Supply chain management plans

Published:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Research and Analysis

Channels of distribution of ice cream

There are three main suppliers that have been very active in new product developments:

  • Kinh Do Co., Ltd, a Vietnamese owned company, acquired Wall's Vietnam in 2003. After acquisition, Kinh Do has produced many new ice cream products under the brand name of Kido's, and Merino brand (such as impulse ice cream with local fruit flavors). With over 20 ice cream products, Kinh Do has been in good position to gain further share in.
  • huy Ta Co., Ltd which is also an established local company. Its products including dairy-based ice cream, water-based ice cream and bulk ice cream with many flavors.
  • Vietnam Dairy Products Co with ice cream products under the brand name of Vinamilk, Familia, SuSu

Beside that, there are some other ice creams suppliers exist in market such as CoolBrands International Inc, an international ice cream maker, has focused on Vietnamese market, especially Ha Noi and Ho Chi Minh, with Swensen's ice cream imported from Thailand, and suppliers for ice cream brands like Goody, BUD's, Fanny, New Zealand, etc. These are premium brands, and more expensive than local products, but have been well received by many consumers in Vietnam (Euromonitor, 2005).

Ice cream products are mostly produced in the factory/manufacturers and kept at a low temperature at about -260C at all stages of production. Then, they are put in refrigerated delivery vehicles with about -220C to be delivered to distribution centre (DC) before delivering to other players in the market. These DCs belong to the manufacturers, and are usually located in each region in Vietnam. For example, Ki Do Joint Stock Company has two DCs, one called Distribution Centre in the South is located in Ho Van Hue industrial park in Ho Chi Minh City, and one called Distribution Centre in the North is located in Vu Trong Phung Street in Ha Noi (Chodientu, 2005). Consumers can get ice cream products from retailers such as outlets, groceries, kiosks, street peddlers, from supermarkets such as Metro, Co-op Mart, Maximart, Intimex, Tax, Big C, etc, or from HoReCa such as BUD's, Vn.Index Café, V3, Flamy café, Penguin, Bo Gia, Sheraton hotel, etc.

Supermarket has become one of the most important distribution channels for not only food products but also ice cream, especially urban area. It is more common for bulk ice cream of both local and imported premium brands. It is expected that sales of ice cream through supermarkets will continue to grow. However, it just is the best place for introducing new products, as it attracts more consumers in the high income group, because product price in there is slightly more expensive than at other retailing channels (Euromonitor 2005, pp. 73)

With impulse ice cream, convenience plays the key role in consumption. There are a growing number of street peddlers, and selling ice cream. In addition to convenience, these outlets or independent stores also offer at lower prices than at supermarkets and much lower than in restaurants, hotels (Euromonitor 2005, pp. 73). The second advantage of independent stores is that consumers receive one-to-one advice from sellers. Different from supermarkets/hypermarkets, in independent stores each consumer is treated separately. Moreover, free delivery is also offered for large orders. Thirdly, independent stores are often located within residential areas, and thus are very convenient and time-saving for the majority of consumers. That's why the percentage of ice cream sold in independent stores is much higher than other distribution channels.

Other retailers include seasonal outlets such as beach kiosks, fairgrounds, theme parks, caravan sites, and historic houses, etc.

HoReCa is also belonged in independent stores but it is has another style with more expensive price. This is a new chain, a new effective distribution channel for ice cream products. However, the tendency of Vietnamese consumers eating ice cream in HoReCa is increasing thanks to increased standard of living. HoReCa can order ice cream from distributors, distribution centre, or they can directly order ice cream to the local manufacturers through franchise.

At the present, most of SC ice cream members use their own transportation means. Therefore, there is no 3PLs used for transportation. They just use 3PLs for hiring warehouses (Thu Duc warehouse, Pacitech corporation, Sotrans, Vietrans, etc), or outsource packaging.

