INVENTOTY MANAGEMENT AT VINAMILK COMPANY

HO CHI MINH UNIVERSITY OF TECHNOLOGY AND EDUCATION  COURSE: INVENTORY MANAGEMENT INVENTOTY MANAGEMENT AT VINAMILK COMPANY MEMBERS STUDENT ID Ho Chi Minh, October 12, 2021 TABLE OF CONTENTS I THEORETICAL BASIS ON STOCK MANAGEMENT .4 1.1 Enterprise inventory .4 1.1.1 Enterprise inventory concept 1.1.2 Characteristics of the enterprise's inventory 1.1.3 Classification of enterprise's inventory 1.1.4 The role and significance of inventory for businesses .6 1.2 Enterprise inventory management 1.2.1 The concept of enterprise inventory management 1.2.2 Benefits and goals of inventory management in business 1.3 Some terms in inventory management 1.4 Factors affecting inventory management .8 1.5 Contents of inventory management .8 II INVENTORY MANAGEMENT IN VINAMILKI COMPANY .10 2.1 Company introduction Vinamilk 10 2.1.1 General introduction .10 2.1.2 Overview of the business .10 2.1.3 Recent business situation 11 2.1.4 Target 12 2.2 Inventory management 12 2.2.1 Overview of inventory management Vinamilk .12 2.2.2 Arrangement and arrangement of inventory 13 2.2.3 Evaluate the effectiveness of inventory management 13 III ERP SYSTEM AND ABC INVENTORY ANALYSIS SOLUTION FOR HIGH EFFICIENT INVENTORY MANAGEMENT .15 3.1 ERP system - inventory management method Vinamilk 15 3.1.1 ERP concept 15 1.2 Resource planning (ERP) systems: .15 3.1.3 Key factors for a successful ERP implementation: 16 3.2 Company activities before ERP implementation 17 3.3 Company activities after implementing ERP .17 3.3.1 Actual situation of ERP implementation at Vinamilk 17 3.3.2 Vinamilk's ERP system implementation process 19 3.3.3 Benefits of ERP system to Vinamilk's billion USD flow .19 3.3.4 Comments on ERP implementation of Vinamilk 20 3.4 Problems in inventory management .23 3.5 Solution - ABC Technical Analysis Method 23 3.5.1 Introduce 23 3.5.2 ABC analysis 24 3.5.3 Steps to perform ABC analysis 24 3.5.4 Inventory management policies 25 3.5.5 Shopping and Warehouse Applications 25 3.5.6 Types of expenses using ABC method 26 3.5.7 The decisive factors for successful ABC implementation 26 3.5.8 Application methods and goals 27 3.5.9 Benefits and pitfalls of ABC Analysis 28 3.5.10 Limit 30 IV INTERNET OF THINGS (IOT): AMAZON GO .32 V LEAN SIX SIGMA TECHNOLOGY AND FISHBOARD DIAGRAM (5M + E) IN STOCK MANAGEMENT PROCESS 34 5.1 Lean six sigma technique finds waste and proposes to eliminate waste in the inventory management process 34 5.2 The fishbone diagram (5M + E) demonstrates the factors that influence inefficient inventory management 35 V INVENTORY AUDIT CHECKLIST 40 REFERENCE 41 TEACHER COMMENT ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ………………………………………………………………………………………… Teacher signature I THEORETICAL BASIS ON STOCK MANAGEMENT 1.1 Enterprise inventory 1.1.1 Enterprise inventory concept Inventory is the last item held and sold in a business's warehouse, so many people mistake it for unsold, damaged or obsolete goods However, many businesses hold inventory as a backup or as raw materials or semi-finished products prepared for the production of new goods A company's inventory is one of its most valuable assets In retail, manufacturing, food service, and other inventory-intensive sectors, a company's inputs and finished products are at the core of its business A lack of inventory when and where it is needed can be extremely detrimental According to Vietnamese accounting standard No 02, inventories are assets  Are kept for sale in the normal period of production and business;  In the process of production, unfinished business;  Raw materials, materials, tools, tools for use in the process of production, business or provision of services Inventories play an extremely important role in the supply chain, as their value is utilized in case of timely supply of goods as customers can order at any time, or add to production In a nutshell, inventory is all of the resources that are held up in the short term to meet the current or future needs of the business 1.1.2 Characteristics of the enterprise's inventory  The ratio of inventory to total current assets of an enterprise can be large or small This depends mainly on the type of production and business of the enterprise For manufacturing or trading enterprises, this proportion is often high and accounts for about 50% - 60% of the total value of current assets because enterprises need to reserve goods for production and business activities However, for businesses providing services (transportation services, educational services, legal consulting services, ) the proportion of inventory is usually very low because services are intangible products, supply and consumption at the same time, so there will be no inventory Therefore, this thesis will only refer to inventory in commercial enterprises and manufacturing enterprises;  Inventories are part of current assets, so they have some characteristics similar to current assets Inventories always change form of expression through the stages of the production and business process From money to raw materials, unfinished products, finished products and finally back to the original form of money;  The value of inventory directly affects the cost of goods sold, and the cost of goods sold directly