INDIVIDUAL ASSIGNMENT

Name: Trần Thị Thủy Tiên

Class: SCM201- IB1502

Lecturer: Nguyễn Hoàng Hữu Giao

VINAMILK'S SUPPLY CHAIN

Abstract: Supply chain management is the critical success factor in the food processing
industries in general and in dairy firms in particular. This assignment  tries to describe the firm's
supply chain (strategy, tactic, philosophy or core value) of Vietnam Dairy Products Joint Stock
Company (Vinamilk). Along with the supply chain’s description, this article evaluates the firm's
supply chain through advantages and disadvantages. This assignment ends up with some
suggestions to improve for the firm's current supply chain (based on the drawback of the firm's
supply chain). 

Keywords: Vinamilk, supply chain, disadvantages, drawbacks, suggestion, improve 

Table of contents

1. Introduction
2. Body
 Introduction of Vinamilk
 Supply chain theory
 The firm’s supply chain
 Advantages and disadvantages of this supply chain
 Some suggestions for improvement current supply chain
3. Conclusion
Introduction: 

Nowadays, milk is known as a delicious, nutritious and extremely convenient product. Dairy
production is becoming one of the most important solutions to achieve sustainable development
for agriculture in Vietnam. However, in order for a glass of milk to reach consumers, it is not
simply a few steps, but a whole cycle, a series of activities that are diverse, complex, continuous
and contain many risks. Many businesses have failed, but there are also many companies that
have gained a lot of success thanks to a good method of their supply chain and Vietnam Dairy
Products Joint Stock Corporation Vinamilk is an example of that. So what has made the success
of Vinamilk in general or Vinamilk's dairy product supply chain in particular ? This assignment
will discuss more details about that.  

Let’s learn about "Vinamilk's dairy product supply chain".

Body

Vinamilk, which stands for Vietnam Dairy

Products Joint Stock Company, was
established in 1976 as the state-owned
Southern Coffee-Dairy. It has reached the title
of the biggest dairy company and has been
listed as 15th largest company currently.
Vinamilk has dominated approximately 75%
of the milk market of our nation and this
company has a solid distribution network
which spread through 64 provinces with 183
distributors and 94000 points of sale; also,
Vinamilk has exported their products to other countries such as Netherland, The United States,
France, Canada, and Germany… and so on.
With more than 43 years of establishment and development, with the bravery in renewing the
mechanism, anticipating the application of new technologies, breakthrough bravery, promoting
the creativity and dynamism of the collective, Vinamilk has risen and become an economic
bright spot during Vietnam's integration into the WTO. Vinamilk has become one of the leading
enterprises in Vietnam in all aspects, greatly contributing to the development of the country and
people of Vietnam.

With these outstanding

achievements, the Company has
honorably received not only
domestic achievements but also
international achievements such as:
VIETNAM’S 50 TOP
VALUABLE BRAND in  Forbes
Vietnam (2016 - 2020), TOP 10
VIETNAMESE HIGH QUALITY
PRODUCT by Association of Vietnamese High Quality Products (1995 - 2020), GLOBAL 2000
THE WORLD'S LARGEST PUBLIC COMPANIES in Forbes Magazine (2017), TOP 200
ASIA'S BEST OVER A BILLION in Forbes Magazine (2019)... and so on. 

Vinamilk has more than 200 products distributed to 30 countries. It commits to bring you the
nutrition solution with international standards, meeting the needs of consumers with delicious
and nutritious products and leading favorite brands in market such as: Vinamilk liquid milk,
Vinamilk yoghurt, Longevity sweetened condensed milk, Southern Star Sweetened Condensed
Creamer, Dielac powdered milk, V-Fresh Fruit Juice, etc. 

SUPPLY CHAIN THEORY

The supply chain includes all the businesses involved, directly or indirectly in satisfying
customer needs, representing the movement of materials throughout the process from the original
supplier to the customer. In the end all related issues directly or indirectly satisfy customer needs
such as manufacturers, suppliers, carriers, warehouses, retailers and customers. 

A supply chain is a set of three or more organizations linked directly by one or more of the
upstream or downstream flows of products, services, finances, and information from a source to
a customer. It is important to acknowledge that anytime business is conducted

a supply chain will exist. A supply chain orientation is a higher-level recognition of the strategic
value of managing operational activities and flows within and across a supply chain.