Current situation in ice cream supply chains (SC) in the HoReCa channel

The ice cream consumption level of Vietnamese people is low compared to the world's consumption level, just 0.3 litres per capita per year (Source: Agriculture and Agri-Food Canada). However, ice cream market in Vietnam had the growth rate of 15-20% per annum (VietnamNet Bridge, 2007). It grew by 7% in volume and 6% in current value terms to reach 31.22 tones and VND 700 billion in 2004 (Euromonitor 2005, pp.63). The retail sales of ice cream increased from 33,387.70 litres in 2005 to 35,663 litres in 2006, and it is forecasted to increase to 40,243.39 litres in the next year.

The ice cream market in Vietnam is held mainly by three companies with made-in-Vietnam products including Kido, holds 45.8% of the market share, Vinamilk holds 20.8%, and Thuy Ta holds 20.8% in 2005 for high quality ice cream. With the high-and medium-class segments, Kido accounts for 60% of the market share with its Kido's Premium and Merino brand (Euromonitor 2005).

Vietnamese people perceive milk as being nutrition and expensive. Dairy-based ice cream is therefore considered as being healthier and worth the money than water-based ice cream. Thus, if these products are at the same price, most Vietnamese consumers will choose dairy-based ice cream rather than water-based ice cream. However, one of current issues is lacking quality ice cream supplied to urban areas as most of water-based ice cream is unbranded, the quality is not guaranteed. An official report has pointed out that 99% of unbranded ice cream does not meet quality standards set by the government (Euromonitor 2005, pp.64).

Logistics and Supply Chain Management (SCM) issues in ice cream SC in the HoReCa channel

  • Ice cream SC members have poor infrastructure such as lacking of qualified cold stores, depots, and refrigerated delivery vehicles, and freezer cabinets to store, display and sell from in HoReCa. This leads to the proportion of damaged ice cream increased significantly.
  • There is nearly no information system in range for SCM. This affects the ability to control and mange the work flow and limit in customer service level. In addition, no standardization about information, services, etc applied in retail system, as well as HoReCa, so customer service will not be equal.
  • SC members face high transportation costs (as explained in the previous part). In addition, transportation cost is high because ice cream producers need to use specialized vehicles and tools to transport ice cream.
  • Poor packaging materials and low quality packaging equipments are used in SC members. There are more than 700 packaging firms in Vietnam, but the increasing of firms has not been matched by any real improvement in packaging and design. The problem is Vietnamese companies prefer second-hand equipments from China with cheap prices. As the result, ice cream will be melted and its quality will be lower.
  • Workforce in SC members is almost unskilled or lacking of knowledge regarding management, sales, trading method, etc. This is the big issues, and weakness for players to compete with other local companies or foreign companies when Vietnam joined WTO.

Strategies contribute to the success of the new franchise concept of Ki Do Joint Stock company (Ki Do)

One of the things that are particularly attractive about franchise is that the product-ice cream- can be market-tested in advance to determine its potential for long-term success. In some case, franchisees (HoReCa or independent stores) can also rely on the reputation of existing ice cream brands to predict the success of their franchise should they choose to buy into the brand.

KiDo's premium and Merio has a good position in most of Vietnamese consumers. Ki Do became the first business of its kind in Vietnam to receive the international quality management system certificate on food safety control-HACCP (Hazard Analysis and Critical Control Point) in 2005 (ThanhNienNews, 2007). Therefore, it can be success in its new franchise concept if it can manage supply chain well.

Time and cost optimization is the major goal of SCM. Players in the supply chain always try to reduce the time and cost of the distribution. Especially time is critical in the ice cream industry, because it has direct impact with the product life. So each player in the SC including Ki Do, its distribution centres, retailers, etc must seek for way to reduce the cost and time of distribution

Five logistics and SCM strategies

Electronic data interchange (EDI)

The major issue is SC members communicate and send handwritten or typed documents primarily through fax, email. So, information sharing between SC players is met an obstacle by enormous paper workload and little standardization.

