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MINISTRY OF EDUCATION AND TRAINING CAN THO UNIVERSITY SUMMARY OF PHD THESIS Major: Business administration Major code: 62.34.01.02 NGUYEN HUU TINH RESEARCH ON CASHEW NUTS SUPPLY CHAIN IN THE SOUTHEAST REGION Can Tho, 2021 THIS THESIS WAS COMPLETED AT CAN THO UNIVERSITY Supervisor 1: Dr Vo Hung Dung Supervisor 2: Dr Nguyen Huynh Phuoc This dissertation will be defended in front the school level at: ….………………………………………………………….………… On ………… hour………….date……… month…………year……… Discussant 1:…………………………………………………………… Discussant 2:…………………………………………………………… Citing of this the dissertation in available at following the: Learning Resource Center - Can Tho University Vietnam National Library LIST OF PUBLISHED PAPERS RELATED TO DISSERTATION Nguyen Huu Tinh, Vo Hung Dung, 2019, “Some solutions to improve the cashew production efficiency of households in the Southeast region.” Asia – Pacific Economic Review, Vol 545 (July 2019), p 40-42 Nguyen Huu Tinh, Vo Hung Dung, 2019, “Proposing a theoretical model to evaluate the performance of the cashew nuts supply chain in the Southeast region.” Asia – Pacific Economic Review, Vol 547 (August 2019), p 51-53 Nguyen Huu Tinh, 2019, “Analysis of the current situation of the cashew nut industry value chain in the Southeast region.” Asia – Pacific Economic Review, Vol 551 (October 2019), p 40-42.33 Nguyen Huu Tinh, Vo Hung Dung, 2019, “Factors affecting the efficiency of farmers’ operations in the cashew nuts supply chain in the Southeast region.” Financial Review, Vol (July 2019), p 101-104 Nguyen Huu Tinh, 2020, “Identifying bottlenecks in the cashew nuts supply chain in the Southeast region.” Asia – Pacific Economic Review, Vol 573 (September 2020), p 64-66 Nguyen Huu Tinh, (2020), “Logistics costs in the cashew nut supply chain in the Southeast region.” Asia – Pacific Economic Review, Vol 575 (October 2020), p 84-86 CHAPTER INTRODUCTION OF RESEARCH TOPIC 1.1 Research problem and rationale 1.1.1 Research problem Supply chain is an integrated process in which raw material is turned into the final product and delivered to customers through distribution, retail or both Several studies have shown that improvements in the supply chain result in a better return by saving costs, enhancing product quality, time and customer service Supply chain assessment is critical to increasing operational efficiency through appropriate improvement plans based on the criteria and information obtained during the assessment process In the world, supply chain is not a new concept However, for Vietnamese businesses, it is still quite new and unfamiliar Over the years, economists and business administrators have pointed out the important role of the supply chain of agricultural products As a result, there have been many studies related to the supply chain of different products Among these are studies on the supply chain of agricultural products, which aim for solutions to improve the efficiency of the chain 1.1.2 Rationale In the context of globalization, especially the process of global economic integration, supply chain management plays an even more important role Currently, a good amount of research on Vietnam agricultural products has been conducted Yet, there is no in-depth study on the cashew supply chain Previous research on supply chain only addresses one of the following issues: Analysis of the supply chain, analysis of supply chain efficiency, analysis of the efficiency of each factor in the supply chain, or bottlenecks in the supply chain, etc No study has ever integrated all the above issues to identify bottlenecks throughout the supply chain From the above rationale and current situation together with the importance supply chain management of commodity and service in general and of cashew in particular, the thesis "Cashew nuts supply chain research in the Southeast region” aims to analyze the cashew nuts supply chain flow, evaluating the quality, time and logistics cost efficiency and identifying bottlenecks in the cashew nuts supply chain in the Southeast region Based on the analysis, the thesis proposes solutions to optimize the cashew supply chain within the research areas and the whole country, which are of absolute necessity 1.1.3 Thesis originality After synthesizing domestic and international studies, the author finds that there are many studies related to the supply chain, specifically the supply chain of agricultural products Yet, there is no in-depth study on the cashew supply chain Previous research on supply chain only addresses one of the following issues: Analysis of the supply chain, analysis of supply chain efficiency, analysis of the efficiency of each factor in the supply chain, or bottlenecks in the supply chain, etc No study has ever integrated all the above issues to identify bottlenecks throughout the supply chain Therefore, in this study, the author conducts in-depth research on the supply chain of cashew products In addition, the author carries out supply chain analysis, supply chain efficiency analysis (quality efficiency, time efficiency and logistics cost efficiency) and analysis of factors affecting the supply chain efficiency to identify bottlenecks that hamper such efficiency 1.2 Research objectives 1.2.1 General objectives Assess the current situation and analyze the effectiveness of the cashew supply chain of the Southeast region, thus devising specific solutions to improve the efficiency of the cashew supply chain in the region and help the Vietnamese cashew industry develop in a stable and sustainable manner 1.2.2 Specific objectives General assessment of the current cashew nuts supply chain in the Southeast Evaluating supply chain efficiency based on quality, time and logistics costs Analyzing and identifying bottlenecks that affect the operation of the entire cashew nuts supply chain in the Southeast region Proposing solutions to improve cashew nuts supply chain efficiency in the Southeast region and to develop the cashew industry in Vietnam in a stable and sustainable manner 1.3 Research questions Question What is the current situation of the cashew nuts supply chain in the Southeast region? Question How efficient is the supply chain, based on product quality, time and logistics costs in the cashew nuts supply chain in the Southeast region? Question What are the bottlenecks that affect the efficiency of the cashew nuts supply chain in the Southeast region? Question What are the solutions to improve the efficiency of the cashew nuts supply chain in the Southeast region and effectively develop the Vietnamese cashew industry? 