0% found this document useful (0 votes)
268 views

Swot Analysis of Aj Total: A Cold Chain Logistics Service Provider (CLP) in Vietnam

Uploaded by

minh nguyen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
268 views

Swot Analysis of Aj Total: A Cold Chain Logistics Service Provider (CLP) in Vietnam

Uploaded by

minh nguyen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 41

TONG MYONG UNIVERSITY

Business School/Department of International Logistics

SWOT ANALYSIS OF AJ TOTAL: A COLD CHAIN


LOGISTICS SERVICE PROVIDER (CLP) IN
VIETNAM
Course: LOGISTICS PROJECT

Professor: Eshetu Tefera

By

GROUP 1

Nguyen Hai Minh - 18330115

Cao Thi Thu Hue - 18330095

Le Khanh Linh – 18330100

Nguyen Xuan Dat – 18330109

Report due date: June 15th, 2022


TONG MYONG UNIVERSITY
Business School/Department of International Logistics

SWOT ANALYSIS OF AJ TOTAL: A COLD


CHAIN LOGISTICS SERVICE PROVIDER
(CLP) IN VIETNAM

By

GROUP 1
Nguyen Hai Minh - 18330115
Cao Thi Thu Hue - 18330095
Le Khanh Linh – 18330100
Nguyen Xuan Dat – 18330109

Copyright © Tong Myong University

ii
Abstract

The new normal state of the economy has fueled the development of the cold chain industry
in Viet Nam. Evaluating the competency of cold chain logistics service providers (CLPs)
is a crucial strategic approach for any party in Vietnam’s Logistics Industry. This study
aims to evaluate one of the most outstanding CLPs named AJ Total VN. SWOT (strengths,
weaknesses, opportunities, and threats) analysis is utilized to evaluate the characteristics,
synthesize key insights and provide recommendations for AJ Total VN.

Keywords: Vietnam’s cold chain; AJ Total VN; SWOT Analysis; Cold Storage; Cold
Logistics Service Providers (CLPs)

iii
Acknowledgements

Our team sincerely thanks the authors. The previous scientific researchers who have had
valuable scientific research articles contributed a lot to our understanding, knowledge, and
experience to complete the research into this report.

We would also like to thank Professor Eshetu and our classmates, who have followed us
and given their positive comments so that we can edit and perfect the report to the best of
our ability.

iv
Table of Contents

Abstract .......................................................................................................................... iii


Acknowledgements ........................................................................................................ iv
Table of Contents ............................................................................................................ v
List of Figures................................................................................................................. vi
List of Tables ................................................................................................................. vii

Chapter 1. Introduction .............................................................................................. 1


1. Background & Justification .......................................................................................... 1
1.1 Vietnam’s cold chain market at a glance ................................................................ 1
1.2 Background of AJ Total .......................................................................................... 6
2. Value System .............................................................................................................. 7
2.1 Mission .................................................................................................................. 7
2.2 Vision/ Slogan ........................................................................................................ 8
2.3 Core Values ........................................................................................................... 8
3. Report Objectives ........................................................................................................ 9
4. Major Activities .......................................................................................................... 10

Chapter 2. Methodology........................................................................................... 16
1. Definition of SWOT analysis ...................................................................................... 16
2. Advantages of SWOT Analysis.................................................................................. 17
3. Limitations of SWOT Analysis ................................................................................... 18
4. Data Collection Method ............................................................................................. 19

Chapter 3. SWOT Analysis of AJ Total VN ............................................................. 22


1. Strengths ................................................................................................................... 22
3.1.1. Expertise ..................................................................................................... 22
3.1.2. Huge investment capital .............................................................................. 22
3.1.3. Technology .................................................................................................. 22
2. Weaknesses.............................................................................................................. 23
3. Opportunities ............................................................................................................. 23
4. Threats ...................................................................................................................... 25

Chapter 4. Lesson Learned ..................................................................................... 27

Chapter 5. Conclusion & Recommendation ........................................................... 32

Reference..................................................................................................................... 34

v
List of Figures

Figure 1 - Logistics market structure in Vietnam .............................................................. 2


