Issues of Supply Chain of Beverage Industry in Vietnam

Topics: Inventory, Supply chain management, Logistics Pages: 7 (1976 words) Published: November 10, 2008
a)5 issues
+ The quality of warehouse system of supply chain players (farmers) using for storing coffee beans is not good: There are rains during the drying season but the farm-level storage facilities are not enough to protect coffee beans from wet weather. Consequently, the quality of coffee beans can be affected negatively by mould (Minot, 1998) + The capacities of warehouses using for finished products are not made use of in the most effective way. Because of lacking management in warehouse operations, utilization of space (utilizing the facility’s height and minimizing aisle space) is not achieved. Also, the placement stock is not paid attention yet in order to minimise labour costs or handling costs in warehouses.

-Information flow and management:
In Vietnam, most of orders of coffee are still treated in the traditional way: via telephone of face-to-face meeting. However, this utility of traditional methods leads to time-consuming and costly results. Some companies have already a website but it is used only for marketing and promotes the products.

-Inventory management:
There is a seasonality of supply of coffee beans in Vietnam: the harvesting season starts from late October and reach the peak in the middle of November each year (Kuwait Times, 2005). However, distributors, wholesalers and retailers of the supply chain do not care about the inventory safety level, they just estimate when they think it is need to replenish, which leads to the overload inventory or stock-out inventory. Sometimes, the overload inventory occurs due to poor demand forecasting or weak inventory visibility.

The mode of transportation distributing coffee beans from farmers to purchasing agent cannot ensure raw material’s quality and safety: Most households use "kong nong” (small locally-made tractors) to transport their dry coffee to private middlemen because of cheap transportation costs. However, that kind of private transportation is not made specializing in delivering coffee beans. Therefore, raw materials are affected in terms of quality and even lost in the delivery process.

-Customer services
Due to lack of communication with customers, the supply chain does not have accurate and updated information about customers’ requirements. As a result, the delivery time and quality of products do not satisfy customers, which results in low customer services level.

b)2 future challenges:
- Currently, there are approximately 800 operators in the Vietnamese coffee industry. However, those local companies mostly run their business in only a small scale and still have poor facilities, especially lacking of information technology capabilities (Phan, 2006).

- Another challenge is the poor infrastructure, especially undeveloped road transportation in Vietnam. The distribution of finished products faces difficulties due to traffic jam problems in urban areas. While the poor quality of roads cause difficulties in transporting raw materials (coffee beans) from growers/planters to purchasing agents (Neptune Orient Lines Limited, n.d.)

2)QUESTION 2: Identification of five feasible strategies and explanation i)Collaborative Planning, Forecasting, and Replenishment (CPFR): By integrating all supply chain members, CPFR can provide accurate and effective planning, forecasting and replenishment through technologies available such as EDI or the Internet. The CPFR strategy starts with the collaboration among trading partners in order to share customer data and marketing plans through EDI or the Internet. Then, CPFR solutions will use the collaboratively developed information about promotions, forecasts, item catalogue and orders with the purpose of generating demand, determine requirement and make to demand (Bowersox et al., 2007). By creating a direct link between the supply chain and consumers, CPFR will not only optimize supply chain by having accurate forecasts,...

References:  Team Coffee beans. 2008S2, OMGT2085: Practical Assignment-Team Part / Coffee Sector, RMIT University Vietnam
 Browersox, D.J., Closs, D.J. and Cooper, M.B., 2007, Supply Chain Logistics Management, 2nd edition, McGraw-Hill Irwin.
 Coyle, J.J, Bardi, E.J. and Langley, C.J., 2003, The Management of Business Logistics – A Supply Chain Perspective, 7th edition, South-Western Thomson Learning, Ohio.
 Wisner, J.D., Leong G.K. and Tan, K.C., 2005, Supply Chain Management: A balanced Approach, 1st edition, South-Western Thomson Learning, Ohio.
 Phan, T., 2006, Vietnam 's elusive WTO entry accompanied by logistics worries, Hong Kong Trade Development Council, Retrieved July 24, 2008 from
 Kuwait Times, 2005, Coffee prices unlikely to drop as demand grows, Retrieved July 24, 2008 from
 Neptune Orient Lines Limited, n.d., Vietnam Transportation and Logistics: Challenges and Opportunities, Retrieved July 24, 2008 from
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