1.4 Research subjects and research scope 1.4.1 Research subjects The main research subject of the thesis is the cashew supply chain: Flows in the supply chain, product quality, time and logistics costs Survey participants are cashew-producing households, traders, product dealers, processing businesses and exporting businesses 1.4.2 Research scope 1.4.2.1 Research scope The research areas are the provinces of the Southeast region, consisting of provinces with cashew-cultivating areas in descending order: Binh Phuoc, Dong Nai, Binh Thuan, Ba Ria - Vung Tau, Binh Duong, Tay Ninh Among these provinces, Binh Duong and Tay Ninh have very small cashew-cultivating areas, less than 1% of the region total areas 1.4.2.2 Research timeline Secondary data: From 2015 to 2019 Primary data: 2018 1.4.2.3 Research content The thesis focuses on researching the cashew nuts supply chain in the Southeast region, aiming to partially change the region's current food production and supply to achieve higher efficiency 1.5 Scientific and practical significance of the thesis 1.5.1 Scientific significance Supply chain research is a relatively new field in Vietnam and this research helps contribute to the overview of agricultural product supply chain and enrich the research approach to agricultural product supply chain This research also lays the foundation for other researchers to extend their studies to the supply chain of other industries across the country 1.5.2 Practical significance This is the first research into the cashew nuts supply chain By analyzing a combination of factors including the supply chain, supply chain efficiency, the efficiency of each factor in the supply chain, etc., bottlenecks throughout the supply chain are identified From here, solutions to optimize the cashew supply chain within the research area and the whole country are proposed The research will contribute to the process of making the Vietnamese cashew industry to be sustainable and competitive against other parts of the world 1.6 Thesis structure In addition to the summary and conclusion, the thesis is divided into chapters in the following order: Chapter 1: Introduction Chapter 2: Theoretical basis and research methodology Chapter 3: Research models Chapter 4: Research results Chapter 5: Conclusion and recommendations CHAPTER THEORETICAL BASIS AND RESEARCH METHODOLOGY 2.1 Theoretical basis - Research overview 2.1.1 Supply chain 2.1.1.1 The concept of supply chain and agricultural product supply chain Up to now, there have been many studies on supply chain, with different approaches and definitions of the term "supply chain" In this thesis, the author summarizes a number of supply chain definitions to reinforce the theoretical basis for this particular research, including: Bryceson and Smith (2008), Christopher (2010), Huynh Thi Thu Suong (2012), Dmitry Ivanov et al (2019) In general, supply chain can be understood as: “The system of organizations, people and infrastructure involved in transferring products from the producer to the consumer Supply chain operations are the process of transforming the input of the manufacturing process into the final product and delivering the product to the end consumer” A supply chain consists of the linkage of stakeholders, in which the three most basic activities are: Supplying, manufacturing, distributing 2.1.1.2 Supply chain management There are different definitions from the following scholars: Lee et al (1995), Mentzer, Dewitt, Min, Nix, Smith and Zachia (2001), Jerrey P Wincel (2004), Christopher (2005), FAO (2007), Huynh Thi Thu Suong (2012) However, to summarize, the above definition of supply chain management addresses all elements of the supply chain; its impact on costs and its role in manufacturing products to meet customers' demands; offers a systematic approach to optimally capture and manage operations from suppliers to production facilities to distribution intermediaries and to end consumers According to Minh Phuong (2013), the linkage in supply chain includes vertical and horizontal link A supply chain can be broken down into the following basic components, including: Suppliers, manufacturers, distributors, retailers, customers/consumers The relationship between stakeholders in the chain can be at many different levels, each with its own strengths 2.1.1.3 Flows in the supply chain According to Chrisopher (2011), there are basic flows throughout the entire supply chain: product - service flow, information flow and cash flow 2.1.1.4 Supply chain assessment Several studies have shown that improvements in the supply chain bring significant benefits in terms of cost reduction, product quality enhancement and customer service Beamon (1998) identified two groups of qualitative and quantitative scales with indicators revolving around the two issues of cost and customer service when assessing the supply chain Tran Tien Khai et al (2011) investigated the cause of Ben Tre coconut supply chain failure: Weak production process, a lack of support from local authorities, lack of product competitiveness, and unsecured value chain structure Krepl et al (2016) conducted research on the value chain of cashew nuts export in Tanzania, by employing a chain diagram and calculating the value of each stage in the chain As such, supply chain assessment is critical to increasing operational efficiency through appropriate improvement plans based on the criteria and information obtained during the assessment process 2.1.2 Supply chain efficiency Quality management efficiency: There have