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Improving Quality Management in
the Dairy Industry: A Case Study
of Vinamilk
Vinamilk: Supply Chain Management Strategy
Overview of Vinamilk
Vinamilk is a leading dairy company in Vietnam, known for its high-quality dairy products. As a major player in the Vietnamese dairy industry, Vinamilk's operations and supply chain management strategies are crucial to its success.
Quality Management and ISO Standards
One of the key factors in Vinamilk's operations management is quality management, particularly in relation to International Organization for Standardization (ISO) standards. ISO standards help ensure the quality, safety, and effectiveness of Vinamilk's dairy products, which is critical in the dairy industry due to the perishable nature of the products.
Challenges in Quality Management
The report identifies several challenges Vinamilk has faced in its quality management efforts, including:
Auditing quality control of dairy products in the Vietnamese market Ensuring consistent quality across its supply chain and manufacturing processes
Analyzing the Manufacturing Process
To address these challenges, the report analyzes Vinamilk's current manufacturing process, looking at both quantitative and qualitative factors. This analysis provides insights into areas where Vinamilk can improve its quality management.
Recommendations for Quality Management
Based on the analysis, the report provides recommendations for Vinamilk's quality management model, drawing on concepts from Total Quality Management (TQM), Six Sigma, and Failure Mode and Effects Analysis (FMEA). These recommendations aim to help Vinamilk enhance its quality control, improve its supply chain management, and maintain its reputation for high-quality dairy products.
Feasibility of Implementing Recommendations
The report also discusses the feasibility of implementing the recommended quality management strategies, considering factors such as cost, resources, and organizational readiness.
Overall, the report provides a comprehensive analysis of Vinamilk's quality management challenges and strategies, with a focus on the role of ISO standards in the dairy industry. The recommendations offered aim to help Vinamilk strengthen its operations and maintain its position as a leading dairy company in Vietnam.
Company Background
Starting with three dairy factories in 1976, Vinamilk has become a prominent player in the Vietnamese dairy industry. The company has received numerous valuable grants from international and domestic organizations in the period 2016 - 2020. Vinamilk is primarily engaged in the manufacturing and trading of dairy products, related machinery, and equipment in Vietnam. Currently, Vinamilk's products are exported to 53 countries, and the company operates 12 farms that meet GLOBAL G.A.P standards, with more than 130,000 dairy cows.
Despite accounting for more than half of the dairy market share in Vietnam, Vinamilk faces strong competition from other players such as TH True Milk, Nestle, Dutch Lady, Moc Chau Milk, and Dalat Milk. In 2019, Vinamilk acquired 75% of Moc Chau Milk's shares, further consolidating its position in the dairy market.
Identify the Problem
Production Issue: The Origin of 'Fresh Milk' is Ambiguous
Vinamilk is known for its popular 'organic milk' and '100% fresh milk' labels, but the company has faced some scandals regarding the origin of its fresh milk, which remains unclear to consumers. Vinamilk has explained that its products are made from 100% fresh milk, ensuring compliance with government regulations. However, data from the Department of Livestock Production, Ministry of Agriculture and Rural Development, indicates that the total supply of raw fresh milk in the country is just under 200,000 tons/ year, which is approximately 22% of the domestic demand. This discrepancy raises questions about the actual source of Vinamilk's dairy milk output, which is reported to be around 1,000 tons/day for 130,000 dairy cows.
Final Product Issue: Preserving Product Quality
In addition to the controversial source of raw milk, Vinamilk has also faced issues with the quality of its final products. In 2016, many consumers reported that when they bought fresh milk from Vinamilk within its expiry date, they found the milk to be rotten, damaged, spicy, and foul-smelling.
In the process of procuring raw milk from farmers, Vinamilk has invested in a Raw Milk Center in Cu Chi to receive and analyze the raw milk's quality, equipped with modern machinery such as cold storage, automatic cleaning- in-place systems, and a quick analysis system using barcodes. Additionally, Vinamilk has been certified by Global GAP as the largest system of dairy farms in Asia, with 12 sophisticated dairy "resorts" throughout Vietnam.
Data Collection
Primary Data
Vietnam Dairy Market
By 2015, Vietnam had more than 275,000 cows and 19,000 dairy farms, but the industry operates on a small scale, with less than 20 cows per farm, and farmers' lack of industrial knowledge, leading to low productivity, high production costs, and unsustainable milk quality. The dairy industry in Vietnam also faces challenges regarding food safety, technology chain, actual milk quality, livestock techniques, prices, and regulations from the authorities. The Vietnam Business Council for Sustainable Development (VBCSD) has invested between $100,000 and $800,000 for each project to help improve the quality of the dairy industry.
Within the Vietnam dairy market, Vinamilk accounts for the largest portion of market share, which has been increasing annually.