Figure 2 - Cold storage type ............................................................................................ 3
Figure 3 - Total designed capacity of cold storage warehouse for lease in Vietnam, 2015
– 2020 ...................................................................................................... 4
Figure 4 - Assessment of cold storage services’ capacity in Vietnam, 2019 .................... 4
Figure 5 - Cold storage development potential ................................................................ 5
Figure 6 - Background of AJ Total ................................................................................... 6
Figure 7 - Developing history of AJ Total ......................................................................... 7
Figure 8 - Value system of AJ Total................................................................................. 7
Figure 9 - Core value of AJ Total ..................................................................................... 9
Figure 10 - AJ Total business ........................................................................................ 10
Figure 11 - Diversification of services ............................................................................ 10
Figure 12 - Cold storage network in S. Korea ................................................................ 11
Figure 13 - Cold storage network in Viet Nam ............................................................... 13
Figure 14 - South warehouse in Viet Nam ..................................................................... 14
Figure 15 - North warehouse in Viet Nam...................................................................... 15
Figure 16 - The process of cold chain logistics .............................................................. 28
Figure 17 - Cold Chain Logistics Process ...................................................................... 28
Figure 18 - Temperature and shelf life. .......................................................................... 30
Figure 19 - The Heat Shock Effect ................................................................................ 31

vi
List of Tables

Table 1 - Cold warehouse statistics in Mekong Delta area .............................................. 5


Table 2 - Overview of AJ Total ........................................................................................ 6
Table 3 - Example of customers in cold chain ............................................................... 25

vii
Chapter 1. Introduction

1. Background & Justification


In developed countries, the term "Supply Chain & Logistics Management" is known as
"the spine of the economy" to the vivid impacts on every individual and any given country.
The fate of the business will lie in the hand of the ones who manage their supply chain
well. On top of that, the cold chain is a subset of the supply chain. The goals are to convey
temperature-sensitive products along a supply chain using thermal and refrigerated packing
methods and logistical planning to protect the integrity of these shipments. COVID-19 and
global disruptions have hindered the global supply chain, yet, has planted the seed to
develop the cold chain.

Vietnam can be cited as an example as, despite widespread COVID, the market is emerging
very fast due to a pile of causes. When the modern commercial sector saw continuous
jumps in customer demand from the increasing numbers of online orders in the e-commerce
sector, the pressure on the current facility of logistics companies is acknowledged to need
upgrading. Also, since the disruption of the Zero-COVID policy hits agriculture, the
exporting flow of agricultural and fishery products gets stagnant, making the refrigerated
warehouse run at full power. Another justification is the ubiquitous existence of the
Omicron variant, accelerating the vaccination and importing medicines, creating the work
of handling and keeping these items for the cold chain field. However, the fledgling cold
chain industry of Vietnam can only meet a small part of the demand of its supply chain. At
the time being, the number of strong logistics service providers (LSP) capable of handling
the complexity and intensity of the supply chain is rare, and most of them are Foreign
Direct Investment (FDI). In short, too much demand and too few supplies.

1.1 Vietnam’s cold chain market at a glance

Cushman & Wakefield predicted Vietnam’s cold chain market grow rapidly, by 12% and
reaching $US295 million in 2025. Savills, a global real estate services provider, reported

1
that modern commercial retail was the driving force behind the industry growth, and
about 80 per cent of demands came from the food industry. In 2019, Vietnam had 48
refrigerated facilities with a total capacity of 600,000 pallets.

The cold chain is synthesized by FiinGroup in the figure 1 below, is the one of the most
promising logistics segments for growing in Vietnam thanks to soaring demands, creating
opportunities for both local and international companies to tap in.

Figure 1 - Logistics market structure in Vietnam

Source: From Vietnam cold chain market report 2019 by Fiin Group, 2019. In the public
domain

According to the Vietnam Logistics Industry Report 2021, Vietnam Industry Research and

Consultancy (VIRAC JSC.) have stated that demand exceeds supply in the cold chain
sector, with the number of enterprises using in production eight times the number of
suppliers in terms of the opportunities of the Vietnam logistics industry. Demand in cold
chain and e-commerce drivers would be favourable factors to consider when it comes to
the collaboration landscape for Korean logistics providers – Entry strategies. (VIRAC,
2021)

Due to the high demand in the South, the majority of cold chain service providers are from
the South, with four different types of ownership: 48% domestic manufacturing

2
companies, 24% foreign companies, 14% logistics companies, and the remaining 14% are
other business types.

Some of the VLA Association's members developed cold storage systems named
Transimex, Gemadept, and Saigon Newport throughout the country. (VIRAC, 2021)

According to CEL research, 66.7% of exporting companies use cold chain production,
which is eight times the number of companies supplying the domestic market (8.2%).
(VIRAC, 2021)

Cold storage can be divided into 2 types: owned and rented as figure 2 below.

Figure 2 - Cold storage type

Source: Adapted from Vietnam Logistics Industry Report 2021(2021st ed.) by VIRAC, 2021. In
the public domain.

