Introduction to Logistics and

Supply Chain Management

VinEco
Course name: Introduction to Logistics and Supply Chain Management

Course code: OMGT2085

Lecturer: Nguyen Manh Hung

Word: 2931

Team 3

S3463113 - Doan Minh Hoang

S3557492 - Luong Thi Hien

S3639863 - Nguyen Duc Thanh

S3636101 - Tran Quynh Ngoc

1.................................................................................................. Ta
ble of Contents
A. EXECUTIVE SUMMARY.....................................................................................2
B. INTRODUCTION...................................................................................................3
1. Company background........................................................................................3
2. Supply chain flow..............................................................................................3
2.1 Channel map……………………………………………………………….3
2.2 Product flows………………………………………………………………4
2.3 Information flows………………………………………………………….4

3. Key supply chain objective……………………………………………………..5

C. LOGISTIC ISSUES ANALYSIS............................................................................5

1. Planning manager..............................................................................................5
Issue 1: Complexity of product types and supplier networks…………………..6
2. Purchasing and materials manager…………………………………………….7
Issue 2 Difficulty in supplier selection process………………………………..7
Issue 3 Difficulty in building supplier development…………………………..9
3. Inventory manager.............................................................................................10
Issue 4 Difficulty in preservation……………………………………………...10
Issue 5 Managing and keeping track of inventory………………………….....11
4. Transportation manager.....................................................................................12
Issue 6 Infrastructure and geographic issue……………………………………13
D. CONCLUSION.......................................................................................................15
E. REFERENCES…………………………………………………………………….16
F. APPENDIX………………………………………………………………………..20

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Executive summary
Vineco is one of the pioneer company that commits to distribute organic vegetables and fruits to
customers. Those qualified products are supplied mainly from four main farms and 1000 local
households (Vineco, 2016). Beside, Vineco are supporting all 1000 suppliers in order to produce
standard agriculture products and helping the suppliers to expose many efficient ways and
techniques of planting. As the results, management team have to consider many tasks in order to
achieve the objectives. This study, 6 potential challenges from 4 different logistic roles regarding
to planning, purchasing and materials, inventory and transportation will be analysed carefully
and shows the implication of each issue on achieving Vineco objectives.
Firstly, Vineco channel map shows the flows of agriculture products to end use customer. Also,
the importance and impacts of information flows to the overall performances of Vineco will be
discussed.
Secondly, in logistic issues parts, for planning manager, the complexity of products and logistic
network might cause error in managing the whole supply chain. Loss of controlling may
ultimately prevent Vineco to achieve the goal of providing non-chemical products for the
communities and ensuring the right time of delivery.
Furthermore, for the inventory manager, challenging in preserving, managing and keeping track
of vegetables and fruits are taken into account. The more effective in preserving, managing
inventory, the better in term of product quality, delivery time, refill stock out. As the results,
customer satisfactions occurred which match with reliability objective of Vineco.
Next, for Vineco purchasing and materials manager, supplier selection process and building
supply development are two main issues which will be debated. This report have found out some
influences of these main challenges which are the significantly contribution on creating
reliability toward customers in term of distributing organic products; building a long-term
community supplied clean, non-chemical agriculture products. Consequently, bring a healthy life
to the community.

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Last but not least, infrastructure and geographic issues will be mentions because its directly
affect the fresh level of vegetables and fruits. As the results, create a barrier for Vineco to
achieve reliability from customer.

INTRODUCTION

1. Company background
Vineco founded in 2015 is a sub-brand of Vingroup and the main vegetables and fruits supplier
for Vinmart supermarkets and VinMart+ convenience stores with four major farms across the
country in Cu Chi, Tam Dao, Quang Ninh and Long Thanh (Vineco 2016). All of its products
comply to Vietgap standards from the seed selection, raising, preservation to delivery to the
customers since its vision focuses on providing nutritious and safe agricultural products for
Vietnamese and future generations while building good reputation in global marketplace
(Vineco, 2016).

2. Supply Chain flow

2.1 Channel map

Figure 1. The Vineco Supply chain Reproduced from Vineco (2016)

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 2.2 Production flow
Product flow is considered as an crucial element in supply-chain management (Coyle et al.
2013). The channel map indicates the movement of products from producers/suppliers to
customers. In detail, after being harvested  from four key producer farms mentioned above and
approximately 1000 households, all the vegetables and fruits will be delivered to a warehouse for
the cleaning, packaging and labelling process, which then will be preserved  in a separate area
with 5 degrees of temperature until the transportation process by Sagawa Holding logistic
company (Vineco 2016). Noticeably, Sagawa is also in charge of transporting all agriculture
products to every Vinmart stores and the Vinhomes Residence as well (Vineco 2016).

