2.3.

Warehousing technology
2.3.1 Warehouse activities (how many warehouses? How to transport products to the warehouse? Which vehicle or
transport lane do they use?)

Figure 2.1 Vinamilk's goods transportation process modelFigure 2.1 Vinamilk's goods
transportation process model
• Currently, Vinamilk has two main transportation units for the company:
1. HO CHI MINH CITY LOGISTICS ENTERPRISE
32 Dang Van Bi, Truong Tho Ward, Thu Duc District, Ho Chi Minh City
2. HANOI LOGISTICS ENTERPRISE
Km 10/National Highway 5, Duong Xa commune, Gia Lam district, Hanoi City
These two units specialize in transporting goods, including both raw materials and finished products, to various
functional units such as factories, wholesale agents, and product introduction stores. Additionally, Vinamilk
utilizes various modes of transportation, including air, waterway, rail, and road, sourced from both domestic and
foreign suppliers.
Vinamilk's goods are transported directly from the warehouse factory to supermarkets, key accounts, and
ultimately to customers. In traditional channels, goods are transferred to distributors through logistics
enterprises, then to small agent stores, and finally to the end customers. Ownership of the goods is transferred to
channel members upon shipment to them.
Raw material transportation activities:
• Vinamilk utilizes various modes of transportation, including air, waterway, rail, and road, sourced from both
domestic and foreign suppliers. At its livestock farms, raw cow milk is swiftly brought to the cold storage
system within an hour of milking and then transferred via pipes into tanks. The quality of raw fresh milk
undergoes testing similar to farm milk.
• Fresh milk from dairy farmers is promptly delivered to the nearest transfer stations. Currently, Vinamilk
operates 86 transfer stations strategically placed in dairy farming areas. These stations invest in facilities and
cold storage tanks, responsible for preserving and transporting milk in accordance with annual contracts with
Vinamilk. At the transfer stations, the factory's product quality inspection staff conducts analytical tests
regularly during morning and afternoon milk collection periods. Milk meeting requirements is sampled,
stored in cold storage tanks at the transfer station, coded, sealed, and then sent to the factory's laboratory for
further analysis.
• Once raw fresh cow's milk is cooled to 4 degrees Celsius or below, specialized tank trucks transport it to the
factory. Transfer stations send representatives to accompany these trucks to ensure the safety and quality of
the milk during transportation. Tank trucks undergo periodic and random inspections to maintain proper
conditions, ensuring milk temperature remains below 6 degrees Celsius upon arrival at the factory. Upon
arrival, the factory's QA staff take samples for quality checks, including sensory evaluations. Qualified milk
is weighed, pumped into tanks, and processed. For efficient goods management and expedited delivery to
customers, Vinamilk has established a dedicated logistics enterprise responsible for transporting finished
products.
2.3.2. Technology in warehouse (Applying technology in warehouses: which? how? why? when?)