3
Figure 3 - Total designed capacity of cold storage warehouse for lease in Vietnam, 2015 – 2020

Source: Adapted from Vietnam Logistics Industry Report 2021(2021st ed.) by VIRAC,
2021. In the public domain
Figure 4 - Assessment of cold storage services’ capacity in Vietnam, 2019

Source: Adapted from Vietnam Logistics Industry Report 2021(2021st ed.) by Emergent
Cold, 2021. In the public domain

Cold storage is one of the most promising fields in Vietnam logistics because the demand
for cold storage is higher compared the supply. For the Vietnamese market, it is because
of high construction costs. Investors participating in this market are also not active. Foreign
enterprises are potential investors in the cold storage market by owning a professional team
and modern equipment. According to JLL, foreign investors are taking 60% market share.

4
JLL forecasts cold storage demand will continue to boom for at least the next half-decade
as global consumers are changing their shopping behaviour since the historical upheaval
of the pandemic. According to the MOIT report in 2020, frozen warehouses and cold
supply chains only meet about 30-35% of the requirements. (VIRAC, 2021)

Figure 5 - Cold storage development potential

Source: Adapted from Vietnam Logistics Industry Report 2021(2021st ed.) by JLL, 2021.
In the public domain

The Vietnam Logistics Research and Development Institute (VLI) synthesized the statistics
of cold warehouses in Mekong Delta area, and it can be seen that Mekong Logistics, Hanh
Nguyen Logistics and AJ Total VN is top cold storage providers.

Table 1 - Cold warehouse statistics in Mekong Delta area

Source: Adapted from Vietnam Logistics Industry Report 2021(2021st ed.) by VIRAC, 2021. In
the public domain.

5
1.2 Background of AJ Total
AJU Group was originally established by Honorary President Moon Tae-shik in 1960.
Today the company is separated into several affiliated companies which are AJU Group,
SINAJU and AJ.

Figure 6 - Background of AJ Total

Source: Adapted from Cold chain best practices by M. Phung Le, 2022. Copyright 2022
by AJ Total

Table 2 - Overview of AJ Total

Source: Adapted from Cold chain best practices by V. Trung Dao, 2022. Copyright 2022
by AJ Total

6
Figure 7 - Developing history of AJ Total

Source: Adapted from Cold chain best practices by M. Phung Le, 2022. Copyright 2022 by AJ
Total.

2. Value System
Figure 8 - Value system of AJ Total

Source: Adapted from Cold chain best practices by M. Phung Le, 2022. Copyright 2022 by AJ
Total.

2.1 Mission

The mission of AJ Total Company is to be happy with a throbbing heart, serve our
customers for their success, contribute to the sustainable growth of our society, and never
stop searching for new opportunities and the next frontiers.

7
2.2 Vision/ Slogan

The CEO of the company - Mr. Kim Geun-tae, has written the message to customers “AJ
Total is a food company specializing in refrigeration and freezing warehouse business and
F&B business.
Starting with the completion of Yongin Refrigeration in 1993, Suzy Refrigeration, Giheung
Refrigeration, and Cheoin Refrigeration were established to establish the largest
refrigeration and freezing warehouse network in the metropolitan area. Based on this, we
acquired AJ Hanrok Co., Ltd. for the livestock processing business, meat
import/distribution food business, and logistics transportation system, expanded our
business area to the 3PL business and advanced into the F&B business by establishing a
restaurant franchise.
In addition, we have established a refrigerated and frozen storage distribution center in Ho
Chi Minh City, Vietnam, and expanded the overseas food material import and distribution
business to become a global company.
AJ Total is striving to create an organizational culture where all employees can work
happily and happily based on the mission of a heart-beating and happy company', and we
will continue to strive to become a company that customers can trust. We, AJ Total, will
always be with you. We ask for your support and interest. Thank you."
“Turning your worries to your edge; Turning your complications to your speed” is the
phrase representing the company's vision and evoking a memory for customers.

2.3 Core Values

The organization's core values are expressed in six letters:


- Honesty means the company working with integrity and confidence.
- Win-Win spirit is growing and sharing together.
- Challenge means not being afraid of obstacles to strive for audacious goals.
- Fun is creating an active and joyful environment at work.
- Customer centricity is consistently placing the benefit of the customer on top.
- Expertise is a result of keen initiative and experience.

8
Figure 9 - Core value of AJ Total

Source: Adapted from Cold chain best practices by M. Phung Le, 2022. Copyright 2022 by AJ
Total.

3. Report Objectives
Compare theoretical knowledge and facts with the actual situation, then analyze objectively
and honestly the cold chain logistics providers - AJ Total Vietnam Company.

Draw lessons from strengths and weaknesses (SWOT analysis) of AJ Total Vietnam
Company, which has had particular successes in the cold chain field. In order to be able to
apply lessons learned from that to other businesses in the same industry, we need an in-
depth understanding of the market and trends in cold chains. Companies can increase
competition among themselves to improve business areas and services for consumers.