2.3 Information flow

Traditionally, the information flow is considered as opposition to product flow (Coyle et al.
2013b). However, the modern situation demonstrates a two-way flow of information in supply
chain.

An effective information flow is generated based on an effective collaboration which enables

business to effectively avoid uncertainty in demand level to improve product life cycle (Madenas
et al, 2014). In the case of agriculture industry, vegetables and fruits are very perishable;
consequently, by applying this method, Vineco is able to reduce the risk faced by high-inventory
status or bullwhip effects (Singh 1996).

Demand and sales data are the first way of information flows. At this stage, data related to the
consumption quantity demanded is forecasted and transmitted towards wholesalers, vendors and
manufacturers hence they are become relatively well-prepared and  could replenished orders
(Coyle et al. 2014). As a result, a well-cooperative information flow may shorten the lead time
while reducing costs.

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The forward information flow involves shipping notifications, inventory information and
delivery condition with which accurate information functions as an improvement tool in terms of
replenishment time, reducing the risk along with high-inventory level and increasing
transportation efficiency.

3. Key supply chain objective

Reliability: There are several ways that enable Vineco to achieve its goal of distributing all
organic-fresh agriculture products which are implementing standardized technology in
plant’s growing process, supporting farmers in term of knowledge and technique to form
consistent planting process; focusing on preservation process and ensuring product are
delivered at the right time and right quality.

Sustainability and green supply chain: Vineco is adopting several corporate social
responsibility (CSRs) in terms of generating jobs for local farmers, assisting farmer to
acknowledge modern technique for sustain-development in long-term, and providing non-
chemical products for the communities to avoid diseases, improve people’s health.

ISSUE ANALYSIS

1. Planning Manager
There are many responsibilities and duties of a planning manager are leading, giving
advices, making decisions on all activities involves supply chain planning operation,
process development, customer and client interaction, etc (Cargill 2016).  Therefore, due
to the nature of complexity tasks, a planning manager faces many difficulties to fulfill
their roles. In case of Vineco, the diversity in term of products and suppliers network will
are considered as main issue which will be discussed carefully.

Issue 1: Complexity of product type and supplier networks

Logistics management involves the coordination of a network of suppliers and market centers
(Langford 2007). Vinmart services provided through a system of VinEco’s 1.000 plants and

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collection points in Cu Chi, Tam Dao, Quang Ninh, Long Thanh, mixing points in preparation -
packaging - preservation and distribution warehouse in VinMart’s retailers. In many scenerios,
VinEco faces a situation in which products and logistics network are being more complex and
the amount of stock keeping units is exploding and must find ways to reducing the complication
of this issue. Recently, VinEco has more than 5.000 items in available of various types of
vegetables for example organic vegetables with 19 different kinds or hydroponic vegetables with
28 different kinds and many other kinds of other veggie types, along with miscellaneous kinds of
fruits (Vingroup 2016). With this variety of products, VinEco and VinMart will perfectly meet
the needs from daily life of a large number of consumers. However, the flow of goods and
services for each product, involves the movement and storage status, work-in-process inventory,
and of finished goods from point of origin to point of consumption will become more complex
because of that, especially when the products are fresh fruits and veggies. According to Closs
(2016), once the company started providing, distributing variety of product portfolio, regardless
of the volume, it will create different level complexity. Moreover, for each additional logistics
network might increase the network’s complexity as well as the possibility to obtain errors,
mistakes in management. Consequently, it could push Vineco into diminishing control on not
only logistic costs but also the overall performances of business. Such loss of control may
ultimately lead to management’s focusing on the logistics cost situation and paying heed to the
logistics functions (Daugherty 2016). There are also many additional services in the network of
distribution for customers such as free shipping within five kilometers, free cleaning fresh-food
or provide a convenient payment method by all types of bank cards (Vineco 2016). Listening to
signals and market demand to plan facilities accordingly improves the effectiveness of sale and
operations planning but also increase complexity for the supply stream

Implication
KPI: 8/10
The capabilities of management task in planning cause many impact to every department and
business divisions of the supply chains. A lack of capacity or talent in the planning management
of a company may dictate that it adopt a strategy which reduces the complexity of management
task, delegates logistics responsibility to other functional managers, or otherwise minimizes the
impact that any single logistics manager or department could have on total corporate perfomance

