UNIVERSITY OF BEDFORDSHIRE FOREIGN TRADE UNIVERSITY

SCHOOL OF BUSINESS HO CHI MINH CITY CAMPUS

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END-MODULE ASSIGNMENT

Module: Operations & Project Management – S1

Code: BSS027-2.S1

SUPPLY CHAIN ANALYSIS OF VIETNAM DAIRY JOINT

STOCK COMPANY VINAMILK

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Ho Chi Minh City, October 2023

UNIVERSITY OF BEDFORDSHIRE FOREIGN TRADE UNIVERSITY
SCHOOL OF BUSINESS HO CHI MINH CITY CAMPUS
----------***---------- ----------***----------

END-MODULE ASSIGNMENT

Module: Operations & Project Management – S1

Code: BSS027-2.S1

SUPPLY CHAIN ANALYSIS OF VIETNAM DAIRY JOINT

STOCK COMAPY VINAMILK

Student’s full name:

Student ID:
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Semester: Academic year:
Lecturer:

Ho Chi Minh City, Octorber 2023

STATEMENT OF AUTHORSHIP
With the exception of references cited in the final essay, this essay does
not contain materials of unknown origin or extracted entirely from previously
submitted assignments.

This assignment has not been submitted for assessment to any university
or organization for the purpose of awarding diplomas or other awards.

Ho Chi Minh City, October 2023

Table of Contents
I. SUPPLY CHAIN SITUATION IN VIETNAM............................................................6
II. SUPPLY CHAIN ANALYSIS OF VIETNAM DAIRY JOINT STOCK COMPANY
VINAMILK.......................................................................................................................6
1. Some general information about Vinamilk company and Vinamilk dairy product supply
chain..........................................................................................................................................6
2. Dairy product supply chain model of Vinamilk dairy company........................................7
2.1 Input supply stage............................................................................................................................7
2.2 Vinamilk's production stage.............................................................................................................9
2.3 Output distribution stage of Vinamilk company..............................................................................9
2.4 Advantages of the company's output distribution...........................................................................10
2.5 Limitations in the company's distribution.............................................................................................10
2.6 Limitations in transportation..........................................................................................................10
2.7 Logistic department.......................................................................................................................10

3. Successes and limitations in Vinamilk's dairy product supply chain...............................10

3.1 Success..........................................................................................................................................10
3.2 Limit..............................................................................................................................................11

4. Vinamilk supplier................................................................................................................12
4.1 Domestic raw material sources.............................................................................................................12
4.2 Raw material supply from abroad.........................................................................................................12

5. Risks in Vinamilk's supply chain.....................................................................................12

5.1 Input supply risks..................................................................................................................................12
5.2 Production stage risks...........................................................................................................................13
5.3 Output distribution risk.........................................................................................................................13

III. SUCCESSFUL LESSONS FROM VINAMILK’S SUPPLY CHAIN SYSTEM..........14

1. Raise awareness about the importance of supply chains..................................................14
2. Complete the synchronous information system...............................................................14
3. Focus on building relationships with partners.................................................................14
4. Minimize risks from imported sources............................................................................14
5. Spread the brand image and exercise social responsibility..............................................15
IV. VINAMILK'S DEVELOPMENT STRATEGY IN 2023..............................................15
1. Develop superior products and experiences for consumers.................................................15
2. Promote the application of technology in sustainable agriculture.......................................15
3. Create new business opportunities.......................................................................................15
4. Become the destination of talent..........................................................................................16
V. VINAMILK’S E-COMMERCE MODEL...............................................................16
1. Prepare for e-commerce...................................................................................................16
2. Challenge.........................................................................................................................16
VI. REFERENCES.....................................................................................................16
 I. SUPPLY CHAIN SITUATION IN VIETNAM

Although the expansion of supply chains is thought to help Vietnamese industry greatly, there
are now far too few Vietnamese businesses in the supporting sectors with the necessary
ability to engage in the supply chain. Vietnam is still not a part of the supply chain in the
area. Vietnam will thus need to focus more on supply chain participation as it approaches
middle-income status if it is to keep its competitive edge. That's correct, recognizing and
doing things correctly will be the first crucial step in a situation where supply chain
management and logistics are growing in importance and strategic relevance for enterprises.

