Individual Assignment 1

Module: ERCBM 110

Supply Network Solutions

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 Table of contents

1.Introduction..............................................................................................................................................1

2.What is supply chain management (SCM)?..............................................................................................1

2.1 Supply chain.......................................................................................................................................1

2.2 Supply chain management................................................................................................................1

3.Trung Nguyen coffee................................................................................................................................1

3.1 Organization overview.......................................................................................................................1

3.2 Trung Nguyen’s supply chain.............................................................................................................2

3.2.1 The first step is Plan....................................................................................................................2

3.2.2 The second step is Source...........................................................................................................3

3.2.3 The third step is Make................................................................................................................3

3.2.4 The fourth step is Delivery..........................................................................................................4

3.2.5 The last step is Return................................................................................................................4

3.3 The key Success Factor of SCM in Trung Nguyen...............................................................................4

3.3.1 UTZ standard..............................................................................................................................4

3.3.2 4C standard.................................................................................................................................6

4.Suggestions for improvement of the organisation’s SCM for the future..................................................6

5.Reference.................................................................................................................................................6
1.Introduction
Supply chain management is the study of the organization, construction, and
management of the supply of materials and goods in the enterprise. The main key here
is to help students have a new perspective, understand supply chain management as a
professional profession and play a very important role in enhancing the competitive
advantage of businesses in the stage of economic development. The course introduces
concepts, definitions, perspectives, values, goals, methods, and techniques for building
supply chain management systems to give learners an overview before entering the
expertise.

2.What is Supply chain management (SCM)?

2.1 Definition of Supply chain
Supply chain is the integration of key business processes from end user through original
suppliers, that provide products, services, and information that add value for customer
and other stakeholders.

A supply chain consists of all parties involved, directly or indirectly, in fulfilling a

customer request. Supply chain includes manufacturer and suppliers, plus transporters,
warehouses, retailers, and customers themselves.

2.2 Supply chain management

Supply chain management involves planning, design and control of flow of material,
information and finance along the supply chain to deliver superior value to the end
customer in an effective and efficient manner.

Supply chain management included logistics, marketing, new product development,

finance and customer care.

A good supply chain management plays an important role to organization: reduce

inventory (25-60%), reduce the cost for supply chain (25-50%), profit after tax increase
20%, increase accuracy in the production forecast (25-80%).

3.Trung Nguyen coffee

3.1 Organization overview

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 Located in the coffee belt which has the ideal conditions for coffee trees to grow up.
Vietnam rapidly became one of the largest coffee exporter in the world (the first is
Brazil). It’s Trung Nguyen That played an important role in bringing the brand of
Vietnamese coffee to the global market.

Trung Nguyen Group was founded in 1996. It is a corporation involving in the production,
manufacturing and coffee business. Trung Nguyen is one of the most famous brands in
Vietnam and exports their product to more than 60 countries in the world.

3.2 Trung Nguyen’s supply chain

Trung Nguyen has continuously improved and develop its supply chain to produce
“Trung Nguyen coffee” product with the highest quality. Trung Nguyen has applied the
supply chain based on SCOR model. In this model, the main supply chain process
includes 5 stage: Plan, Source, Make, Delivery and Return.

Source

Make
Plan
Plan Delivery

Return

Figure 1 ERP

3.2.1 The first step is Plan

Including demand forecasting, inventory management and pricing policies. In order to
carry out those step, Trung Nguyen has started investing to operate the Enterprise
Resource Planning (ERP) system.

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Financial management Manufacturing resource

ERP
Human resource
management

Supply chain management

Customer relationship
management

Figure 2:ERP system

3.2.2 The second step is Source
The company focuses on management suppliers of raw material machinery and
packaging.

Trung Nguyen selects the best coffee bean in the world form Ethiopia, Jamaica, Brazil,
Columbia and Vietnam, Trung Nguyen bought domestic coffee beans from farmers,
businessmen and private agents. Now, to actively manage quality and quantity, Trung
Nguyen has invested and managed sustainable coffee farm in accordance with UTZ
standard in Dak Lak, which planted up to 2.500ha with 1.500 farmer households.

In term of machines, the company has purchased modern processing equipment from
the world’s leading German technology company Neuhaus, Neotec, ….

About packaging, Trung Nguyen has famous packaging supplier in Vietnam such as
Phuong Nam and Vinapacking company.

3.2.3 The third step is Make

Trung Nguyen has two factories of producing coffee, including coffee factory in Binh
Duong and once in Bac Giang. The production process of of instant coffee in Trung
Nguyen assists of 3 major stages:

Stage 1: Raw bean processing, including analyzing materials, impurity screening, raw
bean drying.

Stage 2: Beans roasting.

