1

INTRODUCTION.................................................................................................... 3
1.1

Business sectors:........................................................................................ 3

1.2

Vision, Mission, The Core Values....................................................................4

1.3

Supply Chain.................................................................................................. 4

STRATEGY OF SUPPLY CHAIN................................................................................5

SUPPLY CHAIN LOGISTICS MANAGEMENT.............................................................6

3.1

Customer Relation Management....................................................................6

3.2

Procurement Management............................................................................. 7

3.3

Manufacturing Managament..........................................................................7

DESIGN OF THE SUPPLY CHAIN NETWORK............................................................8

SUPPLY CHAIN LOGISTICS OPERATIONS..............................................................10

5.1

Inventory...................................................................................................... 10

5.2

Warehousing................................................................................................ 11

5.3

Transportation.............................................................................................. 12

5.4

Package and Handling..................................................................................12

INFORMATION TECHNOLOGY.............................................................................. 13

SUSTAINABILITY IN SUPPLY CHAIN OF VINAMILK.................................................14

7.1

Environment................................................................................................. 14

7.2

Ethics........................................................................................................... 14

7.3

Education..................................................................................................... 14

7.4

Economic..................................................................................................... 15

ADVANTAGES, DRAWBACK AND PROPOSED SOLUTIONS....................................16

8.1

Advantages.................................................................................................. 16

8.2

Drawbacks................................................................................................... 17

8.3Proposed solution............................................................................................. 17

OVERVIEW
The reasons of selecting the company and its products
Company Overview :
Vinamilk is a Vietnam-based company selected by Forbes Asia to be qualified in the top
50 companies in Pacific-Asia list. By the mid-August of 2016, VNM sported a market
capitalization of 9.2 billion USD. Forbes Asia commented This time Vietnam itself has
made a hottest news ever.Never was any Vietnamese company nominated to FAB 50 but
this year, Vinamilk has made a change. Based on another report published by Euro
Monitor on dairy companies around the world, Vinamilk stood at 49th position by
revenue last year, whose figure was 18% higher than the average revenue of Asian milk
companies. This is a firm proof of the companys solid financial base and efficient
operation over the past 40 years.
Regarding the supply chain, Vinamilk is regarded as one of the companies with the
largest SCM .Specifically, Vinamilks cow herd, including the herd by owned Company
and that of contracted farmers, now totals over 110,000 cattle and has the ability to
supply nearly 600 tons of raw milk each day (in 2015, Vinamilk purchased 216,485 tons
of rawmilk, 178,890 tons of which was from farming households).
As at December 2015, the Company has 243 exclusive distributors nationwide,serving
directly to more than 212,000 retailers, with the presence in 1,609 small and big
supermarkets and more than 575 convenient stores throughout the country and the daily
purchase of over 18.000.000 units. Also, Vinamilks brand can be now recognized in over
40 countries.
On September 10 of 2013, Vinamilk inaugurated its Milk Mega at My Phuoc 2 Industrial
Park, Binh Duong Province which utilises the most modern auto and integral technology
in the world, being constructed by Tetra Pak (Sweden). In addition, the plant also has first
and largest smart storage system in Vietnam. The storage is located on 6 ha area with
105m length, 35m high, 20 entry lanes, 17 bearers can store 27,168 good sheds.
Product Overview:

Dairy products, particularly fresh milk, generally have a relatively short life cycle, along
with the complicated manufacturing, preservation, and distribution procedures and the
requirement of employing up-to-date technologies.
Thereby analyzing the supply chain model of Vinamilk and its product range will provide
our group a comprehesive perspective on one of the most effectively-operated SCM in
Vietnam. This understanding will assist us to apply the latest supply chain management
lessons to business practices in Vietnam.

Objectives :
Understand and analyze inclusively about Vinamilks SCM.
Identifying practices of managing supply chain issues.
Introducing the latest technologies an their application to Vinamilks SCM.
Drawing a general conclusion and proposing sugesstions to Vinamilks SCM.

