to persuade customers and direct them to what are available in warehouse, in addition to this issues is inexperienced executives, staffs in showroom, in different section and departments that need to be improved A not reasonable salary policy that leads to frequent change in human resource issues that leads to low effective operation in sections Basing on these current scenario of Eurowindow in its improvement, the staff training is needed and including both sales team and other section staffs, logistics and purchasing section staffs, for this issues, currently there are periodical training course in Eurowindow, the training course also are focus on knowledge about products to make sales executive understand better about products so that they can pursued and advise clients in selling products that available for sales other than awaiting for in next production A more 71 reasonable salary policy should be implemented to keep a high qualified and key staffs and managers, this is very important for Eurowindow in running company effectively In terms of BOM regarding inventory structure, the sales data in previous time for any new products not exists that could not support the structuring inventory which leads to situation that the BOM and inventory structure are made in estimation and sometime unreasonable, the market research here has not been paid much attention In order to resolve this problem, Eurowindow should hire a consulting company to carry out the market research, hire a company that can advise the supply chain and logistics management to give out sales structure and percentage, give out a reasonable material inventory extent, so that can make Eurowindow lower the inventory level and capital tieup, one of good consulting company for supply chain and logistics management is Damco Secondly, Eurowindow holding company are a parent company that consist of many subsidiary companies, operating in different fields, including plastics window, aluminum window, wooden window, real estate, logistics, finance, construction, furniture supermarket…., so that in this case General Director not pay much attention to Eurowindow in terms of window business and production that leads to delay in reaching an agreement, the power are central, the General Director have full right in deciding almost things that has cause a lot of difficult in company operation and should be assigned In order to come over this disadvantage, the company power should decentralized, the decision right should be assigned more to subordinates to be more flexible in operation, avoiding delay in all course and stages With current 03 factories operating in North, South and Central of Vietnam, that is a long distance for product and material moving and circulation, a general warehouse or central warehouse should be built up to assure the production running smoothly and meet customer’s needs in aspect of delivery progress One more important regarding strategic improvement to lower inventory in Eurowindow to enhance efficiency of logistics management is that a localization and nationalization should be applied and more implemented in production, this localization will assure the Just – In – Time delivery are running smoothly and reduce transport charge and inventory 72 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 4.3.2 Systematical improvement: 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 should be clarified to avoid situation that 01 section or department handle the same job, it appears clearly on material planning In aspect of department, currently Accounting and Financial Department has not involved in inventory management and inventory turn so that could not advise the Board of Directors, Sales department, Planning and Material Department about the inventory Furthermore, Eurowindow also has not paid much attention to inventory & capital turn in other companies that also produce construction materials from which can make a comparison and get improved for itself 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, a realistic case currently in Eurowindow that a material inventory are not managed well, specifically that is storage will be reported to be not stored, additionally production consumption is not stable and often at high level consumption In order to come over this obstacle in improvement, Eurowindow should buy and implement an optimal production consumption software to manage material inventory and its production consumption, avoiding stored wasted materials in warehouse leading to high inventory and capital tie-up, this software should be bought from European software companies In this improvement area, Eurowindow also hire a consulting company such as Damco, in terms of supply chain and logistics management to outline the operation plan, optimizing the material storage and lower inventory 73 Implementing further the KPI and SMART (Specific, Measurable, Agreed, Realistic and Time) to asses the performance quality for all staffs and mangers in whole company, from which Eurowindow can find out the weaknesses and disadvantage systems that need to be improved and fixed 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 4.3.3 Improving Processes: As author stated above, the operation process in Eurowindow is sophisticated and cumbersome, there are many different sections and departments that sometime its operation overlap and less effectively, for the improvement in this problem, the board of Director should reconsider to use sections, department and humans more effectively by assigning and allocating sections, departments with specific