Supply chain management then, endorses a supply chain orientation and involves proactively
managing the two-way movement and coordination of goods, services, information, and funds
(i.e., the various flows) from raw material through end user. According to this definition, supply
chain management requires the coordination of activities and flows that extend across
boundaries. Organizations that endorse a supply chain orientation are likely to emphasize supply
chain management.

Regardless of the definition or supply chain perspective used, we should recognize that supply
chains are composed of interrelated activities that are internal and external to a firm. These
activities are diverse in their scope; the participants who support them are often located across
geographic boundaries and often come from diverse cultures.

In total, supply chain management is the design, planning, implementation and management of
processes that integrate chain members to maximize value for the entire chain. Supply chain
management is not just a job for supply chain managers. All other parts of an organization also
need to understand about SCM because they also directly affect the success or failure of the
supply chain. 

VINAMILK’ S STRATEGY in building competitive advantage

1. Vinamilk's input supply is strictly managed:

Investing in dairy farms to actively source fresh milk materials is an important strategic goal and
a long-term direction to help Vinamilk improve the quality and increase the localization rate of
raw materials. Vinamilk has the first organic dairy farm in Vietnam and was certified as meeting
EU Organic standards by the Control Union International Organization.

Currently, the DDD is managing two subsidiary companies Vietnam Dairy Cow One-Member
Company Limited (VINACOW; VINAMILK holding 100% charter capital) and Thong Nhat
Thanh Hoa Dairy Cow Company Limited (TNTHDW; VINAMILK holding 96.11% charter
capital); the farms system includes 10 dairy farms that spread out from North to South of
Vietnam. VINAMILK’s goal is to develop a dairy herd reaching up to 40,000 - 50,000 heads in
2021.
In parallel with the modern farm system, the DDD has signed undertaking-contracts for raw milk
with thousands of companies/farmers in the whole country; creating a relationship-bridge of
stable- and balanced-development for improving productivity, quality, reducing costs and
increasing competitiveness with imported milk. 
System of milk collection stations is an indispensable link in this connection. In 2016, the DDD
completed upgrading and modernizing collection stations; complying strictly with requirements
on hygiene and food safety standards. At the same time, to build new milk collection stations
following the modern model, closed process, satisfying farmers’ need to expand their farm.
Currently, the DDD has more than 90 milk collection stations in the whole country, along with
the main activity is purchasing raw milk, the DDD has other missions such as distributing
compound feed, consultancy and technology transfer, and controlling diseases of dairy cow, etc.
supporting to become a reliable address for the development of dairy cow in farmers. 

0. Vinamilk's factory has a high degree of automation and a smart warehouse system
Owning a system of 13 modern factories from North to South. In which, there is one SUPER
MEGA FACTORY, 1 of 3 super milk factories worldwide. All products are manufactured on the
world's most modern production line system of Tetra Pak from Sweden with the capacity
reaching 3 million cups of milk/day. The factory location is allocated close to the raw material
area, helping to optimize the transportation and ensure milk quality. Besides, VNM has LGV
Intelligent Robots to help optimize performance at the plant. 
VINAMILK’S SUPPLY CHAIN ( STRUCTURE and ROLE) 

The picture above is Vinamilk's supply chain model. 

Supplier

Product(s) Name of Suppliers

Powdered Milk Fonterra (SEA) Pte Ltd

Hoogwegt International BV

Tins Perstima Binh Duong

Fresh Milk Dairy Farm Bình Định

Dairy Farm Thanh Hóa

Dairy Farm Tuyên Quang

Dairy Farm Tây Ninh

Dairy Farm Lâm Đồng

Carton packaging and packaging Tetra Pak Indochina

machines

Role:  For the sustainable development purpose and for the high quality products, it is a must to
guarantee the standard of all the supplying materials. That is the reason why suppliers play an
important role in Vinamilk’s success and also contribute to the affordable products for the
customers. 
Fonterra is a global, cooperatively-owned company, also one of the best companies in the dairy
products field. The company holds approximately 30% of the world’s dairy exports and it
provides high class powdered milk to many organizations including Vinamilk.

Hoogwegt International was established in 1965 in the Netherlands, with more than 40 years of
experience Hoogwegt Group consisted of the most significant dairy companies all over the
world. Having a partner as Hoogwegt International is considered to assure the precise
information about dairy products business and catching up with the new trends of customers as
well. Furthermore, it has such a stable network with many large factories which can help
Vinamilk widen its business network. Vinamilk has many close connections with other suppliers
for more than 10 years which are also devoted to its success story. 