INTRODUCTION

The establishment of Vietnam Dairy Products Joint Stock Company (Vinamilk) was
based on Decree No. 155/2003/Q -BCN on Octorber 1st 2003 of The Ministry Of
Industry and Trade, which particularly aimed to convert the company from a state-owned
business to a private-owned one.
1.1 Business sectors:
Dairy and Beverage products Milk Carton, Powdered Milk, Canned Milk, Bread, Soy
Milk, Fruit Juice,
Engaging in the business of manufacturing processed food, trading in machinery,
ingredients, industrial chemicals.
Real Estate Rental/Leasing, Container Yard/Depot trade business, Transportation
services.
Package/ Plastics manufacturing and trade.
1.2 Vision, Mission, The Core Values
Vision : Becoming the top brand of trustworthiness in Vietnam in manufacturing nutrition
products, parallel with prioritizing the communitys health.
Mission : Operating with the high commitment of providing the customers with the best
quality source of nutrition, by the dedication, love along with responsibility with the
community.
Core Values :
Authencity : to be openly genuine in behaviors and business.
Respect : including self-respect, mutual respect for colleagues and partners, cooperation
based on trust and respect.
Equality : treating fairly and equally to staff, customers, providers, and relevant parties.
Integrity: Conforming to the arranged set of principles, and acting, thinking ethically.
Discipline : Abiding by the national laws along with the regulations and policies within
the company itself.

1.3

Supply Chain

Vinamilks Dairy Supply Chain

Dairy Farmers, Farmhouses

Phn phi Retailers, Stores Customers

Firms, Manufacturing Plants
Co-op Collection centre

Imported Ingredients

STRATEGY OF SUPPLY CHAIN

Vinamilk with strategic objectives is to build systems vendors, to expand domestically

and overseas to ensure raw material stability not only in high quality but also at a very
competitive price.
In addition, Vinamilk also reduce the minimum time used between steps in the transport
supply system by building 13 factories and more than 212,000 points of sale that are
placed evenly in 63 provinces from north to south. Accordingly, Vinamilk also has
dispersed the risk when there are problems in the process of production and business
with the availability of factories or suppliers that are ready for the replacement.

However, the department did not operate independently on its own but closely linked
5

and dependent on each other to develop. For example Vinamilk factory used to only
produce dairy products rather than other products. Therefore, plants must have an tight
relationship with the dairy farms because without them and their raw milk, the plants
will have to stop working. To create and keep a close relationship (especially with
individual farms), Vinamilk not only implement a price subsidiary policy, maintain the
stability of procurement but also technical varieties ...
Vinamilk also ensures a stable inventory volume by identifying the right product, the
right quantity and at the right time thanks to investing heavily in information systems,
which rarely any can small enterprises be a match .
Vinamilk is currently one of the few companies in Vietnam with executives supply
chain: Ms. Nguyen Thi Thanh Hoa.
3

SUPPLY CHAIN LOGISTICS MANAGEMENT

3.1 Customer Relation Management

Vinamilks customers includes individuals (consumers, people in need), organizations
(suppliers, wholesalers, retailers, agencies) based on a bilateral relation, existing and
developing together.
Interacting and administrating the customer network
Vinamilk apply some forms of communication such as contacting directly, by phone, by
mail, and by fax to connect to organizations or customers, and using the internet to
approach individual customers with the aim of ensuring parallel information principle
based on one-to-one marketing theory.
To maintain and develop the number of customers, Vinamilk continuously creates
strategies for each period and enhances the quality of products and services.
To administrate and care for the relation with customers, Vinamilk chooses to use Ssoft
CRM and SAP CRM systems to bring the good results in classification and collecting
information about transaction and customers needs.

Vinalmilk was successful in administrating its customers. Determining types of customers

and conducting strategies, in combination with using technology, are based on real
demand on the market, thus bringing the efficience immediately.
3.2 Procurement Management
Purchase the latest modernest equipment and technology.
Vinamilks sources of fresh milk include 2 types: dairy farms owned by the company and
those of domestic farmers. Vinamilk also signed a contract to buy 40% of total quantity of
milk from national milk suppliers. They also import powdered milk from Australia and
New Zealand. In order to complete its purchase policy, Vinamilk did:
Build long-term and stable targets with raw materials suppliers with the aim of ensuring
quality and competitive price.
Building qualified 10 dairy farms, increasing the number of cow dairy herds diversifying
varieties through importing a great number of breeds from America and Australia.
Financially supporting farmers to buy cows and milk, negotiating for ensured quality and
standards, complete raw-milk purchase system, set up entrepot station.
3.3 Manufacturing Managament
Manufacturing size: 13 factories in Vietnam, 3 of which are in USA, New Zealand and
Kampuchea. The highest capacity is 800 million litres of milk, 54.000 tons of dried milk
per year. With 10 national farms, 120.000 cows supplying 750 tons of raw fresh milk per
day.
7

