FSM 3601

Food Industry Operations Management

STUDENT-CENTERED LEARNING GROUP ASSIGNMENT:

Supply Chain Management

LECTURER:
Dr. Tan Tai Boon

Group 4 Members:

No. Name Matric no.

1. Tan Yee Xin 196087

2. Ng Bee Chi 196093

3. Heah Wan Yee 196340

4. Tan Yee Shuang 197324

5. Choy Mun Ngah 197360

6. Loke Pooi Yan 199890

1.0 INTRODUCTION

Supply chain is referred to as the "lifeblood" of a business. It links suppliers,

manufacturers and final customers in a network that is critical to the creation and delivery of
goods and services. Supply chain management (SCM) is the management of this chain which is
defined as the process of integrating supply and demand management across all members and
channels of the supply chain to ensure that they work together efficiently (“Supply Chain
Management: Here’s What You Need to Know”, 2020). It works by organising the movement of
procurement, suppliers, manufacturer, retailers, distributors and customers in the production,
sales and purchase cycles (Indeed Editorial Team, 2021). Generally, SCM is a critical component
of business success and customer satisfaction. An effective SCM can greatly reduce the
operating cost of a company, resulting in higher profits. Also, it allows a company to gain a
competitive advantage by delivering products to customers more quickly.

HEINEKEN Malaysia is a leading brewer in Malaysia which was founded in 1964. This
company operates in the beverage industry, owning a multiple of popular brands such as
Guinness, Tiger, Apple Fox and Anchor. As a major producer of beer, cider and non-alcoholic
malta in Malaysia, HEINEKEN Malaysia deals with a wide variety of suppliers, distributors and
customers. Hence, an integrated approach to management is required for an effective supply
chain to meet the needs of these business partners. This report, therefore, tried to investigate the
SCM strategies in HEINEKEN Malaysia by interviewing a person-in-charge of the company. It
also highlighted the effects of Covid-19 pandemic on the company’s supply chain and their
strategies in overcoming those pandemic effects.
2.0 METHODOLOGY

In this study, a qualitative approach has been selected in order to collect contextual data
regarding the supply chain management strategy of HEINEKEN Malaysia via interview
method, as it has been suggested by Oakley, A. (1998), that “qualitative interview is a type of
framework in which the practices and standards be not only recorded, but also achieved,
challenged and as well as reinforced”. Hence, such an approach has been adopted to obtain more
different perspectives on the study subject matter.

A semi-structured interview was conducted with a respondent holding the position of

total productive maintenance (TPM) manager which focuses on total productive maintenance
(TPM) and human resources management in HEINEKEN Malaysia. A virtual interview call
invitation was being extended to the respondent initially; however, the interview was done via
email as the communication channel as per requested by the respondent due to time constraint
later. A preset 19 open-ended questions were prepared to be delivered to the respondent via
email, where the prepared structured interview set includes the core topic as well as many
relevant questions linked to the study's subject matter, which are supply chain management
elements. The answers given by the respondent were then obtained in transcript form which is
delivered back to us by email channel. Both the question-answer set and email conversation can
be found in the appendix section in Figure 8.1 and Figure 8.1.1 respectively.
3.0 COMPANY BACKGROUND

The company selected for our study is an alcoholic beverage company, which is
HEINEKEN Malaysia. Named after its founder, HEINEKEN is one of the largest brewers in
the world that can be accessed worldwide. Since the turn of the century, Heineken has been
continuously rising, and has grown to become one of the most powerful international premium
beer brands. With its huge international presence, HEINEKEN owns and controls one of the
world's most diverse portfolios of beer brands with over 170 speciality beers available to fulfil
the needs of customers from all over the world. Through a worldwide strong network of
distributors and breweries, Amstel®, Europe's third-best-selling beer, Cruzcampo®, Tiger®,
Zywiec®, Birra Moretti®, Ochota®, Murphy's®, and Star® are among the well-known brands
that has been established in their portfolio.

In this study, we are focusing on HEINEKEN's headquarters in Malaysia. Established in

1964 with 57 years of history, HEINEKEN Malaysia consists of roughly 600 employees located
in its headquarters and brewery at Petaling Jaya, Selangor besides 13 sales offices in Peninsular
and East Malaysia. The company puts high focus towards developing their people as they
believe that their employees are the lifeblood of the company that propels them ahead with their
enthusiasm and commitment. The best values that could represent HEINEKEN are their values
of “passion for quality, enjoyment of life, respect for people and for the planet” in their daily
operations, as such values underpins their worldwide sustainability strategy of “Brewing a
Better World” and improve their stakeholder relationship management in the entire supply
chain. It is their belief that being responsible towards the people, planet, and performance is
essential for long-term sustainability. Hence, HEINEKEN Malaysia has been actively
contributing to their sustainability strategy which focuses on the entire value chain from
production (barley) to bar (consumption), where they support various United Nations
Sustainable Development Goals (SDGs) with relevant strategies. Some significant initiatives to
note are advocating responsible consumption, promoting health and safety, water resources
protection, carbon footprint emissions reduction, sustainable sourcing, and also giving back to
the community via local community engagements.
4.0 SUPPLY CHAIN MANAGEMENT (SCM)

4.1 Supply Chain Description

4.1.1 Plan

The main operation of the supply chain flow in the HEINEKEN company is brewing, packaging
and logistics. Quality, engineering, safety and TPM are the main support functions in their
supply chain. Besides, their procurement is also important to ensure the company has the correct
vendor and materials in place. They have a supplier for packaging material and raw material.
These suppliers also provide technical and knowledge support whenever needed.

