Issues of Supply Chain of Beverage Industry in Vietnam Assignment

Issues of Supply Chain of Beverage Industry in Vietnam Assignment Words: 1876

Warehouse + The quality of warehouse system of supply chain players (farmers) using for storing coffee beans is not good: There are rains during the drying season but the farm-level storage facilities are not enough to protect coffee beans from wet weather. Consequently, the quality of coffee beans can be affected negatively by mould (Minot, 1998) + The capacities of warehouses using for finished products are not made use of in the most effective way.

Because of lacking management in warehouse operations, utilization of space (utilizing the facility’s height and minimizing aisle space) is not achieved. Also, the placement stock is not paid attention yet in order to minimise labour costs or handling costs in warehouses. -Information flow and management: In Vietnam, most of orders of coffee are still treated in the traditional way: via telephone of face-to-face meeting. However, this utility of traditional methods leads to time-consuming and costly results. Some companies have already a website but it is used only for marketing and promotes the products. Inventory management: There is a seasonality of supply of coffee beans in Vietnam: the harvesting season starts from late October and reach the peak in the middle of November each year (Kuwait Times, 2005). However, distributors, wholesalers and retailers of the supply chain do not care about the inventory safety level, they just estimate when they think it is need to replenish, which leads to the overload inventory or stock-out inventory. Sometimes, the overload inventory occurs due to poor demand forecasting or weak inventory visibility. -Transportation

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The mode of transportation distributing coffee beans from farmers to purchasing agent cannot ensure raw material’s quality and safety: Most households use “kong nong” (small locally-made tractors) to transport their dry coffee to private middlemen because of cheap transportation costs. However, that kind of private transportation is not made specializing in delivering coffee beans. Therefore, raw materials are affected in terms of quality and even lost in the delivery process. -Customer services Due to lack of communication with customers, the supply chain does not have accurate and updated information about customers’ requirements.

As a result, the delivery time and quality of products do not satisfy customers, which results in low customer services level. b)2 future challenges: – Currently, there are approximately 800 operators in the Vietnamese coffee industry. However, those local companies mostly run their business in only a small scale and still have poor facilities, especially lacking of information technology capabilities (Phan, 2006). – Another challenge is the poor infrastructure, especially undeveloped road transportation in Vietnam.

The distribution of finished products faces difficulties due to traffic jam problems in urban areas. While the poor quality of roads cause difficulties in transporting raw materials (coffee beans) from growers/planters to purchasing agents (Neptune Orient Lines Limited, n. d. ) 2)QUESTION 2: Identification of five feasible strategies and explanation i)Collaborative Planning, Forecasting, and Replenishment (CPFR): By integrating all supply chain members, CPFR can provide accurate and effective planning, forecasting and replenishment through technologies available such as EDI or the Internet.

The CPFR strategy starts with the collaboration among trading partners in order to share customer data and marketing plans through EDI or the Internet. Then, CPFR solutions will use the collaboratively developed information about promotions, forecasts, item catalogue and orders with the purpose of generating demand, determine requirement and make to demand (Bowersox et al. , 2007). By creating a direct link between the supply chain and consumers, CPFR will not only optimize supply chain by having accurate forecasts, reducing inventories and avoiding stock-outs but also can improve the customer service. i)Third-party Supply Chain Management services (3PLs): 3PLs means that the company out-sources logistics activities such as transportation and warehousing, which has positive impact on asset productivity. – The third-party transportation will take part or all of the responsibility for transporting finished products to customers as well as moving materials (coffee beans) to manufacturing process. – The third-party warehousing will provide all services related to warehousing including space, labour and equipment tailored to satisfy specific product needs (Coyle et al. 2007). Using this strategy, the company can quickly gain competitive advantage without gaining the experience beforehand (Winser et al. , 2005). iii)Warehouse management system (WMS): WMS helps to control inventory of goods stored as well as manage the warehouse operations, including: – verifying the item basing on the purchase order – adding the item to inventory when shortages occur – finding out the suitable location for stock in the warehouse – keeping track of the item’s location – determining the item-picking arrangement (Coyle et al. , 2007)

As a result, thanks to this system, the company can make right decisions on replenishing items to the inventory when needed and manage effectively the allocation of customer’s orders. iv)E-commerce: Using e-commerce, the supply chain players take advantage of the Internet in order to improve the efficiency of logistics management. Thanks to this strategy, companies can find it easier to research information about products and traders as well as to carry out supply chain activities online instead of using traditional methods with such amounts of paperwork.

As a result, e-commerce helps speed the process, avoid errors and reduce cost in logistics. v)Just in time (JIT): This strategy assists the company in controlling effectively its inventory and reducing wastes by supplying products just in time when products are needed. With the purpose of achieving zero inventory, JIT helps the supply chain players to reduce inventory levels and thus can save inventory costs. 3)QUESTION 3: a)CPFR: i)Advantages: – CPFR provides analysis of sales and order forecasts upstream and downstream.

