Applying Total Quality Management and Just-In-Time

This assignment requires analyzing the effectiveness of Total Quality Management (TQM) and Just-In-Time (JIT) inventory systems in a business context. Petrolimex, an equipment company, is used as a case study to demonstrate how these management strategies can improve productivity, reduce costs, and increase customer satisfaction. The benefits of TQM include increased customer satisfaction, cost savings, and improved employee morale. JIT, on the other hand, helps minimize inventory costs, reduce warehouse area, and increase product quality. However, JIT may be less effective in large companies with bureaucratic systems. The Covid-19 pandemic has also disrupted JIT use due to supply chain interruptions and storage issues.

Gross profit margin 2019: 111708622121
837392135778 * 100% = 13%
Gross profit margin 2018: 118902404448
848424341813 * 100% = 14.01%
From $1 in revenue, the business gets $ 0.13 in gross profit.
Gross profit in 2019 is higher than 2018, proving that the company has generated better profit.
This index also reflects the efficiency of production cost management of the firm. We can see
that 2019 is less efficient than 2018. The oil and gas equipment company petrolimex has the
advantage of being in the Petrolimex Group, so the supply to the market will be easier. However,
it can be seen that the company experienced a decrease compared to the previous year due to
competition from many competitors. The company should improve costs as well as more
marketing strategies for further growth next year.
Net profit margin 2019: 23331564179
837392135778 * 100% = 2.78%
Net profit margin 2018: 27387897311
848424341813 * 100% = 3.22%
$ 1 in revenue for 2019 generates $ 0.02 profit. In 2018, $ 1 in revenue generated $ 0.03 in
profit. That shows that net profit margin of 2019 is lower than that of 2018. We can see that Net
profit of 2019 decreased sharply compared to 2018 from 27387897311 to 23331564179 VND.
while revenue decreased slightly. To increase net profit margin, the company needs to reduce
related costs such as: Financial expenses, Administration expenses.
Levarage ratio 2019 : 440000000
88952711182=0.004
Levarage ratio 2018: 3547291000
77610970900 =¿0.045
The financial leverage of 2018 and 2018 is both less than 1, which proves that the business can
easily borrow. Long-term debt of the company in 2 years has high disparity. In 2018, the
company owes more than 3 billion VND, however by 2019, the company only owes 440 million
VND. This proves that the company has settled its long-term debts effectively. However, in

2019, this index is only 0.004, this can be considered that the company has not taken advantage
of the debt mobilization channel, has not exploited the financial leverage well.
Current ratio 2019: 115013884166
63937691903 = 1.79
Current ratio 2018: 114382129750
73856424544 =¿1.54
Short-term debt has decreased by more than 10 billion VND from 2018 to 2019. while short-term
assets increased only about 1 billion VND. this causes the coefficient to slightly increase from
1.54 to 1.79. This coefficient increases showing that the business has the ability to pay off due
debts.
Quick ratio 2019: 115013884166−62007066011
63937691903 = 0.82
Quick ratio 2018: 114382129750−68024877422
73856424544 = 0.62
The firm's quick ratio has increased from 0.62 to 0.82. Because the quick ratio is less than 1, the
company will not be able to pay all short-term debts immediately or more accurately, the
company will face more difficulties if they have to pay off short-term debts immediately. term.
This also shows that short-term assets heavily depend on inventories. In this case, the liquidity of
short-term assets over 2 years is relatively low
Trade receivable turnover a day 2019: 23256811918
837392135778∗365=10.13
Trade receivable turnover a day 2018: 17789390613
848424341813 * 365 = 7.65
This metric tells us: how long does the business make money from selling. The number of days
has increased from 7.65 to 10.13. Because it is an oil and gas equipment company, it is not too
high to let customers buy it for 2 years. This also helps to retain loyal customers of the company
as well as not affect the use of money for production and business.
Inventory turnover in day 2019: 62007066011
725683513657∗365=31.18

Inventory turnover in day 2018: 68024877422
729521937365∗365=34.03
The number of two years' inventory storage days is quite high. However, this is an oil and gas
equipment company so they can see the price of raw materials is falling, they will step up the
material stockpiling. Then, the inventory in stock will increase. The purchase of raw materials at
low prices will reduce production costs, thereby increasing profits
Trade payable turnover 2019: 29756049319
84062865983∗365=¿129.2
Trade payable turnover 2018: 42718634763
87685505937∗365 = 177.8
Viết
2016 2017 2018 2019
P/E 2.99 5.8 4.14 10.79
Eps (1000Vnd) 4.62 4.91 7.79 4.17
The EPS index is used by analysts as an indicator of the profitability of a business. Within 4
years, the quality of the business had many changes. from 2016 to 2018 Eps increased from 4.62
to 7.97. however in 2019 Eps is only 4.17 (the lowest in 4 years). That shows that the business
has a decrease compared to the previous year
Comparison with VVMI Mechanical and Pressure Equipment (APL) company. 3-year company
Eps from 2016 to 2018 had a slight decrease from 1.6 to 1.57. by 2019, the company's Eps
increases to 1.9. As can be seen, APL's Eps has grown. However, we can see that PEQ's Eps is
higher than APL, so Petrolimex Petroleum Equipment Company is more attractive to investors.

