Evaluatinh the performance of supply chain management and solution a case study of thái binh shoes

MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HOCHIMINH CITY
--------------------

NGUYỄN PHỤNG HIẾU

EVALUATING THE PERFORMANCE OF
SUPPLY CHAIN MANAGEMENT AND
SOLUTIONS:
A CASE STUDY OF THAI BINH SHOES

MASTER OF BUSINESS ADMINISTRATION THESIS

Ho Chi Minh City, 2010


MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HOCHIMINH CITY
--------------------

NGUYỄN PHỤNG HIẾU
EVALUATING THE PERFORMANCE OF
SUPPLY CHAIN MANAGEMENT AND
SOLUTIONS:
A CASE STUDY OF THAI BINH SHOES

Major:
Business Administration
Major code:
60.34.05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr. Trần Hà Minh Quân
Ho Chi Minh City, 2010


Aknowledgement
I would like to express my heartfelt gratitude and deepest appreciation to my
research Supervisor, Dr. Tran Ha Minh Quan for his precious guidance, share of
experience, ceaseless encouragement and highly valuable suggestions throughout the
course of my research.
Besides, I would like to extend my sincere thanks to Prof. Ms Ta Thi Bich Thuy, for
her valuable comments and constructive suggestions on the theory foundation and the APA
format from early draft of my thesis.
My special gratitude is extended to all instructors and staff at Faculty of Business
Administration and Postgraduate Faculty, University of Economics HoChiMinh City (UEH)
for their support and the valuable knowledge during my study in UEH.
I would also like to avail this opportunity to express my appreciation to Professor
Nguyen Dong Phong and UEH Board of Directors for creating MBA program in English.
Specially, my thanks also go to to many of my collegues from Shoes Secteur in
Decathlon company, who have helped me during the collection of data as well as support
me during doing research: Ms. Nguyen Thi Hoai Trinh (Supply chain production leader),
Mr Nguyen Du Thuan (Development Industrialization Production Leader), as well as Mr
Nguyen Thanh Son from Board of Director, Ms. Phan Thi Thu Thao, Ms. Ngo Ngoc Thy,
Mr. Phan Van Phuong and other staffs of Production& Planning, Costing,
Purchasing…Departments in TBS Group.
Many thanks to Ms. Nguyen Thi Kim Anh, Mr. Nguyen Thanh Trung, as well as the
other classmates in MBA class, Batch 16 for their valuable and enthusiastic support for this
research study.
Last but not least, the deepest and most sincere gratitude go to my beloved mother,

my husband Mr Nguyen Le Thanh Vinh for their boundless support, abundant love and
encouragement throughout my period of study. I, therefore, dedicate this work as a gift to
them all.
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Abstract
Nowadays, the wide application of supply chain in most of business has been
observed. Based on this, there are many improvements in customer’s reliability and speed
of order fulfillment. The impacts of supply chain on business’s activities were examined in
reality. This experimental study will seek to discuss more detail in the Chapter 2,3,4.
The function of supply chain management is to design and manage the processes, assets,
and flows of material and information required to satisfy customers’ demands.

The evaluation Supply chain management‘s performance is more important in most
of companies. Author chose TBS Group – one of biggest footwear enterprises with their
supply chain management (SCM) for her research study. Through key indicators to
measure SCM’s performance at TBS, author will generalize the statement problem which
still exist in TBS’s SCM and have deeply understanding about TBS’s production planning
and their organization of shoes process.

Recommendations with concrete solutions for related entities concerning pending
problem of TBS such as the delivery on time, quality, cost and lead time are suggested to
improve the supply chain management of TBS Group.