II. SUPPLY CHAIN ANALYSIS OF VIETNAM DAIRY JOINT STOCK

COMPANY VINAMILK
1. Some general information about Vinamilk company and Vinamilk dairy product
supply chain

The Vietnam Dairy Products Joint Stock Company is the full name of the business.

Vietnam Dairy Products Joint Stock Company is the international transaction name for the
abbreviated term VINAMILK.

In order to form the corporation, the previous regime's three dairy facilities had to be taken
over in 1976. There is one office and seventeen allied units in the organizational structure.
There are 4,500 workers in all. Making milk and milk products is the primary duty. With
exceptional efforts throughout the years, the Company has emerged as one of Vietnam's top
businesses in every way. Career development has benefited from the Company's
accomplishments.

Vinamilk offers a variety of goods, including powdered milk and liquid milk as well as value-
added items like drinkable and eating yogurt, ice cream, and cheese. Vinamilk offers the
market's largest selection of products in terms of flavor and packaging.

Vietnam Dairy Products Joint Stock Company (VINAMILK), which presently has around
40% of the country's milk market share, has expanded to become a prominent business in the
milk processing sector.

You can always count on Vinamilk to provide you with the highest caliber, healthiest, and
tastiest goods. There's nothing to worry about when you use Vinamilk products. Possessing
state-of-the-art laboratories and first-rate technology, Vinamilk is pleased to collaborate with
respected local and international specialists in an effort to deliver the finest and most ideal
nutritious goods. People labor so much, day and night. Each product is the result of a great
deal of responsibility and excitement. All in the interest of preserving the health of the
community and the next generation.

Today, management and staff across the board at Vinamilk have completely exhibited
political boldness, garnering significant success and a unique position with the exceptional
brand both locally and internationally. Professional credentials and industry-proven
knowledge are the attributes that have built a well-known brand's worth over the previous 35
years. Overall, over the past 35 years, the men of the Viet Dairy Joint Stock Company have
shown great nurturing and maturity. With the well-known and recognizable VINAMILK
brand both domestically and internationally, the company has performed admirably as an
economic unit for the State and has emerged as a very respectable shining star during the
WTO integration period. It takes courage for the company to consistently be innovative,
creative, and dynamic in identifying a course of action and economic model that is both most
appropriate and effective while adhering to Party policy. The staff and employees of the
company affirm and take pride in that as their greatest accomplishment. That is the power and
faith in the Party's leadership, the government, labor unions, and the Vietnam Dairy Products
Joint Stock Company as a whole, which they have been and will keep working hard to
develop, implement, and advance.

2. Dairy product supply chain model of Vinamilk dairy company

2.1 Input supply stage

The input supply stage of Vinamilk Dairy Company consists of the following: imported raw
materials as well as raw materials bought from domestic beef farms and cow farmers. In the
supply chain, this is the initial participant. Via milk collecting stations, cow farms and cow
farming families are responsible for supplying input milk resources for manufacturing. The
quality requirements that the Vinamilk firm and domestic dairy farmers signed must always
be met by milk that is acquired from farms. When meeting the following requirements, raw
fresh milk must go through a thorough testing process: sensory, guaranteeing higher solids
and fats; freshness; acidity; microbiological parameters; heavy metal content; pesticides;
veterinary medications; and provenance (do not use milk from ill cows). Fresh milk must
tightly preserve freshness and not be precipitated by alcohol heated to 75 degrees, especially
when pasteurized. Big farms, such the 1000-cow herd at DELTA Joint Stock Company
(HCMC) and the 120-cow herd at Phuong Binh Dairy Farming Commercial Enterprise, are
examples. The business owns 4 farms. dairy farms with cutting-edge machinery located in
Tuyen Quang, Lam Dong, Thanh Hoa, and Nghe An. An electronic chip is implanted in
every cow to precisely monitor each cow's milk production. Additionally, the firm receives
fresh milk from several cow-raising cooperatives and animal homes in Binh Dinh, HCM,
Lam Dong, and Long An.

