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<b>MINISTRY OF EDUCATION AND TRAINING</b>

<b>HCMC UNIVERSITY OF TECHNOLOGY AND EDUCATION</b>

<b>AN ESSAY ON INVENTORY MANAGEMENT SUBJECT </b>

<b>DESCRIBE VINAMILK'S INVENTORY MANAGEMENTMODEL AND ANALYZE ITS BENEFITS AND WEAKNESSES.</b>

<b>Instructor: M.Econ NGUYEN HOANG LONG </b>

<b>Class time:</b> Monday | Periods 10-12

<b>Course Code: INMA321506E_22_1_02CLC</b>

<i>Ho Chi Minh City, October 2022</i>

<b>LIST OF MEMBERS</b>

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NGUYEN PHAM KIEU DUYEN 20124215 Describe model + Presentation

NGUYEN PHUONG NHI 20124193 Strengths of model + Presentation

NGUYEN THI THANH HUYEN 20124186 Weaknesses of model + Presentation

VO DUC HUY 20142216 PPT + Presentation

LAM TRUC PHI 20124195 Format Essay + PPT + Presentation

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<b>TABLE OF CONTENTS</b>

<b>LIST OF ABBREVIATIONS...4</b>

<b>I. INTRODUCTION...5</b>

<b>II. CONTENTS... 6</b>

1. Overview of Vietnam Dairy Products Joint Stock Company (Vinamilk)...6

1.1. About Vietnam Dairy Products Joint Stock Company...6

1.2. Functions, Objectives, Mission, Vision and Core Values of Vinamilk...8

2. Describe the inventory management of Vinamilk...9

2.1 Classification of the company’s inventory...10

2.2 Inventory management activities...10

2.3 Vinamilk’s inventory management model...12

2.3.1 Analysis of EOQ inventory model of Vinamilk...12

2.3.2 Arrangement of types of inventory...13

3. Advantages and Disadvantages of Vinamilk’s inventory management model...14

3.1 Advantages...14

3.2 Disadvantages...15

<b>REFERENCES...17</b>

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<b>LIST OF ABBREVIATIONS</b>

WTO World Trade Organization

RGV Rail guided vehicle

EOQ Economic Order Quantity

FIFO First In, First Out

ERP Enterprise Resource Planning

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<b>I. INTRODUCTION</b>

In the current trend, Vietnam's extensive accession to The World Trade Organization (WTO) has made the competitive environment of domestic enterprises very exciting with many opportunities and challenges consciousness. In order to survive and develop, domestic enterprises are forced to change their management methods to improve product quality, lower product costs, and minimize production costs to ensure product competitiveness products of your business.

For manufacturing enterprises as well as commercial enterprises, the management of raw material inventory is a very important issue and has special meaning because the management of raw materials inventory is carried out. Good quality will help businesses reduce costs for storing raw materials, avoid occupying a lot of capital for inventory, reduce costs for renting premises and renting warehouses to store materials, and at the same time ensure a sufficient supply of raw materials for production, avoiding the shortage of materials leading to production line stagnation, shortage of supply components for the market leading to reduced profits, or loss of customers, loss of market lost market share...

Currently, inventory management is considered to be a very important step in corporate governance but sometimes it is not really valued and paid due attention in domestic enterprises in general and those in domestic enterprises business in the dairy sector in particular. Because of that, we decided to choose the topic: "Inventory management at Vinamilk" to somewhat have an overview of the inventory management of a business enterprise from there, it is possible to propose solutions to improve the efficiency of this management.

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<b>II. CONTENTS</b>

<b>1. Overview of Vietnam Dairy Products Joint Stock Company (Vinamilk)1.1. About Vietnam Dairy Products Joint Stock Company</b>

Vinamilk is the short name of Vietnam Dairy Products Joint Stock Company - a company that manufactures and trades milk and dairy products as well as related equipment and machinery in Vietnam.

Established on August 20, 1976, up to now Vinamilk has become the leading company in Vietnam in processing and supplying dairy products, ranked in the Top 10 strong brands in Vietnam. Vinamilk not only owns 75% of the domestic milk market share but also exports its products to many countries around the world such as the United States (US), Canada, France, etc. Commitment to international quality, quality Vinamilk has affirmed its aim. Vinamilk's goal of conquering everyone regardless of national borders. Actively integrating, Vinamilk has prepared from human resources to facilities and business capabilities to enter the market of the World Trade Organization (WTO) countries firmly with a mark bearing the Vietnamese Brand.

After more than 30 years of launching to consumers, up to now, Vinamilk has built 8 factories and 1 factory and is building 3 new factories, with a variety of products, Vinamilk currently has over 200 dairy products. pasteurized, pasteurized and dairy products.

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The history of company's foundation:

On August 20, 1976, Vinamilk was established on the basis of taking over 3 milk factories left by the old regime, including:

Thong Nhat Dairy Factory (formerly Foremost factory). Truong Tho Dairy Factory (formerly Cosuvina Factory).

Dielac Milk Powder Factory (formerly Nestle' milk powder factory) (Switzerland).