Keywords: supply chain, supply chain management, key indicator to measure,
performance; delivery on time, quality, cost and lead time, production planning.

ii

Contents
Acknowledgement ................................................................................................................... i
Abstract .................................................................................................................................. ii
Contents ................................................................................................................................ iii
List of Tables ......................................................................................................................... iv
List of Figures ........................................................................................................................ v
Abbreviations ......................................................................................................................... vi
CHAPTER 1: INTRODUCTION .......................................................................................... 1
1.1. Problem Statement ......................................................................................................... 1
1.2. Research Objectives ....................................................................................................... 2
1.3. Research question .......................................................................................................... 3
1.4. Scope and limitations ..................................................................................................... 3
1.5. Methodology ................................................................................................................... 3
1.6. Research rationale .......................................................................................................... 4
1.7. Structure of thesis .......................................................................................................... 4
CHAPTER 2: LITERATURE REVIEW ................................................................................ 5
2.1. SUPPLY CHAIN AND SUPPLY CHAIN MANAGEMENT DEFINITIONS ............................. 5
2.2. FRAMEWORK OF SCM FROM PRODUCTION SIDE ........................................................ 8
2.3 KEY INDICATORS OF EFFECTIVE MEASUREMENT IN SCM .......................................... 10
CHAPTER 3: THAI BINH FOOTWEAR JOINT STOCK AND THEIR SUPPLY CHAIN
MANAGEMENT ................................................................................................................... 19
3.1. GENERAL VIEW OF LEATHER AND FOOTWEAR INDUSTRY IN VIET NAM................. 19
3.2. THAI BINH FOOTWEAR JOINT STOCK TBS Group)’S BACKGROUND………………..21
3.3. SUPPLY CHAIN MANAGEMENT IN TBS GROUP ........................................................... 27
3.4. MEASUREMENT SCM IN TBS GROUP ........................................................................... 33

3.4.1. Personal Interviews .............................................................................................. 33
3.4.2. Current indicators of TBS to measure the SCM’s performance .......................... 35
CHAPTER 4: CONCLUSIONS AND RECOMMENDATIONS FOR TBS GROUP’S

IMPROVEMENT IN SCM .................................................................................................. 50
4.1. CONCLUDING REMARKS............................................................................................... 50
4.2. RECOMMENDATIONS OF THE RESEARCH STUDY: ..................................................... 51

4.2.1. Self-contained process ........................................................................................ 51
4.2.2. Simplification of major processes ....................................................................... 55
4.2.3. Upgrade the system or expand sub-contract supplier ........................................ 55
4.2.4. Design main style of product with investment .................................................... 56
4.2.5. Outsourcing the satellites factories ..................................................................... 56
4.3. LIMITATIONS AND FURTHER RESEARCH: .................................................................. 56
REFERENCES ........................................................................................................................ 58
APPENDIX 1: Guide for Interview & Questionaires............................................................. 59
List of interviewees .............................................................................................................. 61
APPENDIX 2:Key Figures of TBS Groups ............................................................................. 62
iii


List of Tables

Table 2.1 Framework of production planning.................................................................11
Table 3.1 Sharing percent of Vietnam’s export market……………………………. . . 20
Table 3.2 Interviewees and statement concerning to SCM.......................................... ..34
Table 3.3 Shipment report of TBS from week21-week 25, 2010…...............................38
Table 3.4 Quality control of TBS from the beginning until shipment........................... 41
Table 3.5 Top 10 models in TBS with quality high return rate......................................42
Table 3.6 Situation of lead time at TBS Groups before for some typical model…...….43
Table 3.7 Lead time flow in production of TBS Groups................................................44

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List of Figures

Figure 2.1 Basic flow of SCM (sited of Decathlon company)........................................8
Figure 2.2 Basic Quality Control (From Quad tool of Decathlon Company)………….14
Figure 3.1 % Delivery on time of TBS through years for Europe Customer................36
Figure 3.2 Global lead time 2008 of TBS.......................................................................44
Figure 3.3 Replenishment lead time 2008 of TBS……………………………………..45
Figure 3.4 Derivation of basic cost elements..................................................................47

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Abbreviations

SCM: Supply chain management
DOT: Delivery on time
LT : Lead- time
TBS: Thai Binh Shoes
EU: Europe
FDI: Foreign Direct Investment
Lefaso: Vietnam Leather and Footwear Association
OEM: Original Equipment Manufacturing
R&D: Research and Development
QFD: Quality Function Development
LOP: Labor cost, Overhead and profit
EDI: Electronic Data Interchange
TMS: Transportation Management System
SQC: Statistical Quality Control