been many studies on the quality of the supply chain performance such as those of Kaoru Ishikawa (1990), Aramyan (2007), Terera Bett (2009) In this study, to evaluate the effectiveness of cashew nuts quality, the author uses the following criteria: The evaluating criteria for fresh cashew nuts from the National Standard TCVN 12380: 2018, the evaluating criteria for cashew kernel quality from AFI standard Time efficiency: There has been a great number of studies related to time efficiency in the supply chain such as those of Aramyan (2007), Teresa Betts (2009), Dore (2000) In short, time is an important factor in enhancing customers’/partners’ trust in and satisfaction with the supply chain, thereby improving supply chain efficiency Meeting time requirements and being flexible when needed are the interests of this research Cost effectiveness - Logistics costs: According to Steward (2010), in terms of supplier efficiency, researchers refer to cost effectiveness as a measure of supply chain performance Cost-effectiveness measures a business’ ability to produce an appropriate level of profit 2.1.3 Bottlenecks in the supply chain Through the concept of the supply chain, it can be understood that the supply chain is a network of organizations involving in the flow of input and information from the first suppliers to the end consumers and related activities Each organization in the chain has close relationship, collaborating to share responsibilities, resources and information to increase the competitiveness of each party and make profit (Togar and Sridharan, 2002) When a link in the supply chain deteriorates in value, the whole supply chain is affected, which is considered a bottleneck in the supply chain The bottlenecks in supply chain can be broadly understood as the phenomenon when one or more links in the supply chain deteriorate(s) in value, causing a decline in product quantity and quality, leading to higher costs and resulting in profit loss for manufacturers or service providers 2.2 Research methodology 2.2.1 Research approach The approach to cashew nuts supply chain analysis: Based on this research approach, the author argues that a supply chain must have at least basic stakeholders, including: Supplier, manufacturer, distributor/retailer/customer in mutual relationships In analyzing the supply chain flow, theoretically, there are types of flow: Information flow, product service flow and cash flow The author divides the product - service flow into flows: tangible ownership flow, distribution flow and promotion flow Thus, there are flows in the supply chain: Information flow, tangible ownership flow, distribution flow, promotion flow and cash flow The approach for efficiency analysis in cashew nuts supply chain: As for analysis of the quality efficiency of the cashew nuts supply chain, according to the "National Standard TCVN 12380: 2018" and the "AFI Standard", the author qualitatively analyzes the status-quo of cashew nuts quality in the Southeast region, and compares it with specified criteria to draw conclusions about cashew nuts quality in the region In addition, the author conducts quantitative analysis to evaluate customers' perception of cashew nuts quality The author also builds a regression model of factors affecting the fresh cashew nuts quality produced by farmers Regarding the analysis of time efficiency, the author employs qualitative research to describe the actual time of each stage in the entire supply chain and then compares it with the actual delivery time from suppliers to customers; Regarding the analysis of logistic efficiency, the author uses qualitative research to describe the logistics situation of each stage in the entire supply chain, calculate logistics costs and its proportion in each stage in comparison with the logistics cost and total cost of the whole supply chain The approach for bottleneck analysis in the cashew nuts supply chain: To identify bottlenecks in the cashew nuts supply chain in the Southeast region, the thesis analyzes the supply chain in a deeper and broader sense: Association and collaboration, information technology application, labor force’s capabilities, uncertain environment and state policies and regulations In order to have a solid scientific basis, the author builds a model of factors affecting the supply chain efficiency in cases: businesses and farmers The author employs exploratory factor analysis to find out the impact of each factor In addition, the identification of bottlenecks is also based on the following grounds: Description of the current situation and analysis of the cashew nuts supply chain; Research results concerning supply chain efficiency 2.2.2 Research framework for cashew nuts supply chain This research begins with the identification of the research problem, from which research objectives, theoretical basis and research methodology are determined The next steps are: Establishing research models, analyzing the current situation of the supply chain Finally comes an assessment of the strengths and limitations, which lays the foundation for solutions and recommendations to improve efficiency and optimize the cashew nuts supply chain 2.2.3 Data collection methods - Sample size Systematic random sampling (P.E Church, 1984) was employed to select households to collect information With this method, the number of samples allocated to each commune depends on that commune's cashew-cultivating area; In each commune, a list of households by production scale is made Then, from the number of samples needed for each group, sample distances are calculated to determine which households to be surveyed to collect information Chain analysis data is derived from sources: Primary and secondary Secondary data: This is synthesized from the reports of cashew associations of the provinces, the Vietnam Cashew Association and statistics in the provincial statistical yearbooks, from reports of the Ministry of Industry and Trade and the Ministry of Agriculture and Rural Development on yields and costs of agricultural sector, including cashew nuts, as