affects the net profit of the business Therefore, the value of inventory indirectly affects the net profit of the enterprise;  Inventory is one of the main sources of revenue for a business because sales from inventory (usually sales of finished goods) are one of the primary sources of revenue and other sources of income later added by the business (revenue from financial activities when customers buy goods on credit, ) 1.1.3 Classification of enterprise's inventory There are many different ways to classify inventory, but this thesis will only deal with how to classify inventory according to different stages of a production process With this classification, inventory can be divided into main categories:  Raw materials: are materials that are sold or kept for future production, sent for processing and purchased on the way back  Semi-finished products: are products that are allowed to be used for production but have not yet been completed and finished products that have not yet gone through the procedures for warehousing of finished products  Finished product: is the finished product after the production process The three types of inventory above that are maintained will vary from company to company depending on the different nature of each business Some companies also maintain a fourth type of inventory, called supplies, such as office supplies, machine cleaning materials, oil, fuel, light bulbs, and the like These goods are all necessary for the production process 1.1.4 The role and significance of inventory for businesses Role: Ensure storage, supply, avoid loss of goods, production and business processes of  enterprises are operated continuously Ensure cost savings, cost savings, economical use of production and business  activities of the enterprise Promote the rapid turnover of materials, rational use of capital to increase revenue  for the business Check the implementation of material supply, increase working capital efficiency  Meaning: Inventory management is very important in the process of production and business activities of enterprises In order for production and business activities to be conducted regularly and continuously, it is necessary to regularly ensure that the materials and energy are sufficient in quantity, on time, in the right quality and in the right specifications It is a mandatory issue without which the production of the product cannot be Manufacturing enterprises need to have materials and energy to survive Therefore, securing energy resources for production is an objective necessity, a common condition of all social production activities Commercial enterprises need to have goods in order to survive, so it is necessary to ensure that there are enough goods to supply the market and society 1.2 Enterprise inventory management 1.2.1 The concept of enterprise inventory management  Inventory management refers to the process of ordering, storing, and using a company's inventory These include the management of raw materials, components, and finished products, as well as the warehousing and handling of such items  For companies with complex supply chains and manufacturing processes, balancing the risks of inventory shortages and shortages is especially difficult To strike these balances, companies have developed two primary approaches to inventory management: just-in-time (JIT) and just-in-time (JIT) material requirements planning and just-in-time (JIT) planning material requirements (MRP) 1.2.2 Benefits and goals of inventory management in business 1.2.2.1 Benefits of keeping inventory As with other assets, holding inventory is a decision to spend money To determine the level of investment in inventory, it is necessary to compare the benefits achieved and the costs incurred, including the opportunity cost of money invested in inventory Here's a breakdown of the benefits and costs of holding a business's inventory 1.2.2.2 Objectives of inventory management On the basis of balancing the benefits achieved and the costs incurred from the investment in inventory, the enterprise must manage inventory so that:  Ensuring the supply of inputs for production and business activities takes place continuously, avoiding any interruption caused by the reserve;  Ensure the supply of sufficient output products to meet the needs of the market;  The total cost of holding inventory is the lowest 1.3 Some terms in inventory management Stock: refer to the quantity of stock Inventory: Refers to the quality, composition, quantity of the inventory Warehouse: Means warehouse Goods Receipt: Means to import goods Goods Issue: Export goods Warranty Costs: Costs for the warranty process Waybill: Means bill of lading Certificate of origin, also abbreviated as C/O: Only certificate of origin Certificate of Inspection: Means the certificate of goods quality inspection Materials: Raw materials Demand: Need or expectation Equipment: Equipment Order: Means order Customs Declaration: Customs declaration Delivery Order Abbreviation D/O: Delivery order Expired Date: Expiration date Warehouse Card: Means warehouse card General Account of Input – Output – Inventory: Means the sum of input – output – inventory Inventory Report: Report on the amount of inventory 1.4 Factors affecting inventory management The