Therefore, the inventory level is reduced since the right amount of inventory is delivered in the right time as well as reallocated to the right places. For that reason, it helps reduce the inventory level in the supply chain, which results in the decrease in warehousing cost and transportation cost. – Thanks to shared information about the quantity demanded and time required, customer service levels will increase. Products with the ordered quantity can come to customers in the short time, which actually satisfies customers. i)Disadvantages: – Due to the requirement of involvement of all players in the supply chain (trading partners, manufacturers, distributors, transport providers, retailers and customers), it is complicated and costly to establish the SPFR system. – It takes time not only to train partners to have technology skills using this system but also to gain mutual trust between parties in the supply chain to share proprietary information required by CPFR. b)3PLs: i)Advantages: The company can get better transportation and warehousing services which are outsourced by companies specializing on those fields. – Cost-savings and focusing on other core competencies: reduce asset investment to improve asset productivity ii)Disadvantages: – Due to depending on outsourcing companies, companies lose of control and will be difficult to prevent problems from occurring. – There will be a loss of communication with customers and suppliers. c)WMS i)Advantages: – WMS improves warehouse productivity, efficiency and accuracy by keeping track of item locations in the warehouse. WMS can also improve labour’s productivity, reduce the number of personnel required and improve the order-picking accuracy. ii)Disadvantages: – This strategy depends mostly on computer system. – It takes time to train employees using this system and costly to operate and running this system. d)E-commerce: i)Advantages: – E-commerce helps lower procurement operating costs: the reduction of paper work and the associated cost of paper processing, filling and storing ? cost-savings. E-commerce improves communication between players in the distribution channel: + A buyer can easily get information about product line, prices and product availability + A seller can improve customer service by communicating frequently with buyers, giving advance notices of any delays in the order fulfilment due to stock-out conditions or transportations. ii)Disadvantages: – There are risks in security because order and payment transactions are proceed online, such as credit cards and hacker attacks on website. – It takes time and costly to meet requirements of technology when carrying out this e-commerce. )JIT i)Advantages: – JIT reduces inventory cost by delivering goods just in time for use. – JIT can optimize inventory levels across the entire supply chain, move products through the production system quickly and communicate end-customer demand forecasts. Therefore, the customer service level can be improved. ii)Disadvantages: – It takes time to establish close co-operation and communication between a manufacturer’s purchasing organization and suppliers. – JIT requires delivering smaller quantities more frequently, which leads to higher inbound transportation costs. )QUESTION 4: Issues WarehouseInformation managementInventory managementTransportationCustomer service levelsTOTAL 10%15%35%20%20%100% CPFR7109598. 2 3PLs936976. 7 WMS928175. 6 e-Commerce396185. 6 JIT768376. 4 Strategic Statement: The two best solutions that possibly solve all issues are CPFR and 3PLs. The CPFR with the highest point (8. 2) can best fix three out of five issues (Information Management, Inventory Management and Customer service levels) while the 3PLs is the strategy that best solve the other two issues (Warehouse and Transportation).

Explanation: With the purpose of getting the true supply chain integration, CPFR is considered the best solution in logistics. Firstly, using this strategy, all players in the supply chain can easily share information via EDI or the Internet, which helps manage efficiently information among players. Besides information management issue, inventory management is also best solved by CPFR. Thanks to accurate planning and forecasting generated by CPFR, the inventory level is managed well so that overload inventory or stock-out inventory will not happen.

Moreover, CPFR links the supply chain directly to its customers; therefore the company using this strategy can find out exactly what customers want in order to satisfy those needs in the best way. Then, high customer service levels can be achieved thanks to CPFR. Additionally, as a result of good inventory management when using CPFR, warehouse and transportation costs can be reduced considerably. However, 3PLs can fix two issues of warehouse and transportation better than CPFR.

Since third party companies are specialized in transportation and warehouse, they can manage these two fields in the most effective way. In short, the 3Pls is suitable to be a short-term strategy which can soon improve logistics. Meanwhile, with its undeniable advantages, CPFR is the best strategy but it is for the long-term because CPFR takes time and costly to establish. 6)REFERENCES: ?Team Coffee beans. 2008S2, OMGT2085: Practical Assignment-Team Part / Coffee Sector, RMIT University Vietnam ? Browersox, D. J. , Closs, D. J. and Cooper, M. B. 2007, Supply Chain Logistics Management, 2nd edition, McGraw-Hill Irwin. ?Coyle, J. J, Bardi, E. J. and Langley, C. J. , 2003, The Management of Business Logistics – A Supply Chain Perspective, 7th edition, South-Western Thomson Learning, Ohio. ?Wisner, J. D. , Leong G. K. and Tan, K. C. , 2005, Supply Chain Management: A balanced Approach, 1st edition, South-Western Thomson Learning, Ohio. ?Phan, T. , 2006, Vietnam’s elusive WTO entry accompanied by logistics worries, Hong Kong Trade Development Council, Retrieved July 24, 2008 from http://info. hktdc. com/imn/06101002/transportation029. htm ?

Kuwait Times, 2005, Coffee prices unlikely to drop as demand grows, Retrieved July 24, 2008 from http://agriculturenews. net/index. aspx? Type=Briefnews&ID=1723 ? Neptune Orient Lines Limited, n. d. , Vietnam Transportation and Logistics: Challenges and Opportunities, Retrieved July 24, 2008 from http://www. nol. com. sg/newsroom/07news/070125_execsummary. pdf ? Minot, N. , 1998, COMPETITIVENESS OF FOOD PROCESSING IN VIET NAM: A STUDY OF THE RICE, COFFEE, SEAFOOD, AND FRUIT AND VEGETABLES SUBSECTORS, Retrieved July 24, 2008 from http://www. ifpri. org/themes/crossmp/vietnam/papers/unido. pdf

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