well as financial statements collected from 12 cashew nuts processing and exporting businesses in the Southeast region Primary data: Primary data is collected in the following process Step 1: Questionnaire development Step 2: Determining the required number of samples Table 2.1 Distribution of survey samples on supply chain Province Area (Ha) Frequency % Frequency Household Trader Enterprises Binh Phuoc 134,302 67 149 102 20 27 9,175 10 Dong Nai 37,802 19 42 29 Binh Thuan 17,053 19 14 198,332 100 30 40 BR-VT Total Step 3: Interviewing customers 220 150 Source: Author's synthesis and analysis, 2020 Step 4: Examining interview results, excluding unsatisfactory samples Step 5: Data input Step 6: Data processing 2.2.4 Research methods and data analysis Qualitative analysis: The qualitative methods used in this study are in-depth discussions and interviews They were carried out by direct discussions with 20 stakeholders, business owners and cashew farmers to explore the concepts and operation characteristics of the industry Research table, construction of draft scales, discussion outlines had been prepared in advance The results of this study are the basis for the author to consolidate and develop the theoretical research results used for in-depth interviews In-depth interviews were conducted with 10 industry experts Quantitative analysis: The author uses the SPSS software and EXCEL to synthesize and analyze the data, which includes: Descriptive statistics, comparative methods, multiple regression analysis and testing of hypothesis violations in the regression model, Scale testing - Exploratory factor analysis, scoring method 10 CHAPTER RESEARCH MODELS 3.1 Analysis model of cashew nuts supply chain Source: Author's synthesis and analysis, 2020 Figure 3.1 Supply chain model of cashew nuts in the Southeast region Analysis of flows in the supply chain: (1) Information flow, (2) Tangible ownership flow, (3) Transport flow, (4) Promotion flow, (5) Cash flow 3.2 Model of supply chain efficiency analysis Source: Author's synthesis and analysis, 2020 Figure 3.2 Research model for evaluating the efficiency of cashew nuts supply chain 11 3.3 Cashew supply chain bottleneck analysis model Qualitative research Supply chain analysis The bottleneck in the supply chain Supply chain efficiency analysis Analyze factors affecting supply chain efficiency Source: Author's synthesis and analysis, 2020 Figure 3.3 Analysis model of supply chain bottleneck 12 CHAPTER RESEARCH RESULTS 4.1 The current situation of the cashew industry 4.1.1 The current situation of the cashew industry in the world and Vietnam According to data from provincial Department of Agriculture and Rural Development, the cashew area of Vietnam went down continuously in years, from 440,000 in 2007 to 290,000 in 2017 The cashew area showed a tendency to recover and reached 293,000 in 2018, and then reached 297,498 in 2019 From 2008 to 2015, the national cashew yields always remained low, with less than ton/ha In 2018 and 2019, cashew yield decreased due to the heavy impacts of droughts, unseasonal rain and epidemic The output of raw cashew nuts in Vietnam grew by 2.3% per year The yield tended to increase while the cashew-cultivating area decreased by 4.8% per year from 2010 to 2017 In 2018 and 2019, the output of raw cashew decreased, only reaching 303,948 tons in 2018 and 210,899 tons in 2019 According to the statistics of the International Dry Fruit Council (INC) and the Global Cashew Council (GCC, 2018), in the 2018 - 2019 period, the total global production of raw cashew nuts was estimated at 3.485 million tons, an increase of 160 thousand tons compared to 2017 - 2018 period This can be attributed to a favorable harvest season in several countries in Africa and Southeast Asia The six countries with the largest production of raw cashew nuts in the world are: India, Ivory Coast, Vietnam, Tanzania, Guinea Bissau and Nigeria Thus, when comparing the cashew-cultivating area of Vietnam to the world, it is clear that while the world has experienced a strong upward trend, Vietnam has experienced a downward trend in recent years Vietnam is clearly going against the global trend The world's cashew kernel production in 2018 was 754 thousand tons, of which India was the largest producer and processor with an output of 172 thousand tons (23%), while Vietnam (113 thousand tons, accounting for 15%) came second Global production of cashew kernels has grown quite slowly, with a growth rate of only 3.5%/year over the 2007 2018 period Vietnam had more than 30 import markets for raw cashew, of which the largest import markets for raw cashew included: Ivory Coast (accounting for 35% of the total import volume), Cambodia (11%) and other markets (54%) Despite being the world's leading cashew kernel processor and exporter, domestic consumption of Vietnamese cashew products is still limited, accounting for only about 6% of highly processed products 4.1.2 Current situation of cashew industry in the Southeast region Results of the survey on cashew nuts supply chain in the Southeast region shows that the product chain of cashew trees is quite diverse Apart from the main product - the cashew kernel, the majority of other parts such as the stem, flesh, rind, etc also have economic value The product chain from cashew is illustrated in the following figure: 13 Source: Author's synthesis and analysis, 2020 Figure 4.1 The cashew product chain in the Southeast region Cashew-cultivating area in Southeastern provinces from 2015 to 2019 is shown in table 4.1 Binh Phuoc province had the largest cashew-cultivating area in the Southeast region over the years, with the least fluctuation The two provinces with the smallest cashew areas were Tay Ninh and Binh Duong, with such areas accounting for less than 1% of the total regional areas According to data from the provincial Departments of Agriculture and Rural Development, the area of cashew trees in the country was 337,143 in 2019 The cashew-cultivating area in Southeastern provinces was 200,738 ha, making up 59.5% of the country's total