9
4. Major Activities
4.1 A Glance at AJ Total’s Business

AJ Total diversified and specialized in cold chain operation from cold storage, cold
distribution to food processing.
Figure 10 - AJ Total business

Source: Adapted from Cold chain best practices by V. Trung Dao, 2022. Copyright 2022
by AJ Total

Figure 11 - Diversification of services

Source: Adapted from Cold chain best practices by V. Trung Dao, 2022. Copyright 2022
by AJ Total

10
4.2 Business Network in South Korea

- Own the largest networks in capital area (operate 4 cold storage).


- Handling 500,000 tons a year with 70,000 tons of storage capacity.
- Optimal temperature management by state-of-the-art self-control system.
- Meet customer satisfaction on safe, fast and accurate warehousing of goods.
Figure 12 - Cold storage network in S. Korea

Source: Adapted from Cold chain best practices by M. Phung Le, 2022. Copyright 2022
by AJ Total

4.3 Business Network in Vietnam

AJ Total Vietnam builds and operates the largest and most advanced temperature-
controlled warehousing facility in Vietnam. The warehouse's location is advantageous for
all shipment operations, distribution, import, and export. It has diversified and specialized
in international quality, capacity, and ability to provide full service.
AJ Total Vietnam has other utilities such as a Checking room, Repacking room, more than
20 small and large forklift trucks, and a flexible inventory management system. The
company can meet the most complex requests from clients.

11
AJ Total Vietnam plays a significant role in the logistics supply chain to strengthen
fisheries in Vietnam and provide support services for all imported foodstuffs, such as ice
cream, dairy products, fruit concentrate, frozen vegetables, and other items.
AJ Total Vietnam facilities offer value-added services to support the ever-growing
Vietnam market: Handling, Sorting, Repacking, Labeling, Weighting, Bundle, Inspection
rooms, Office for rent, Refrigerated Transport, Cross-docking, Distribution Center, Order
Fulfillment, and Blast freezing. A brief overview is the following.
- Enter overseas markets by operating cold logistics center in Ho Chi Minh City (2021)
- Plan to build 3 logistics centers in Vietnam by 2023
- Each center has 30,000 tons of storage capacity
- Extend business field to import/ distribution of food resource

12
Figure 13 - Cold storage network in Viet Nam

Source: Adapted from Cold chain best practices by M. Phung Le, 2022. Copyright 2022
by AJ Total

4.3.1 South Warehouse

The South warehouse is built in 2021 in Long An province with:

- Total area: 25,600 m²


- Number of docks: 44
- Volume: 153.5 x 58.9 x 52 (m)
- Capacity: 32,000 Tons; 31,024 Pallets
- Robotic automation 25,200 Pallets. ASRS - Automatic Storage & Retrieval System
- Forklift operation 5 Rooms; 5,824 Pallets
- Strategic location: 26 km from Cat Lai Port; 8.3 km from Hiep Phuoc Port

13
Figure 14 - South warehouse in Viet Nam

Source: Adapted from Cold chain best practices by V. Trung Dao, 2022. Copyright 2022
by AJ Total

4.3.2 North Warehouse

The North warehouse is built in 2021 in Hung Yen province with:

- Total area: 17,853 m²


- Number of docks: 30
- Volume: 153.5 x 58.9 x 52 (m)
- Capacity: 20,000 Tons; 21,408 Pallets
- Robotic automation 18,192 Pallets.
- Forklift operation 4 Rooms; 3,216 Pallets
- Strategic location: 109 km from Hai Phong Port; 24.3 km from Ha Noi

14
Figure 15 - North warehouse in Viet Nam

Source: Adapted from Cold chain best practices by V. Trung Dao, 2022. Copyright 2022
by AJ Total

15
Chapter 2. Methodology

1. Definition of SWOT analysis


SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to
evaluate a company's competitive position and develop strategic planning. SWOT analysis
assesses internal and external factors and current and future potential.

A SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look at the


strengths and weaknesses of an organization, its initiatives, or its industry. The organization
needs to keep the analysis accurate by avoiding preconceived beliefs or gray areas and
focusing on real-life contexts. Companies should use it as a guide and not necessarily as a
prescription. Below is an overview of the four factors (Strengths, Weaknesses,
Opportunities, and Threats).