There are three strategies used by the company to ensure their products meet the customer
demand. Firstly, they have to understand the need in forecasting the future demands, then plan
ahead to prevent out of stocks. Next, they have to ensure food safety and quality products of their
company. Collecting the voice of customers and the feedback periodically is another strategy to
know about the satisfaction of customers with their products. Moreover, the strategies to yield
the maximum profits were also stated during the interview. These strategies include
understanding and tackling the losses, besides, understanding the process and always checking
with other partners (in the Region/ Global) on good practices. Another strategy is worked with
procurement which is searching for alternative approved materials or vendors.

4.1.2 Source

There are three types of sources received by the HEINEKEN company which are raw materials,
packaging materials and the services. The raw materials are liquid sugar, malt, yeast, etc.
Besides, the packaging materials involve glass bottle, can, lid, glass lid, cartoon boxes, paper
layer, plastic crates, keg, plastic wrappers, labels, etc. Lastly, their service includes labor, civil
works, mechanical works, technical works, machines maintenance and services, calibration, pest
control, cleaning, etc. The criteria for the HEINEKEN company to choose the suppliers for
ingredients and materials is to make sure the quality materials meet the specification and are
approved by region. The company carried out the audit of their suppliers by visiting the plants
yearly or whenever required. Also, they use email as the communication method to remain
connected with the suppliers.
4.1.3 Make

Make is the process that transforms the product into a finished state to meet planned or actual
demand. In this process, it is necessary to take into account all the activities of the transformation
process from the raw material to the final product, as well as the flows of material and
information of the productive process.

In HEINEKEN, the processes involved in producing the beverage are brewing, packing and
distribution. There are various measures that HEINEKEN takes to ensure a smooth production
process flow such as materials planning, production planning, maintenance planning, Hazard
Analysis Critical Control Point (HACCP) and ISO system and Total Productive Maintenance
Methodology. Material planning is the method of planning to determine the requirements of
consumables, raw materials, spare parts and other miscellaneous materials essential for the
production plan implementation whereas production planning is the planning in production or
manufacturing in order to achieve the efficient process for production. It maximizes the
utilization of employees and materials as well as the capacity of production. In the aspect of food
safety, HACCP is used in HEINEKEN as it is the management system in which food safety is
addressed through the analysis and control of biological, chemical and physical hazards from raw
material production, procurement and handling, to manufacturing, distribution and consumption
of the finished product. Since HEINEKEN achieved ISO 9001:2015, hence it uses the standard
to demonstrate the ability to consistently provide products and services that meet customer and
regulatory requirements. Total productive maintenance (TPM), on the other hand, is the process
of using machines, equipment, employees and supporting processes to maintain and improve the
integrity of production and the quality of systems. Finally, the measures that HEINEKEN takes
to ensure good storage of finished product are the standard establishment of warehouse space and
condition.
4.1.4 Deliver

Deliver is the process that provides finished goods and services to meet planned or actual
demand, typically including order management, transportation management and distribution
management.

HEINEKEN uses trucking and waterway in delivering their product. Trucking is used for
delivery within Peninsular Malaysia while waterway is used for delivery to East Malaysia.
HEINEKEN uses third party logistics service providers (LSPs) for the distribution of their
finished goods to their customers. What can the potential suppliers offer and how competitive
they are with their bids or quotes for the lanes are the criterias for HEINEKEN to choose their
LSPs. Besides, they also evaluate the supplier in terms of reputation, service levels and costs
during the selection of the supplier. To ensure full commitment and smooth operations, they
focus on limiting the number of LSPs per region. Meanwhile, they also have specific LSPs to
handle duty free shipments which require specific requirements and good experience in handling
the market. Furthermore, the company has specific LSPs management to ensure they maximize
value out of their contracts.

4.1.5 Return

HEINEKEN has the business continuity program and product recall procedure to manage
product recall or return. Business continuity program is a document that outlines how a business
will continue operating during an unplanned disruption in service while product recall is defined
as a request to return, exchange, or replace a product after a manufacturer or consumer watch
group discovers defects that could hinder performance, harm consumers, or produce legal issues
for the producers. Yearly audit (mock recall) is used to ensure system works to trace from raw
material to finished goods. Mock recall is regular activities performed by manufacturers,
processors, distributions and other business partners in the supply chain to evaluate the recall
processes and responsiveness. If the products have been returned to HEINEKEN, the products
will be disposed of due to quality issues. Finally, their strategies to reduce the number of
products returned is to ensure food safety and quality of the products and plan the production as
per market demand.
4.2 Supply Chain Flow

HEINEKEN’s supply chain is based on the SCOR model. This model is a management tool for
evaluating supply chains, which stretches from the supplier's supplier to the customer's customer
(Armendáriz, 2010). It is based on five business processes:

● Plan: processes that control sourcing, making, delivering and returning.