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(Daugherty 2016). To reduce the level complexity, which is one of VinMart's primary concerns,
the company could following seven principles of supply chain management especially source
strategically (Novack, 2008). In detail, several common approaches included greater
standardization and simplifying processes to minimize the costs and lead-time for complexity.
Managing the supply chain will become quicker and more nimble. Manufacturing can be
standardized by focusing on fewer individual products and stock keeping units at individual
locations or by simplifying component combinations (Closs 2016). For example, agricultural
products from plants using high technologies of VinEco will be focused only to produce basic
vegetables and fruits, follow seasonal demands as well as geographical and other conditions of
each farm. In fact, agricultural products are composed of similar components. Therefore, VinEco
should extend component commonality to offer a high customer product variety with a low
production variety. More specifically, the company might replace several different components
by ones and raise the degree of variety of non-chemical vegetables and fruits that can be
produced with the same components. That leads to a reduction in term of time, cost and risk due
to the re-use of existing parts. On the other hand, VinMart provides a multiple channel
distribution for customers. Therefore, to support the development of VinEco and VinMart brand,
investing in systems for direct to consumers and investing in for wholesale must be concerned
seriously to avoid misspending and find out the best amount for each one because evidence of
strong planning management expertise includes developing a strategy based largely on its
logistics capability. That way, VinEco might achieve the goal for organizational objectives of
producing stably with consistent results and ensuring all organic-fresh products for consumers
through sustainable and green supply chain.

2. Purchasing and material managers

Purchasing management involves the procurement process of raw materials, suppliers,
equipments and so on (Johnsen, Miemczyk & Howard 2014) . Purchasing and materials
managements could functions as a competitive advantage of an organisation. The
competitive advantage is obtained via  the effectiveness in picking the right suppliers and
well-managing suppliers. In case of large number of suppliers, selecting and managing
suppliers could be challenges which will be discuss below

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 Issue 1: Difficulty in supplier selection process
According to Feyzan (2013), suitable suppliers bring multiple benefits for any operation in term
of reducing in purchasing cost, lead-time, increasing customer satisfaction and strengthen
competitive advantage. Therefore, selecting appropriate suppliers process is critically important
to achieve an effective supply-chain management. However, the larger the number of supplier,
the more difficulty in selecting process. As the result, the buying firm should obtain some clear
criterias as the benchmark in evaluating and selecting the suppliers. It enables for a fair and
objective decision occurred.  
Implication
KPI: 8.5/10
According to Vineco (2016), the supplier will benefit from different type of integration provided
by Vineco such as, knowledge support, technical support, technology support, and a maximum
300 billions Vietnam Dong budget. By sharing and committing with those integrating terms
show the responsibility of Vineco toward community, helping farmers to improve knowledge,
expose an efficient and productive ways of planting which are contribute for a long-term
sustainability of agriculture industry.
Noticeable that, Vineco have drawn a significant large number of applications due to its
favourable integrating conditions (Vineco, 2016). Then, if Vineco does not set a standard
benchmark, there will be an absolutely complexed selecting process. Hence, inappropriate
supplier is selected, they are unable to follows all the Vineco’s technique and standards. As the
results, product’s quality is questioned combining with the unstable lead time imply a negative
impact on the progress of building customer’s reliability. Consequently,  reduce the performance
status of Vineco.
Issue 2: Difficulty in building supplier development
Supplier development aims to align the benefit of buyer and suppliers (Larson, Carr & Dhariwal,
2005). Several benefits of the buying firm are determined based on some measurements such as
defective rate, on-time delivery, product quality (Krause, 1997). Ford et al (2003) claims that,
multi-suppliers could be an obstacles in developing long-term relationship. The below diagram
extracted from Kraljic (1983) illustrates some criterias that indicates Vineco belongs to the

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noncritical quadrat. He claims that, supplier development is obtained best under high risk
supplying.

Adapted from Larson, P Carr, P Dhariwal, K  (2005)

Implication
KPI: 8.5/10

Establishing and maintaining buyer-supplier relationship via communication are two

fundamental factors affect the process of supply development (Li et al, 2012). In case of Vineco,
Firstly, 1000 suppliers enable Vineco to have a low level of risk due to high switching power.
Consequently, create a barrier to form and strengthen the relationship with suppliers. As the
relationship is not close, Vineco cannot obtain some benefit such as product quality and on-time
delivery.
Secondly, in order to achieve an effective buyer-supplier connection, a well-communication
method and minimizing of conflicts should be required (Paulraj, Lado & Chen 2008) The larger