− Strengths: Strengths are the qualities that enable us to accomplish the


organization's mission. These are the basis on which continued success can be made
and continued/sustained. Strengths can be either tangible or intangible. A
company's core competencies, distinct features, and the traits and qualities its
employees possess (individually and collectively) make it distinctive. Strengths are
the benefits of the organization or the capabilities, including human competencies,
process capabilities, financial resources, products and services, customer goodwill,
and brand loyalty. Examples of organizational strengths are huge financial
resources, a broad product line, no debt, and committed employees.
− Weaknesses: Weaknesses are the qualities that prevent us from accomplishing our
mission and achieving our full potential, which deteriorate and influence the
organizational success and growth. Weaknesses are the factors that do not meet the
standards we feel they should meet. Weaknesses in an organization may be
depreciating machinery, insufficient research and development facilities, a narrow
product range, and poor decision-making. Weaknesses are controllable. They must
be minimized and eliminated. For instance - to overcome obsolete machinery, new
machinery can be purchased. Other organizational weaknesses are huge debts, high

16
employee turnover, complex decision-making processes, narrow product range,
and large wastage of raw materials.
− Opportunities: Opportunities are presented by the environment within which our
organization operates. These arise when an organization can benefit from
environmental conditions to plan and execute strategies that enable it to become
more profitable. Organizations can gain a competitive advantage by making use of
opportunities. The organization should be careful and recognize the opportunities
and grasp them whenever they arise—selecting the targets that will best serve the
clients while getting desired results is a difficult task. The market, competition,
industry/government, and technology may arise opportunities. Increasing demand
for telecommunications, accompanied by deregulation, is a great opportunity for
new firms to enter the telecom sector and compete with existing firms for revenue.
− Threats: Threats arise when conditions in the external environment jeopardize the
reliability and profitability of the organization's business. They compound the
vulnerability when they relate to the weaknesses. Threats are uncontrollable. When
a threat comes, stability and survival can be at stake. Examples of threats are -
unrest among employees, ever-changing technology, increasing competition
leading to excess capacity, price wars, and reducing industry profits.

2. Advantages of SWOT Analysis


A SWOT analysis plays a key role in developing and selecting a strategy. The tool is effective,
but it is subject to the influence of a large number of subjective factors. Rather than being a
prescription, it should be used as a guide. In order to succeed, businesses build on their
strengths, correct their weaknesses, and protect themselves against internal and external
threats. They also monitor its overall business environment and recognize and exploit new
opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in the following manner.

1. It is a source of information for strategic planning.


2. It builds the organization’s strengths.
3. Reverse its weaknesses.

17
4. Maximize its response to opportunities.
5. Overcome the organization’s threats.
6. It helps in identifying the core competencies of the firm.
7. It helps in setting objectives for strategic planning.
8. It helps in knowing past, present, and future so that plans can be chalked out by using
past and current data.

SWOT Analysis provides information that helps synchronize the firm’s resources and
capabilities with the competitive environment in which the firm operates.

3. Limitations of SWOT Analysis


Although SWOT Analysis has its advantages, it also has its limitations. It may cause
organizations to view circumstances as very simple, because of which the organizations
might overlook certain key strategic contact. Moreover, categorizing aspects as strengths,
weaknesses, opportunities, and threats might be very subjective as there is a great degree
of uncertainty in the market. SWOT Analysis stresses the significance of these four aspects,
but it does not tell how an organization can identify these aspects for itself. There are
certain limitations of SWOT Analysis that are not in the control of management. These
include:

1. Price increase;
2. Inputs/raw materials;
3. Government legislation;
4. Economic environment;
5. Searching for a new market for the product which does not have an overseas market
due to import restrictions.

Internal limitations may include:

1. Insufficient research and development facilities;


2. Faulty products due to poor quality control;
3. Poor industrial relations;
4. Lack of skilled and efficient labor

18
4. Data Collection Method
We created a survey question for the collection of SWOT data involving a case of cold
logistics service providers of AJ Total. Below is a link to that.

After that, we send it to about 20 experts and non-experts who know about AJ Total VN
online to get the data for making SWOT.

19
Figure 16 - The questionnaire form

20
21
Chapter 3. SWOT Analysis of AJ Total VN

The strengths, weaknesses, opportunities and threats are synthesized in the figure 14
below.

Figure 14: SWOT Analysis of AJ Total VN

1. Strengths
3.1.1. Expertise

It has expertise in cold chain warehousing & distribution and is able to identify the root
cause of customer problems and provide best practices for solving them.

3.1.2. Huge investment capital

AJU group has been operated in Korea since 1960 and become a giant in Korean cold chain market.
With substantial investments, they established AJ Total VN in the Vietnamese market.