Tetra Pak is one of the largest international companies with headquarters in Sweden which
supplies processing solutions and products packaging for more than 170 countries. In 2013 it
provided Vinamilk with the integration and automation technology in the newly built factory that
helps enhance the efficiency production within the factory. One more factor which is taken into
account of Vinamilk competitive advantages is the fresh milk collected from the farms. After
being bought from the farmers, the fresh milk will be immediately moved to the milk hubs
within 1 hour in a cold storage system and then they will get the quality check with the set of
standards which are dry matter, fat, microbiology in order to make sure the material is good
enough. Especially, for the UHT milk production, the fresh milk has to be tested with 75 degree
alcohol to inspect the precipitation. After that, the qualified fresh milk will be transported to the
factories and wait for the production and in 2013, Vinamilk bought 156,562 tons of milk from
the farms in total. 

Perstima Binh Duong has continuously been a long-term partner of Vinamilk since establishment
in 1976 with the provision of high quality tins 

Delivery of material or production inventory

1. Collected fresh milk from farms

Raw milk from international standard farms such as: 12 farms meeting with ISO 9001: 2015,
Global G.A.P. standards and 3 farms meeting with the EU Organic standards. 

Quality raw milk products: At Vinamilk, raw materials are strictly selected from reputable
suppliers at home and abroad. Each shipment must have clear documents and be checked before,
during and after warehousing. Classification and assessment of supplier risks. Criteria for
evaluating high-end suppliers (raw materials, materials in direct contact with products: GFSI
certified or equivalent (FSSC/BRC/IFS / HACCP) ). Periodic supplier assessment (100% of
suppliers are monitored and assessed by the program established on the ERP system with the
criteria as goods quality and serving quality; 100% of new suppliers are assessed). Supervision
of supply process and irregular assessment. The strict control of the quality of milk purchased
from households.

0. Transported to hubs nearby to get quality check within 1 hour 

All fresh milk sources in the vicinity are gathered to the Center (Cu Chi Raw Milk Center), after
quality control, distributed to all factories in Ho Chi Minh City and Binh Duong, ensuring the
source, supply timing and quality of fresh milk are managed optimally. 

Cu Chi Raw Milk Center is equipped with modern machinery and equipment, including
refrigerated warehouses to store samples; a system of quick analysis and returning results to each
household; automatic CIP system providing tank trucks of the milk station with advanced
cleaning mode to ensure food hygiene and safety; ISO 9001: 2015 management system; rapid
milk cooling tank system of large volume, high flexibility, both receiving milk from the purchase
stations when necessary and directly receiving milk from cow farmers.

Currently, Vinamilk manages more than 83 milk purchase stations nationwide

0. Transported by tank truck to production inventories and wait to be transported to the

factories. 

There are 13 factories that are certificated with ISO 9001, FSSC 22000, ISO 17025, HALAL; 7
factories certified with the EU ORGANIC standard and 2 factories certified BRC standard. 
Role: Vinamilk has owned 2 logistics enterprises in the North and South of Vietnam which store
materials for production lines and transport products to distributors and consumers.

HCM Logistics Enterprise: 32 Dang Van Bi, Truong Tho, Thu Duc, HCMC

HN Logistics Enterprise: km10 route 5, Duong Xa, Gia Lam, Ha Noi.  

Production (Milk Factories)

The system of 13 factories built by

Vinamilk to connect with 13 dairy farms
across the country, combined with a
"huge" distribution system, has really
created a great strength for Vinamilk in
terms of supply chain.

Role: The Vietnam Dairy Factory is equipped with modern fresh milk production lines applied
state-of-the-art production technology, operated with a completely closed process from raw
material input to finished product output.
After testing for quality, raw milk will be weighed, filtered and entered into a cold storage silo
tank system ( 150 m3/ tank).

After cold storage, raw milk will be processed, i.e. centrifuged, homogenized, pasteurized,
cooled to 4oC then transferred to tanks and ready for UHT sterilization. Centrifugal separator
helps to eliminate almost all pathogens and spores.

State-of-the-art UHT sterilization systems can heat the milk up to 140 oC and cool down to 25 oC
quickly, helping to keep the natural flavor, nutrients, vitamins and minerals of the product. Milk
is pumped to aseptic tanks before aseptic filling.
The combination of advanced processing technology, UHT Sterilization and aseptic filling helps
products remain fresh for 6 months without any preservative.

LGV automatic robots move pallets of finished products to the smart warehouse. Furthermore,
LGV robots also transport packaging materials to filling machines. They can recharge
themselves without human intervention.