level of inventory of a business more or less depends on a number of basic factors: - Scale of production and the need to reserve raw materials for production and business of the enterprise The need to reserve raw materials and goods of enterprises usually includes: Regular reserve, insurance reserve, seasonal reserve - Availability of the market - Delivery time of goods from supplier to enterprise - Trends in price fluctuations of goods and raw materials - Length of product production cycle time - The level of production organization and the ability to sell products of the enterprise - Ability to import and expand product consumption markets 1.5 Contents of inventory management In inventory management, management must consider the trade-off between the benefits and costs of maintaining inventory through determining the optimal inventory level In which, balance the cost of storing too much inventory and the cost of storing too little inventory Based on this optimal level, businesses will make decisions related to inventory value: - Deciding to increase inventory value when: + Actual reserve < Optimal reserve - Deciding to reduce the value of inventory when: + Actual Reserve > Optimal Reserve To make a decision to increase or decrease inventory value, a business needs to estimate its optimal inventory level Here are a few inventory management models that can be used to calculate a business's optimal inventory level 10 the preferred type, to optimize inventory levels These service rates will be the input for calculating Safe Stocks, establishing reordering strategies, and more 3.5.8 Application methods and goals Method In the ABC model, groups of overhead costs such as administrative costs, rental costs, transportation costs, and insurance costs must be identified This cost information can be easily obtained from the accounting department The next step is to identify key activities for which cost information can be easily tracked This can be done by grouping related actions into activities and grouping activities into activity centers according to the ABC approach A few examples of activities for a small business are taking customer orders, quoting customers, supervising production, and shipping goods Costs will be allocated to the activities that have just been identified through the cost allocation criteria in the first phase In the second stage, the criteria for allocating costs to activities are determined to allocate the overall cost to each product This method assumes that the business can categorize all overhead costs into specific groups This is the classification still commonly used in the traditional method This information helps to rebalance the overheads calculated from the beginning against the total costs allocated to each individual product in the ABC method The analysis of any company or organization depends on its important factor The strategy to be implemented depends on what the company wants to achieve Activities are at the heart of the activity-based model Before defining activities, one should analyze the company's value chain, this gives relevant data for this strategy to be implemented or determined Typically, output is measured by electronic operations to better describe the necessary proportions of operations, to calculate the cost of the product Target The cost system is based on activities that aim to improve the quality, content, importance and information of costs With this information, the accuracy of global quality and cost regulations and the relevance of information about every cost in an operation, 29 from raw materials to the final product This system is capable of providing information on all expenses, to assist the management of any company, better plan activities, control costs and make decisions 3.5.9 Benefits and pitfalls of ABC Analysis Benefit - ABC provides reductions not only in clerical duties, but also in parts shortages and inventory levels This leads to cost reduction It gives individuals involved in inventory management an opportunity to formally prioritize their control efforts - Resources are better allocated in operating efforts Changes in inventory requirements due to changes in policy related to advertising, service levels, and bookkeeping costs can be more predictable This method helps Vinamilk maintain control over costly items with large capital investments in them Not only does it help reduce unnecessary staffing costs, but more importantly, it ensures optimal inventory levels are always maintained The ABC method ensures that the inventory turnover ratio is maintained at a relatively higher level through systematic inventory control Hosting costs are cut significantly with this tool It is in place to have enough Class C stock to be maintained without affecting more important items Pitfalls In production efforts, stocking a C item can cause severe delays in the completion of the finished product - Some inventory situations not lend themselves to classification If the inventory situation does not accurately reflect the fundamental basis of the ABC technique "significant few" and "many insignificant" - then such a technique should not be implemented 30 For this method to work and deliver successful results, appropriate standardization of