EDI helps vendors and HoReCa communicate easily because it use a standard format (such as Uniform Communication Standard (UCS)) to communicate the data including purchasing orders, price, promotion, invoices, shipping notices, vendor-managed inventory, and information that enables vendors to put price tags on goods over the Internet through extranets

Using Third Party Logistics (3PL)

The current issues of some SC players in Vietnam are having poor transportation condition, insufficient quantity with low condition of warehouse, low knowledge and skills in logistics, etc because they do not have capability to investment much on them. Therefore, using 3PLs is the best choice for these companies. In the past, each manufacturer or each distributor needs to purchase their own refrigerated delivery vehicles, and other specialized tools to support for ice cream transportation. These things are costly, and if any distributor can not invest on this, its ice cream will be lowered quality during transportation process. However, 3PLs (such as FedEx or UPS, etc) nowadays has invested on these transportation means and cold storage facilities to serve many manufacturers and distributors.

3PLs is not only provide outbound and inbound transportation service (such as NYK logistics, VN train, Germatrans, etc), but only warehouse (Pacitech corporatio, etc.), freight forwarding (Vinalink, Sotrans, Vietrans), quality inspection (Vina Control, Pacific Inspection Co., Ltd), packaging, importing or customs clearance (Intimes, Tanimex), and customs brokerage service. SC players can use these services from 3PLs.

Collaborative Planning, forecasting and Replenishment (CPFR)

CPFR in itself is not software, propriety technology or even a data standard. CPFR is a business practice for trading partners to share forecast and results data over the internet, so they can reduce inventory costs while improving product availability across the SC.

There are many steps to plan and execute CPFR such as create Front end agreement with partners, joint business plan with them, sales forecast collaboration, order forecast collaboration, order generation and delivery execution.

By implementing CPFR, single-function relationships across organizations (buyer and seller) will be moved to multi-functional collaboration between trading partners. It can be imagined as "moving from a butterfly structure to a diamond structure".

Apply Scan-Based Trading (SBT)

Scan-based trading is the process where suppliers maintain ownership of inventory within retailers' warehouses or stores until items are scanned at the point of sale. In order to extend quality control, Ki Do Joint Stock Company can use SBT with their franchisees and other distribution channels. In this case, merchant pays Ki Do for products based on what is actually scanned at the checkout counter.

Invest on human resource development by training programs

As the concept of supply chain management becomes more popular and more technology focused, Ki Do and other SC members need to think that it is necessary to provide some additional training for:

  • people will be working directly with supply chain technology
  • managers of the supply chain
  • and sales team so that they know the objectives of the company, the importance of supply chain management, and requirement (required information, data, etc) that supply chain management people need from them, etc.

With the rapid changes taking place in most companies, it is extremely important for employees to have their technological skills up to date. According to a survey developed by BearingPoint, one of the world's largest business consulting and systems integration firms, there is 96 percent cited the need for further employee training to help maintain inventory control and integrity. In addition, the fact is that given a high percentage of warehouse employees who are from the local communities, many lack a solid understanding of basic warehouse principles. Moreover, supply chain management is still quite new for many employees and many companies in Vietnam. Therefore, training programs are really necessary.

Logistics and SCM strategic plan

  • Vision:

Ki Do Joint Stock Company's supply chain is the best cost effective, integrated and demand-responsive one for packaged food in Vietnam by 2012

  • Mission:

The purpose of project is to provide (across the various components of the enterprise) streamlined execution, increased visibility, seamless collaboration, spent logistics and supply chain cost efficiency by implementing SBT, CPFR and Training Programs.

  • Operative goals
  • Reduce paperwork to 95% by 2012
  • Reduce document error correction costs to 90% by 2012
  • Reduce sales force time spent communicating basic item information to customers, following up, resolving queries by 30% by 2012
  • Reduced total logistics and supply chain costs by 10% each year
  • Increase the relationship between SC member by 40% by 2012
  • Sales increases ranged from 20% to 30% each year based on product category
  • Increase customer service level by 20% each year
  • Required resources:
  • Finance: Money to buy softwares, applications; pay for installing staff, maintaining fee, etc.
  • Personnel: top management of all participant firms, logistics & SC staff of these firms and IT staff
  • Technology: fax, phone, internet, etc.