To effectively manage its distribution channels in the market, Vinamilk has adopted several modern
information technology applications, including the Oracle E-Business Suite 11i integrated information
management program, Enterprise Resource Planning (ERP) system, and customer relationship management
(CRM) solution.
• The Oracle E-Business Suite 11i system was officially implemented in January 2007, connecting 13 locations
including headquarters, factories, and warehouses nationwide. This system has synchronized, standardized,
and consolidated Vinamilk's IT infrastructure.
• The ERP system serves as a supportive tool for employees, enabling the Vinamilk distribution network across
the country to exchange information with the central system in both online and offline scenarios. Centralized
information allows Vinamilk to provide timely solutions and accurate support for planning. Collecting and
managing dealership sales information facilitates prompt responses, enhancing customer satisfaction. This
process has also aided employees in enhancing their capacity, professionalism, and market insight by utilizing
shared information within the system. Vinamilk also manages price and promotion policies throughout its
distribution system, contributing to improved service quality for end customers.
To effectively manage its distribution channels in the market, Vinamilk has adopted several modern
information technology applications, including the Oracle E-Business Suite 11i integrated information
management program, Enterprise Resource Planning (ERP) system, and customer relationship management
(CRM) solution.
• The Oracle E-Business Suite 11i system was officially implemented in January 2007, connecting 13 locations
including headquarters, factories, and warehouses nationwide. This system has synchronized, standardized,
and consolidated Vinamilk's IT infrastructure.
• The ERP system serves as a supportive tool for employees, enabling the Vinamilk distribution network across
the country to exchange information with the central system in both online and offline scenarios. Centralized
information allows Vinamilk to provide timely solutions and accurate support for planning. Collecting and
managing dealership sales information facilitates prompt responses, enhancing customer satisfaction. This
process has also aided employees in enhancing their capacity, professionalism, and market insight by utilizing
shared information within the system. Vinamilk also manages price and promotion policies throughout its
distribution system, contributing to improved service quality for end customers.
Warehouse Management
• In its warehouse management approach, Vinamilk employs advanced technology such as Robots and "smart
warehouses." Self-propelled robots, known as LGVs (Laser Guided Vehicles), oversee the entire process from raw
materials for packaging to finished products, facilitating optimal quality control and cost efficiency. These
machines are seamlessly integrated into a synchronized system, significantly enhancing efficiency and
productivity compared to manual operations. Central to this system is the utilization of LGV robots, which
operate automatically and are centrally controlled by a computer system. They possess the capability to self-
replace batteries using automatic chargers, eliminating the need for human intervention. Throughout the
production process, each step is meticulously monitored, and all parameters are tracked, ensuring instantaneous
traceability for every product.
• Partnering with SSI Schaefer, a globally renowned provider of logistics system solutions, Vinamilk has
implemented a fully automated guided vehicle (RGV) system. This system serves as the backbone of the
automated material flow within Vinamilk's distribution center, facilitating seamless transportation between various
manufacturing areas. With over 15 transfer vehicles, the transport rail system efficiently delivers goods to all
required locations from the production site, ensuring smooth and timely operations.
Chapter 3: Challenges and Solutions (evaluate risks or challenges and give solutions)

No. Risks/Challenges

Vinamilk's approach to raw material sourcing lacks proactivity, as it heavily depends on imported raw materials.
This reliance makes the company vulnerable to fluctuations in global milk prices and exchange rates, thereby
1 significantly impacting input costs.

The instability in sourcing raw materials is rooted in the predominance of small, family-owned dairy farms in
Vietnam. These farms can only meet a fraction of the country's milk demand, leading to the necessity of importing
the majority of milk. The dairy industry's growth slowdown since 2005 has exposed challenges in macro
management and production organization, posing a significant challenge to securing a stable source of raw materials.
This contributes to the high cost of milk production compared to other countries like Thailand and Taiwan.
“Sharing insights at the 2023 Annual General Meeting held in April, Ms. Mai Kieu Lien, the CEO, acknowledged
that in the company's 47-year history, she had never witnessed such a significant surge in material prices in 2022—
ranging from 37-50%—due to conflicts and inflation, adversely impacting profits. Although material prices started
2 to decline rapidly since the beginning of 2023, Ms. Lien admitted that input prices fluctuated rapidly and were
challenging to predict.”
 Vinamilk's export market is highly susceptible to the unstable political and economic conditions prevailing in various
3 countries, particularly in the Middle East where the company's products are present.

Managing a vast network of agents, particularly in remote areas, poses a significant challenge for Vinamilk.
Additionally, controlling smaller distributors and grocery stores at the grassroots level presents its own set of
4 challenges.

Compliance with transportation regulations presents difficulties, as some distributors stack more boxes than
5 permitted, resulting in product damage during transportation.

Storage limitations affect the shelf life of Vinamilk products, especially those requiring refrigeration. Without proper
6 storage facilities, the company faces challenges in preserving product quality.