Vinamilk's Reports and Quality Policy
Vinamilk prioritizes safety and freshness in milk quality, with "organic" being a key business driver. To ensure product efficiency, the company has built processes in detail, including research, finding raw materials, manufacturing the product by mixing, processing, storing, and delivering it to customers. Vinamilk uses a 100% automated and integrated operating system like Tetra Plant Master to keep the production process on track, making it more transparent and efficient.
Vinamilk's quality control works under the principles of professional due care and ISO policies and procedures. The company has been certified worldwide, such as BRC, VSATTP, FSSC 22000, which ensure food safety by evaluating and controlling risks and hazards during the food chain. Vinamilk also holds the ISO 9001 certification, indicating its ability to consistently provide products and services that meet customer and regulatory requirements.
Vinamilk's quality management includes strict assurance to protect the quality level in its Sustainable Development Report. The company ensures the quality of ingredients and nutrition, follows strict requirements for employee working conditions and labor safety, invests in eco-friendly technology and R&D activities, and researches the market and customer reviews to produce the most satisfactory, quality, and safe products.
Vinamilk's quality management process includes five steps: raw material collection, production and packaging, inventory management, and delivery. The process is executed under 100% technology, including Tetra Plant Master, LGV Intelligent Robot, and Smart Warehouse system. Vinamilk also sources milk from its own farms and farmer households, following strict requirements to ensure product characteristics.
Secondary Data
According to a reliable statistical indicator, quality holds the core value of Vinamilk's products, as shown by 63% of participants (Statista 2019).
A survey conducted with 200 participants of different income levels, age groups, and locations evaluated Vinamilk's products based on various criteria, such as taste, packaging, food safety, and nutrition. The results showed:
Packaging milk quality was not highly rated, with 11.9% of votes on "poor" and 15.3% on "average". The taste element was also assessed to be in poor condition, with 5.1% of respondents rating it as "poor". More than half of the customers were not assured about the quality of the ingredients, with 52.6% rating the nutrition as "average" and 6.8% marking it as 2 out of 5. However, the food safety through milk quality received the most positive feedback, with 49.2% rating it as "very good" and 37.3% as "good".
Analysis
Vinamilk's Quality Management System
Overall Analysis
Vinamilk's quality management system is highly focused on the Tetra Master Plan, an operational system that aims to maximize value production, reduce time losses, ensure consistent product quality, and create full end-to-end traceability. These methods are designed to ensure that Vinamilk has an efficient logistics management system with a focus on food safety, high hygiene standards, and environmental friendliness. These successes are certified by both domestic and international organizations, such as the Research and Development Center, Food Safety Assurance Department, and Production Department.
Vinamilk also has the honor of coordinating with the National Institute of Nutrition and testing centers to develop methods for testing and controlling food safety and hygiene. Furthermore, Vinamilk follows strict requirements while processing milk with a closed production process.
Strengths and Achievements
Vinamilk has a total of 130,000 dairy cows. 100% of Vinamilk's ingredients are organic. Vinamilk's fresh milk is EU Certified Organic and meets ISO standards, including ISO 9001, FSSC 22000, and ISO 14000. Vinamilk owns the biggest resort farm in Asia, making it the biggest supplier for its own products. Vinamilk has a transparent origin and provides supported techniques to its farmers and suppliers. Vinamilk has built 13 factories across Vietnam, 7 of which meet the organic standard. Vinamilk utilizes technology to operate its system, maximize productivity, and reduce raw material costs.
Vinamilk's Environmental Protection and
Sustainability Efforts
Environmental Protection Practices
Vinamilk has compiled the Safety - Health - Environment Handbook to apply in all of its factories. The process of treating water waste dairy technology is certified with national quality, with a capacity of 1600m3 per day.
Sustainable Packaging and Materials
Vinamilk aims to go green and ensure the sustainability of the environment in its research and choice of packaging materials. The company applies UHT sterilization paper packaging and collaborates with the packaging supplier giants Tetra Pak (Sweden) and Combibloc (Germany).
Smart Factory and Automation
Vinamilk's warehouse management system (WMA) integrates with the ERP management system, enabling seamless and smooth factory operations. The factory utilizes robots and smart LGV (Laser Guided Vehicle) robots to optimize performance in a compact 6000m2 area, with a storage capacity of up to 3 million barrels of finished milk.
Supply Chain and Logistics Optimization
Vinamilk's factory can provide 600 tons of milk each day and has an ongoing development and implementation of a tracking system. The company manages its warehousing trips using route splitting software, which saves 1.5 hours of transport time. Vinamilk has coded and applied traceability on its ERP system, covering 500 manufacturers.