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CHAPTER 1: INTRODUCTION
1.1. PROBLEM STATEMENT:
Nowadays, Supply chains are becoming increasingly global and ever more complex.
In addition, organizations also want try to support strategic management practices such as
entering new markets, controlling business activity in a good system, increasing the pace of
new product introductions, improving customer satisfaction. Thus, for organizations to
work closely with their suppliers, logistics providers, distributors and retailers, their supply
chains must be streamlined and technology-enabled.
However, the full understanding about supply chain management (SCM) and its
application in the real organizations are different among enterprises. Assessing the
performance of SCM is necessarily indispensable in the period and Thai Binh Footwear
Joint Stock is the case at point, especially when Thai Binh is one of biggest footwear
companies of Vietnam. On the other hand, Thai Binh also has a full supply chain from the
beginning of material purchase until the finished product among footwear enterprises. The
results from the evaluating supply chain management of Thai Binh can be used to refer for
the application of SCM in real enterprises.
Importantly, this research will outline how supply chain management is an
important part in business activities, from production view, especially in footwear industry.
Through working few years as supply chain leader, the real problems in applying
supply chain management in general and in Thai Binh Footwear Joint Stock- one of typical
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footwear company of Vietnam in particular can show the function and physical structure
supply chain management as well as the inner problems in key indicators to measure
SCM’s effectiveness. I will go to the detail to state clearly my understanding in literature
review and analyze bottle neck in this company (Chapter 2&3).

Although TBS Group owns one strong supply chain, in their management, it still
exist some problems, especially with main key indicators that use to measure the efficiency
of their supply chain. By analyzing the situation arising at SCM of TBS Groups, the author
reveals that the delivery on time (DOT) at TBS still faces some big delay. Besides, Thai
Binh controls well the orders but lead time of order processing is too long. Concerning to
the quality, whether TBS can produce the shoes in good quality, there are many additional
steps and they need to control more to follow the good and do the traceability when there is
any problem arising at destination. For the cost, the author would like to analyze deeply the
detail of production cost and investigate why the cost of TBS is still higher than other
competitors in footwear field.
By examining the concrete footwear company Thai Binh Joint Stock, the author will
show out the main purpose of this study, that is to find the solutions to improve their
production planning in order to ensure the rate of delivery on time (DOT), reduce lead time,
control quality figure, optimize the cost in supply chain management.
1.2. RESEARCH OBJECTIVES:
The primary objective of this study is to present the important role of supply chain
in a footwear company, to identify key drivers to measure the performance of supply chain
2


management and their inter-relationship in SCM. It would be an interesting study to tackle
all inner problems at TBS Group on delivery and production planning and have a deeply
understand on lead time break down in order to improve it, manage quality and cost- all
key indicators to measure supply chain management in order to satisfy more and more
customers in footwear industry.
1.3.

RESEARCH QUESTION:

The questions raise some critical points on the topic. In lieu with this, the study will

answer the following research questions:
1. Which causes have big impact on DOT, lead time, quality and cost in SCM from
production view at TBS Groups?
2. What solutions can be made to improve the SCM of TBS Groups?
1.4.

SCOPE AND LIMITATIONS:

The study will particularly focuses on Thai Binh Joint Stock Footwear business
from production view to clarify the real application flow of SCM as well as their SCM’s
control comparing to the theory.
1.5.

METHODOLOGY:

The research takes most principles of SCM from the experiments and reality
application in footwear Company. Information will be summarized to show the impact of
SCM to business activities from procurement of materials to delivery finished product to
customers. Furthermore, by analyzing the case studies of a shoes company with the
implementation of SCM, the research identifies the real impact of the key indicators of
SCM on business operations and outlines the practical flow from material to finished good.

3


1.6. RESEARCH RATIONALE:
The study also helps us to understand the various factors of SCM as well as their
influences on supply chain. Analysis from this study will improve our understanding of
measurement of SCM’ s effectiveness through the scales: Delivery on time, quality, lead
time and cost and result findings will lead us to the solution of improvement in these scales

to obtain the well control SCM in footwear company.
1.7.

STRUCTURE OF THESIS:

The thesis is presented in 4 chapters:
CHAPTER 1

Introduction: give general information about the problem.