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 Stage 3: To produce instant coffee, the coffee beans have been extracted, filtered and
concentrated, spayed drying.

3.2.4 The fourth step is Delivery

Tru ng Nguyen’s distribution system consists of 2 main channels:

Traditional distribution systems include local retail supermarkets (BigC, Co.op Mart,
Vinmart,…) with a network of 121 distributors, 7.000 outlet all over the country and
many countries around the worlds.

G7 Mart is modern distribution system located all over the provinces and cities
nationwide. Trung Nguyen also perform the first franchise system in Vietnam (2009)
that includes in the United States, Japan, Singapore.

3.2.5 The last step is Return

If goods are defective by the manufacturer, they will be exchanged within 3 days
according to the company. Furthermore, Trung Nguyen is committed to ensuring the
quality of good according to standards and food safety such as ingredient, expire
date….

3.3 The key Success Factor of SCM in Trung Nguyen

To operate smoothly in the whole supply chain, every point of supply chain must be
operated effectively as planned. However, there are always possible risks which can
make it fail to do so. Therefore, companies need to implement safety practices to avoid
risk.

Trung Nguyen know that over 90% safety and taste of every cup of coffee is decided by
the quality of coffee beans. That’s why their prominent safety practices are applying UTZ
and 4C standard for source of raw material.

3.3.1 UTZ standard

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 Figure 2 UTZ wheel

In term of UTZ standard. UTZ standard focuses on regulation of irrigation water, use of
fertilizers and pesticide, regulation on harvesting, processing and preserving to the
regulations on the environment, biodiversity, soil erosion.

Firstly, the achievement of UTZ certification helps Trung Nguyen affirm the brand, grow,
harvest and process reliable products.

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 Secondly, compliance with the UTZ standard has ensured the safety of farmers,
citizens involved in labor and production. Over the past 10 years, there has been no
record of serious labor accidents in Trung Nguyen’s production.

Applying UTZ standard Trung Nguyen has achieved a lot of competitive advantage. The
biggest advantage is that Trung Nguyen can control the stable supply of raw materials
with the right quality and quantity without dependence on businessmen and the private
supplying agents. Besides, the implementation of safety practices has increased the
brand value of Trung Nguyen in the coffee products markets.

At the beginning of apply UTZ standards, Trung Nguyen has many difficulties such as
farmers producing coffee previously familiar with small production, the sense of
cooperation it not high, not familiar with the application of labor safety measures,
improper use of water reduces production.

3.3.2 4C standard
Trung Nguyen also applies the Common Code for the Coffee Community (4C) which
includes 12 principles of similar economic social and environmental similar with UTZ; 45
criteria, entailing specific check-points to be controlled during the audit in order to verify
compliance with the respective criteria. However, achieving the 4C standard will help
Trung Nguyen to affirm its name in markets where UTZ is not recognized.

When applying 4C standard, Trung Nguyen has to spend a lot of money in the transition
period. If there is no guarantee for selling the product at a higher price, then they will
suffer a great loss.

4.Suggestions for improvement of the organisation’s SCM for the future

In my opinion, I have a few recommendations to progress this supply chain. First, they
should train farmers, advise and support the peasant households. Second, strengthen the
Trung Nguyen fund to support coffee farmers and sustainable coffee development for
farmers. Third, raise awareness about the benefits of sustainable coffee to consumers
thereby increasing demand, market share of sustainable coffee. Finally, increase
technical inputs for farmers, continue to create sustainable models of coffee production.
5.Reference
4C official website: <https://www.4c-services.org/about/what-is-4c/>.

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Christopher, M., 2017. Logistics & Supply Chain Management.

ERC Institue’s learning material.

Khosrow-Pour, M., 2017. Encyclopedia of Information Science and Technology. IGI

Global.

Lambert, D. M., Cooper, M. C. & Pagh, J. D., 1998. Supply Chain Management:
Implementation Issues and Research Opportunities. The International Journal of
Logistics Management, 9(2), 1-20.

Nguyễn Thanh Đạm, T., 2020. Trung Nguyên Modernizes IT With IBM Cloud To Take
Coffee Brand Global. [online] Cloud computing news. Available at:
<https://www.ibm.com/blogs/cloud-computing/2018/11/30/trung-nguyen-legend-corp-ibm-
cloud/> [Accessed 31 October 2020].

Trung Nguyên Legend. 2020. TRUNG NGUYEN LEGEND’S MILESTONE - Trung

Nguyên Legend. [online] Available at :<https://trungnguyenlegend.com/lich-su-phat-
trien/?lang=en>.

UTZ official website. [online] Available at: <https://utz.org/what-we-offer/certification/the-

standard/>.

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