References

  • 'Ai se la nha phan phoi lon cua VN trong tuong lai?', VietnamNet, 21 May 2005, viewed 6 September 2007,<http://vietnamnet.vn/kinhte/2005/05/437311/>
  • Access supply chain website, About Access Supply Chain Ltd, Company profile, '10 Steps implementation Plan', viewed on 5 September 2007, <http://www.access-supplychain.com/company/about-access-supply-chain/implementation-plan.aspx>
  • Coyle, JJ, Bardi, EJ & Langley, CJ 2003, 'Logistics and Supply Chain Information Systems', The Management of Business Logistics, 7th edn, Thomson Learning, Canada, pp. 75
  • '300 Dreyer's Ice Cream Reefers Sport New Decals', Refrigerated Transporter', viewed 7 September 2007, <http://refrigeratedtrans.com/mag/transportation_dreyers_ice_cream/>
  • Foster, T., 2000, 'Collaborative Planning, Forecasting and Replenishment- Made for the Web', SupplyChainBrain.com, 31 October 2000, viewed 3 September 2007, <http://www.glscs.com/archives/10.31.00.Planning.htm?adcode=10>
  • 'Gotcha! Watch Your Steps With Scan-Based Trading', Baseline, A Year in the Life of a Greeting Card, 1 March 2003, viewed 6 September 2007, <http://www.baselinemag.com/print_article2/0,1217,a=38465,00.asp>
  • Group 11/SMD9, 2006, Slime ice cream project, view on 3 September, 2007, <http://www.khoiphucdulieu.com/vn/idr/smd_mau2.pdf>
  • Ha 2007, 'Kido's ice-cream sets share auction to raise funds', ThanhNienNews, 24 January 2007, viewed 6 September 2007, <http://www.thanhniennews.com/business/?catid=2&newsid=24580>
  • Kurt Salmon, 'Survey of Supply Chain Effectiveness', GMA (The Association of Food, Beverage and Consumer Products Companies), viewed on 7 September 2007, <http://www.gmabrands.com/publications/docs/SupplyChain.pdf>
  • 'Ngon tuy?t kem Merino - Trúng ngay xe Piaggio', Cho Dien Tu, viewed on 4 September 2007, <http://www.chodientu.vn/?portal=auction&page=saleoff_view&id=488>
  • Paul, D. 2006, 'Beyond CPFR Web-enabled scan-based trading emerges as a trusted tool for managing in-store inventory', Internet Retailer, viewed 7 September 2007, <http://www.internetretailer.com/internet/marketing-conference/06930-beyond-cpfr.html>
  • 'Phased approach Blends Management, Process and Technology', Ozburn-Hessey Logistics, viewed 7 September 2007, <http://www.ohlogistics.com/Approach.asp>
  • RMIT Blackboard, Euromonitor International, 'Packaged Food In Vietnam', March 2005, viewed 4 September 2007
  • RMIT library, Euromonitor International, 'Ice Cream- Vietnam', 25 April, 2007, viewed 5 September 2007, <http://www.portal.euromonitor.com.ezproxy.lib.rmit.edu.au/portal/server.pt?control=SetCommunity&CommunityID=206&PageID=719&cached=false&space=CommunityPage>
  • RMIT library, Euromonitor International, 'Packaged Food- Vietnam', 5 April 2006, viewed 6 September, <http://www.portal.euromonitor.com.ezproxy.lib.rmit.edu.au/portal/server.pt?control=SetCommunity&CommunityID=210&PageID=726&cached=false&space=CommunityPage>
  • Sa, N 2007, 'Ice cream market heating up', VietnamNet Bridge, 25 January 2007, viewed 4 September 2007, <http://english.vietnamnet.vn/biz/2007/01/657399/>
  • 'Scan based trading: listen, learn, save', Prescient, Fact sheet, marketing material sent to An's email on 6 September 2007
  • 'Supply chain technology', EPIQ, viewed 7 September, 2007, <http://www.epiqtech.com/supply_chain-Technology.htm>
  • 'Supply chain training', EPIQ, viewed 7 September, 2007, <http://www.epiqtech.com/supply_chain-Training.htm>
  • 'The Future is Here', From the MIT Center for Transportation & Logistics, SupplyChainBrain.com, viewed 31 August 2007, <http://www.supplychainbrain.com/news/e02.22.05.newsletter.htm>
  • Wikipedia, 'Scan-based trading', viewed 7 September 20007, <http://en.wikipedia.org/wiki/Scan-based_trading>