CHAPTER 2

Literature review with the theoretical supply chain management, its

application, element and the framework of effectiveness measurement.
CHAPTER 3
CHAPTER 4

Thai Binh footwear joint stock and their supply chain management
Conclusion

and

improvement in SCM

4

Recommendations

for

TBS

Group’s


CHAPTER 2: LITERATURE REVIEW

2.1.

SUPPLY

CHAIN

AND

SUPPLY

CHAIN

MANAGEMENT

DEFINITIONS:

Why do so many people spend so much time on thinking, writing and doing SCM?
The answer is that it is a considerable source of competitive advantage in the global market.
The fierce competitions in today’s markets is led by advances in industrial technology,
increased globalization, big improvement in information availability, plentiful venture
capital and supply chain management (Bovet & Sheffi, 1998). In addition, we can realize
that supply chain management is occupying one importance part in running, maintaining

and managing the company’s primary and support activities at the most favorable
conditions.
It has now been two decades since SCM began to receive serious attention, with
scholars arguing that purchasing, as it was then known, be regarded as a key area of
academic study and practitioner focus ( Burt DNS 1985; Farmer 1972). This debate has
continued to attract scholars across the range of academic disciplines, including operation
management, management science, strategy, economics and organizational behavior, to
name but a few. The early 1980s saw the academic debate move from a logistics/operation
management orientation, focused on inventory control systems, transportation, transshipment problem, and distribution issues, toward a focus on the strategic nature of supply
itself. Kraljic(1983) introduced concepts and strategies, such as category management,
leveraging and relationship management, into common business parlance. Frankly
speaking, Supply chain management is an essential aspect of business today. A company
can identify its supply chain by first selecting a particular product group or product family.
Then it should trace the flow of material and information from the final customer backward
5


through the distribution system, to the manufacturer, and then to the suppliers and to the
source of raw materials. This entire chain of activities and processes is known as the supply
chain for that product group.
A large company will have several supply chains. In a multidivisional company with
many product groups, there could be many different supply chains. For example, large
companies such as Procter & Gamble or General Electric may use 50 to 100 different
supply chains to bring their products to market. Some of these supply chains utilize
distribution through company –owned warehouses, some use direct distribution, some use
outside manufacturing, and some use in-house manufacturing sites.
A number of different theoretical models have evolved to provide the frameworks
for explaining and analyzing supply chain and SCM. However, concepts, definitions and
perceptions of these theories tend to differ among scholars. It is also known that there is no
single, totally accepted definition of supply chain and SCM. The definitions usually reflect

the needs, the interests or attitudes of different people (Wang, 2006).

However, the

essence of supply chain and SCM can be summarized by the following definition:

“A supply chain is the alignment of firms that brings products or services to market
“- from Lambert, Stock, and Ellram (Lambert Douglas M., Jame R Stock and Lisa M.
Ellram, 1998, Fundamentals of Logistics Management, Boston, MA: Irwin / McGraw-Hill,
Chapter 14).
“A supply chain is a network of facilities and distribution options that performs the
functions of procurement of materials, transformation of these materials into intermediate
and finished products, and the distribution of these finished products to customers. Supply
chains exist in both service and manufacturing organizations” (from Ganeshan, Ram and
Terry P. Harrison,1995, “ An introduction o supply chain management”, Department of
Management Sciences and Information Systems, 303 Beam Business Building, Penn State
University, University Park, PA).
If this is what a supply chain is then we can define supply chain management as the
thing we do to influence the behavior of the supply chain and get the result we want.
6


“Supply chain management (SCM). It is a broader and strategically more significant
concept, which includes the entire supply chain from the supply of raw materials, through
manufacture, assembly and distribution to the end customer (Cited from one paper written
by Venus D, 2001).
Traditionally, supply chain management (SCM) has been a melting pot of various
disciplines, with influences from logistics and transportation, operations management and
materials and distribution management, marketing, as well as purchasing and information
technology (IT).