1985: Vinamilk was honored to be awarded the Third Class Labor Medal by the State. 1991: Vinamilk was honored to be awarded the Second-class Labor Medal by the State.

1995: Vinamilk officially inaugurated the first dairy factory in Hanoi.

1996: Vinamilk was honored to be awarded the First Class Labor Medal by the State 2001-2003: Vinamilk inaugurated the Can Tho Dairy Factory, Saigon, Binh Dinh, Nghe An.

2006: Vinamilk inaugurated its first dairy farm in Tuyen Quang.

On January 19, 2006, the company was listed on the Ho Chi Minh Stock Exchange. At that time, the capital of the State Capital Investment and Trading Corporation held 50.01% of the Company's charter capital. On August 20, 2006, Vinamilk officially changed the company's brand logo.

In 2009, the enterprise has developed 135,000 distribution agents, 9 factories and many dairy farms in Nghe An, Tuyen Quang. In 2012, the company continued to change the brand's logo.

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In the period 2010 - 2012, the enterprise built a liquid milk and powdered milk factory in Binh Duong province with a total investment capital of 220 million USD. In 2011, Da Nang dairy factory was put into operation with an investment capital of up to 30 million USD.

In 2016, inaugurated the first dairy factory abroad, which is Angkormilk Dairy Factory in Cambodia. By 2017, continue to inaugurate Vinamilk Organic Dalat farm -the first organic dairy farm in Vietnam.

In 2016, Vinamilk company was ranked by Forbes as a billion-dollar enterprise in Vietnam with a brand value of more than $1.5 billion, In 2020, despite facing the Covid-19 pandemic, the company is still determined price increased by 200 million USD compared to 2019, reaching more than 2.4 billion USD.

According to the financial report of Vinamilk company in the second quarter of 2020, net sales of domestic business reached VND 25,456 billion. Direct exports reached VND 2,451 billion, up 7.7% over the same period last year. In the first 6 months of 2020, Vinamilk's net revenue reached VND 29,648 billion, up 6.7% compared to 2019.

Up to now, Vietnam Dairy Products Company has exported products to 54 countries and territories with a total turnover of more than 2.2 billion USD. Vinamilk's stock is classified as a blue-chip stock in Vietnam, for businesses with stable growth and revenue.

<b>1.2. Functions, Objectives, Mission, Vision and Core Values of Vinamilk1.2.1. Function</b>

Vinamilk consistently provides worldwide quality nutritional solutions, fulfilling the demands of all consumers with tasty, nutritious, and healthy products associated with market leaders. Vinamilk liquid milk, Vinamilk yogurt, Ong Tho and Phuong Nam Star Condensed Milk, Dielac Powdered Milk, Vfresh Fruit Juice... are all popular.

<b> 1.2.2. Objective</b>

Positioning the brand as a pride of Vietnamese people

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Building new emotional value of Vinamilk company_ embodiment of life Constantly developing the scale and stature, implementing the standard of covering goods to communes and wards across the country

Reaching out to the most demanding markets such as the US, Japan...

<b>1.2.3 Mission</b>

To deliver valuable nutrition to the community with our respect, love and responsibility.

<b>1.2.4 Vision</b>

To become a world-grade brand in the food and beverage industry, where people put all their trust in nutrient and health products.

<b>1.2.5 Core Values</b>

<b>Integrity: Integrity and transparency in actions and transactions.</b>

<b>Respect: To have self-respect, to respect colleagues. To respect the Company and </b>

partners. To cooperate with respect.

<b>Fairness: To be fair with employees, customers, suppliers and other parties.Ethics: To respect the established ethical standards and act accordingly.</b>

<b>Compliance: To comply with legal regulations, the Company’s Code of Conduct and </b>

the Company’s procedures and policies.

<b>2. Describe the inventory management of Vinamilk</b>

Vinamilk dairy factory operates on an automatic, closed line, from input materials to product output.

Vinamilk has built the leading smart warehouse in Vietnam, with an area of 6000 m2 with 20 entry and exit gates, 105 meters long and 35 meters high, including 17 shelves with a capacity of 27168 lots. Import and export goods automatically with 15 RGV (Rail guided vehicle) transporting finished pallets to the warehouse and 08 Robot Crane (Stacker Crane) arranging pallets into the shelf system.

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<b>2.1 Classification of the company’s inventory</b>

Vinamilk categorized inventories by Standard No. 02, one of 26 accounting standards published and notified by the Minister of Finance in Decision No. 149/2001/QD-BTC on December 31, 2001.

<i>Source:The interim financial statements for the second quarter and six months endedJune 30, 2022 - Vinamilk</i>

<b>2.2 Inventory management activities</b>

Vinamilk inventory management has two procedures for importing raw materials, moving internal materials, and exporting completed goods. Each procedure will include the cooperation of several departments.

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<i>Source: Vinamilk </i>

The production planning department and the board of directors will make production and business plans based on the objectives and goals of each year. The production planning department will distribute spending to the factories based on the annual production plan. Planning the production plan in line with the available production variables, maintaining it on a regular and timely basis, and immediately adapting to market variations such as demand, supply, economic condition, pricing, and so on.