the material in the store is required It requires a good coding system of active materials for this analysis to work Since this analysis looks at the monetary value of items, it ignores other factors that may be more important to your business Therefore, this distinction is very important The ABC model works in a way that draws top attention to the important or few important items and does not give unnecessary attention to the unimportant items or many trivial items Each category has a different management control in place This priority attention and focus is critical to keeping costs under control and under control throughout the supply chain system For best results, it is important that high-cost items receive proper management attention 3.5.10 Limit While ABC analysis is a relatively easy way to categorize and manage a company's inventory, it also has some limitations For a manager, categorizing items based on one or two factors can be one-sided and too simple Traditional ABC analysis can be inflexible In a market where trends are constantly updated and product sales can be erratic, items can go from C to A very quickly Without ongoing analysis, a company's current ABC classification can quickly become obsolete In addition to the risk of the classification group becoming obsolete over time, it can be very time consuming to constantly re-evaluate and reclassify between the three groups This will ultimately lead to effects in the general interest of the company Remedies exist in inventory management To reduce the cost of goods sold, the company should the following:  Firstly, the company should actively look for other distributors to provide products with the same quality but at a lower price Or the company can negotiate with the current supplier to ask to buy at a cheaper price, otherwise it will terminate the purchase contract with the supplier; 31  Second, the company should weigh the added benefits with the added costs of increasing the number of orders in an order to reduce shipping costs The added benefit is the transportation cost savings when making the most of the vehicle's storage space The incremental cost is the inventory cost, the opportunity cost of the money invested in inventory To improve inventory turnover as well as inventory profitability, the company should the following:  Firstly, the company should estimate and carefully calculate the needs of its goods before ordering more goods Stocking inventory is essential However, the company should consider carefully before making the decision to stock more goods In the peak seasons, the demand for clothes of customers increases, such as when the weather changes seasons and holidays, the company should stock more goods However, storing too much goods will be unnecessary and superfluous in the low seasons, causing high inventory costs, affecting the company's revenue and profit During off-seasons, the company should only stock a moderate amount of inventory to save inventory costs and reduce the opportunity cost of the inventory investment;  Second, the company should invest more in the sales department because the sales department does a good job, selling more goods means the inventory will move faster, increasing the company's revenue and profit For example, the company should open classes on soft skills for sales staff such as customer care skills, negotiation skills with customers, communication and persuasion skills, ;  Third, the company should have market research strategies, understand the tastes and psychology of consumers to be able to better meet market needs such as regularly changing product designs and designs In addition, the company should also actively search for customers, giving customers some more incentives for benefits such as payment discounts, trade discounts For large and reputable customers, it is necessary to encourage customers to buy and place orders from the company by allowing customers to order goods without paying an advance In 32 addition, the company can apply a free delivery program for large value orders This can encourage customers to buy more products, thereby increasing the speed of inventory turnover  33 IV INTERNET OF THINGS (IOT): AMAZON GO The Internet of Things (IoT) includes “Things” that are capable of sensing or remotely triggering and that can exchange data with other connected devices and applications (directly or indirectly) IoT devices can collect data and process it locally or send it to centralized servers or cloud-based application endpoints for processing Promising IoT technologies for industrial and manufacturing systems Amazon has always been at the forefront of combining new technologies, and this giant does not ignore the application of the Internet of Things to bring great shopping experiences to customers “Scan the code and skip the checkout line” In 2018, Amazon's first convenience store officially opened with the name Amazon Go A special feature is that Amazon Go stores not need employees, security guards or cashiers Customers just need to walk in and pick up the item they need, the payment will take place automatically The principle that it works is that shoppers must download the free Amazon app (which can be installed on an Android or iPhone device) and link