cashew area 14 Table 4.1 Cashew-cultivating area in Southeastern provinces (2015 - 2019) Unit: Ha Year Province 2015 2016 2017 2018 2019 % 2019 134,911 134,107 134,014 134,204 134,302 67.2 1,447 1,153 1,045 1,007 1,020 0.5 BR-VT 11,759 10,566 9,825 9,374 9,175 4.6 Dong Nai 44,770 41,125 39,741 38,888 37,802 0.9 Binh Thuan 17,179 17,892 16,588 17,025 17,053 8.5 Binh Duong 2,181 1,739 1,613 1,559 1,386 0.7 212,247 206,582 202,826 202,057 200,738 Binh Phuoc Tay Ninh Total Source: Summarized from Statistical Yearbook of Southeastern provinces, 2020 From 2016 to 2018, domestic enterprises purchased 100% of the domestically produced cashew, which was estimated at 1.36 million tons In which the 2016 output was 384 thousand tons, the 2017 output was 500 thousand tons and the 2018 output was 475 thousand tons (VINACAS, 2019) The export volume of cashew kernels in the Southeast region tended to increase over time, with a YOY growth of over 20% 4.2 Research results 4.2.1 Qualitative results 4.2.1.1 Proposal for the scale of measurement Experts suggest: Customers’ perceived quality of fresh cashew nuts produced by farmers and of cashew kernels produced by companies is measured using the 5-point Likert scale for the criteria in the "National Standard TCVN 12380: 2018" (concerning the quality of fresh cashew nuts) and the "AFI Standard” (concerning kernel quality); The scale of general perception of fresh cashew nuts quality ranges from to 10: is completely unqualified and 10 is completely meeting the standards of the "National Standard TCVN 12380: 2018" 4.2.1.2 Expectations of time, quality and logistics cost efficiency 15 Table 4.2 Expectations of cashew kernel processing and distributing time No Stage Time (Day) Receiving input material 1-2 Drying and storing material 2-4 Classifying raw material (cashew size) Steaming/roasting Cutting and separating Drying Peeling off the velamen 1-2 Packaging 1-2 Preserving and distributing 1-2 Total 10-15 19-30 Source: Results of author’s qualitative research, 2020 According to experts, the actual time may be prolonged due to a variety of unexpected reasons; however, this period should not exceed 35 days to achieve economic efficiency Table 4.3 Expectation of delivery time from manufacturers to on-board No Stage Time (Day) Loading into containers Transportation to the port Waiting time at the port 4-5 Total 6-7 Source: Results of author’s qualitative research, 2020 According to experts, the cashew industry in Vietnam is currently using two sets of standards, the "National Standard TCVN 12380: 2018" and the "AFI Standard", to evaluate cashew quality Experts say that logistics costs currently account for a relatively high proportion of the total cost, thus having a significant impact on supply chain efficiency Logistics costs should be around 15% to 20% of the cost of goods sold (COGS), which is the same level as those of developed countries Experts say the most noticeable bottlenecks in the supply chain are: Logistics costs, import and export procedures and lack of raw material There are other factors with less 16 prominent manifestation such as collaboration, information, price volatility, etc In-depth analysis is required to determine these factors 4.2.2 Analysis of the cashew supply chain in the Southeast region Description of the tangible asset ownership transfer process: The process of tangible asset ownership transfer in the cashew supply chain is illustrated in the following figure: 45.8% Dealers/ Agricultural supply companies Small dealers 45.8% 36.7% Finished product dealers 8% Traders/36.4% Big Dealers Small and medium 3% processing facilities 1% 2.5% Import-e 5.5% 0.5% xport company 5.6% 46.1% 13.4% 0.7% 2.85% 4.5% 0.25% Import-export and processing company Other provinces 22.7% 17.8% Source: Author's synthesis and analysis, 2020 Figure 4.2 The cashew nuts supply chain in the Southeast region Description of the cashew nuts transport flow Collectors / Farmers Dealers day 1.5-2 days Processing businesses Exporting businesses Ship decks 25-36 7-10 days ngày Source: Author's synthesis and analysis, 2020 Figure 4.3 The cashew nuts transport flow in the Southeast region Description of the information flow in the cashew nuts supply chain: Farmers receive information about seeds, fertilizers and cultivating techniques from a variety of channels A 17 number of major seed and fertilizer suppliers provide technical support for farmers; however, these activities are also very limited Most small seed establishments have almost no sales activities Most information is passed on personally; Usually, farmers only contact traders they know or ask for traders' information from nearby households; Traders and factories communicate via phone every day Normally, traders and factories are bound by product supply contracts while traders in the area are also closely connected, contributing to price consistency and low variance in buying prices among traders The main communication method is still phone; The domestic cashew nuts distribution channel is insignificant, so most processing businesses (80%) not actively offer the product through mass distributions channels or directly offer products to retail stores and dealers Businesses that collaborate in processing have communication made entirely via phone when required or with prior contracts Processing and exporting businesses collaborate under export - import contracts Description of the promotion flow in the cashew nuts supply chain: The mutual support between stakeholders in the supply chain is not great, with no promotions or promotion policies other than the commercial credits granted to each other However, the effects of these commercial credit packages are also evident, which speed ups the material flow Description of the financial flow in the cashew supply chain: The distribution of VAT and profit in the cashew nuts supply chain is showed in two distribution channels  Long distribution channel: Farmer - Local dealer – Agricultural products dealer Small and medium processing facility - Finished product dealer - Exporting