Manufacturing organization:
Process: the process is specialised with high standards, breeding facilities which are built
with the latest technology of using electrionic chips to monitor the cows, feeding the
cows according to TMR method (Totol Mixing rotation).
Buying centers and manufacturing factories are located in the same place to
ensure the freshment and quality of milk.
Workplaces are designed systematically in line in order to perform steps of work
in turn.
4

DESIGN OF THE SUPPLY CHAIN NETWORK

Location of Vinamilk dairy farms: (located in Tuyen Quang, Binh Dinh, Nghe An,
Thanh Hoa, Lam Dong, Tay Ninh, Ha Tinh Province) Most of Vinamilk dairy farms are
located at North and Middle of Viet Nam. Southern region depends on imports,
individual households and other companies because there is only one dairy farm in this
region.
Transit station: in the year 2015, Vinamilk had 91 transit stations and this ensured the
procurement and storage of raw milk from farms.
Factory: 15 factories of Vinamilk are located in the provinces and cities: Ho Chi Minh
City, Dong Nai, Binh Duong, Binh Dinh, Nghe An, Can Tho, Bac Ninh, Da Nang. With
those factories, Vinamilk's products are distributed easily around the country. Most of
the factories are located in Binh Duong Province and Ho Chi Minh City because Ho Chi
Minh City is the biggest market of Vinamilk in Viet Nam.

Warehouse:
Automated storage and retrieval system (Binh Duong Province): This factory can supply
liquid milk for the whole Viet Nam market.
Warehouse (1 in HCM , 1 in Ha Noi ): Ho Chi Minh City and Ha Noi capital are big
markets in milk consumption. Warehouses were located in those city to distribute easily
products to customers.
Distribution model:

Distributors
As at December 2015, the Company has 243 exclusive distributors nationwide. They
serve directly to more than 212,000 retailers.
Supermarkets and convenient stores
Vinamilk products are present in 1,609 small and big supermarkets and more than 575
convenience stores throughout the country.
Export
Export sales contribute about 13% of the total consolidated revenue. At the end of 2015,
the Company has exported to more than 40 nations and regions. In 2015, the Company
maintains its exports to traditional markets in Middle East and South East Asia and
explores to potential markets in Africa and especially high-end markets like Japan,
Canada
Group model

10

SUPPLY CHAIN LOGISTICS OPERATIONS

5.1 Inventory
To efficiently manage these distribution channels, Vinamilk has adopted and successfully
applied these advanced IT techniques into their operation such as Enterprises Resourse
Planning (ERP), Oracle Business Suite System and Customer Relationship Management
(CRM).
Oracle Business Suite solution that helps connect to 13 places including headquarters,
factories and nationwide storages. The information technology facilities also were
standardized, synchronized and consolidated.

11

Customer Relationship Management (CRM): with this solution, all the process will be
optimized and provide all the information of customers for the sellers in order to create a
close relationship as long as the convenience for customers to contact the sellers and the
company anytime, anyplace and by any means of communication.
Enterprises Resource Planning (ERP): tools which assist the employees in working and
allow distribution channels throughout Vietnam can access to the headquarter in both
offline and online modes. With the information centre, Vinamilk would be able to make
critical decisions on time and also boost up the planning processes effectively. By
updating customers information of each retailers, the company can satisfy the customers
in such higher stage; furthermore, this also support the workers in the retailers to be more
flexible, to keep track of the trends of the market and also improve their personal skills.
Besides, Vinamilk also keeps an eye on the price policies and discount throughout the
distribution system while the customers would also receive the benefit from a better
service which is also an advantage to Vinamilk.
5.2 Warehousing
Two Vinamilks logistics buildings:
Ho Chi Minh Warehousing and Transportation Services Enterprise (Thu Duc District, Ho
Chi Minh City)
Ha Noi Warehousing and Transportation Services Enterprise (Gia Lam District, Hanoi
City)
Storage of finished goods:
Vinamilk has the first and biggest smart storage in Vietnam with the area of 6,000 m2 and
20 entry ports; the storage is 105 meter long, 35 meter high including 17 bracket floors
and 27168 storage spots. With this, the import and export of materials and goods will be
automatically operated with 15 automated rail guided vehicles which will transfer the
finished products pallets to the storage and 8 stacker crane robots will arrange these
pallets on the shelf brackets.