P/E ratio of the company has fluctuations from year to year. with 10.79, 2019 is considered the
year with the highest P/E index in 4 years. The company's outlook in the future is very good, so
the investor is willing to pay more than $ 10 for a $ 1 profit.
Pestel
Legal THÊM TÊN LUẬT
From July 1, 2018, the petrol and oil gauge must be fitted with a sales voucher printing device
Receipt printing equipment must meet the following requirements: Ensure the technical
condition according to the manufacturer's instructions and work well; document printing is only
possible at the end of the fuel injection process for customers; Mandatory information printed on
the sale voucher includes: Name of the establishment, address; model, symbol, serial number of
the fuel gauge; minutes, hours, days, months and years of sales; type of petrol and oil, quantity,
unit price, total amount of petrol and oil sold; There is no structure or function to change
information printed on sales vouchers or to change technical metrological characteristics of the
petroleum gauge.
The Circular stipulates that the traders importing, manufacturing, preparing, distributing, storing
and transporting petroleum must comply with the regulations on measurement. Specifically, the
measuring instrument used to determine the amount of petroleum in the purchase, sale and
payment between organizations and individuals must satisfy the following requirements: the
parts and details of the measuring device must be in line with the sample. has been approved
according to regulations; parts, details and functions capable of interventions that change the
basic technical metrological properties of a measuring device must be sealed or leaded by the
verification organization; have measuring ranges suitable to the amount of petroleum to be
measured; has been tested in accordance with the law on measurement; the inspection certificate
must be valid.
Economic
The Vietnam-EU Self-Trade Agreement (EVFTA) is forecasted to bring a strong investment
wave from EU countries to Vietnam, of which retail distribution is one of the potential areas.

However, besides the benefits that EVFTA brings, the company will have to face competition
from foreign enterprises to assert its position in domestic and foreign markets.
Foreign goods have high quality credit for domestic consumers. If the company's products are
not competitive or do not have the necessary information to let local consumers know, then it is
clear that the extrovert, cult of foreign goods can directly affect the company.
To attract customers, businesses need to focus on promoting market research and product
marketing, integrating information about consumers both offline and online, and promoting trade
promotion activities. develop, promote brand name in the field of manufacturing petroleum
equipment.
For petroleum materials and equipment: Currently, the procurement of petroleum materials and
equipment from all customers (including Petrolimex) is done through online public bidding,
Therefore, this business field is considered to be fiercely competitive and increasingly difficult.
The company has been very active in searching and participating in bidding packages and has
also achieved certain results in the packages of supplying petroleum pump system to Anh Phat
Corporation - Thanh Hoa, supplying for the Department of Petroleum, for the Petroleum
Company of B12 ... However, due to the huge competition in participating in the bidding, the
revenue and profit of this activity is relatively low
Enviroment
The petroleum equipment manufacturing industry generates a large amount of chemicals that
affect the water and air environment. industrial solid wastes such as scrap iron, steel, metal,
plastic, and rubber make the environment even more polluted.
The company has responsibilities such as collecting waste, applying production technology,
building waste treatment system; improve capacity, fully equip necessary equipment and means,
arrange funding sources to regularly maintain surveillance activities to detect violations of the
law on pollution control to timely and satisfactory handling.
Customer preference

Consulting services, after-sales customer care services, maintenance and maintenance: widely
and promptly deployed to customers, promoting efficiency of business - service. The company
received many positive feedback from customers, enhancing the company's reputation.
For example, to improve customer care services, the company set up a survey team. The survey
team went to 10 stores of Quang Nam Petroleum Branch and 06 stores in Da Nang. At each
store, the delegation and the shop manager shared their experiences in attracting and taking care
of customers; evaluate the organization of industrial hygiene, protection and branding;
Considering the potential to expand and develop customer care services based on the advantages
of commercial location, technical infrastructure ...
Covid 19
Before Covid 19
- Pump column products: In 2019, sales of complete pump columns and SKD is the type of
pump column that accounts for a large proportion in the total output of the pump column | on the
market; Total output reached 1,363 pump columns, reaching 85% of the year plan and equal to
87% in 2018; The main types of pumps for sale are the Tatsuno Sunny XE and PECO pumps (of
which: XE pump column accounts for 75.9%, PECO pump column accounts for 24.1% - a
decrease of about 8% compared to 2018). Sales column for sale Petrolimex external schools with
475 pump columns, reaching 34.8% of total output, 4.8% higher than in 2018.
- Plastic Sealing Products: In addition to providing for the regular needs of the units in
Petrolimex, the Company also introduced and was introduced by the non-Petrolimex units, the
Military Petroleum Corporation and some traders | use care distribution. The total number of
PECO plastic seals produced and supplied to the market in 2019 will increase by 11% compared
to 2018 ...
Due to the influence of Covid 19, revenue and profit will decrease compared to 2019.
In fact, in the first quarter of 2020, the output of gasoline and pump column decreased by over
30% compared to the same period in 2019, so far there has been no sign of recovery and
according to the socio-economic forecast, it will be affected by Covid-19 translation to the end of
quarter II / 2020. In 2020, the Company will focus investment capital for big projects, so the cost