it to their Amazon 34 shopping account After successful installation, the buyer can use their personal mobile device to register using the QR code at the store, when entering Amazon Go, the customer will scan the QR code on their phone and the This code is linked to each person's Amazon account and bank account Amazon calls it the key to its door “I went in, grabbed a cake, and literally walked out the door It all happened in 17 seconds!” shared by a customer “They feel exactly the same as when you're stealing from a convenience store, except it's completely legal In-store technologies allow shoppers to enjoy a fun and productive experience The door of opportunity for similar stores is wide open,” said RBC analyst Items for sale include mainly grab-and-go lunch options like yogurt, meatloaf and salads Weight sensors detect when items are picked up or put back on the shelf Products placed back on the shelf are automatically removed from the shopper's virtual cart Hundreds of cameras track shoppers around the store, able to distinguish between different shoppers by body type Meaning: if Vinamilk applies Amazon go to the role of inventory management as well as products sold in stores, it will save long-term investment in labor and employees for small and fast-growing branches and branches fresh milk store chains in the market Direct these investment resources into market expansion activities, investment in new products, technical investment and other activities 35 V LEAN SIX SIGMA TECHNOLOGY AND FISHBOARD DIAGRAM (5M + E) IN STOCK MANAGEMENT PROCESS 5.1 Lean six sigma technique finds waste and proposes to eliminate waste in the inventory management process Define the problem: Received many complaints from dealers about frozen milk Measure: With the goal: Vietnam dairy factory is called a super factory (Mega factory) due to its modern automatic technology, extremely large capacity of 800 million liters/year (about 2.2 million liters/day) The table below shows the amount of milk sold from January to May, with a fixed target price of 2.2 million liters per day Quantity = number of days per month * 2,200,000 Ratio = (Average of liters of milk sold per day/ 2,200,000) - Month January February March April May Quality (liter) 68,235,000 61,668,000 68,192,000 54,780,000 52,514,000 Ratio (%) + 0.05 + 0.11 - 0.01 - 17 - 23 => Conclusion: Within months (April, May) there was a sharp decrease, an average of 20% reduction in the amount of fresh milk sold and the cost of compensation for previous damaged milk Analysis: • Paper packaging, very vulnerable during transportation, storage and preservation According to the regulations, milk is only arranged in layers, but maybe because the retailer has only a few square meters of space to display the goods, so the beer, soft drink, etc can be stacked on top of the milk carton 36 • If the weight is too heavy, the milk carton can be rafted, the paper box will be forced open somewhere on the package, especially at the seams At that time, bacteria invade and degrade the quality of milk • During the hot summer season, the temperature is high The milk is easily degraded, curdled and frozen Improve: • Agents need to have a spacious and airy trading area (Vinamilk can't control it) • Improve packaging quality transportation and storage quality • Invest in agents to store milk in miniature form with the same temperature conditions as at the factory Control: • 100% of agents received a milk storage cabinet with good feedback • No more compensation fees • Restore customer confidence 5.2 The fishbone diagram (5M + E) demonstrates the factors that influence inefficient inventory management Problem: As a senior in the dairy processing industry, Vinamilk has a strong competitor, compared to its potential, the revenue is not high 37 Man: Why people-related problems affect work? Because people are an important factor in work Why are people an important factor in work? Humans help to decide and control activities and machines in work Why not use machines to decide the work? Because the machine will not have the whole view Why can't machines have an overview? Because when working with customers, machines cannot make accurate decisions Why is that? Because humans decide everything according to many aspects including reason, emotions and surrounding factors, while machines can only solve according to the program, not with high improvisation  Solution: People are always an important and necessary factor at work, so professional training and development for employees is always a key factor for the company to be able to business successfully Material: 38 Why is the investment cost high? Because raw materials are mostly imported Why are imported raw materials expensive? Raw materials purchased are always higher than available materials, in addition, there are other costs, such as shipping costs Why import raw materials? Because milk materials imported by Vinamilk to produce powdered milk have 100% origin/origin from the US, Australia, New Zealand, EU and Japan Why are raw materials imported from the above countries having a common ground in terms of high prices? To ensure product quality Why ensure product quality? Because to bring valuable health products, affirming brand reputation and quality  Solution: Continuously inventorying goods, implementing models, calculation methods and optimizing the amount of materials to be ordered to avoid redundancy and damage Machine : High investment cost Why is the investment cost high? Because you have to buy high-tech and technical machines Why machines require high technique and technology? To properly manage corporate information, to manufacture company products at optimum quality levels Why produce the company's products at optimum quality? Bringing in the mission of human health, and at the same time need to upgrade product quality Why upgrade product quality? To compete in the market and affirm the position and reputation of the brand Why is it important to affirm the position and reputation of the brand? 