● Source: procedures that obtain products and services.
● Make: procedures that convert the product to a finished state.
● Deliver: procedures that provide finished goods, order management, transportation
management and distribution management.
● Return: procedures involved in receiving and returning goods.

Figure 4.2: HEINEKEN Supply Chain

5.0 COVID-19 PANDEMIC ON COMPANY’S SUPPLY CHAIN

In order to overcome the Covid-19 pandemic, our government has been implementing the
Movement Control Order (MCO) since March 2020. This has caused a direct impact to almost
all the economic sectors in Malaysia because their business operations are being restricted.

5.1 Effects

The Food and Beverages (F&B) industry is one of the most impacted sectors during this
pandemic. From the interview, we can know that HEINEKEN has been experiencing the
operation idle and interrupted. This is because almost all the non-essential services,
industries and entertaining sectors are unable to operate during the MCO period. Therefore,
HEINEKEN is unable to produce or deliver their products as usual. They have to bear the risk of
their operating cost as they are holding the raw materials and finished goods in the factory. This
definitely causes a huge financial trouble to HEINEKEN; thus, leads to the difficulty in their
business operation, especially the production and human resource department.

5.2 Strategies

For their business to be sustained in this pandemic, HEINEKEN has undertaken several
initiatives. The major initiative taken is optimizing the operating cost which literally means
reducing the cost while maximizing the business value. One way to better monitor the operating
cost is by right sizing. Right sizing is known as a process to restructure or reorganize the
company itself by lowering the workforce and cost as well as repositioning the top management
(Ahmed, 2019). This measure aims to streamline the business so that an effective profit making
is assured. In this case, HEINEKEN has implemented right sizing to help them overcome the
crisis caused by the pandemic. They have reorganized their operation in order to make
themselves better fitting into the current economic system. Moreover, they cut down some
unnecessary workforce for the sake of cost saving.
6.0 CONCLUSION

In summary, supply chain management (SCM) of HEINEKEN Malaysia can be discussed

using the supply chain operations reference model (SCOR). The model covers six key
components for creating an effective supply chain which are planning, sourcing, making,
delivering and return. It clearly describes the business processes implemented by HEINEKEN
Malaysia to meet their customer's demands. By interviewing the total productive maintenance
(TPM) manager of the company, it was found that each of the components is an essential step in
the company’s supply chain, successfully moving their product through each level between their
suppliers, their company and their customers.
7.0 REFERENCES

Ahmed, A. (2019). What Is Organizational Rightsizing? Retrieved from:

https://smallbusiness.chron.com/organizational-rightsizing-78217.html

Armendáriz, M. (2010). A methodology to assess the maturity level of brewery business

Processes.

Golparvar, M., & Seifbarghy, M. (2009). Application of SCOR Model in an Oil-producing

Company. Journal Of Optimization In Industrial Engineering, 4, 59-69. Retrieved from
http://www.qjie.ir/article_33_5baf8c771a8cf8fead5b3bbd14071749.pdf

Heineken Malaysia Berhad Corporate Profile. (n.d.). Company Profile. Retrieved from:
https://www.heinekenmalaysia.com/corporate-profile/.

Indeed Editorial Team (2021). What Is Supply Chain Management and Why Is It Important?
Retrieved from:
https://www.indeed.com/career-advice/career-development/what-is-supply-chain-manage
ment-and-why-is-it-important

Jonathan, T., & Noria, C. (n.d). Total Productive Maintenance: An Overview. Retrieved from:
https://www.reliableplant.com/Read/26210/tpm-lean-implement

MBA Skool Team. (2020). Materials Planning. Retrieved from:

https://www.mbaskool.com/business-concepts/operations-logistics-supply-chain-terms/15
614-materials-planning.html#:~:text=Material%20planning%20is%20the%20scientific,fo
r%20the%20production%20plan%20implementation.

Oakley, A. (1998). Gender, methodology and people's ways of knowing: Some problems with
feminism and the paradigm debate in social science. Sociology, 32(4), 707-731.

Supply Chain Management: Here’s What You Need to Know. (2020). Retrieved from:
https://www.michiganstateuniversityonline.com/resources/supply-chain/what-is-supply-c
hain-management/
The Scor Model: Example and Definition. (2020). Retrieved from:
https://www.hebergementwebs.com/selling-on-the-internet/the-scor-model-example-and-
definition

What is ISO 9001:2005 - Quality Management Systems? (n.d). Retrieved from:

https://asq.org/quality-resources/iso-9001
8.0 APPENDICES
8.1 Interview Questions and Answers
 Figure 8.1: Interview Questions and Answers

Figure 8.1.1: Email Conversation for Supply Chain Management Interview with HEINEKEN
Malaysia’s TPM Manager