OMGT2085_ICS_Sample2

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MIT International University Vietnam

Bachelor of Commerce Program

ASSIGNMENT COVER PAGE

Your assessment will not be accepted unless all fields below are completed

Subject Code: OMGT2085

Subject Name: Introduction to Logistics & SupplyChain Management

Location where you study: RMIT Vietnam SGS

Title of Assignment: Individual Case Study

File(s) Submitted

Student name:

Student Number:

Student Email Address:

Learning Facilitator in charge: Mr. Jaime Calbeto

Assignment due date:

Date of Submission:

Late Submission Approval NA

Number of pages including this one:(Please number your pages like this:

page 1 of 7, page 2 of 7, etc)

16

Word Count:(Main Content)

1,797


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OMGT2085 Logistics & Supply Chain

MIT International University Vietnam ......................................................................................1EXECUTIVE SUMMARY ....................................................................................................... 3

RESEARCH & ANALYSIS ......................................................................................................4

Fruit Juices Distribution Channel .........................................................................................4

Current Situation ....................................................................................................................5

Customer Service ...............................................................................................................5

Dependability .....................................................................................................................5

Communication ..................................................................................................................5

Convenience ......................................................................................................................5

Inventory ............................................................................................................................5

Warehouse ......................................................................................................................... 6

Transportation ....................................................................................................................6SWOT ANALYSIS ............................................................................................................... 6

ISSUES ......................................................................................................................................7

STRATEGIES ...........................................................................................................................7

Strategy 1: Scan-based Trading .............................................................................................7

Strategy 2: Using 3PLs To Store Inventories And Distribute ...............................................7

Strategy 3: Computerizing order processes ...........................................................................8

ADVANTAGES AND DISADVANTAGES OF STRATEGIES .............................................8

EVALUATING QUANTITATIVELY STRATEGIES ............................................................ 9

Analysis .................................................................................................................................9

IMPLEMENTATION ..............................................................................................................10

Operational Plans ................................................................................................................. 10Short-term Plan (4 months) 2008 .....................................................................................11

Long-term Plan (more than 2 years) ................................................................................ 12

Key Performance Indicators (KPIs) .....................................................................................13

Cost vs. Benefit ....................................................................................................................13

REFERENCE ...........................................................................................................................14

APPENDIX ..............................................................................................................................15

1. Multi-Criteria Decision Matrix tables ..............................................................................15

Criteria Weighting Tables ...............................................................................................15

Ranking Table ..................................................................................................................15

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EXECUTIVE SUMMARY

As a manufacturer, one of the keys to success is to manage the logistics and supply chain

of the organization. This report is designed to give the Saigon Beverage Joint-stock

Company and other interested investors an overview of our research and analysis of logisticsand supply chain in vegetable/fruit juice sector as well as the identifications of possible

issues and strategies.

Overall, the average lead time in vegetable/fruit juice sector is 1 day to the retailers and 7

days to the wholesalers. This is because the order processing still takes much time. However,

the dependability is high due to fixed lead time, low damages and errors.

Further, one big challenge is the reluctance of players to share information to each other, and

the flexibility of Vietnamese firms is low. In addition, there is a tendency to hold excessive

inventory; and warehouse is not fully equipped with handling equipment, plus the current

equipment is old and big, wasting more space. Besides, the warehouse layout is underused.

The good news is foreign investors are starting to build logistics-supporting facilities in

Vietnam like temperature-controlled warehouses. Also, the suppliers of handling equipment

are widely available.

Meanwhile, the fuel cost increase makes many businesses struggle, and the poor

infrastructure causes slower delivery.