39 Because more and more milk brands appear and develop competition  Solution: It is necessary to invite experts to find the right machines for the situation and the needs of the company to avoid waste, and at the same time, the skilled workers to use and manage those machines Methods: Why is there a problem with the method? Because the market demand reporting process and method is not fully efficient Why is the market demand reporting process and method not working at its best? Because calculation theory and reality are not the same Why is the theory of calculation and reality not the same? Since theory is based on formulas, there is no flexibility Reality has changed Why Does Reality Change? Because the quantity demanded depends on many factors: economy, health, weather, Why are these factors affecting quantity demanded? The amount of milk cream will sell better in the summer The situation of the Covid-19 epidemic has partly affected the economic situation, so market demand also changes  Solution: In addition to applying the calculation method, there should be flexibility depending on the market situation Measurements: 1.Why does measuring equipment affect investment costs? Because the measuring device is old Why old equipment has high impact on investment? Old equipment needs to invest in new, more advanced equipment 3.Why a new, more advanced device? Because old measuring equipment has old technology and needs to be replaced Why should it be replaced with new technology equipment? To promptly catch up with the trend of modern machinery in business Why should we keep up with modern trends in business? Modern, working efficiency is also better 40  Solution: This investment is expensive but effective in the long run Careful selection and application is required for optimal results Environment: Why is storage a problem? Due to hot weather Why is hot weather a problem? Hot weather will damage raw materials and finished products Why does hot weather damage raw materials and finished products? Vinamilk's raw materials and finished products need to be stored at appropriate temperature conditions Why is it important to store at the right temperature? To ensure optimum quality Why is it important to ensure optimum quality? Avoid damage to avoid damage, and quality assurance is to ensure credibility => Solution: Need a reasonable investment in the environment investment in inventory preservation 41 V INVENTORY AUDIT CHECKLIST The Firm may also conduct an audit of the firm’s inventory planning and monitoring systems Some of the possible areas to look out for are the following: Description YES NO GENERAL REQUIREMENTS X Have the elements of the company's food safety management system been implemented? X Are the elements of the company's food safety management system applied at all times? X Are the elements of the company's food safety management system applied at all times? X REMARKS/AUDIT EVIDENCE ON INVENTORY LEVEL Is there an excess of inventory in your warehouse? X Are there frequent shortages of inventory? X Is there excessive inventory variance? X ABOUT STOCK INFORMATION Are there many expired items in stock? (if any, list by code) X 121219,120719,271218.141219 Is there a backlog of items that don't sell well? (if any, list by code) X 140920,230720,220620,251020 Are there any products that are selling well recently? (if any, list them by code) X 010921,010821,120721,120221 42 REFERENCE https://www.vinamilk.com.vn/ https://sctt.net.vn/cac-phuong-phap-quan-ly-hang-ton-kho/ https://himolde.brage.unit.no/himoldexmlui/bitstream/handle/11250/2374122/master_maliqi.pdf?sequence=1 https://quanlysanxuat.net/phuong-phap-phan-tich-abc-trong-quan-ly-ton-kho/ https://www.itgvietnam.com/he-thong-erp-la-gi/ https://en.wikipedia.org/wiki/Internet_of_things https://knowledge-swami.com/ishikawa-fish-bone-cause-and-effect-diagram/ https://en.wikipedia.org/wiki/Lean_Six_Sigma 43 ... it with the application of the ERP model 3.3 Company activities after implementing ERP 3.3.1 Actual situation of ERP implementation at Vinamilk The application of IT in company management in Vietnam... 2.1 Company introduction Vinamilk 2.1.1 General introduction Vinamilk is the abbreviation of Vietnam Dairy Products Joint Stock Company (Vietnam Dairy Products Joint Stock Company) a company that... implementation 17 3.3 Company activities after implementing ERP .17 3.3.1 Actual situation of ERP implementation at Vinamilk 17 3.3.2 Vinamilk' s ERP system implementation process