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the number of suppliers, the more difficulty in communicating, transmitting informations.
Vineco, with a thousands of supplier imply an obstacle in communication. According to
Vinhome (2016) and Vineco (2016), the main method of communication amongst Vineco and
suppliers are via phone in ordering process and direct supervising in each household. The
expected outcomes are to ensure each household is following the standards to produce the
qualified product to customer; checking whether there are any barriers occurred during
implementing new method to guarantee a sustained progress for agriculture industry generally
and individual household specifically.
3. Inventory manager
The ultimate objective in inventory management is to maintain specific requirements,
provide an ideal preservation environment and limit such expenditures as administration
and store costs (Johnson 2015). In fact, it illustrates the necessity of balancing products
availability; controlling inward and outward goods flow as well as safety stock (Vrijhoef
& Koskela 2000). In the case of excess in sales or unexpected delay that withhold
products and prolong turnover cycle, safety stock can be considered as a backup plan for
specific situations (Langford, 2007). Therefore, Radhakrishnan, Gopalan and Prasad
(2009) refer inventory management as one of the key factors for every supply chain.

Issue 1: Difficulty in preservation

The perishability characteristic of fruits and vegetable creates a strict demand for high-quality
preservation technology in providing ideal environment for agricultural products in transporting
to distributors and retailers. Importantly, each type of fresh ingredients and food requires slight
differences in terms of temperature, humidity and methods (Blackburn & Scudder 2009). For
example, vegetables need to keep in plastic bags as well as keep it in a degrees from 1-4 degrees
to make sure the vegetable is fresh and doesn't go wilt (Ha Vy 2014). It indicates that the costs of
preserving for storing as well as transporting are quite high, not to mention the significant
expenditures spent on adjustments in preservation methods in accordance to different product
kinds. One of the selling point for the company which is also the reason that consumers choose
to trust and purchase products from Vineco is the reliability of the firm. Vineco is known for
providing all organic-fresh vegetables and fruit to consumers which mean the firm preserved the
product without any pesticides or chemical. Even though it is challenging and costly to preserves

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vegetable and fruits in a an organic method due to the variety of the products, it is a necessary
cost to maintain the quality of the products to ensure the reliability of the firm, increase customer
services as well as competing with the competitors.
Implication
KPI: 8.5/10
Due to the fact that preservation of the products is directly related to the quality of the products
(Blackburn & Scudder, 2009) Therefore, if Vineco does not meet the requirement to preserve
their products can lead to reduce in quality of the products. Nguyen (n.d) that consumer’s most
concern is the products are pesticides or not. Over 50% of the consumer first criteria to purchase
vegetables is 100% organic and the product does not use pesticides. Secondly, almost 30% of
consumers concern about how fresh the product is. This clearly demonstrates that the quality of
vegetable is an important factor to encourage consumer to purchase the products from Vineco.
Therefore, if there is a decrease in the quality of the product, it can directly affect to sales of the
company, lost customer to competitors and create an opportunity for competitors to surpass as
well as gaining loyal customers. To ensure this does not happen, Vineco need to increase their
investment to make sure the inventory management meet the requirement in preservation to
maintain the product’s quality. This lead to a significant increase in cost for inventory to
continuous repairing and maintaining the inventory in best condition.

Issue 2. Managing and keeping track of inventory

A basic issue for inventory manager is managing and keeping track of inventory. The manager
need to keeping track on basic problems like when to order new products, what items need to be
re-order, how much products need to be order for the next shipment and where to store the
products in the inventory. It is even more challenging with the products being related to the food
category due to the fact that vegetable and fruits are a diversity product. Customer concern about
the quality of the product, as well as where the product come from and made in. As for each
types of vegetable or fruits that made in a different area or in different method will have a
signature taste lead to differences in the price range which create difficulty in categorizing and
managing these products. Inventory play a crucial role mitigating variations in supply and
demand as well as providing high customer services. Nonetheless, the process of inventory
decision-making is not included when it come to distribution plan for the supply chain. These

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created an increase in workload as well as raise the difficulty for inventory manager to manage
their inventory.
Implication
KPI: 8.5/10
Based on the fact that inventory management directly affect the quality of the product as well as
the level of customer services, Vineco need to ensure their inventory management process
fluently in order to compete with other competitors. Problems in keeping track and managing
inventory can create varied issues such as increase in workload, stock out in products, messing
up order and delivery time as well as increase in inventory cost which directly affect the level of
customer services due to the fact that these issues are factors that impact on lead time reduction
(Joannès, 2014) which also related to level of customer services. To avoid this, Vineco need to
utilize more responsive for order processing as well as create the ability to strategically manage
logistic data. Applying the Pull and Push approach and system-wide approach like MRP or DRP
can increase in performance and anticipate the amount of products need to order for inventory
and can decrease lead time and boost customer services.
4. Transportation manager
Transportation always plays a vital role in any supply chain of every company in the
world because all of the product must be delivered through this channel. As Yue (2014)
claims that, transportation process costs approximately 33% to 66% of total expenses for
any enterprises. Thus, if a company doesn’t have a good logistics system, the delivery
cost will be huge and cause a massive loss in the company revenue. Therefore, the need
for developing a reliable, responsive and responsible transport system in every company
supply chain is inevitable. A transportation manager is responsible for the shipments
process of an organization are handled as fast as possible, safely, and within budget
constraints (Dtudy.com, 2016). Vineco has already taken the pioneering steps to enhance
its transport system with the new agreement with Sagawa (Dantri, 2016) but there still
might face problems with infrastructure and geographic features.