At the moment, the existence of some logistics and supply chain issues are identified:

Tendency to overstock fruit juice

High order processing cost due to waste of time and paper

Many approval levels slow down the order processing

Not enough material handling equipment in warehouse

Warehouse layout is not utilized

Correspondingly, three strategies are proposed to solve these issues:

Apply Scan-based trading

Hire a 3PL company to manage warehouse and distribution

Computerize the order processing

Finally, using computers to process orders is systematically found most effective using the

Multi-Criteria Decision Matrix and pros and cons analysis. Like other strategies, this strategy

involves some costs such as investment in computers, peripherals and software; time to train

staff and probability of standstill of the whole system. However, the benefits it brings by far

overcome these: better information security, fast order processing and shorter order cycle

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SuperMarketsMarkets

Cash & CarryWholesalers

Full ServiceWholesalers

VendorMachine

ConvenienceStores

Hospitals

Consumers

Restaurants Schools

Manufacturers

Local packagingcompanies Farmers

Concentrate-fruit suppliersinbo

und-to-operations

outbound-to-customer s

Note: Restaurants, Schools and Hospitals are just to represent a number of

retailers including cafeterias, bars, coffee shops, street food vendors.

Foreign Importers

: Most important segment

3PLs

(Transportatio n

)

3PLs

(Transportation

)

(Tran et al. 2008)


time, quick information retrieval, less information transferring errors, improved employees

satisfaction, and ability to process more orders.

RESEARCH & ANALYSIS

Fruit Juices Distribution Channel

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Current Situation

Customer Service

As fruit juice is usually a product line of big companies like Vinamilk, Tribeco and

Chuong Duong whose distribution network is strong, products are delivered fast to

customers. The average lead time is 1 day at retailer level and 7 days at the wholesaler level.

The delivery time is fast; however, the order processing takes long time. This is because most

firms still depend on paper to do this process and the order goes through many levels of

management to be approved.

Dependability

Currently the lead time is constant. There is almost no complaint about late delivery. In

addition, the package of fruit juice is usually paper and plastic and put in corrugated

cardboard boxes. Therefore, the damage is minimized to the lowest.

In addition, although the order process is mostly on paper, there is very little incorrect order

delivery.

Communication

Firms are not willing to share their information due to the fear of losing profit and

customers.

Convenience

The flexibility of Vietnamese suppliers is low. They cannot deliver large orders or

cooperate with others to distribute (Vy 2006). Further, firms cannot satisfy the urgent or

special orders.

Inventory

Vietnamese organizations usually store more inventory than they need. Especially in the

fruit seasons, they have to produce fast, and therefore, store a huge amount of fruit juice.

This is then pushed to the wholesalers and retailers.

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Warehouse

Most of warehouse including public and private are not utilizing its layout properly

especially the vertical space of the warehouse. In addition, the material handling equipment

is big and old, wasting more space to keep and larger aisles. Further, because this equipment

cost relatively high, firms are reluctant to equip warehouse with enough equipment.

Because Vietnam does not have enough superior temperature-controlled logistics facility,

some foreign cold storage providers started to erect warehouses in the country. (Patton 2006)

Recently, there are many companies supplying the new material handling equipment with a

wide range of equipment at competitive price.

Transportation

There are more and more 3PL logistics companies coming in Vietnam. Also, the increase

in fuel price causes firms to gain less profit and force them to reduce the number of trucks.

This makes the delivery slower. Moreover, the poor infrastructure makes the delivery time

longer and increases the damages of products in carrying.

SWOT ANALYSIS

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(Coyle et al. 2003)

ISSUES

Firms in the logistics and supply chain stock undue inventory.

Waste of warehouse space caused by inappropriate warehouse layout and bighandling equipment.

Lack of investment in materials handling equipment leading to less efficient and

effective performance.

Order processing is slow and time-consuming due to many approval levels to pass

through.

High order processing cost due to little application of technology like computers,

scanning device, etc., requiring more manual work.

STRATEGIES

Strategy 1: Scan-based Trading

Explanation: this is an application of Vendor-Managed Inventory (VMI) to manage

inventory, whereby the customers pay for products that are scanned and sold to end-

consumers at the checkout counter. Before that, although the product is in the warehouse

of the customers, it still belongs to the supplier. Therefore, the supplier takes

responsibility for managing and replenishing the inventory of the customers. The supplier

will track the inventory and sales of the customer and decide when and how much to

deliver to the customer. In this way, the inventory is well-managed to an adequate level.