company With the long distribution channel, the total added value generated was VND 42.66 million /ton, the total gross profit was VND 28.61 million/ton and the net profit was VND 26.64 million/ton Among the stakeholders with distributing function, the final cashew product distribution stakeholders had a higher profit margin than the raw cashew distribution stakeholders  Short distribution channel: Farmer - Local dealer - Raw material dealer - Processing and exporting company As for the short distribution channel, farmers were the biggest added value contributor (73.51%), who also made the most profit (gross profit 80.15%; net profit 80.37%) The added value generated by the processing stakeholder was also quite high, accounting for 10.74% of the total added value of the whole chain However, the profit of this stakeholder made up only 5.03% of the total gross profit and 4.58% of the total net profit because it was not involved in distributing the final product The current state of linkage activities in the cashew nuts supply chain in the Southeast region: Most farmers only assist one another by providing information during the production process In addition, many experts say that cashew farmers’ largest weakness is their lack of linkage Farmers who engage with businesses are assisted in the supply of input factors Although farmers enjoy trading with traders who have already done business with them, this relationship is still lax The linkage between farmers and processing businesses is very loose Farmers only sell fresh cashew nuts to traders or dealers In the cashew industry, the Vietnam Cashew Association (VINACAS) is now regarded as the bridge for the industry, but the Association has not clearly demonstrated its role in connecting businesses The survey shows that traders and processing companies have a close and long-term relationship with each other Processing businesses usually initiate production based on the orders of the exporting businesses There are always purchase and sale contracts between them so this linkage is solid and long-lasting Export companies have weak linkage with foreign customers in terms 18 of product price and quantity due to the constantly fluctuating market and fierce competition from other countries 4.2.3 Efficiency of the cashew nuts supply chain in the Southeast region 4.2.3.1 Quality efficiency Fresh cashew nuts quality According to a VINACAS report, Vietnamese fresh cashew nuts are not as consistent in quality as those of other countries such as the US and India However, when comparison is made between the Southeast region and entire Vietnamese market, the Southeastern cashew nuts have more uniform sizes and a higher proportion of big-sized ones Regarding quality standards, visual analysis shows that the quality of Southeastern fresh cashew nuts is still limited by the preservation stage, which makes fresh cashew nuts damp, filled with strange smells and mixed in with harmful insects  The moisture content of cashew nuts is 5% higher than the standard  The kernel recovery rate of small cashew nuts is higher than the standard, but for the big-sized ones, this number is lower than the specified standard  The proportion of defective seeds is acceptable  The impurity rate is times higher than the standard; therefore, this criterion requires further attention When testing cashew nut buoyancy, the quality of fresh cashew nuts meets buyers’ requirements Quantitative research was carried out after qualitative research to examine more thoroughly customers’ perception of the quality of fresh cashew nuts produced by farmers The analysis shows that: Among the criteria, criteria regarding size, shape, color, smell, insects, kernel recovery rate and defective kernel rate have an average value greater than 3, meaning that the majority of people agrees with these criteria and believes that the current quality of fresh cashew nuts satisfies these criteria However, among these 7, the presence of insects has the lowest value, which is consistent with the aforementioned qualitative results, when many respondents have reported the presence of insects in fresh cashew nuts In addition, the figures reflect the reality well based on criteria: The kernel recovery rate is high and the average rate of low defect seeds is also relatively high (> 3.8) This is very much in line with what is observed in reality as the cashew variety and cultivation techniques are currently quite good, exerting a strong impact on these criteria Fresh cashew nuts have high moisture content and foreign matters because producers while chasing profit, deliberately raise moisture content and mixing in foreign matters to increase the product weight (these two indicators have low average scores) The result from running the regression model via the SPSS software to analyze factors affecting the quality of fresh cashew produced by farmers is as follows: Y = 0.344 + 0.097 * X3 + 0.296 * X5 + 0.083 * X7 + 0.058 * X9 19 + 0.299 * X10 + 0.293 * X11 Quality of cashew kernels Regarding cashew products, in the past, yield of blemished and broken cashew kernels constituted a high proportion - at about 60%, while the remaining 40% was white or lightly blemished whole kernels with small sizes, W320 and W450 being the most common Despite having superior quality, W240 kernels were very few and virtually non-existent Although businesses have focused on continuously improving quality over the past years, because of which their competitiveness has also been raised, product quality has yet to meet the requirements Currently, the quality of cashew kernels has been greatly improved because of seed enhancement and renovated production and processing techniques The field survey results show that W240 and W320 kernels make up the majority, while small W450 kernels and WS kernels (insect-bitten, blemished, broken, etc.) account for a negligible proportion Quantitative research was carried out after qualitative research to examine more thoroughly customers’ perceptions of the quality of cashew kernels produced by the company The results of