Issue 1: Infrastructure and Geographic issues

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According to Yuen (2015), underdevelopment infrastructures in Vietnam are consider as main
barrier to growth for not only the domestic logistic companies but also the international one.
Specifically, some logistics facilities, which contain warehouses, container freight stations, are
not accessible regarding to the fact of long distances, geographical located and so on. Moreover,
Hunter Publishing (2003) states that approximately 75% percent of Vietnam is wrapped by
mountains and rain forests. Although the infrastructure in term of port, road, railway etc. have
been upgraded, however, the fact of enormous number of industrial parks appears are exceeded
the development of infrastructure. In detail, many of the highways are linked the ports with
industrial parks or city centers, as well as the port terminals lead to an extremely congestion.
Combining with infrastructure gaps between the North and the South of Vietnam. Consequently,
it creates a high barrier for delivery, shipping products from one area to another. In case of
Vineco, collaborate and buy all the agriculture products from 1000 households in different parts
of Vietnam (Vineco, 2016) might pull Vineco into the problem of transportation.

Traffic Jam In Ho Chi Minh City (Taken by: L.G, Vnexpress.net)

Implication

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 KPI: 9.5/10
The fact that traffic jam causes delivery delays is undeniable. Also, it negativly impact on
Vineco in this circumstance. As many Vinmart/Vinmart+ located in densely populated areas,
which makes it impossible to deliver any Vineco products during peak hours. The inadequate
infrastructure, especially in remote areas, could increase the chance of traffic accidents, which
may result in the human casualties and the loss of assets. It will hamper the company profit and
cause a delay in the logistics system and make it become unresponsive. As a result of the
unexpected accident, Vineco will have to make an urgent shipment to compensate the loss
products in the accident, which not only increase the cost of operation but also deter the
company image - an unreliable one.
Although all companies have no choice but to use the infrastructure, they can still reduce the loss
products percentage during delivering by carefully making schedules, avoid rush hour and
reduce the number of steps to deliver the products from the farms to the retailers.

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 CONCLUSION
In conclusion, we have identified and analyzed 6 issues that Vineco logistics system are
potentially face. The importance of each issue are undeniable due to the fact its effect directly
Vineco ‘s performance to achieve objectives. However, transportation roles is considered as most
crucial factors for Vineco to build up reliability toward consumers.
Firstly, transporting functions are tightly associated with the delivery time and quality products
(Yue, 2014). Because the faster the transporting process, the higher  the product’s quality. In
case of agriculture industry, regarding to the nature feature of products which are perishables,
transportation time could determine the level of fresh vegetables and fruits. Consequently, for
over 30% of customer who are concern about the freshness of product (Nguyen, n.d) will be
satisfy, boosting the purchasing level as well as building customer reliability for the brand
Vineco.  

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APPENDICES
APPENDIX 1: CHANNEL MAP

APPENDIX 2: SWOT ANALYSIS

STRENGTHS WEAKNESSES

 High reputation brand (MarketLine,  High price compares to

2016) traditional market (see Appendix
 Using cutting-edge technology from the 4)
farms to the customers’ end (Vineco)  Difficulty in managing 1000
 Approx 350 retailers in Vietnam suppliers (Vineco, 2016)
(Vingroup,2015)  External factors such as
 Diverse product portfolio (see Appendix infrastructure, geographic might
4) be the barriers in transporting
 Receive many positive attention from product.

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 press and goverman in term of
supporting farmers, distributing
qualified products (Vineco, 2016)
 High capabilities in supply vegetables
and fruit
⇒ Strengthen company’s credibility

OPPORTUNITIES THREATS

 In 2020, the demand for organic  New competitors.

vegetable is expected 962 tons/day  Traditional markets are still
(Phung, n.d) leading the retail. (Phuong, 2016)

APPENDIX 3. PORTFOLIO OF SUPPLIER RELATIONSHIPS.

APPENDIX 4: PRODUCTS SOLD IN VINMART

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