Appendix

  1. Scan-Based Trading:

Because consumer takeaway drives what the ice cream manufacturer stocks, the manufacturer has shifted to a closed-loop distribution system. As the result, they reported having more detailed knowledge of what is selling at each location, and the traditional invoice discrepancies are being eliminated (Coylr, Bardi & Langley 2003, pp.75). One SBT user reported a 60% reduction in invoice error correction costs by the implementation of SBT at an average cost of $70.00 per disputed invoice, the savings are substantial (Wikipedia, 2007)

This is the important and effective strategy that Ki Do Joint Stock Company should think, utilize, and implement it when Ki Do is going to implement new franchise concept. Ki Do can increase speed to market by scan-based trading because it does not only bring many advantages to Ki Do, but also to its franchisees or retailers.

Other advantages of SBT for Ki Do include:

  • Increased sales: other SBT suppliers have estimated that their increase in sales by switching to a Scan Based Trading model is from 1% - 5%
  • Reduced cost of inventory: in the supply chain for supplier merchandized product retailers will experience a reduction in cost of inventory. With SBT, product deliveries are based on actual store inventory of individual items. There is a dramatic reduction in product held in the supply chain (typically held by suppliers agents/merchandisers/franchisees) by implementing SBT
  • Reduced time to market: SBT allows Ki Do to put new products into retail outlets at no risk to the retailer, since Ki Do continues to own the inventory until it is scanned at the point of sale. This allows the supplier to determine new item performance and adjusting selection prior to wide scale rollout to all retail locations. The result is increased selection of timely products which results in a better shopping experience for the consumer and increased sales for both the retailer and supplier because the "expert" on product, the supplier, is in charge of inventory selection. In addition, suppliers can reduce cost for sales staff to service retailers by using the co-ordinated "bi-directional item information synchronization approach inherent in SBT, suppliers have reported a 7% to 13% reduction in sales force time spent communicating basic item information to customers, following up, resolving queries (Wikipedia, 2007).

By using SBT, Ki Do's pre-sales and merchandising personnel are no longer tied to a truck and without worrying about delivery deadlines. Ki Do's truck can deliver to 12 stores per route, instead of just about eight. Some routes can now run one truck two times per day, adding efficiencies to the delivery process the company has never before seen. Where it used to take one hour to make an average delivery, now it takes just 18 to 20 minutes

Advantages of SBT for Ki Do's franchisees and retailers include:

  • Increased Sales: the increase was driven by the supplier having more time in the store to merchandise its product, fill holes, and maintain plan-o-gram integrity. In addition, several retailers mentioned suppliers were able to make an additional stop at each store during the week to merchandise products and prevent out-of-stocks. Salmon and Associates reported that "a grocery retailer's sales increased in every product category it tested - from bread to ice to magazines. Sales increases ranged from 1% to 5%, based on product category". Schnuck Markets reported a 4% increase in sales for its SBT pilot (Wikipedia, 2007)
  • Reduced Invoice/Order Processing Costs (as surveyed many retailers)
  • Lowered Cost of Inventory: SBT changes inventory ownership to the supplier, the retailer experiences a reduction in retailer-owned inventory.
  • Reduced Stock Outages: SBT forces the supplier to manage and merchandize its products to ensure that the right product is on the shelf at the right time or the supplier will see a loss of revenue. This provides a powerful incentive to reduce stock outages.

