CHALLENGE IN
PURCHASING IN
SAIGON
COMMERCIAL
BANK

Tram Nguyen


HO CHI MINH OPEN UNIVERSITY

UNIVERSITE LIBRE DE BRUXELLES
SOLVAY BRUSSELS SCHOOL OF
ECONOMICS AND MANAGEMENT

MBQPM6

TRAM NGUYEN

CHALLENGE IN PURCHASING IN
SAIGON COMMERCIAL BANK
MASTER FINAL PROJECT
MASTER IN BUSINESS QUALITY AND
PERFORMANCE MANAGEMENT

Ho Chi Minh City
(2018)


HO CHI MINH OPEN UNIVERSITY

UNIVERSITE LIBRE DE BRUXELLES
SOLVAY BRUSSELS SCHOOL OF
ECONOMICS AND MANAGEMENT

MBQPM6

CHALLENGE IN PURCHASING IN
SAIGON COMMERCIAL BANK
MASTER FINAL PROJECT
MASTER IN BUSINESS QUALITY AND
PERFORMANCE MANAGEMENT

Tutor: Jacques Martin
Class : MBQPM6
Full Name : Tram Nguyen

Ho Chi Minh City
(2018)


This report has been written from November 2017 to March 2018
under supervision of Mr Jacques Martin. I am thankful for Mr Jacques
for his monitoring and constant feedback that helps to achieve more than
I thought I would be.
Having the great opportunity to study master in business quality
and performance management course at Solvay Brussels School of
Economics and Management, I have to appreciate Solvay Administration
Staff for accepting my transfer application from Master Computer
Science in Belgium program and the support from my manager – director
at P.O Dept. and colleagues at SCB for work support as well as providing

information and knowledge so this final report can be done closely to my
chosen topic.
As a Challenge in Purchasing in Saigon Commercial Bank in
Purchasing Order Department, I find working for this final project to
analyze challenge in purchasing in SCB is extremely helpful for me to have
an exact view of how the whole purchasing system is operating not only in
Ho Chi Minh area but to all units those involving purchase activities.
Through the research, output leads to application ideas to improve
purchasing operation to benefit all the stake holders in terms of time
consuming, cost consuming for other departments, thus, achieving
strategic goals of SCB in several years to come.

Sincerely,

Tram Nguyen


INTRODUCTION:
BACKGROUND
CHALENGE IN PURCHASING IN BANKING
Purchasing in almost any operation in the economic world is covers the same
areas of IT and data; HR; Marketing, communication and PR; Buildings,
operations and maintenance; Canteen and Catering; Business trips and
meetings; Other services; and Office and Branch equipment.
Most major companies and even some government organizations have a
purchasing or procurement department as part of everyday operations. These
departments provide a service that is the backbone of many manufacturing,
retail, military and other industrial organizations. Many individuals, even some
who work for these companies, are unaware of what the purchasing department
does, why it exists or what purposes it serves. To understand better what the

role of the purchasing department is, consider some functions it performs.
However, banking industry is quite different in terms of equipment and security
demand involve in this operation. Thus, the value and number of transactions
if relatively larger than majorities of industries with the charter capital for
whole Vietnam system in August 2017 was VND505.258 trillion or
approximately USD 21.96 billion.1
In more details, the areas of purchasing varied as following table which has
some relatively common areas as other with higher level of security and
transaction value:
● IT and data;
o Copiers
o Computers

1

State Bank of Viet Nam (June 2018) "Performance of Credit Institutions". Available at:
/>00#%40%3F_afrLoop%3D3411346043363000%26centerWidth%3D80%2525%26leftWidth%3D20
%2525%26rightWidth%3D0%2525%26showFooter%3Dfalse%26showHeader%3Dfalse%26_adf.ctr
l-state%3D92shnoih8_9