Challenges and Limitations
Vinamilk still depends on supply from households, which takes more time for product screening. The company faces a lack of sensors from human resources due to the dependence on machinery. Technical errors can lead to leaks of private information and the company's control system and strategies. There are limitations in flavor while mixing ingredients, and a focus on providing products for teenagers. Quality management errors can lead to unexpected cases of failed products. The equipment for transporting and storing the products may have faulty preservation, preventing the products from maintaining their best condition.
Suggested Improvements
Packaging and Labeling
Increase the quality and transparency of information provision on the packaging, such as transforming the packaging presentation and using marketing campaigns, tracking systems, and raising awareness.
Inventory Management
Utilize human resources to double-check and avoid unnecessary mistakes, provide training, apply product codes, and test random batches before shipment. Invest in risk management tools, use multiple operation systems for verification, and hire consultants to evaluate and suggest improvements. Implement "customer-driven quality" by listening to customer feedback and providing clear strategies for improvement.
Quality Management Practices
Vinamilk currently has various quality certifications, such as ISO 31000 (risk management), ISO 9001 (quality management), ISO 27000 (information security management), and ISO 14000 and ISO 50000 (environment and energy management). The company has a composed team of 11 members responsible for inspection activities, comparing final goods to certified standards.
Suggested Quality Management Models
Vinamilk could consider implementing the following models to further improve its quality management system:
Total Quality Management (TQM) Six Sigma Model
Utilizing performance measurement to gain strategic practice by executing advanced strategy. Reducing fluctuation in production and final quality disparity. Taking actions to eliminate or reduce failures, starting with the highest- priority ones, and determining the impact of these failures on the product to improve the quality of the process. Getting an assessment and control of operations within the organization.
Participation
Involves the entire organization, especially senior management. Involves most of the workers in the operational system, including managers and operators.
Discussion
Vinamilk should implement the TQM model to improve its supply chain and avoid maximum risks. Applying TQM can create positive effects on Vinamilk's processes, such as improving worker relationships and communication, enhancing operational practices, creating better customer satisfaction, and boosting profitability and market share. Compared to other models like Six Sigma and Failure Mode and Effects Analysis (FMEA), TQM is more suitable for Vinamilk due to its focus on customer satisfaction and involvement of all staff.
Introduction
The dairy industry is a crucial sector in Vietnam's economy, with Vinamilk being the leading dairy company in the country. This report provides a comprehensive analysis of Vinamilk's milk production process, quality management system, and its position in the Vietnamese dairy market.
Company Background
Vinamilk is the largest dairy company in Vietnam, with a strong brand presence and a wide range of dairy products. The company has a long history of operations, dating back to 1976, and has since grown to become a dominant player in the Vietnamese dairy market. Vinamilk is known for its commitment to quality, innovation, and sustainability, as evidenced by its various certifications and awards.
Milk Production Process
Vinamilk's milk production process is highly automated and adheres to strict quality standards. The company has a network of modern, world-class dairy plants that utilize advanced technology to ensure the production of high- quality milk products. The process involves the collection of raw milk from
farmer households, followed by various processing steps, including pasteurization, homogenization, and packaging.
Quality Management System
Vinamilk's quality management system is a crucial aspect of its operations. The company has implemented various quality management frameworks, such as ISO 9001 and ISO 14001, to ensure the consistent production of safe and high-quality milk products. Vinamilk also employs quality control measures, such as Failure Mode and Effects Analysis (FMEA) and Six Sigma, to identify and mitigate potential quality issues.
Competitive Landscape
The Vietnamese dairy market is highly competitive, with Vinamilk facing competition from both domestic and international players. However, Vinamilk's strong brand recognition, product diversification, and commitment to quality have allowed it to maintain its market-leading position. The company's ability to adapt to changing consumer preferences and market conditions has also contributed to its success.
Challenges and Opportunities
The dairy industry in Vietnam faces several challenges, including the need for continuous investment in technology and infrastructure, the impact of trade agreements, and the increasing demand for high-quality and sustainable dairy products. Vinamilk, however, has been able to capitalize on these challenges and opportunities, as evidenced by its continued growth and expansion.
Analysis
Vinamilk's success can be attributed to its focus on quality, innovation, and sustainability. The company's commitment to implementing robust quality management systems, investing in modern production facilities, and diversifying its product portfolio have all contributed to its market dominance. Additionally, Vinamilk's ability to adapt to changing consumer preferences and market conditions has been a key factor in its continued growth.
Discussion
The Vietnamese dairy industry presents both challenges and opportunities for Vinamilk. While the company has been able to maintain its market- leading position, it must continue to invest in technology, infrastructure, and sustainability initiatives to stay ahead of the competition. Additionally, Vinamilk must closely monitor consumer trends and preferences to ensure that its product offerings remain relevant and appealing to its target market.
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