12

The LGV automatic operating robot will move pallets of finished products to the smart
storage area. In addition, LGV longer shipping the reels packaging and wrapping
materials to the machine automatically. LGV robotic system can charge the battery
without human intervention.
With the storage management system Wamas integrated with the management system
ERP and Tetra Pak Master Automation solution, which bring the smooth and seamless
production within the factories with other activies such as production planning importing
materials and exporting finished good as well.
5.3 Transportation
Fresh milk collected from the farms Transported to 91 dairy hubs nearby to get quality
check within 1 hour Transported by a tank truck to 2 production inventory warehouses
in Ho Chi Minh and Hanoi and waiting to be transported to the factories for the main
production.
5.4 Package and Handling
Tetra Paks broad product range and vast knowledge come to full use: milk reception,
pasteurizers, mixing units, aseptic tanks, UHT treatment units and cleaning-in-place units.
More than 20 processing modules are used. Carton packages are filled with the processed
dairy products on 17 packaging lines. Fifteen unmanned laserguided vehicles move
packaging and products around the factory via Wi-Fi instructions.
Milk is pumped through pipelines into automatic packaging machines where the milk
will be loaded and attached the lid of the milk container is made of paperboard or plastic
bottle. When the milk containers are passing line, manufacturing date and expiry date will
be printed on the packaging shell
6

INFORMATION TECHNOLOGY

Vinamilk is one of the first companies implementing ERP model for its information
management system since 2007 under the administration of FPT. Vinamilk is currently
implementing three ERP solutions simultaneously Oracle, SAP, Microsoft. The ERP
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system using Oracle E Business Suite of Oracle by Pyrthis started launching since
15/3/2005, including accounting, sales management, production management, business
performance analysis.
Overview of ERP:
Meaning of E R v P in the glossary term ERP (E: Interprise; R: Resource; P: Planning)
As for the effectiveness, the application of this technology in SCM can be exemplified
by the customer relationship management via the CRM model by SAP.
With server systems running SAP CRM at the headquarters, the database is centralized
(Master Data), integrated by a standard that daily data from distributors from handheld
PDAs from sales representatives. A central database system is responsible for reporting
inventory status, sales revenue, debt of individual distributors. Thereby, sales employees
manage to analyze daily market fluctuations to propose solutions, identify sales targets
as well as an accurate distribution plan.
These 3 applications - Oracle EBS ,Microsoft Exchange, Solomon (now called
Microsoft Dynamics SL) used at distributors and applied on PDA for sales persons
,were integrated into Business Warehouse by NetWeaver to serve smart reporting
system; help Management Board have accurate and online information about business
movement situation nationwide.
Over many years of operation and patching carried out by FPT, the system is still
applied within Vinamilk, continuing to bring about good results for the company in the
domain of enterprise management in general and SCM in particular
7

SUSTAINABILITY IN SUPPLY CHAIN OF VINAMILK

7.1 Environment
Sustainability in supplychain is an important subject of most companies On
environmental aspects, Vinamilk guides its supply chain to a socially and
environmentally responsible ecosystem. In doing this, Vinamilk develop and manufacture
14

products planned with the orientation of reducing impacts on environment and promoting
environmental protection. It establishes, maintains and continuously improves safe
working conditions, prevent injuries and impairment of employees health, apply 5S and
the plan Cleaner Production. It also upgrades efficiency and effectiveness of the
Integrated System of ISO 14001 and OHSAS 18001 according to PAS 99:2012 in order
to improve the environment.
7.2 Ethics
Particularly, Vinamilk is committed to conform to business practices and high standards
of Ethical conduct. Raise awareness in all employees by training and participation in
activities concerning work safety and health issues; and the improvements of cleaner and
greener environment, and last but not least building a policy on corporate social
responsible (CSR) throughout all departments of the company.
Being the Community-focused Trademark and Cooperating to build a sustainable
Community by actively organizing/participating in community support programs.
Moreover, Vinamilk accompany, share, and cooperate closely with the local government
to solve common issues of the community.
7.3 Education
For nearly 4 decades of being founded and continuously growing, Vinamilk has always
considered human resources as the key factor to the success and development of the
Company. Vinamilk has always aimed at becoming the best workplace for employees,
and in order to achieve such goal, the Company has always maintained the ideal working
environment, favorable welfare policy as well as numerous talent training and
development programs. Vinamilks strategy on an ideal workplace has been directly
connected with one of the general Values of the company, being one of the priorities on
the Companys sustainability.