The job of the fresh milk purchase center is to buy fresh milk components from cow farms
and farmers, weigh and measure the volume of the milk, inspect the quality of the milk,
preserve it, and ship it to the manufacturing facility. Farmers may obtain information
regarding the quantity, cost, and quality of raw resources from the center. The buying center
will compensate cow farmers concurrently.

There are two ways to import milk ingredients: directly from the source and then sent to the
manufacturing facility. The following are a few vendors of foreign milk components that
Vinamilk uses:

- With a third of global trade volume, Fonterra is the most important multinational company
in the world for milk and dairy product exports.

- Along with Vinamilk firm, Hoogwegt International is a significant partner that specializes
in supplying milk powder to manufacturers and customers in Europe in particular and
globally in general.

- Furthermore, for over a decade, Vinamilk has relied on Perstima Binh Duong Vietnam and
several other local enterprises as important suppliers.

In order to create a high-quality product that satisfies customer demands and helps firms
achieve long-term and sustainable growth goals, the input supply chain is crucial. Vinamilk's
major objective is to strategically supply dairy both domestically and abroad in order to
guarantee a steady supply of premium-quality raw materials at extremely reasonable costs.

Benefits of the stage of input supply: Vietnamese farmers sell their cow milk, which is
inspected thoroughly at the purchasing and transit locations. A group of professionals is
available to help farmers with meal preparation, barn maintenance, milking practices, milk
preservation, and milk buying. fresh milk that has been purchased and kept chilled. Tank
trucks undergo many inspections upon arrival at the manufacturer.

Limitations in the supply chain for inputs: Milk fat and powder, which are utilized to make
yogurt, sterilized milk, whole milk, and other products: sourced from reliable production
locations throughout the globe, such the US, Australia, and New Zealand, which is why the
cost is so expensive.

2.2 Vinamilk's production stage

Before the milk is put to the manufacturing line, the milk processing plants are examined
many times after the milk is carried there.

In the manufacturing facility: has the responsibility of obtaining milk components from
vendors that import milk ingredients or from the milk purchasing center and carrying out the
production steps. To produce finished milk, milk raw materials are packed after undergoing
the processes of standardization, deaeration, homogenization, and pasteurization.

Vinamilk has constructed 8 plants, 1 business, and 3 more additional factories after
introducing to customers 30 years ago.

2.3 Output distribution stage of Vinamilk company

Via the Phu Thai Group, Vinamilk Company distributes its products to agents, retailers, and
ultimately, customers, who complete the output-consumption distribution chain. - Milk is
directly consumed by consumers.

It is the responsibility of agents, retailers, and supermarkets to receive milk from distributors
and provide customers with fresh milk.

Those who directly drink milk are known as consumers. Customers can pay for milk at the
time of purchase or purchase it via agencies, supermarkets, wholesale, or retail
establishments. The agent system of the corporation is separated into two groups: one for
dairy goods, such as powdered milk and condensed milk, and another for ice cream, yogurt,
and fresh milk.
The firm now uses two distribution channels:

- Traditional channels account for more than 80% of the company's output distribution.

- Disseminated via contemporary outlets including metro networks and supermarkets.

Vinamilk benefits from a nationwide network of dairy plants that are spread across several
locations.

2.4 Advantages of the company's output distribution

The company's agent system has grown and now encompasses the majority of the Northern
provinces thanks to efficient management strategies and incentives for agents within its
network. Each province typically has one or two official agents; some may have as many as
seven. Furthermore, the corporation has a bonus program that is contingent on the sales
volume of its agents. This strategy has facilitated the growth of small agents, stores, and other
related entities.
2.5 Limitations in the company's distribution
The corporation faces challenges in managing its big agent system, particularly when it
comes to outlying places. However, supermarkets and small distributors at the "lower level"
of the organization are similarly challenging to manage.