In my opinion, there is a different between the concept of SCM and traditional
concept of logistics. Logistics typically refer the activities behind production, including
transportation, warehousing, and customer service. Whilst SCM acknowledge all of
traditional logistics and also includes other activities such as forecast, determine process of
buying, new product development, production and finance, in the wider view of supply
chain thinking, these additional activities are now seen as part of the work needed to fulfill
customer requests.
Another definition (Cited from Web Strategist and Project manager 2002), Supply
chain management (SCM) is the oversight of materials, information, and finances as they
move in a process from supplier to manufacturer to wholesaler to retailer to consumer.
Supply chain management involves coordinating and integrating these flows both within
and among companies. It is said that the ultimate goal of any effective supply chain
management system is to reduce inventory (with the assumption that products are available
when needed).
Supply chain management flows can be divided into three main flows:
•

The product flow

•

The information flow

•

The finances flow
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From my point of view, I totally agree with the last approach.

The above flows must be coordinated well together in order to achieve the least key
goals measurement of SCM: delivery on time (DOT), lead time, quality and cost.
Supply chain management is among the most important processes a company must
master if it to remain competitive in the current global marketplace. Most analysis and
discussion of SCM begins with the basic picture below:

Move
Buy

Make

Store

Sell

Figure 2.1. Basic flow of SCM (Cited from sited of Decathlon company)

2.2. FRAMEWORK OF SCM FROM PRODUCTION SIDE:
If your company makes a product from parts purchased from suppliers, and those
products are sold to customers, then you have a supply chain. Some supply chains are
simple, while others are rather complicated. The complexity of the supply chain will vary
with the size of the business and the intricacy and numbers of items that are manufactured
(Croom et. al. 2001).
From definition of SCM, There are many factors to build up SCM, but I would like
to zoom out this research to SCM from production side. In fact, we see Planning,
organizing, producing, directing, & controlling flows of materials;
♦ Begins with raw materials
♦ Continues through internal operations
♦ Ends with distribution of finished goods
8

So, I will identify the elements inherent in supply chain management from
production’s view:
1. Planning – This is the strategic portion of SCM. You need a strategy for
managing all the resources that go toward meeting customer demand for your product or
service. If we don’t build up the efficient planning at the beginning, it may lead us to
inefficiency, high costs, long lead time, late reception, or good delivery with less quality
and value to customers.
2. Source– Choose the suppliers that will deliver the goods and services you need to
create your product. We develop a set of pricing, delivery and payment processes with
suppliers and create metrics for monitoring and improving the relationships. And we put
together processes for managing the inventory of goods and services we receive from
suppliers, including receiving shipments, verifying them, transferring them to our
manufacturing facilities and authorizing supplier payments. In case, you don’t gather in all
these information in supplier’s decision, maybe you will take wrong choice, it may lead to
big problem. For instance, you choose one supplier to produce your product based only on
good price, but you don’t care about the delivery lead time. This choice is not profitable at
all.
3. Make – This is the manufacturing step. The team of SCM needs to schedule the
activities necessary for homologation, production facilities, testing, packaging, and
preparation for delivery. As the most metric-intensive portion of the supply chain, we
should measure quality levels, production output and worker productivity.
4. Deliver (Logistics) – This is the part that many insiders refer to as logistics. It can
coordinate the receipt of orders from supplier, carry out the shipment, follow up flow
includes custom clearance till reception at the warehouse, develop a network of warehouses,
pick carriers to get products to customers and set up an invoicing system to receive
payments. Logistics purpose is the right product in the right place at the right time.

9

5. Return – The problem part of the SCM. It can create a network for receiving
defective or sale withdrawn products back from customers and supporting customers who
have problems with delivered products.
(Cited from source of supply chain company of France 2000: Decathlon)

2.3

KEY INDICATORS OF EFFECTIVE MEASUREMENT IN SCM:

The metrics and measures are discussed in the context of the following supply chain
activities/ processes: (1) production planning, (2) delivery/customer, (3) quality
(make/assemble), and (4) cost (Stewart, 1995; Gunasekaran et al., 2001).
• Production planning:
At its core, production planning represents the beating heart of any manufacturing
process. Its purpose is to minimize production time and costs, efficiently organize the use
of resources and maximize efficiency in the workplace.
Production planning incorporates a multiplicity of production elements, ranging
from the everyday activities of staff to the ability to realize accurate delivery times for the
customer.
Nothing disappoints customers more than not being able to get the goods they need,
when they need them. In order to do this, the most important part is how to build up the
good production planning. It determines the production output level and workforce for the
medium term (normally one semester or a year) within the physical capacity available.
However, it should be create based on the reliable forecast and enough information
collected from customer‘s demand for a semester or a year. The better planning is allocated
at the beginning, the more rate of delivery on time can be realized.
In production planning, booking capacity is one important part. Capacity planning
or capacity requirements planning are the function of establishing, measuring and adjusting

limits or levels of capacity. The term “capacity requirements planning” in this context is
10


the process of determining how much labor and machine resource is required to accomplish
the tasks of production.