15

With the motto Human resources are the Companys valuable asset and are an important
factor to achieve work efficiency, training and development of human resources have
been always regarded as a long-term investment strategy for the Companys success in
the future
7.4 Economic
Internal Management
From October 2013, Vinamilk has adapted new production technology which is an
automatic and closed production line from raw materials inputs to products output. All
Vinamilks laboratories in these factories have received the ISO/IEC 17025:2005
Certificate in chemistry and biology aspects. Moreover, Vinamilk has owned 2 logistics
enterprises on the North and the South of Vietnam. Their functions are to store the
materials serve for the production lines and ship the products to the distributors as well
as the consumers through the truck shipping system. This also to make sure that all the
products will be easily shipped since these logistics enterprises locate at two directions
of Vietnam which is pretty flexible.
External Management
16

Fonterra is one of the best companies in dairy products industry. The company is holding
approximately 30% of the worlds dairy exports and it provides high class powdered milk
to many organizations including Vinamilk. Hoogwegt International with more than 40
years of experience is the most important partner of Vinamilk. Hoogwegt Group can help
having the precise information about dairy products business and catching up with the
new trends of customers as well. Furthermore, it has such stable network with many large
factories which can help Vinamilk widen its business network.
Tetra Pak is one of the largest international companies which supplies processing solution
and products packaging for more than 170 countries. In 2013 it has provided Vinamilk
with the integration and automation technology in the new built factory that helps
enhance the efficiency in production within the factory.
8

ADVANTAGES, DRAWBACK AND PROPOSED SOLUTIONS

8.1 Advantages
According to all the information above, we can see Vinamilk got these following
advantages:
Vinamilk is the biggest dairy company that have been operating for more than 37 years.
Vinamilk owned the best dairy manufacturers in Vietnam with advanced
technology that reach international level. The portfolio of high quality and
flexible products manages to satisfy consumers demand.
Strong and nationwide distribution channels with 266 exclusive
distributors, more than 224,000 retailers selling directly to more than 600
supermarkets throughout Vietnam; besides, with the export of its goods to
many other countries.
Vinamilk is possessing a skilful and experienced Research and Product
Development Department and also collaborate with other international wellknown research companies to improve the products standard and quality as
well as satisfy different segments of customers.
Applying cutting-edge highly information technology systems into operation
17

management such as ERP, CRM, ERM and so on from production, quality

management to distribution channels.
Efficient and highly experienced Executive Board in Dairy Industry that have
been working with the company for many years. They also understand the
market and can anticipate the new trends coming up to set up a the
development strategy for Vinamilk.
8.2 Drawbacks
Besides the advantages, there are still disadvantages remained in Vinamilks supply
chain, such as:
Due to the massive distribution channels, its complicated to monitor all
the retailers especially the ones in remote areas.
Hard to maintain the quality of the milk since not all the remote retailers
have good facilities
Lower livestock productivity compared to foreign countries and high-cost
that is incurred from raw milk production in domestic farms affecting the
revenue.
Depending on exported milk resources, the milk from the domestic farms can
only fulfil 30% of production demand; therefore, the stability of supply and
raw materials cost are based on the worlds supply-demand relationship.
8.3 Proposed solution
Monitoring the distribution channels even from remote areas
Request the distributors committed about preservation standards products. Development
the team which guide and supervise the preservation of the product supplier.
Set up long-term strategic plan for the production of domestic raw materials, to avoid
excessive dependence on imported raw materials, which helps reduce costs to compete
with rivals.
Manage the human resources, make the plans to help the employees improve their
18

working skills and also catch up with the international advanced technology.
Finally, we think if Vinamilk keeps on developing its product portfolio and boost up the
customer services as well as the quality of the products; their target to reach 3 billion
USD of total revenue in 2017 will be within their grasp.

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