II.6Limitations in transportation

The maximum number of boxes that can be piled on top of one another in accordance with
milk transportation standards is eight. However, a lot of tiny Vinamilk milk distribution
agents handle and carry up to fifteen boxes without being careful. This has a big impact on
the product.

II.7Logistic department

Since Vinamilk still handles its own logistics, 15% of the product's price is now allocated to
logistics. In order to cut this expense to 13 percent or less, Vinamilk will need to work with
companies that specialize in logistics.

3. Successes and limitations in Vinamilk's dairy product supply chain

3.1 Success

As was said at the outset, supply chain management has played a significant role in
Vinamilk's current success. What, therefore, has contributed to the success of Vinamilk's
goods and the milk product supply chain in general?
In general, the three right policies are:

- This entails choosing the appropriate product, amount, and timing. Vinamilk needs to
identify the correct market items in order to guarantee product sales and build momentum for
a seamless supply of goods to the market. Furthermore, Vinamilk understands how crucial it
is to deliver in the appropriate amount and at the appropriate time. In order to achieve the
finest possible balance between supply and demand, the proper number is neither too little
nor too much. Just in time to save inventory and storage expenses.

- Speed: Given the properties of dairy products in particular and food goods in general,
businesses depend heavily on time. Food producers are aware of this, and Vinamilk is no
different. Vinamilk consistently maximizes time between steps in its supply chain, reducing
downtime.

- Spreading risks: Vinamilk has constructed several cow farms, and these farms are getting
bigger and more sophisticated in order to guarantee that there is always enough raw milk for
factories to run. about technology. This lowers production and business process risks for
Vinamilk by preventing raw material shortages in the event of unforeseen events.

- Tighten links within the chain: Vinamilk has a coherent and well-integrated supply chain.
Each link in the chain is essential to its growth and depends on the others.

. Make sure the product line and information flow are parallel to one other: the two are one
and the same. These two lines support and are dependent upon one another. Consumers and
pertinent entities are notified about newly launched items.

Data from the market and internal company systems will direct the manufacturing and
product delivery process.

While most companies recognize the value of information, very few venture to invest in
information systems similar to Vinamilk, and as a result, very few Vietnamese companies are
as successful as Vinamilk.

Verify the three as: aligned, flexible, and agile.

The success of Vinamilk's dairy product supply chain may be attributed to a variety of
factors, the most crucial of which is that Vinamilk has consistently enhanced its supply chain
and acknowledged its significance.

3.2 Limit
In light of the constraints present at every level and supply chain step, the chain as a whole
has the following broad limitations:

- There are still a lot of middlemen in the supply chain, which raises selling prices and
transaction expenses. Due of its size, the market is not fully covered.

Insufficient number of businesses offering comprehensive package logistics services to

efficiently reduce shipping and transportation expenses. The standards cannot be met even
throughout the product's transportation procedure since the firm has not yet established strong
connections between its stores and supermarkets.

- Product management constraints - Exorbitant prices are a result of the large importation of
input materials
4. Vinamilk supplier
At the moment, Vinamilk is concentrating on sustainable development objectives. Currently,
this company is actively investing in several really large-scale dairy farms in addition to
searching for reliable domestic and international suppliers.
4.1 Domestic raw material sources
The system supports farmers and promotes the growth of milk purchasing agencies in order
to proactively create alternative sources of fresh milk raw materials. Households on cow
farms will supply input materials through middlemen. Standards for purchased milk must be
met in accordance with the terms of the contract that Vinamilk and the domestic farm agree.

Furthermore, Vinamilk has been constructing a dairy farm system for a long time in order to
be self-sufficient in fresh raw materials. With a herd of around 150,000 cows, Vinamilk has
owned more than 13 international standard farms to date. These farms are capable of
producing more than 1,000 tons of milk per day for input materials.
4.2 Raw material supply from abroad
Simultaneously, the brand places emphasis on the procurement of raw material suppliers
from nations like New Zealand, Europe, and the US that have created industries that adhere
to standards and guarantee food safety and quality. To industrial facilities, raw materials
might be imported directly or through middlemen.