responsibilities, responsible limitation should be clear and make a better assessment in terms of job performance The power allocation should be implemented more strongly by Board of Director to subordinates, a specific allocation of responsibility along with reasonable encouragement accordingly should bring about a better and more effective performance in all process In particular, General Director should allocate decision right to project directors, right allocation shall based on budget limitation, the project directors therefore will be more flexible in decision and limited to fixed budget, this allocation specifically will be more smooth for process operation or in general be more active for all company members The Internal Control department currently pay too much attention to purchasing price other than other factors of management or job performance progress, this imbalance certainly leading to be less effective in serving customers as well as human resource management in Eurowindow, thus, an improvement here should be applied to Internal Control Department, more responsibilities regarding to job performance efficiency and progress allocated to this department, the common efficiency in whole company should be set first in this case Furthermore, 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 74 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 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 ===========THE END=========== 75 LIST OF REFERENCES Nguyen Quyet Chien (1999) Export –Import Forwarding and Case of Export Import forwarding activities of Vietnam, Hanoi Foreign Trade University Pham Manh Hien (2004) International Forwarding Operation, Ho Chi Minh Statistics Publishing House Nguyen Nhu 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Technology, Göteborg, Sweden, Martin Christopher, Cranfield University, Cranfield, UK, René De Koster, RSM Erasmus University, Rotterdam, The Netherlands 11 Shoshanah Cohen / Joseph Roussel (2005) Strategic Supply Chain Management, The Five Disciplines For Top McGraw-Hill 76 12 Zylstra, Kirk D Lean Distribution (1999): Applying Lean Manufacturing to Distribution, Logistics, and Supply Chain John Wiley & Sons, Inc 13 Vietnam Commercial Law (2005) National Assembly of Vietnam 14 Vietnam Shipping Review (2009) Expertise Magazine of Foreign Trade University 15 ‘Green’ Factors in Transportation: Empty Miles and Unused Trailer , Posted on Jan 07 2010 | By Christopher Timmer (http://logisticsviewpoints.com/author/ctimmer/) 16 Council of Supply Chain Management Professionals (http://cscmp.org/) 17 http://www.scmvietnam.com/home/node/18 18 Vietnam Freight Forwarders Association (Viffas), www.viffas.org.vn 19 Vietnam Logistics Review (the Magazine for Vietnam Freight Forwarders Association- VIFFAS), www.vlr.com.vn 20 Vietnam Shipper Association (www.vietnamshipper.vn) 21 Vietnam Shipping Forum (www.Vietship.vn) 77 Guideline OF depth - INTERVIEWs 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 ) Can you please describe the current logistics management systems: characteristics, Procedures, responsibilities of each department in Eurowindow? Can you provide monthly P&L data and potential Balance Sheet? From what department does the data on inventory come from? (both for the finished goods and materials) How is the DC (cut leftover) calculated in the cost? Please advise where in the financial report is the cost of DC? 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? 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? 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 how MP recognizes the case where many codes are made for item? 10 Please advise how positive (+) and negative (-) discrepancy in inventory is solved after stock count or inventory check? 11 Please advise how the warehouse receives in case there is many EW codes for item? How is it updated in the system later? 12 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? 13 Please advise the MOQ and who is in charge of controlling the MOQ Please advise who negotiates for the MOQ with suppliers? 14 Please advise the procedure to scrap/write-off the leftover from the production? 15 Please advise the warehouse management in Da Nang (Vinh Phuc use stock card, Binh Duong use warehouse management file updated daily)? 16 Relating to provided data, Can you provide the raw inventory data from Bravo, as discussed during site visit? 78 17 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? 18 What are the target safety stock levels for the different Product Groups? 19 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? 20 What is the Eurowindow inventory policy for Inventory Groups and Product Groups? How to calculate safety stock? 21 What is the supplier service level in terms of percentage of on-time delivery, percentage of late delivery and how many days? 22 Which department/person is responsible for keeping the inventory levels down (physically and financially)? 23 Who is the one to be in charge of brand-new leftover sending back to warehouse? ... of Logistics Management 14 2.1 Logistic concepts and attribute 14 2.1.1 Logistics and logistics management concepts 14 2.1.2 Logistics attributes 16 2.1.3 Logistics. .. aspects of logistics system in manufacturing enterprises, review the basic characteristics of logistics management in business activities, systematizing the basic theory about logistics and it’ management. .. weaknesses presented in this system 14 CHAPTER THEORETICAL BACKGROUND OF LOGISTICS MANAGEMENT 2.1 Logistic concepts and attribute 2.1.1 Logistics and logistics management concepts Logistics has gone from