●

●
●

●
●

●


●

o Fax machines
o Networking equipment
o Servers
o Surveillance equipment
HR;
o Recruit agency
o Training
Marketing, communications and PR;
o Advertising agency
Buildings, operations and maintenance;
o Building services (mep engineers, cleaners, etc.)
o Automobiles
o Artwork
o Furniture;
o General construction;
o Housekeeping;
Canteens and Catering;
Business trips and meetings;
o Meeting venue
o Accommodation
o Traveling
Other Services;
o Armored carriers
o Audiovisual services
o Equipment maintenance
o Temporary staffing
o Trash removal

o Uniform and linen services
Office and branch equipment.
As per SCB’s operation license and business Certificate, SCB providing

all the financial and banking services that are allowed. According to SCB
official homepage, the bank provides banking services including mobilizing
and receiving short, medium and long-term deposits from organizations and
individuals; providing short, medium and long-term loans to organizations and
individuals based on the Bank’s nature and capability of the capital resources;
conducting foreign currency transactions; providing international trade finance


services; discounting of commercial notes, bonds and valuable papers;
providing settlement services; participating in currency market; conducting
consultancy work in finance and banking; purchasing of government bonds,
corporate bonds; gold trading; cash management services, asset preservation;
cabinets and safety deposit boxes for rent services; insurance agents; currency
brokerage service and other banking services as allowed by the SBV.
Among its competitor, SCB has high chartered capital and wide network
of office and branches which majority are in Ho Chi Minh City. However, there
several areas of operations that SCB is not as good at such are high operating
expense, low brand awareness in other areas of Vietnam, high level of human
resource management demand for its wide network, and demand for high-tech
skills in human resource demand to operate continuously upgrading system.
The banking business environment introduced a new law amendment to allow
bank to declare bankruptcy which will leave less players in the market. In
addition, thanks to technical development in recent years that some of
transactions can be done in distance which require less physical operations.



This report discusses about the purchase problems in SCB by stating the
problem and investigating the root causes. After reviewing Vietnam banking
industry and SCB performance in the market, the problems are identified as
budget corruption phenomenon, collusion between buyers and suppliers, loss
control of purchasing quality, and frequently delay in delivering. All of those
are the main reason for establishing central procurement department at SCB
head quarter. In the next part, major root causes are listed out as corruption on
buying price, monopolism in decentralize purchasing, management problems
that cause inappropriate product certification, and laziness of buyer staff.
After analyzing purchasing problem, the report solving the problem and
suggested improvement practices for improvement. Firstly, to solve the
problem from high-level management, a centralized procurement department
in head quarter is essential for whole group procurement. Suggested
organizational chart for this department and human resource allocation is
provided to have clear view on the importance of this arrangement.
In addition, performance improvement requires few more further steps
such are clarify purchasing structure now that we have centralized procurement
department. Further analysis of pros and cons of this arrangement is provided
together with improved purchasing process and standardize it. Purchasing
efficiency is also a part of this report which discusses the procurement
methodology for ATM machines with or without of purchasing center control.
Finally, there is reference list that summary all the reference used in this
report and annexes for SCB network distribution.


1
1
CHAPTER 1.
1.1.


STATEMENT OF PROBLEM

2

Overview Banking Sector in Vietnam And Sai Gon Commercial Bank 2

1.1.1.

Overview of Viet Nam economies:

2

1.1.2.

Overview of Vietnam banking sector:

4

1.1.3.

About the Saigon Commercial Bank (SCB) :

6

General Information

6

SWOT Analysis


8

Strategic Goals for Fiscal Year 2018

1.2.

15

In Purchasing

15

In Payment

15

In Quality Control

15

Balance Score Card

16

In Purchasing

16

In Payment


16

In Quality Control

17

Frequently exceeded budget estimates - Corruption phenomenon

17

1.3. Collusion between buyers and suppliers (Raise prices and requirements
for commission)
18
1.4.

Loss of control over the quality of the purchased product

20

1.5. Frequently overdue for the timely delivery of products for the operation
of branches throughout the country
22
1.6.

Why need Establishment of a centralized procurement center in SCB 22

CHAPTER 2.
2.1.

INVESTIGATION OF THE PROBLEM (ROOT CAUSE)


The increase price from the buyer staff to profit – Corruption

2.2. Exclusive offer of products offered by familiar companies - no
competition

24
24
25

2.3. Poor management leads to the passage of products without certification
of origin and quality
25


2.4.

The laziness of the person in charge - the supply delay

25

2.5.

The vast network of operations at SCB - difficult to manage closely

26
27

CHAPTER 1.
CENTER


ESTABLISHMENT OF A CENTRALIZED PROCUREMENT
28

1.1.