Strategy 2: Using 3PLs To Store Inventories And Distribute

Explanation: there are many companies providing logistics services like warehousing

and transportation. As a result, we have options to choose a good 3PL company having

quality warehouses like temperature-controlled facilities, good material handling

equipment and sufficient trucks. In addition, some also include transportation services.

They manage to carry the products from manufacturers site to their warehouses and

distribute to customers. As an expert in logistics, they know how to manage the

warehouse and transportation efficiently and effectively. Therefore, we can save the

spending on building warehouses, managing workers and trucks to allocate to needed

areas.


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Strategy 3: Computerizing order processes

Explanation: this strategy is to equip firms with computer system and software to

process orders faster and more efficiently, whereby the cost of ordering also reduces.

Order information is entered on computers and can be easily tracked and traced. And

checking the receivers and inventory in stock is faster. The order information is then

passed immediately to the warehouse to pick the goods and distribute to the customers. In

addition, order reporting is simplified thanks to the order information instantly updated

and available. Moreover, the paper document is minimized and error rate involving in

transferring information from paper to paper is eliminated. This also helps to reduce the

aggregate delivery errors.

ADVANTAGES AND DISADVANTAGES OF STRATEGIES

Strategy Advantages Disadvantages

Scan-Based

Trading

Reducing excessiveinventory

Reduce the impact ofdemand 'bullwhip' effect

Cannot apply to markets whodo not have scanning system

Require strongcommunications andrelationship with customers

Using 3PLs To

Store Inventories

And Distribute

Distribution is well-managed and scheduledresulting in high level of

customer serviceLogistics is professionallydone resulting in lesswastes and costs

Heavily rely on the 3PLs socompany cannot do logisticswhen it needs.

Higher risk of leaking outcompetitive information

Computerizing

Order Processes

Order processing is donefaster improving the leadtime.

Simplify the job causingless mistakes

Processing order still takesmuch time at the beginningbecause the staff need to get

used to the systemRequire training for staff


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(refer to Appendix 1 for Criteria Weighting and

Strategies Ranking Tables)

EVALUATING QUANTITATIVELY STRATEGIES

Multi-criteria Decision Matrix

Analysis

Each strategy can solve each issue to some extent. Therefore, to decide which

strategy is the most effective, we can apply the multi-criteria decision matrix. It results in

that the strategy to computerize the order processing can solve most of the issues better.

Each activity in processing fruit juice orders consumes time and creates costs for the

organization such as time to check the order information, to check customers credit, to

check for the amount of fruit juice in stock, to consider and approve the order. In

addition, we have to pay for these activities like salaries, wages and electricity.

Using computers, we are able to reduce the time and therefore cost of each activity. After

fruit juice order is received and transferred to the computer, the rest of the process is done

faster. The system automatically checks for credit, inventory and approve order based on

specific criteria. The pick list is then prepared and passed to warehouse staff, also

automatically, to load products to the truck. Instead of few days with working on paper,

this only takes few minutes to complete.


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As a result, the order processing time reduces, which also means the costs of these

activities are minimized. Also, salaries paid for managers and staff can be utilized. And

amount of money spent on paper is reduced.

Further, transferring information by computer eliminates the error occurring in

transferring from paper to paper. Such errors can lead to increase in costs due to time

spent to review, retrieving products, and decrease in customer service level as a result of

wrong products delivered.

More over, this also solves the problem of slowness due to many approval levels.

Approval is now given by the computer based on certain set of criteria. There is no more

management levels to pass through to get approval.

Additionally, the most convincing reason to choose this strategy is that it costs less

money than others. Indeed, buying computers, peripherals and software is not expensive

relative to hiring a 3PL or providing scanning system for the customers, not to mention

the continuous reduction in prices of these machines.