The operating system is based on the Tetra Plant Master Automation solution, which is the
integration, enables it to connect the entire plant from raw materials to finished products.
According to that, people can control every activity in the factory, monitor and control the
quality continuously. The Tetra Plant Master system also provides all the necessary data that
helps to continuously improve its production and maintain operations.
Storage and preservation

Besides products with nutritional quality, storage and preservation play an important role in
ensuring the quality from the farms to the dining tables.

Modern infrastructure and control systems are established on the basis of GMP and FSSC 22000
so that products are stored and preserved strictly according to technical requirements and the
regulations of loading and unloading during distribution.

At the same time, with the support of the ERP system, goods can be tracked, traced, imported
and exported using the FEFO principle.

Role: The warehouse is the leading smart warehouse in Vietnam which has an area of 6000 m2
with 20 entrances and exits, width of 105 m, height of 35 m. It is designed with 17 stores,
containing up to 27168 lots. Automatic import and export with 15 Rail guided vehicles (RGV)
transport pallets of finished product to the warehouse and then 8 stacker cranes align them to the
shelf system. The management of import and export goods is controlled by Wamas software. 
Distributors and retailers: 

With an extensive distribution network, quality control in distribution is a responsibility and also
a challenge for Vinamilk. 

Applying high technology, optimizing transportation routes.

Gradually converting fuel sources and vehicle types, reducing emissions.

Vinamilk’s distributor network: 

Satisfying food hygiene and safety requirements (Obtaining the certificate of food safety and
hygiene) 

Ensuring the infrastructure, area, warehouse environment match the characteristics of the
product 

Controlling pests and complying with the requirements of the Ministry of Health on the use of
insecticidal and germicidal chemicals and preparations.

Assessing capacity before entering into a contract 

Implementing regular and irregular reviews to ensure compliance.

Present, VNM has 2 domestic distribution channels:

 Traditional channel: distributes more than 80% of the company's production.  Vinamilk
has 3 main branches in Ha Noi, Da Nang, Can Tho and one headquarter in Ho Chi Minh
City. Hundreds of Vinamilk Stores provide a convenient and fast door-to-door delivery
service to consumers with Vinamilk’s top quality products, along with distinguished
promotions. In particular, there are 52 stores in North, 62 stores in Coast, 92 stores in Center,
52 stores in West, 32 stores in West and especially 103 stores in HCMC and 106 stores in Ha
Noi. 

 Modern channel: Vinamilk's advantage is through a system of invested dairy factories in

many localities throughout the country. With more than 1,400 first-level agents as well as a
distribution network spread across the country with more than 5000 agents and 178,000 retail
outlets selling Vinamilk's products as well as at other direct distribution channels such as
schools, hospitals, supermarkets, etc. market…

Besides, Vinamilk distributes its products abroad by region. Today Vinamilk’s products have
been exported to more than 40 countries worldwide, which include the South East Asian, the
Middle East, Africa and other countries with some key export products such as: Powder Milk,
Condensed product, Cereal, Soya drink, Milk drink and Beverage. 

Role: Vinamilk has been successful in managing all distribution channels, enhancing the skills of
its employees and meeting the increasing demands of consumers by applying advanced
information technology systems such as ERP, Oracle E Business Suite and Customer
Relationship Management row (CRM) to the entire process with the total revenue (consolidated)
2020 reached 59734vnd Billion.  

Customers: 

Individual customers

Organization
Role: Customers play an important part in the supply chain of lots of companies, not only
Vinamilk because all of the activities that Vinamilk has done are for their customers. It is a basic
profit factor and also sends feedback to the company. With customer feedback, they will
introduce what they are doing, what they are interested in the product as well as the expected
request that Vinamilk needs to adjust the flexibility and improve the supply chain.

Besides, Vinamilk wants users to better understand that they not only sell products but also
distribute them to the community such as creating many funds to support poor children from
remote areas and also showing interest in the environment.

Advantages and disadvantages of Vinamilk’s supply chain: 

Vinamilk's success today is largely due to supply chain management. So what has made the
success in the supply chain of Vinamilk product or advantages of Vinamilk supply chain. 

First of all, policy 3 “ YES”

It is Right Product, Right Quantity and Right Time. The correct identification of market products
should help Vinamilk ensure the sale of products, creating momentum for the smoothness in the
supply of goods to the market. Besides, Vinamilk is also aware of the importance of supplying
the right quantity and at the right time. The right quantity means not too much, not too little, so
that supply and demand balance as best as possible. Just in time to avoid storage and inventory
costs.