Organization of the centralized purchasing.

28

1.2.

Human resources

31

CHAPTER 2.

PERFORMANCE IMPROVEMENT

33
33

2.1.

Purchasing Structures

2.2.

Advantages and disadvantages of centralized procurement department.

35

2.3.

Purchasing processes

36

2.4.

Standardization of processes

37

2.5.

Purchasing efficiency

38

2.5.1.

Purchasing a ATM machine without the controlling of P.O center
39

2.5.2.

Purchasing a ATM machine under the controlling of P.O center 41
42
44

45

ANNEXES 1 - SCB'S NETWORK DISTRIBUTION as on SCB's Annual Report
in 2016
46
ANNEX 2 - Vietnam Joint Stock Commercial Bank List as of June 2017 by State
Bank of Viet Nam
47


Tram Nguyen

Page 1


CHAPTER 1. STATEMENT OF PROBLEM
1.1.

Overview Banking Sector in Vietnam And Sai Gon Commercial Bank

1.1.1.

Overview of Viet Nam economies:

Vietnam is one of the world’s fastest-growing economies, and there’s
no reason to believe it will slowdown. Its infrastructure is improving, and
modern trade has made significant inroads. Asia’s youngest population (8th in
51 Asian countries in medium age in 20172) in which high proportion is in
working age, and the rapid adoption of modern technology make Vietnam an
exciting market.

Below table shown population estimated by Vietnam General Statistic
Office by age above 15 years old in Vietnam 2016 3 at total 54.445 million
people as compared to total the country total population of 92.6 million. This
mean Viet Nam has age dependency ratio (% of working-age population) at
approximately 58% which is slightly higher than South Asia area ratio at
53.8%.4

2 WorldoMetrers (2017) “Asian Countries by population”. Available at: o/population/countriesin-asia-by-population/
3 Tổng cục thông kê (2016) “Lực lượng lao động từ 15 tuồi trở lên phân theo nhóm tuổi”. Available at:
/>4 Trading Economics (2016) “South Asia - Age dependency ratio (% of working-age population)”. Available at:
/>
Tram Nguyen

Page 2


Table 1 - Vietnam population by age (>15 years old) estimated in 2016 by General Statistic Office of Vietnam

Table 2- Vietnam country overview by World Bank5

Generally, Vietnam locates in the South-East Asia, in the middle of the
Pacific Asia area. It is bordered by Laos to the North West, Cambodia to the
south west and People’s Republic of China to the north and the east sea to the
east. This is a high competitive location with access to Europe-Asia and
Oceania continents with diverse nature surface and complex nature resource.
Only 75% of 93 million people in Vietnam using limited banking services, the
remaining 25% has not yet to utilize banking services.

The stable economic with GDP growth of around 6% to 7%; low wage
costs; a large population with a high savings rate and lack of innovative

approach to the market are advantages for foreign investors to accelerate
financial and industrial development in Vietnam market.
Have taken part in variety of trade agreement such as Trans Pacific
Strategic Economic Partnership (TTP), Association of Southeast Asian
Nations (ASEAN) and Free Trade Agreement with different countries,
Vietnam has made restructuring move to standardize banking system which
will be compatible and accessible to other countries. Vietnam is required to
have bilateral arrangement which eliminate the challenges of foreign
establishment of banking services.
Vietnam- a destination of foreign investment in South East Asian market

5 World

Bank. (2018) “Vietnam country overview”. Available at:
/>
Tram Nguyen

Page 3


1.1.2.

Overview of Vietnam banking sector:
The banking sector of Vietnam plays an important role in the economic

development of Vietnam. Moreover, it showed significant improvements that
result from stable inflation and interest rate, a favorable environment for
foreign direct investment and a shift from deficit to surplus the country's
current account.
There are two tiers in banking sector in Vietnam:

● The first one is State Bank of Vietnam (SBV) which is responsible for
monetary policy and supervision/regulation of the banking system in
Vietnam.
● The second one consists of commercial banks, financial companies, credit
co-operatives, people’s credit funds, and insurance companies.
The main activity driving banking system is commercial bank which includes:
● 5 state-owned commercial banks
State owned commercial banks (SOCB) account for more than 40% of
market share. The largest bank in terms of total assets, network and still
100% state owned share is Agribank. And four other SOCB are
Vietcombank, Viettin Bank, BIDV and MH6
● 31 joint stock commercial banks
In term of chartered capital, tops of them are: Vietnam Joint Stock
Commercial Bank of Industry and Trade, Joint Stock Commercial Bank
for Foreign Trade of Vietnam – VCB, Joint Stock Commercial Bank for
Investment and Development of Vietnam – BIDV, Saigon Thuong
TinCommercial Joint Stock Bank – Sacombank, Military Commercial
Joint Stock Bank – MB, Sai Gon Commercial Joint Stock Bank – SCB, and
so on7.
● 2 joint venture commercial banks:

6

Kim Tiền. (13 March 2017) “Bảng xếp hạng 5 ngân hàng cổ phần tư nhân lớn nhất”. Tri Thức Trẻ.
Available at: />7

State Bank of Viet Nam. (June 2017) “Danh Sách Các Ngân Hàng Tmcp Trong Nước”. Available
at:
/>72141000


Tram Nguyen

Page 4


Namely Indovina Bank Limited – IVB and Vietnam-Russia Joint Venture
Bank – VRB.
● 5 wholly-owned foreign owned banks:
SBV had granted 5 licenses to permit HSBC, Standard Charter Bank,
ANZ Bank, Shinhanh Bank and Hong Leong Bank to establish as whollyowned foreign banks
Notes : Beside that , The government also encourages foreign investors to hold
shares for five year period and partnering with the local bank to enhance
management, capacity or new development. With the 30% limit of oversea
ownership to domestic banks, the strategic foreign investors are allowed to
acquire up to 15% of share in a bank, and up to 20% with Prime Ministerial
approval. HSBC has also invested in a leading local bank, possessing a 20%
stake in the Vietnam Technological and Commercial Joint Stock Bank—
Techcombank. It is also the sole foreign strategic partner of the BaoViet
Finance-Insurance Group, Vietnam’s largest insurance company. In a vote of
confidence in the insurer, HSBC increased its stake to 18% in October 2009.
There is a huge untapped market in Vietnam. According to SBV, only
20% of more than 90 million citizens in Vietnam hold bank accounts and 3%
of the population have credit cards. With 87% of the population under the age
of 54, there is a great opportunity for retail banking activity development in
Vietnam.
Also it is agreed that SME and rural areas have had challenges to access
bank investment and loan. The data of Asian Development Bank shows that
“lack the capacity to assess the risk of investment into SMEs and find bankable
projects” and lack of knowledge about loan and lending systems for rural
citizens are the main reasons leading to current under-banked circumstances.


Tram Nguyen

Page 5


1.1.3.
About the Saigon Commercial Bank (SCB) :
General Information
● Bank’s name in Vietnamese : Ngân hàng thương mại Cổ phần Sài Gòn
● Bank’s name in English

: Saigon Commercial Bank

● Brand name

: SCB

● Operating license

: 283/GP-NHNN issued on 26/12/2011

● Head Office

: 927 Tran Hung Dao Street, Ward 1,

District 5, HCMC
● SWIFT

: SACLVNVX


● Website

: www.scb.com.vn

As of 31st December 2016:
● Charter capital

: appx. VND 14,294,801,040,000

● Total outstanding shares

: 1,429,480,104

● Network: 230 trading units including 1 HQ and 229 transaction offices in
Vietnam. Having relationships with more than 6,300 banks and branches
in 78 countries and territories around the world.
● Total employees of the Bank : 5,556 persons

The current consolidated SCB was established basing on the voluntary merge
of three banks: SCB, Ficombank and TinNghiaBank, approved and licensed by
SBV in 26th December 2011, officially operating from 1st January 20128. SCB

8

SCB. (2016) “Annual Report”.

Tram Nguyen

Page 6



is currently in top 10 Vietnam banks in term of chartered capital as of June at
VND 14,295bn9.

1.1.4.

Table 3 - Charted capital as of June 2017 by SBV.