3.1.3. Technology

AJ Total's cold storage in Long Hau industrial park is invested in high-tech facilities and
applied cutting-edge technology to help increase working efficiency and reduce human

22
labour requirements. According to AJ Total VN, the warehouse is invested with a fireproof
partition system, automatic fire fighting system, backup generator, and technology to cool
the transit area with salt water, which is modern, leak-proof, and safe. For workers. The
delivery and receipt of goods at AJ Total cold storage is convenient and safe thanks to the
3,000 m2 buffer warehouse with 44 modern equipped import and export doors, surveillance
cameras, and automatic lifts. With the automation system, AJ Total is able to reduce most
of the operating cost from labour, gain more throughput capacity, better optimize the
resources and maintain higher reliability. Hence, the automation application give AJ Total
the prevalent competency through cost-efficiency.

1.4 Reputation

As a result of its parent company in Korea, AJ Total VN enjoys a high reputation


throughout the region.

2. Weaknesses
Since AJ Total Vietnam entered the Vietnamese cold chain market in 2021, it is relatively
new, so the market share is not high and it is not as competitive as competitors with many
years of experience. Because of this, the lack of qualified human resources is inevitable,
and therefore high-qualified human resources must be recruited. Competitors in other fields
are not only involved in the cold chain but also in other areas. AJ Total VN, however, is
limited in the cold chain area, concentrating on a niche market, making it difficult for it
to compete with other LSPs.

3. Opportunities
Vietnam’s free trade agreements, along with the recent Regional Comprehensive
Economic Partnership (RCEP) are expected to play a major role in helping Vietnam’s
economic growth this year. As Vietnam further opens up its borders for international travel,
the government wants to ensure that the country returns to its pre-pandemic growth.
Vietnam’s FTAs and other bilateral agreements are likely to aid and play a significant role

23
in the medium to long term. While Vietnam is one of the countries with several FTAs, most
recently it has signed new generation FTAs such as the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP), EU-Vietnam FTA (EVFTA),
UK-Vietnam FTA (UKVFTA), and most recently the RCEP. While these agreements
will not only help Vietnam advance its economy and production network, it will also help
the country conform to labor standards while modernizing labor laws and industrial relation
systems.

Since the US-China trade war, and even before that, businesses have been looking at
Vietnam as a China plus one destination and to reduce their operation costs and diversify
their production capabilities, due to Vietnam’s stable politics, cheap inputs, competitive
labor costs, facilitative trade environment, and investment policies, particularly in
electronics and supply chain industries.

Regarding to Ministry of Planning and Investment, accumulated to 20/09/2021, Korea has


9,165 valid projects with total registered investment capital of 73.76 billion USD. From
01/01/2021 to 20/09/2021, Korea ranked second in the list of partners having high
registered capital in Vietnam with 3.91 billion USD, among that, there are 262 new
projects in Vietnam with total newly registered capital of nearly 767.66 million USD; 190
adjusted projects with total adjusted capital of 2.64 billion USD, and 1,003 turns of capital
contribution and share purchase with a total value of 509.25 million USD. (VIRAC, 2021).

Businesses can further look at which industries can benefit from FTAs, and tailor their
production according to current demand and trends. For example, in January 2021,
Vietnamese exports were valued at US$29 billion increasing 1.5 percent over the same
period last year. Out of this, seven commodity groups, earned over US$1billlion each
accounting for a total of 63.3 percent for total export turnover as per the MoIT. Some of
these commodity groups were:

− Phones and components US$4 billion;

− Computers, electronic products, and components (US$3.5 billion);

− Textiles and garments (US3.3 billion); and

24
− Agro, forestry, and fisheries (US$2.67 billion).

The increasing demand of cold chain benefited from the invest-flow help AJ Total to gain
more customers such as manufacturer producing and exporting fishery products to Europe
(EU) and other markets. In order to keep the products fresh and expand the product shelf
life so more profit would be gained, the cold chain system is necessary. They will have a
demand of building a cold room for their own to store the product under cold temperature.
In case they only specialize in production, they will have an LSP to take care of storing the
products in the cold outside warehouse. Transporting perishable products is rough when
the scorching heat and humidity of Vietnam's atmosphere cause a significant loss rate of a
product. That will need an CLP's hand specializing in the cold chain field. Outsourcing
logistics operations, also known as a Third-Party Logistics (3PL) solution, is when a cold
logistics service provider (CLP) handles all logistics activities from the final products
produced and transported to the end customer assured in the correct quantity, good quality,
and on time.

Table 3 - Example of customers in cold chain

4. Threats
Prior to 2022, the global supply chain witnessed the rampage of COVID 19 and other
disruptions such as Suez Canal congestion, China closing border, US port congestion.
Furthermore, the war between Russia and Ukraine led to the increase in fuel cost,
inflation rate, severely damaged the logistics players in the entire world.