Natural disasters and epidemics disrupt the supply of raw materials, despite Vinamilk's efforts to establish its dairy
7 farms. Vietnam's tropical climate and limited land hinder favorable conditions for dairy farming

Economic integration, particularly after joining the WTO, exposes Vietnamese dairy businesses to increased
competition due to reduced tariffs on imported milk. This, coupled with Vietnamese consumers' preference for foreign
8 products, impacts the market share of domestic dairy products, which currently stands at 30%.
• Suggestions and improvements for businesses

Presently, Vinamilk heavily relies on imports (particularly milk supply), leading to high milk prices and
intensified competition within the industry. To streamline the logistics chain and mitigate these challenges, it's
imperative to establish a robust supply chain system with cohesive links between its components.
To address this, the company should shift its focus towards investing in acquiring raw materials directly from
farmers. Rather than solely expanding the factory scale and importing cows, Vinamilk should explore sending its
experts to countries importing cows. This approach allows for learning best practices in cow breeding and care
and subsequently applying them within the company. Additionally, ensuring stability in raw material sources
entails comprehensive investment from selecting cow breeds and implementing proper care standards to
providing training courses on clean cow raising, all supported by company experts. This not only assures
farmers' peace of mind but also stabilizes the raw material supply.
In the competitive landscape, including rivals like TH True Milk, Nutifood, Hanoi Milk, Dutch Lady, and
Abbott, Vinamilk must stay abreast of market trends, diversify and refine its product offerings, and prioritize
both price and quality. Researching cost structures and optimizing expenses are crucial to enhancing product
competitiveness. Concurrently, robust marketing strategies, advertising campaigns, and loyalty programs are
essential to attract consumers.
Addressing concerns regarding product quality control, transportation, and preservation in remote areas requires
implementing appropriate management strategies and stringent oversight. By ensuring the highest quality
standards, Vinamilk can instill consumer confidence.
Looking ahead, with Vietnam's participation in initiatives like the TPP and economic integration,
opportunities arise for Vinamilk to expand its distribution network into foreign markets, thereby sustaining its
growth trajectory.
Chapter 4: Conclusion
Vinamilk stands as a premier dairy brand in Vietnam, widely recognized for its diverse product range
including fresh milk, condensed milk, powdered milk, and yogurt, among others. With a capital investment
exceeding 6,500 billion VND, Vinamilk boasts a network of highly automated factories equipped with state-of-the-
art sterilization lines sourced from leading European countries and Sweden. Notably, the spray drying line
technology from Niro in Denmark, exclusive to Vinamilk in Vietnam, underscores its commitment to innovation and
quality.
The extensive factory system, comprising 13 manufacturing facilities domestically and super factories in
Binh Duong, alongside international facilities in the US, Poland, and New Zealand, ensures efficient milk
transportation from source to factory within the same day, upholding the highest milk quality standards.
Furthermore, the company has invested in specialized laboratories for biochemistry research and product quality
enhancement, aligning with ISO 14001:2004 environmental management standards. Vinamilk's robust supply chain,
facilitated by a direct distribution system encompassing genuine stores, retail outlets, supermarkets, and
convenience stores nationwide, underscores its commitment to prompt and comprehensive product delivery.
Embracing e-commerce trends, the brand launched the giacmosuaviet.com commercial website in 2016 and
continues to expand its online presence through strategic partnerships with e-commerce platforms. Internationally,
Vinamilk products have garnered positive reception in discerning markets, with recent successes seen in Korea,
where milk tea and nut milk products are gaining traction. Additionally, products such as baby milk powder, yogurt,
and soy milk hold promising potential in countries like Japan, Thailand, Canada, and Australia
Vinamilk's supply chain success is attributed to its proactive management approach, exemplified by
continuous investment in dairy farms and modern technology to ensure sufficient raw milk input, thereby mitigating
production risks. A cohesive information system integrates market insights with internal operations, guiding
production and supply processes effectively.
While Vinamilk's supply chain model serves as a standard for many businesses, it also faces inherent
risks, including input supply, production, and distribution risks. Nonetheless, its success underscores the importance
of leveraging comprehensive supply chain strategies across industries. While emulating Vinamilk's achievements
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• Ngo, H. (2018). POTENTIAL DAIRY INDUSTRY IN VIETNAM: Case Study: Vinamilk LTD.
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