The buying department will be in charge of raw material purchase planning. The purchasing department will utilize the client orders received by the sales department and submit them to the warehouse statistics daily to determine which raw materials are below the final safe inventory level. By the warehouse’s inventory reception capacity and the priority of the items in the warehouse: which products need to be imported to service the sales promotion in the future period to develop a strategy for raw material inventory?

The raw material warehousing plan will then be sent to the coordination department (particularly, the coordination of materials) so that this department may coordinate Vinamilk’s trucks to pick up the supplies or arrange the time so that the supplier's delivery truck may arrive without causing any congestion in the warehouse When the products are delivered to the factory from the suppliers, the security will verify the original quantity. Following that, the raw materials will be checked by the quality control department to ensure that the arriving materials meet the pre-established criteria. When the criteria are satisfied, items will be entered into the warehouse, where the storekeeper and warehouse personnel will check the quantity and arrange each type of material in the required location. Simultaneously, it will enter

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raw material inventory data into the computer system to enable information verification.

<b>2.3 Vinamilk’s inventory management model2.3.1 Analysis of EOQ inventory model of Vinamilk</b>

Applying the EOQ model to calculate the optimal order quantity of Vinamilk Company:

For the management of raw materials inventory. Currently, the company applies the EOQ ordering model. However, because the characteristics of each material are different as well as the packaging method of the manufacturer, supplier, order cycle, waiting time from ordering to delivery, etc., the quantity This optimal ordering cannot be fully compliant with the EOQ model but also from the experience of the staff in the production planning department. In some cases, the order volume is also dependent on the requirements of the export manager when there are situations where the shortage of raw materials occurs during the production process as well as on the programs of company promotions.

For many years, the demand for Vinamilk’s raw milk has been rapidly growing. To meet this need, the firm has aggressively invested in industrial-scale farms on the one hand and has steadily grown its purchase and development of raw milk from homes on the other. As a result, the team decided to investigate the inventory of raw milk from families.

EOQ formula: We call:

D = Annual demand it units of a product S = Ordering cost per order

H = Holding cost per unit of the product

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The assumptions of the EOQ model are as follows: Demand for inventory is stable (no change).

The waiting time for goods from placing an order to receiving the goods is determined and does not change.

The company receives all orders from suppliers at the same time. There are only 2 types of costs: ordering costs and storage costs.

No shortage occurs if the order is fulfilled on time, i.e. if the order is placed after the optimal inventory is determined and the order is fulfilled on time, there will be no status at all. Inventory shortages lead to production and consumption disruptions.

Assume that Vinamilk annual demand for products is 300,000 units. The holding cost is $80 per year involves keeping a product in stock and the ordering cost per order is $50,000.

So we have: D = 300,000 units; S = $50,000; H = $80 Thus, EOQ = = 19,365 units

This depicts that at the order quantity of 19,365 units per order, the company would have minimum cost with keeping the required stock in hand.

<b>2.3.2 Arrangement of types of inventory</b>

For raw materials: Raw milk, imported milk powder 3, and spices are the primary raw materials used in Vinamilk. Raw milk, in example, will be imported into cool tank

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systems after being filtered for contaminants and quality checked, rather than being separated at the raw material warehouse. The majority of the remaining raw materials will be stored in a cool, normal-temperature environment, and the firm will adhere to the FIFO (First In, First Out) concept to assure the quality of their resources. With many sorts of materials, the materials that are entered into the warehouse first will be utilised in the production process first. Depending on the form of the material warehouse, materials are kept on huge shelves with 4-6 storeys. Those having a high weight will be placed at the bottom, while materials with a lower weight will be placed on top. The shelf number, cell number, name and code of the material, and these orders are stored in the warehouse management diagram system on each shelf cell. As a result, while looking for raw materials that are in stock or out of stock, we enter the product name or item code into the system, and the system displays the location of such raw materials, saving us a lot of time. Set up and remove extra parts. For Finished goods inventory: In addition to sorting by rows, shelves, and order of review, like with raw material inventory, this finished product inventory is split into four major regions to preserve ice cream: pasteurized milk products, yogurt... Furthermore, if the inventory exceeds the warehouse’s capacity and requires the hiring of an outside warehouse, Vinamilk will prioritize its own warehouse for completed goods inventory and the rented warehouse for raw material inventory.

How to manage inventory based on the ERP (Enterprise Resource Planning) model: On the ERP system, there will be a corresponding position on the ERP system at how many lines, which lot of products, how many shelves, and the order of shelves for each item code and real location in the warehouse.

<b>3. Advantages and Disadvantages of Vinamilk’s inventory management model3.1 Advantages</b>

First, let’s look at Vinamilk’s inventory management operations. Inventory management efforts at Vinamilk are closely coordinated and flexible across divisions. Inventory management divisions such as production planning, sales, customer service, buying, warehousing, and coordination are all coordinated closely and harmoniously

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