(Wikipedia, 2007)

Disadvantages of SBT:

  • According to Kurt Salmon's survey result (http://www.gmabrands.com/publications/docs/SupplyChain.pdf) manufacturers are generally not enthusiastic about SBT based on issues including shrink, tax implications, damages, liability, etc.
  • Synchronizing data is not a simple and small step: The matching of product data moving inside suppliers' and retailers' supply-chain systems is required before companies can even think of trading ice cream based on scanning bar codes at the checkout lane. This means not just getting product codes and descriptions in the retailer's system to match those in each supplier's database, but "cleaning" the data to remove any erroneous items or "free-form" data that may have been entered into systems to fudge in the future. Only then can data be shared through a directory of products or electronic document exchanges.
  • Many right standards needed to be followed: In order to make sure the work Ki Do do to synchronize date is reusable across the retailers, franchisees Ki Do trade with it will need to convince its partners all to adhere to standard ways of formatting their information. There are many standards followed such as the Uniform Code Council and EAN International, UCCnet, GTIN, etc.
  • Bar codes are not accurate enough: The Universal Product Code that is captured in a bar code only has 12 digits and only categorizes a product. It takes more digits to identify a specific product and manufacturer. There will have an extension of the UPC standard, but most of point-of sale and retail systems can not read the extended barcode. There is a solution for this problem is that supplier can use the Electronic Product Code (EPC), a 28-digit number that can be used with radio-frequency identification (RFID) chips and other electronic labels to give each product its own unique identifier developed by the Auto-ID Center at MIT. However, it is very expensive that few companies accept it.

(Baseline, 2003)

  1. Invest on human resource development by training programs

The purpose of training is to help managers and other employers feel comfortable and confident in their ability to use the available tools to effectively manage the business's supply chain.

There are many training methods and options for SC members to use. However, companies should recognize the need to provide the training in the most cost-effective and time-efficient manner.

Following are some options SC members can consider:

  • On-the-job training: the employee would learn how to use the supply chain management tools while working with them in a hands-on situation. Someone knowledgeable about the program would normally supervise them either from within the organization or from a third-party firm.
  1. Evaluation:

There are four criteria chosen to evaluate the identified strategies as following:

  • Low implementation barriers (30%): how many barriers happened when implementing the strategy, and how big they are. Barriers may include initial set up cost, standards followed, accompanying applications required to install, etc.
  • Reduced logistics & SC costs (30%): how much inventory cost, transportation cost, procurement cost, customer service cost, etc will be reduced after implementing the strategy.
  • Improved relationship between SC members (20%): how collaboration level, trusting level, etc that SC members will have after implementing the strategy.
  • Improved customer service (20%): how well the strategy will help SC members increase customer service and customer satisfaction regarding improved cycle time, on-time delivery, good quality of products, less complicated in procurement and procedures, etc.

Writing Services

Essay Writing
Service

Find out how the very best essay writing service can help you accomplish more and achieve higher marks today.

Assignment Writing Service

From complicated assignments to tricky tasks, our experts can tackle virtually any question thrown at them.

Dissertation Writing Service

A dissertation (also known as a thesis or research project) is probably the most important piece of work for any student! From full dissertations to individual chapters, we’re on hand to support you.

Coursework Writing Service

Our expert qualified writers can help you get your coursework right first time, every time.

Dissertation Proposal Service

The first step to completing a dissertation is to create a proposal that talks about what you wish to do. Our experts can design suitable methodologies - perfect to help you get started with a dissertation.

Report Writing
Service

Reports for any audience. Perfectly structured, professionally written, and tailored to suit your exact requirements.

Essay Skeleton Answer Service

If you’re just looking for some help to get started on an essay, our outline service provides you with a perfect essay plan.

Marking & Proofreading Service

Not sure if your work is hitting the mark? Struggling to get feedback from your lecturer? Our premium marking service was created just for you - get the feedback you deserve now.

Exam Revision
Service

Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.