5. Risks in Vinamilk's supply chain

Besides the successes it deserves, Vinamilk's supply chain also faces many risks
5.1 Input supply risks
When importing raw materials, businesses face many risks such as:

- Domestic production costs depend on world fluctuations. The price of milk input materials
can increase sharply and then decrease suddenly with many unpredictable fluctuations.

- Recently, scandals about milk containing Melamine and gunpowder have made milk
consumption difficult.

- According to the commitment to join the WTO, the import level of finished milk powder
must be at 25%, but currently it is still lower than this commitment, causing many imported
dairy product lines to compete strongly with domestic enterprises.

Raw materials purchased from households also bring many challenges to Vinamilk:

- Poor health and herds of cows cause the quality of milk supply to decline sharply,

- Farmers do not care about the physical and mental health of cows and use stimulant
injections.

- The environment around the farm is polluted and unhygienic.

- Disease causes cows to not meet standards for milk production.

- Poor technical technology causes cows to become infected and sick during the process of
making and collecting milk
5.2 Production stage risks
Risks that businesses may encounter during the production process include:

- Contract risks between farms and raw material purchasing centers.

- Risks about product quality.

- Storing products that do not comply with specifications.

- Fire, flooding, mold in storage.

- Milk sample testing process does not comply with specifications.

- The process is interrupted, not sterilized, not closed.

- Dosage does not match the formula.

- Natural disasters.

- Improper packaging causes the product to be distorted and torn.

- The wastewater treatment process is not in accordance with regulations.
5.3 Output distribution risk
Possible risks during the distribution process include:

- Insufficient supply.

- Marketing efficiency is not good, lots of inventory.

- Store management is not strict.

- A contract dispute occurs.

- Problems arising during transportation and delivery.

- Customers are not satisfied with the staff's working attitude.

- Customers complain and complain about the business.

- User tastes change

III. SUCCESSFUL LESSONS FROM VINAMILK’S SUPPLY CHAIN SYSTEM

1. Raise awareness about the importance of supply chains

Administrators must understand that supply chain management is not simply a technical
function. It is becoming an important strategic part of the business.

Vinamilk's leadership focuses on investing in building a scientifically organized supply

chain, streamlining each step. From there, speed up the speed of closing orders, packaging
until delivery to consumers.

2. Complete the synchronous information system

Information standards at Vinamilk are fast, clear, and easy to understand communication to
effectively serve the requirements in each stage of supply. Therefore, the application of
accurate information storage, transmission, and processing technology will allow businesses
to improve the efficiency of the entire supply chain.

3. Focus on building relationships with partners

This note has the most practical significance for businesses that own large, complex
distribution networks like Vinamilk. To effectively connect manufacturers and retailers,
Vinamilk focuses on reputable collaboration. The company's supplier and distributor
selection process is strictly established. All contracts and agreements clearly and
transparently define rights and responsibilities for both parties.
 4. Minimize risks from imported sources

It is easy to see that Vinamilk is always looking for supply backup plans and moving towards
autonomy in raw material areas. Importing raw materials helps businesses save a lot of
production costs, but it also has many risks. As during the stressful Covid epidemic period in
2019 - 2020, import and export were almost completely stagnant.

For that reason, Vinamilk is increasingly focusing on applying a policy of supply autonomy,
establishing groups of measures to prevent risks and quickly restore business if a threat
appears. For example, even if one supplier is lost, there will be another unit to replace it,
ensuring stable operating frequency of the factory.

5. Spread the brand image and exercise social responsibility

Vinamilk focuses on community support and children's health care activities that have been
creating a positive brand image with the public. Thereby, the company's message and core
values were widely spread, and the business situation improved significantly.