Secondly, speed

With the characteristics of food products in general and dairy products in general.

In particular, time is a vital element for businesses. Food manufacturers understand that and
Vinamilk is no exception. Between stages in its supply chain, Vinamilk always makes the most
of time, minimizing downtime.

Thirdly, spread the risk

In order to ensure that there is always enough raw milk for factories to operate, Vinamilk has
built many cow farms and the farms are increasingly expanded in size and modern in technology.
This helps Vinamilk avoid the scarcity of raw materials when an unexpected incident occurs,
reducing risks in the production and business process.

Risk dispersion was also applied by Vinamilk to the source of raw powder when the company
used a multi-supplier strategy (Fonterra and Hoogwegt International) instead of choosing a single
supplier.

Fourthly, tighten members in the chain

Vinamilk's supply chain is a unified and cohesive chain. Chain members depend on each other,
rely on each other to thrive.

  Fifthly, ensure parallel between a line of information and product line

Information flow and product line are two but one. These two lines exist relying on each other
and supporting each other. The launched products are informed to relevant units and to
consumers.

Lastly, guarantee 3 A: Agile, Adaptable and Align. 

However, there are some drawbacks that have a huge impact on revenue.

Milk powder, milk fat, ... used in the production of whole milk, pasteurized milk, yogurt, ... and
other products: imported from the US, Australia, New Zealand, ... Therefore, the price is very
high.

Since the company has a large dealer network, it is difficult for the company to manage these
agents, especially in remote and isolated areas. On the other hand, it is difficult to control all the
grocery stores and retail distributors at the "lower level" of the company.

Limitations in transportation: according to regulations on transporting milk, it is only allowed to

load up to 8 boxes on top of each other, but many retail Vinamilk milk distribution agents load
up to 15 boxes, then load and unload, toss. knocks damage the packaging.

Limitations in preservation: because the company's products are ubiquitous, for some fresh milk
products, they must be stored below 60C for 45 days, and at 150C for 20 days. At normal
temperature, it takes 2 or 3 days for milk to sour, but stores without air conditioning or
refrigeration equipment are very limited in preserving products that require refrigeration.

According to the advantages and disadvantages that I have mentioned above. I got some advice
for Vinamilk’s recent supply chain. First of all, I think Vinamilk should proactively source raw
materials in the domestic market and gradually replace imported raw materials for product price
reduction. Secondly, scale up factories and warehouses to avoid problems caused by long
distance transportation. Besides, modernizing factories to produce high-quality products. Next,
paying attention to the shipping process such as: the maximum quantity, healing system. Thirdly,
applicating and developing a software management system for both dealers and retailers. Lastly,
understand the nature of inspection and inspection during production, check regularly to make
early adjustments. Especially, constantly improve everything in the supply chain and be prepared
for change.

Conclusion: 

Over 43 years of establishment and development, with the courage to boldly innovate
mechanisms, take the lead in applying new technologies, breakthrough bravery, and promote the
creativity and dynamism of the collective, Vinamilk has risen to become one of the leading
brands in the world. become an economic bright spot in the time of Vietnam's WTO integration.
Vinamilk has become one of the leading enterprises of Vietnam in all aspects, making great
contributions to the development of the country and the people of Vietnam. Vinamilk's supply
chain must be improved and further improved so that Vinamilk can be more successful not only
in the domestic market but also abroad. 

References: 

[1] Book: Purchasing and Supply Chain Management 6th Edition of Monczka, Handfield,
Giunipero, Patterson.
[2] https://vietstock.vn/2009/06/sua-vinamilk-nhiem-khuan-su-co-moi-nguyen-nhan-luon-cu-36-
117655.htm 

[3]  https://www.vinamilk.com.vn/vi

[4] https://vinamilk.com.vn/static/uploads/article/1620207714-
e3cfc52e4ad5dff98c95899e572436272485aa1fd25939b33d90af899b376d65.pdf

[5] https://vilas.edu.vn/chuoi-cung-ung-cua-vinamilk.html

[6] https://text.123docz.net/document/2266722-phan-tich-chuoi-cung-ung-cua-cong-ty-co-phan-
sua-viet-nam-vinamilk.htm 

[7] https://www.slideshare.net/hoadai2891/bi-tho-lun-chui-cung-ng-sa-vinamilk 
References: 

https://sites.google.com/site/suabovinamilk1993/1---tap-dhoan-vinamilk/a-gioi-thieu-chung