the study show that all the criteria applied to cashew kernels receive an average score of over 3.6, indicating that the quality of the kernels meets AFI standards 4.2.3.2 Time efficiency From farmers to large processing businesses The time each stage takes varies depending on the characteristics of that stage Survey results of the actual average time of stages in processing and distributing kernels, and the expected time for each stage, are shown in table 4.4 20 Table 4.4 Synthesis of actual cashew kernel processing and delivery time and expected time Expectation (Day) No Stage Time (Day) Receiving material input 1-2 1-2 Drying and storing material 3-5 2-4 Classification (cashew size) 1 Steaming/roasting 1-2 1-2 Cutting and separating 1 Drying 1 Peeling off the velamen 1-2 1-2 Packaging 1-2 1-2 Preserving and distributing 15-20 10-15 25-36 19-30 of ingredients Total Source: Synthesis and analysis of author's survey data, 2020 When comparing field survey results with qualitative results, the author finds out a gap between reality and experts’ expectations The actual total time would be about days longer than the expected if stage-switching periods and non-working days are taken into account, leading to a 10-day gap This gap can affect the efficiency of the supply chain to a great extent This gap mainly occurred during the stages of drying, preserving raw materials, preserving and distributing finished products From exporting business to ship deck The transportation of product from exporting business to the ship deck consists of three important stages: loading the cargo into containers, transporting to the port and waiting at the port, with the actual time of field survey and expected time displayed in table 4.5 The actual duration of this process differed considerably from expectations The highest expected time was week while the actual time was week at least and 10 days at most Thus, the real time was days longer, or 50% more than expected This gap was quite large, causing waste and significantly affecting the efficiency of the supply chain The difference occurred mainly during the transportation and waiting (to be transferred on board) stages 21 Table 4.5 Actual and expected time for delivering products from the business to on-board No Stage Loading and unloading into containers Time (Day) Expectation (Day) 1 Shipping to the port 1-2 Waiting to be transferred on board 5-7 4-5 7-10 6-7 Total Source: Author's synthesis and analysis, 2020 4.2.3.3 Logistics efficiency From the total cost structure and the logistics costs in the supply chain, it can be seen that the average logistics costs accounted for more than 22% of the total cost in each stage Considering the distance and transportation means among locations in the supply chain, figures were about 26% of the total cost This shows that transportation costs and the distance among locations in the supply chain are closely connected Costs would increase if the distance between locations in the supply chain increased According to the financial statements of the 15 surveyed businesses, as for export cashew nuts prices, logistics costs accounted for an average of 24% of the COGS During the first months of 2020, due to the outbreak of Covid-19, this proportion increased to 35% of the cost As a consequence, neither the businesses nor the cashew growers made great profits Thus, the actual logistics costs here, when compared to experts’ expectation which was analogous to the logistics costs of developed countries, was almost twice as high The burden of logistics costs is too large for the cashew industry in the Southeast region in particular and for Vietnamese cashew industry in general 4.2.4 Analysis of bottlenecks in the cashew nuts supply chain Analysis of factors affecting the performance efficiency of the supply chain - The case of businesses: the analysis shows that the order of significance of the factors affecting supply chain efficiency can be concluded as follows:  First: "Labor force’s capabilities" with an average of 0.454 and a proportion of 25%  Second: “State policies and regulations” with an average of 0.414 and a proportion of 23%  Third: “Information technology” with an average of 0.392 and a proportion of 22%  Fourth: “Uncertain environment” with average of 0.321 and a proportion of 18%  Fifth: “Collaboration” with an average of 0.204 and a proportion of 11% 22 Analysis of factors affecting the performance efficiency of the supply chain - The case of businesses - The case of farming households: the analysis shows that the order of significance of the factors affecting supply chain efficiency can be concluded as follows:  First: “State policies and regulations” with an average of 0.463 and a proportion of 34%  Second: “Labor force’s capabilities” with an average of 0.389 and a proportion of 28%  Third: “Uncertain environment” with an average of 0.357 and a proportion of 26%  Fourth: “Collaboration” with an average of 0.161 and a proportion of 12% 4.2.4.1 Bottlenecks in the cashew nuts supply chain Despite impressive export figures, cashew processing and exporting businesses did not make high profits, some of which even suffered losses Cashew farmers did not have a stable income, thus leading a difficult life The reason is that there are still many bottlenecks in the Southeastern cashew supply chain: Raw materials; The linkage and collaboration among stakeholders in the cashew nuts supply chain in the region are very poor; Southeast provinces have not devised any plans for industrial zones dedicated to cashew processing; High transportation and preservation costs; Information technology; Labor force’s capabilities; Collaboration among stakeholders in the supply chain; Uncertain environment; State policies and regulations 4.3 Solutions The author proposes solutions to the aforementioned bottlenecks in the cashew nuts supply chain of the Southeast region to increase its efficiency The proposed solutions aim to: Solve problems with raw materials; Strengthen linkages; Facilitate collaboration among stakeholders in the cashew nuts supply