Because the cold chain facilities need a great deals of energy consumption to operate, AJ
Total could face the increase of energy cost due to the inflation and fuel cost, lowering

25
the return on investment (ROI). Besides, although the number of CLPs in Viet Nam is not
many, those LSPs, rivals of AJ Total, own an integrated supply chain network while AJ
concentrates on just cold chain business. This could limit the opportunity for AJ to connect
more customers.

26
Chapter 4. Lesson Learned

Cold chain industry is a promising field, yet, still developing because there are countless
challenges from many parties in Vietnam, for both upstream and downstream (figure 15).

Figure 16 - Cold chain challenges in Vietnam

Source: Adapted from Cold chain best practices by M. Phung Le, 2022. Copyright 2022 by AJ
Total.

There is a paradox in Vietnam logistics when individuals consider supply chain is the chain
of cost, so organization tend to cut the business cost whenever they can, regardless of the
opportunities cost. Therefore, agricultural products when finished, stacked on the dry truck
and transport to China through border. Meanwhile, the supply chain should be understood
as the demand chain because it originates from customer and when the customer demands
for product with high value, high-valued providers can gain a big share of the cake, of the
value-added chain. The value-added activities, which are organized in figure 16, ensure the
objective of cold chains.

27
Figure 17 - The process of cold chain logistics

Source: From Understanding of Cold chain Logistics lecture by S. S. Hyun, n.d.


Copyright 2022 by Ecampus. Reprinted with permission

The objective of cold chain includes safety & security of shipment; clear, tight chain of
control, well-articulated responsibilities of participants; traceability of product movement;
tamper proof packaging; limitation of cross-contamination; and temperature monitoring
device in product and in transport vehicle.

Figure 18 - Cold Chain Logistics Process

Source: From Cold Chain Logistics 101 for Small Businesses by Optimal Route, 2021. In the
public domain.

28
In the origin stage (upstream) of the production of agricultural products, the high qualified
product that meet the standards should be sorted and stored right at the harvesting stage to
preserve the quality. There rises the demand of building the cooling system or precooling
facility for the supplier, farmers, and manufacturers instead of using reefer container. For
production factory, higher quality packaging material and effective cold storage design
with large door is recommended. There should be separate storage between different
products and production lot as well.

Preparation before shipping, supplier should prepare the package, sort product by size,
quality, degree of ripeness (ripe products have very short shelf life and must be delivered
to market within a very short time), cull out dirty, insect infested, damaged, over-ripen
product and dry product completely.

The next step is shipping the product to the customer while control the quality of the
product within the appropriate temperature.

Conditional demand which means arrival time and their state of arrival drive the demand
for products that require cold chain shipping (Cold Chain Logistics 101 for Small
Businesses, 2021). The optimum temperature control determines the length of product shelf
life; however, different type of products need different temperature control as figure 18
below.

29
Figure 19 - Temperature and shelf life.

Source: AJ Total Vietnam, Cold chain best practices

Load integrity refers to technologies required to maintain the products in a shipment. This
includes adequate packaging and packing, as well as the conditioning that the product must
go through before transport (e.g., fruit washed and cooled down prior to transport &
storage).

Blast freezers, insulated containers, vacuum packing, perforated plastic containers,


perforated boxes, and other technologies are examples of these technologies. Reefer
containers are included in this category because they keep the load intact while being
transported. GPS, air conditioner (AC) equipped on reefer container along with data logger
to record the temperature, help monitor track the product in real time. Small Medium
Enterprises (SME) may implement cloud-based software to reduce cost.

30
Transport integrity relates to the technologies required to ensure a cold chain’s
temperature-controlled environment stays intact. When transporting from the factory to the
customer, the Heat Shock Effect is caused by temperature fluctuations will happen between
the drop point (Figure 29). Because of that, during the delivery, the reefer truck should
always be turned on to keep the temperature stable.

Figure 20 - The Heat Shock Effect

Source: Adapted from Cold chain best practices by M. Phung Le, 2022. Copyright 2022 by AJ
Total.

For proper transport and handling, the truck driver should use a clean, cool, insect free
vehicle to pick up product, preferably in the morning and the vehicle should be in good
running condition to avoid emergency repair that will delay deliver. The employee should
load and secure product carefully, damage will cause fruit and vegetable to rot. Carton
board or plywood decking can be used to distribute weight pressure. For high value
customer such as convenient store, we can use crates or plastic baskets instead of cartons
to prevent product damage. The truck should be always on moving to keep movement
supplies ventilation and speeds up delivery time. In case of necessary stop, the truck should
be parked in a shaded a well-ventilated location. Cooperation with border control officials
to assign special times slots for agricultural product clearance or to set up a green corridor
for expedited border crossing or create practical means of dealing with overload is needed
in order to avoid shipment delays. When mechanical refrigeration is not available or too
costly, consider using insulated blanket, styrofoam containers and ice (if compatible with
product).