Although this strategy cannot solve the other issues as good as other strategies, it is able

to diminish the impact of them to some degree. The time to complete an order is

shortened so the organization can process more orders. The inventory turnover, therefore,

also improves because more fruit juice are sold. This way, the inventory becomes less

excessive. As a result, we earn profits faster instead of putting some orders in waiting

lists. And the increase in profit will enable us to invest more in material handling

equipment.

IMPLEMENTATION

Operational Plans


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Short-term Plan (4 months) 2008

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Long-term Plan (more than 2 years)

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Key Performance Indicators (KPIs)

Reduce the customer information checking, credit checking and order

approval to 10 minutes.

Increase number of completed orders by 60 orders

Reduce the use of paper in order processing to 5%

All staff in sales department is trained to use computers and software system

Reduce order processing cost by 80%

Cost vs. Benefit

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REFERENCE

Coyle, J, Bardi, E & Langley, J 2003, The Management of Business Logistics A

Supply Chain Perspective, 7th Edition, South-Western, Canada.

Harrison, A & Hoek, R 2005,Logistics Management and Strategy, 2nd Edition, FTPrentice Hall, the United Kingdom.

Patton, D 2006,New cold chain facility for Vietnam,APFoodTechnology, viewed 19

August 2008, .

Tran, D, Vu, M, Lam, G, Nguyen, H, and Tran, N 2008,Logistics presentation fruit

and vegetable juice, retrieved from group presentation, submitted file:OMGT2085_PA_Team_SGSG4_Aloha.ppt, RMIT Vietnam Saigon Campus, Vietnam.

Vy, D, 2006, Gia nhap WTO, ai se nam he thong phan phoi?,Vietnamnet,viewed on

9 July 2008, .

Original:

im yu na ca DN Vit Nam l kh nng lin kt p ng th trng thp. quen

vi li sn xut nh, DN Vit Nam ch p ng c nhng n t hng nh. Vi nhngn t hng ln, cc DN khng theo kp, trong khi cng khng lin kt nhau c cng phn phi sn xut v gi th trng. V iu ny, ngi lng ging Trung Quc l inhnh tiu biu cho s lin kt sn xut v chia s th trng. Trung Quc thnh cng khivo th trng M v ngay bc u thm nhp c vo mng phn phi.

Translation:

Another weakness of Vietnamese enterprises is low integration ability to adapt to

market. Get acquainted with small manufacturing scope, Vietnamese enterprises just

have enough abilities to complete small orders. To large orders, firms can not deliver,

while they also can not cooperate to distribute and maintain the market together.

About this issue, China is the typical pattern for production integration and marketsharing. China has been successful in USA market because from the first days, they

have penetrated distribution system.

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http://www.ap-foodtechnology.com/Processing/New-cold-chain-facility-for-Vietnamhttp://www.ap-foodtechnology.com/Processing/New-cold-chain-facility-for-Vietnamhttp://vietnamnet.vn/kinhte/kinhdoanh/2006/04/558263/http://www.ap-foodtechnology.com/Processing/New-cold-chain-facility-for-Vietnamhttp://www.ap-foodtechnology.com/Processing/New-cold-chain-facility-for-Vietnamhttp://vietnamnet.vn/kinhte/kinhdoanh/2006/04/558263/


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APPENDIX

1. Multi-Criteria Decision Matrix tables

Criteria Weighting Tables

Criteria Weight

Stocking undue Inventory 20%

Waste of warehouse space 10%

Lack of investment in handlingequipment

10%

Slow & Time-consuming orderprocessing 10%

High order processing cost 20%

Least amount of investment 30%

Total > 100%

Ranking Table

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Strategy

Stockingundue

Inventory

Waste ofwarehouse

space

Lack ofinvestment

inhandling

equipment

Slow &Time-

consumingorder

processing

High orderprocessing

cost

Requiringleast

investmentTotal

0.2 0.1 0.1 0.1 0.2 0.3 1

Scan-BasedTrading

8 5 5 4 4 4 30

Using 3PLs ToStore

InventoriesAnd Distribute

8 7 7 5 5 1 33

ComputerizingOrder

Processes5 4 4 8 9 6 36

OMGT2085_ICS_Sample2

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