chain of the region; Address the planning of industrial zones dedicated to cashew processing; Improve product quality; Reduce logistics costs; Solve funding problems; Improve the production and business efficiency of businesses and farmers by increasing the application of information technology, improving labor force's capabilities, limiting the impact of market price fluctuations, increasing access to information, changing the cashew-growing model, boosting the integration of technology into production; Facilitate more beneficial policies for the cashew industry In addition, the author proposes solutions for each stakeholder of the supply chain 23 CHAPTER CONCLUSION AND RECOMMENDATIONS 5.1 Conclusion 5.1.1 Cashew nuts supply chain analysis in the Southeast region The author analyzes the current state of the cashew supply chain based on the flows in the supply chain: tangible ownership flow, transportation flow, information flow, promotion flow, financial flow and linkage activity analysis in the cashew nuts supply chain Thereby, the author summarizes the main limitations of the cashew nuts supply chain as follows: complex and fragmented structure with various stakeholders participating through different distribution channels; stakeholders in the chain are mostly small-scale in production, trading and processing; the ability to collaborate and connect among stakeholders in the chain is very limited Although the existence of many intermediaries in the chain is necessary, this has increased transaction costs and risks, while the ability to upgrade the chain and the capacity of participating stakeholders is very limited 5.1.2 Evaluation of the cashew nuts supply chain efficiency in the Southeast Product quality: The Vietnam cashew industry has also revealed many weaknesses in terms of quality and categories of exported products The quality of Vietnam's exporting products is inconsistent and unstable Lead time: There was a considerable gap between the total turn-around time of all stages in the process and the actual time it took to complete the whole process which is days These extra 4-day came about due to the transition time between different stages, and because the non-working days of workers and businesses were also taken into account The actual total time was about days longer than expected If the transition period and the non-working days were included, the real lead time can be up to 10 days longer than theoretical lead time Such a gap would greatly affect the efficiency of the chain Logistics costs: The logistics costs of the cashew industry in the Southeast account for a large share in the COGS and revenue Even when compared to other agricultural products, the logistics costs for the cashew industry were always higher This was partly due to the lack of alignment, lack of connection between transport modes and businesses, between exporters and logistics businesses The additional costs also put pressure on the COGS, creating bottlenecks in the logistics chain of the cashew industry in the region 5.1.3 Bottlenecks in the cashew nuts supply chain in the Southeast region From the cashew nuts supply chain description, the analysis of time, quality and logistics efficiency as well as the examination of factors affecting supply chain efficiency in stakeholders - businesses and farmers - the author has pointed out some main bottlenecks in the cashew nuts supply chain in the Southeast region: Material bottlenecks; The linkage and collaboration among the stakeholders in the cashew nuts supply chain in the region is very poor; Southeastern provinces have not had plans for industrial zones dedicated to cashew processing; High transportation and preservation costs; Funding and capital sources; 24 Information technology; Labor force’s capabilities; Uncertain environment; State policies and regulations 5.2 Recommendations The research shows that apart from efforts of the main stakeholders in the cashew nuts supply chain such as farmers, traders, dealers and collection businesses, processors and exporters, to increase the supply chain efficiency, the supply chain needs to connect with the relevant government agencies and VINACAS Governmental policies exert influence on whether or not businesses are encouraged to work together to boost competitiveness and facilitate proactive and sustainable development In addition, VINACAS, once having demonstrated its capacity and role, will truly become a forum for businesses to proactively take part in exchanging information on production techniques and the situation of raw material on the market, on sales distribution issues and on the policies of exporting and importing countries Hence, VINACAS must truly be a linkage between businesses and the government, helping businesses boost trade promotion activities, and especially act as the legal representative that takes part in protecting the interests of businesses in the industry during the process of international and economic integration The author’s recommendations include:  Recommendations to the government and relevant agencies: It is necessary that a legal framework be promulgated to facilitate the production and business activities of farmers, traders, dealers and business stakeholders  Recommendations to the VINACAS: The Association shall be a real platform for businesses in the industry to exchange information as well as respond to information on the adversities faced by stakeholders in the production and business process 25 ... the cashew industry in the world and Vietnam According to data from provincial Department of Agriculture and Rural Development, the cashew area of Vietnam went down continuously in years, from... nuts in the world are: India, Ivory Coast, Vietnam, Tanzania, Guinea Bissau and Nigeria Thus, when comparing the cashew-cultivating area of Vietnam to the world, it is clear that while the world... clear that while the world has experienced a strong upward trend, Vietnam has experienced a downward trend in recent years Vietnam is clearly going against the global trend The world's cashew kernel