IV. VINAMILK'S DEVELOPMENT STRATEGY IN 2023

1. Develop superior products and experiences for consumers
- Restructure the product portfolio based on the brand structure for the long term;

- Review product quality and optimize new product launch processes;

- Improve price structure and packaging specifications for each channel and region to
optimize product structure based on market needs and future growth;

- Building a new product portfolio in preparation for expanding the portfolio in the next 5
years.
2. Promote the application of technology in sustainable agriculture
- Restructuring the distribution organization with an emphasis on modifying the role and
activities of distributors in Vinamilk's supply chain; Restructuring the business model
organization with an emphasis on altering functional needs, capacity, and assessing the
effectiveness of the sales team;

- Establish a foundation of technological expertise and get ready for initiatives that use
automation and data analysis to improve company processes; Commence with your sales
efforts.
3. Create new business opportunities
Enhance trade promotion efforts to locate new export clients;-Build strategic partnerships
with possible partners for product portfolio development opportunities;-Maximize operational
capacity and increase multi-channel distribution services directly to consumers;
4. Become the destination of talent
Establishing a business planning system, assessing operational effectiveness, and reassessing
the capacity needs for management roles are all part of creating brand value and laying the
groundwork for organizational restructuring.

V. VINAMILK’S E-COMMERCE MODEL

1. Prepare for e-commerce

Future e-commerce will undoubtedly occur, and Vinamilk will be impacted by this as well.
E-commerce channels are changing the way that consumers behave. In response to this trend,
Vinamilk opened Vinamilk eShop, also known as Vietnamese Milk Dream, an online store in
October 2016 to market its dairy goods. This channel is used to deliver products including
cheese, yogurt, soft beverages, ice cream, condensed milk, powdered milk, nutritious powder,
and soy milk.

Payment may be made in a number of ways, including cash on delivery, prepayment,

postpayment, and with common international credit cards including Visa, MasterCard, and
JCB. At the Vietnamese Milk Dream system, Vinamilk currently has customer service
centers as well.

2. Challenge

But there are significant obstacles for "newcomers" entering the e-commerce space. These
include the need for substantial financial resources, deployment platforms, and market
knowledge of both local and overseas rivals. which over a lengthy period of time has had
numerous noteworthy events and lessons learned.

Vinamilk will thus require time to address the issue of "having market share will solve
everything" in addition to developing a strong e-commerce system in the future.

Vinamilk reported total assets of 34,026 trillion VND as of September 30, 2018, of which
almost 631 billion VND were cash and cash equivalents. At the moment, equity stands at
25,950 billion, with around 7,046 billion in after-tax gains that are not dispersed.
Benefits in terms of size, potential for profit, and prior retailing experience... are very
fundamental requirements that Vinamilk must meet in order to effectively enter the e-
commerce age with its own skills.

VI. REFERENCES

[1] Sustainable development report 2022

https://www.vinamilk.com.vn/static/uploads/article/1683631993-
840733d05a0ce9533cfd4eb963c14816cc15c40cd088faef088c9b32b24bd763.pdf

[2] Learn Vinamilk’s supply chain analysis

https://www.thuvientailieu.vn/tai-lieu/tim-hieu-phan-tich-chuoi-cung-ung-cua-vinamilk-
8173/?
fbclid=IwAR15RIkAl9PRg5mI6LULTRmvTVZU6Fk1Pk1WjBD1LEF4RiLSMZ77kg8HLQ
U

[3] Transformation - Drive growth

https://www.vinamilk.com.vn/static/uploads/bc_thuong_nien/1681715597-
f2ab21a9612f1da979df9f9bc70d3191ce1867c50f38eea2f6b5027d87960d18.pdf

[4] Vinamilk identifies sustainable development as a strategic goal

https://baochinhphu.vn/vinamilk-xac-dinh-phat-trien-ben-vung-la-muc-tieu-chien-luoc-
102220429114311433.htm

[5] Vinamilk expects to reach 63% of dairy industry sales by 2025

https://baochinhphu.vn/vinamilk-ky-vong-dat-63-doanh-so-nganh-sua-den-nam-2025-
102220520124617738.htm