According to SCB official homepage, the bank provides banking
services including mobilizing and receiving short, medium and long-term
deposits from organizations and individuals; providing short, medium and
long-term loans to organizations and individuals based on the Bank’s nature
and capability of the capital resources; conducting foreign currency
transactions; providing international trade finance services; discounting of
commercial notes, bonds and valuable papers; providing settlement services;
participating in currency market; conducting consultancy work in finance and
banking; purchasing of government bonds, corporate bonds; gold trading; cash
management services, asset preservation; cabinets and safety deposit boxes for
rent services; insurance agents; currency brokerage service and other banking
services as allowed by the SBV.10

9

State Bank of Viet Nam. (June 2017) “Danh Sách Các Ngân Hàng TMCP Trong Nước”. Available
at:
/>72141000
10 SCB.

(2016) “SCB Annual Report”


Tram Nguyen

Page 7


Figure 1- SCB services
SWOT Analysis
Below is SWOT analysis table of SCB as compared to other banks in Vietnam:
Strengths:
o

High Chartered Capital - SCB was at 6th highest chartered capital bank

in Vietnam as the end of 201611. Having its chartered capital in high
value is to ensure its operation activities to be funded well and to meet
various operation ratio requirement.
o

Wide network with 230 branches and transaction offices in Vietnam
including 1 Head Quarter12. Considering the whole banking system in
Vietnam with 10,000 branches and transaction offices in 2016, SCB
accounted for 2.3% holding 11th position in 34 banks. The largest one
was Agribank with 2,300 units, following by Agribank with 1,156,
BIDV with 1,106, Sacombank with 563 units, ACB with 345 units,
Techcombank with 315 unites, Maritime Bank with 300 units,

11

Tung Lam. (3 May 2017) “ Hơn 32.000 tỷ đồng vốn điều lệ được bơm thêm, hệ thống ngân hàng

sẽ chứng kiến những "sao đổi ngôi". Tri Thức Trẻ. Available at: />12

SCB. (2016) “SCB Annual Report”

Tram Nguyen

Page 8


MBBank

with

254

units,

and

SCB

with

230

units13.

Table 4- Viet Nam Banks Network on 21 September 201714
o According to SCB For SCB Annual report in 2016, the network focus
most of its units in Ho Chi Minh City with 51% of the branches and

transaction offices, following by Hanoi area, Southern area, Southwest
area, Central and Highland area, Coastal northern area, and South-East
area at 16%,12%, 9%,7%, and 5%, respectively.

13

Tung Lam. (31 October 2016) “Cánh tay” của 34 ngân hàng Việt đã vươn tới đâu? ". Tri Thức
Trẻ. Availabe at: cafef.vn/canh-tay-cua-34-ngan-hang-viet-da-vuon-toi-dau-2016103111325929.chn
Minh Ngô - Ngọc Thảo. (21 September 2017). “Câu chuyện mở rộng mạng lưới và cơ hội của
ngành ngân hàng. Tri Thức Trẻ. Available at: />14

Tram Nguyen

Page 9


Figure 2 - SCB network in Viet Nam in 2016
o Applying high technology in operation such are Oracle ERP system to
be able to build a multi-dimensional accounting system (COA) to suit
international accounting standards while serving its local management
demand; Payment Card Industry Data Security Standard ("PCI DSS")
with higher card security that accepted by International Card
Association and Security Standards Council whose members are
internal organizations including Visa and MasterCard; Histaff software
to support human resource management; and among others, updating
data centre to most modern in Southeast Asia to utilize its performance
and improving backup function as one of risk management activities.
o Having client awareness on its brand by awarded as Best Deposit
Service by The Asian Banker in 2016 which is a creditable financial
institution in research, providing financial reference, publishing

finance publication and ranking financial institutions in Asia15.
o Having many staff at more than 5,500 people in which 50% are young
and dynamic at age below 29, only 17% more than 35 years old, leaving
33% for staffs more than 35 years old.

15

The Asian Banker (2018) “About us”. Available at: />
Tram Nguyen

Page 10


Figure 3 - SCB Staff Structure by Qualification

Figure 4 - SCB Staff structure by qualification
● Weaknesses:
o High operating expense: Basing on SCB's financial statement as of
end from FY 2014 to 2016, its operation expenses before credit loss
ranges from 52% to 56%. The cost associated from having large
network of branches and offices all over Viet Nam.