Table 2.1 : Framework of production planning
(Source: Cites from site allbusiness)
Finite capacity scheduling uses basically the same data as capacity requirements
planning but adjusts the schedule to ensure that the capacity required never exceeds a work
center’s defined capacity limits in a given time period.
The above figure describes the hierarchy of capacity planning decisions that can be
made within a planning and control environment. These range from long-term capacity
decisions down to short-term shop floor monitoring and control tasks:
•

Planning resource capacities over long time horizons.

•

The rough-cut evaluation of capacity required by the master production schedule.
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•

Detailed capacity requirements of a particular production schedule.

•

The simulation of the use of alternate capacity plans.

•

Monitoring actual outputs versus plan.
The source of the loading data changes as you move down this hierarchy. While

resource planning takes its capacity requirements from the business plan, rough-cut
capacity planning uses the master production schedule as the source of its information.
Capacity requirements planning and the remainder of these shorter-term planning modules
take their loading data from the Material Requirements Planning output.
This production plan needs to be translated into a master production schedule
(MPS) so as to schedule the items for completion promptly, according to promised
delivery dates; to avoid the overloading or under loading of the production facility; and so
that production capacity is efficiently utilized and low production costs result.
• Delivery:
The improved

ability of an organization to

deliver a product or

service that meets customer

requirements against a

specification for delivery time.

While price has always

been a key determinate in the

purchasing decision, the

emphasis on timely delivery is

becoming increasingly

important, for both individual

consumers and

subassemblies.

This actually

refers to on time deliver: the

percentage of orders

delivered completely and on

the date requested by customer. Noted that orders are not counted as delivered on time
when only part of order is filled – we call partial reception or when the customer does not
get the delivery on the requested date.

12

In production side, On-time delivery is measured as percent achievement within a
window of time that brackets the customer-requested date or the business's committed date
and is not improved by quoting long lead times and turning down tough business. Using
time as a metric allows to improve quality and decrease costs as process times are reduced
through systematic barrier removal.(Source: Operation Management: Roger 2003)
The key element to improving on-time delivery is the standardization of the criteria
by which each supply chain segment is measured against. Problems arise when different
segments define on-time delivery differently and in ways that are not tied to the
commitment date to the customer. By aligning all internal lines to a common standard it is
easier to drive different parties towards what they need to achieve.
In my point of view, it is key indicator to measure the efficiency of supply chain
management, and should be followed every week.

• Lead time:
In today’s global economy, cost and quality is no longer “King.” It seems that
everyone is on a level playing field. Today’s battles are being won by those companies that
can effectively add the third dimension: rapid response to customer needs. The operation
function in many companies is dramatically reducing lead time to make shorten product
available for customer’s use. It was done by radical steps of production and development
planning as well as the material management by several methods. It should be mentioned in
detail in next chapters.
The concept of supply chain management in lead time is to overlook and manage
the time of transition of raw goods into finished products, something that has become
necessary over the years as more corporations have become increasingly flexible and
dependent on outsourcing the production of their goods to other corporations, who are able
to do the job at a more affordable rate.

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• Quality:
Quality is no more a marketing argument so far, it is included as a due. To help
improve customer satisfaction, greater emphasis is given to the aspect of quality in the
supply chain. The articles on this page helped you understand some of the quality issues
and methodologies that are relevant in current supply chain management.
A direct measure of quality is customer satisfaction, which can be measured in
several ways. It can be measured relative to what the customer expected. Thus, there are
several model of quality control, the core conditions in quality is:
-

Having set up an internal quality organization => CONSTANT QUALITY LEVEL
for components & for production assembly

-

Constant analyze & concrete actions to Non Quality Causes at each production
steps
(non quality = human waste + component waste + lead-time waste= cost!)
We can see below the flow for basic Quality control:
Figure 2.2. Basic Quality Control

(Source: From Quad tool of Decathlon Company)

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A list of special quality checks follows. The control points list mentioned isn’t
exhaustive; its purpose is to highlight specific points to control closely in order to ensure
the product quality.
The supplier guarantee the quality level agreed on the confirm sample.