31
Chapter 5. Conclusion & Recommendation

AJ in Vietnam is one of the companies that have been successful in the supply chain field,
especially in the cold chain. As one of the leading companies in the field of pioneering in
bringing customers the best services in cold chain products. With the company's values
set out to provide customers with the best services including trust, win-win,, challenges to
overcome, joy, customer assurance and professional expertise, AJ is to bring and provide
customers with the best service.

In addition, based on SWOT, we can see strengths, weaknesses as well as potentials and
challenges that AJ needs to overcome in order to lead the company to become stronger
and stronger. From there, based on the weaknesses and challenges that AJ is facing, we
can offer methods as well as strategies to help AJ overcome the weaknesses it is facing so
that the company can develop in perfect way.

Although AJ TOTAL has much experience in the Korean market, the new entrance to
Vietnam means that it has not acquired much market share. An expert with knowledge
about AJ has mentioned that the warehouse’s dock area serves 30 trucks per day. However,
the number of dock doors in the South warehouse has 44 doors; each door serves one truck
per shift, and there are two daily shifts. It can be seen that the facility has not operated to
its full potential.

Besides, in addition to cold chain transportation, AJ can also open and exploit many other
aspects of transportation goods in Vietnam. Currently, AJ Group has cold storage in Long
An and Hung Yen, with a large area suitable for expanding and developing many other
edge locks besides cold storage. Because of the geographical location of both provinces,
they are adjacent to major cities of Vietnam, which is very easy to move to transport all
kinds of goods. In addition, the expansion of scale and other types of services can help AJ
reach many other large customers. That will help the corporation grow and reach out in the
future. In another aspect, AJ Group is currently a relatively new name in the Vietnamese
market, so AJ will have to face a challenge to get more customers. However. That will not

32
be difficult for AJ if the company has a complete and thorough preparation and clear plans
to develop the company. Thus, AJ can develop significantly compared to other companies.

To gain more customer and input flow, AJ needs to expand business connectivity by
connecting the true shippers from upstream and providing an integrated solution to meet
the satisfaction of their demand in the cold chain. Human resources are the most
challenging problem of the Logistic industry today because due to hot development, the
human resource of this industry is both lacking and weak. Currently, the supply of labor
for the logistics service industry only meets about 40% of the actual demand. Managers
are often key people, trained and retrained, but they lack business knowledge and
experience, are rarely updated with new knowledge, and their leadership and management
styles are unsatisfactory. Be in demand. Therefore, AJ needs to screen and select excellent
and key human resources to develop the company in the Vietnamese market.

AJ TOTAL VN is an up-and-coming player in Vietnam’s cold chain market. In the future,


with the vision and competency of the company, AJ TOTAL can become the top CLP in
Vietnam.

33
Reference

1. Optimal Route. (2021, March 8). Cold Chain Logistics Process [Illustration]. Cold
Chain Logistics 101 for Small Businesses.
2. Phung Le, M. (2022). The main location of AJ Total cold warehouse in Vietnam
[Presentation]. In COLD CHAIN BEST PRATICES.
3. Phung Le, M. (2022). Cold chain challenges in Vietnam [Photograph]. In COLD
CHAIN BEST PRATICES
4. Phung Le, M. (2022). Temperature and shelf life [Graph]. In COLD CHAIN BEST
PRATICES
5. Phung Le, M. (2022). The Heat Shock Effect [Graph]. In COLD CHAIN BEST
PRATICES
6. JLL. (2021). Cold storage development potential [Photograph]. In Vietnam

Logistics Industry Report 2021 (2021st ed.).

7. Emergent Cold. (2021). Assessment of cold storage services’ capacity in Vietnam,

2019 [Illustration]. In Vietnam Logistics Industry Report 2021 (2021st ed.).

8. VIRAC (Vietnam Industry Research and Consultancy). (2021). Total designed

capacity of cold storage warehouse for lease in Vietnam, 2015 – 2020 [Graph]. In

Vietnam Logistics Industry Report 2021 (2021st ed.).

9. Cold Chain Logistics 101 for Small Businesses. (2021, August 3). OptimoRoute.

10. Briefing, V. (2021, June 7). Vietnam’s M&A Market: Opportunities for Foreign

Investors. Vietnam Briefing News.

11. VIRAC. (2021). Vietnam Logistics Industry Report 2021. Vietnam Industry

Research and Consultancy.

34

You might also like