Tram Nguyen

Page 11


FY14' in

FY15' in


FY16' in

VNDm

VNDm

VNDm

Total Operating Income

3,147,475

5,008,331

4,040,806

Total Operating Expense

1,702,616

2,618,541

2,440,004

% Operating Expense

54%

52%


60%

SCB

Table 5 - SCB Operating expense ratio in FY15' and FY16'
o Except from Ho Chi Minh City area and following by Ha Noi City area,
in other regions of Viet Nam, SCB brand is not as well recognizable as
most of the Corporate Social Responsibility activities were in Ho Chi
Minh City and Ha Noi. In 2016, there were major activities in which 5
were in Ho Chi Minh, 2 were in Ha Noi and 2 others16.
o Pressure on managing resources especially human resource regarding
SCB's wide existence in the country.
o Demand for high-tech staffs to be able to operate upgraded system.
● Opportunities:
o In November 2017, Vietnam went through a law amendment to allow
bank to be declared bankrupt. This new provision took effect from
January 2018. This was resulted by high bad debt ratio at 8.61 percent
of total credit at the end of September and level of non-performing
loans at 17.21 in 2012. Potential trend will be less players in the market
in a long-run.
o As the development of technology system, virtual banking services
such as mobile and online banking will gradually allow more types of
transactions that leads to less demand on physical operations and more
on technology capacity.

16

SCB. (2016) “SCB Annual Report”


Tram Nguyen

Page 12


● Threats
o The mentioned bank bankruptcy provision will also have introduced a
threat on general belief of banking existing user and potential users.
Considering only 75% of 93 million people in Vietnam using limited
banking services, despite the potential market of 25%, when some of
the banks declare to bankrupt, belief of not only existing client but the
potential client will be no more potential.
o Vietnam joining TPP (Trans-Pacific Partnership)17 which is a trade
agreement between has 12 countries namely Australia Brunei, Canada,
Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and
Vietnam signed on 4 February 2016. This has not entered in force as
United Stated withdrew from it in January 2017. TPP changes its name
to CPTPP - the Comprehensive and Progressive Agreement for TransPacific Partnership with 11 members whose combined GDP at 13% of
global GDP18. However this agreement may end up with, the agreement
allows foreign banks of TPP member to provide service to local market
without having to open branch or representative office in Viet Nam19
which is a threat for majority of Vietnamese bank in term of capital
value and also for customer service experience.
o

Demand on improving banking customer service and mobile platform:
Basing on Brands Viet Nam website, a well-known website for
marketing and branding news, customer behavior towards banking
services has shift from high loyalty to lower level due to competition
of Viet Nam banks. On social media, in 2nd quarter of 2017, among


17

Trung tâm WTO (05 March 2018) “Hiệp định TPP -CPTPP”. Available at:
/>18 Isabel Reynolds and David Tweed (24 January 2018) “Why a TPP Without the U.S. Is Still a
Big Deal”. Available at: />19

Mai Trinh (12 June 2016) “TPP tác động đến ngành ngân hàng: Rủi ro đến từ dòng vốn ngoại”.
Nguoi Tieu Dung eNews. Available at: />
Tram Nguyen

Page 13


890,000 discussions about banking services, there are 5,000 people
claim to fell dissatisfied with banking services, 250 of loyal client
willing to change bank service provider for new brand or using ebanking or mobile banking for better service.

Tram Nguyen

Page 14


In Purchasing
•

Fulfil purchasing demand for all equipment on time, following
purchasing schedule.

•


Expanding supply sources to achieve required quality at most
reasonable price meanwhile conforming to the bank’s regulation. By
sourcing for direct manufactures or authorized distributors. In
addition, keep sourcing for more purchasing options or alternatives to
avoid passive position where price negotiation is not available.

•

Ensure all transactions to be transparent.

•

Coordinating with other department to schedule for periodically
purchase demand including administrative, information technology
equipment, technical equipment for maintenance, maintenance plan for
fixed asset, building maintenance plan for offices/branches, technical
equipment for ATMs machines, software purchasing/license renewals,
uniform, internal/external gift.

In Payment
•

Facilitate payment as per approved payment term in time and expense
accuracy.

In Quality Control
•

Keep updating quality requirements and internal quality control

process to suit the industry typical fast-changing environment.

Tram Nguyen

Page 15