The statistical control method is also presented in the following pages. Of course,
for maximum quality, many controls have to be done on 100% of products.
* Every step impacts the Quality of finished goods:
The Quality Control contains six major components (Explanation of Quality
Function Deployment of Akao and Mizuno. (1965) Contributed by: G Prasanna Kumar)
1. Customer requirements (HOWS). A structured list of requirements derived
from customer statements.
2. Technical requirement (WHATS): A structured set of relevant and
measurable product characteristics.
3. Planning matrix: Illustrates customer perceptions observed in market surveys.
Includes relative importance of customer requirements, company and
competitor performance in meeting these requirements.
4. Interrelationship matrix: Illustrates the Quality Function Development (QFD)
team’s perception of interrelationships between technical and customer
requirements.
5. Technical correlation (Roof) matrix: Used to identify where technical
requirements support or impede each other in the product design. Can
highlight innovation opportunities.
6. Technical priorities, benchmarks and targets: Used to record:
The final output of the matrix is a set of target values for each technical
requirement to be met by the new design, which are linked back to the demands of the
customer.

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• Cost:
“Price competitiveness is fundamental in a stronger competition world with other
suppliers and countries”
In SCM from production side, there are many kinds of cost:

-

Production cost (supplier cost, material cost, mould cost, Overhead cost, labour
cost…)

-

Finance cost (building, finance charge, inventory duty cost..)

-

Logistics costs ( service, warehouse, custom clearance, shipment)

-

IT cost, Quality cost, etc….
A good SCM is to make the product in good quality but at lower cost. It should be in

parallel. It is the task to work with supplier and other part by understanding that we don’t
attack its margin and by its good collaborative spirit to work on its cost decrease.
Besides, for the cost in production side, we refers the optimization of consumption,
better purchase for components, waste rate decrease, maximization of productivity …)
Many companies believe that the costs of the introduction of SCM are far greater
than the benefits it will produce. However, research across a number of industries has
costs involved in doing nothing, i.e. the direct and indirect costs of quality problems,
finance, are far greater than the costs of implementing SCM (By Martin Murray,
About.com)
SCM costs are associated with the design, implementation and maintenance
of the SCM system. They are planned and incurred before actual operation, and can include:
• Product Requirements – The setting specifications for incoming materials, processes,

finished products/services.
• Planning – Creation of plans for quality, reliability, operational, production and
inspections.

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Quality cost is one big part of SCM. We emphasized the detail in total quality
control. Firstly, appraisal costs are associated with the vendors and customers evaluation of
purchased materials and services to ensure they are within specification. They can include:
• Quality Verification – Inspection of incoming material against agreed upon
specifications.
• Audits – Check that the quality system is functioning correctly.
• Vendor Evaluation – Assessment and approval of vendors.
• Rework – Correction of defective material or errors. .

After viewing some important theory that links to SCM, I would like to make
conclusion with conceptual framework of this thesis.
A supply chain encompasses all activities in fulfilling customer requests. These
activities are associated with the flow and transformation of goods from the material stage,
through to the end user. Supply chain management is a set of synchronized decisions and
activities utilized to efficiently integrate suppliers, manufacturers, warehouse, transporters,
retailers, and customers so that the right product or service is distributed at the right
quantities, to the right location and at the right time, in order to minimize system-wide
costs while satisfying customer service level requirements (according to Ben(2003)).
However, theory is theory; the real application in each company has its own supply
chain to adapt to their own operations, especially in production field. The aims of the
research were to develop an integrated framework, and to provide a methodology for
planning of many components in the supply chain such as production planning, key
indicators which apply in practical to measure the SCM’s performance. And the author

chose Thai Binh– one of biggest footwear company in the Vietnam shoes industry– which
has applied supply chain in practical for long time-is the case to analyze.

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