of capital will increase; a number of land locations reduced revenue from renting offices,
warehouses: De La Thanh land was completely acquired over 544m for Hanoi city to build
roads; The locations of Sai Dong, Thanh Liet, the company recovered to invest, renovate and
upgrade petrol stations
Trading in pump columns and equipment: In the years from 2017 to 2019, the output of pump
columns has increased, partly due to the sudden increase from Petrolimex's demand to replace
old pumps. Up to now, the replacement of the old pump column of Petrolimex has almost been
completed and the demand for using the new pump column in Petrolimex as well as the market is
not expected to grow much in 2020. According to business experience in the field of pump
columns and the needs of customers in recent years, the average number of pumps PECO sold to
the market per year is about 1,200 poles / year, which is successful (regardless of breakthroughs).
changes in demand as Petrolimex's in the past 3 years); At the same time, the impact of the
epidemic caused the slowdown in production and business activities, so investment decreased.
TQM, JIT GIẢI THÍCH TỪNG BENEFIT (TẬP TRUNG)
Total Quality Management ( TQM) is the method of identifying and reducing or removing output
defects on an ongoing basis, streamlining supply chain management, enhancing customer
service, and ensuring that staff are qualified to keep pace. Total quality control seeks to keep the
overall quality of the finished product or service accountable to all parties involved in the
production process (Bảone, 2020).
Characteristics
 Customer-focused
The customer plays a central and decisive role in this approach. Customers' opinions will be
focused on listening to and TQM's approaches are also aimed at addressing them. Customer
satisfaction will be a measure of the success of the improvement process.
 Process orientation
Everything needs a clear process to execute, implement, act
 Strategic Technique

In order to help fulfill their mission and vision, businesses work under the TQM model, using
unique techniques. Specific techniques are built and used as a guide to guide all strategic
decisions and to form the road to continuous effort for all employees.
 Good contact
One of the goals for business improvement is connecting and engaging within the organization.
Resources are given for both employees and clients to maintain information connections and
ensure frequent contact with the organization.
Prevention Cost: Prevention is an important part of a company's manufacturing process.
Incorporate activities designed to prevent errors, including direct and indirect costs related to
activities such as quality training and training, trial research, review new products,
implementation of quality circle activities, quality appraisal, supplier capacity investigation,
machinery vendor technical support, process capacity analysis. These costs are used to build
awareness of quality programs and help keep audit costs and error costs to a minimum.
Appraisal costs: Attached to the evaluation of finished products and verification of compliance
against criteria and processes of all functions, including testing, testing and testing costs
manufacturing or operational procurement activities, and finished products and services.
Here, the company evaluates the level of implementation of quality requirements such as input
testing costs, process testing testing, output testing, product quality auditing. Thereby, the quality
of pumps and petroleum equipment has been increased.
Internal failure costs: Defects, failures, rework and general costs related to supplier fault
analysis, rework and waste, re-verification, retry, shutdown due to quality defects, and product
degradation.
External failure cost: Includes warranty costs, customer complaint investigation, merchandise
returns, product recalls, discounts, and other product-related obligations. External fault costs also
include, direct and indirect costs such as: labor and travel costs related to investigation of
customer complaints, warranty verification, testing and repair
Benefit of TQM
Increase customer satisfaction and trust;

Cost savings;
Increase employee productivity;
Increase profits for businesses;
Improving existing processes in the enterprise ;;
Promoting employee morale;
Build a positive working environment;
Firms use TQM by focusing on customer wishes, continuous improvement processes, and
making decisions based on data obtained or from the experience of employees.
TQM has been applied effectively at equipment company Petrolimex. First, the company needs
to know its customers well. The company's main customers include petroleum stores and
factories. The company should have forms of customer survey, functional analysis and quality
cost analysis. Next, the company needs to know its competitors well. There are many companies
producing oil and gas equipment on the market today. These include Hanoi Petroleum
Equipment Company, HungPhat Company. Under the impact of the EVFTA agreement,
competitors can import raw materials from European countries, which makes Petrolimex's
revenue decrease. Thirdly, the Company needs to have strategies in place for manufacturing and
designing products. The production should ensure that there is little impact on the environment.
Metals or chemicals should be handled with care. Finally, the company needs to attach
importance to the human factor in quality management: in management, it is necessary to apply
appropriate methods and measures to fully mobilize human talent at all levels, in all industries.
settlement to stabilize and improve the product-service quality.
The just-in-time ( JIT ) inventory system is a management strategy which directly aligns
supplier raw-material orders with production schedules. This inventory strategy is used by
businesses to improve productivity and minimize waste by only receiving products where they
need them for the manufacturing process, which decreases inventory costs. This approach allows
producers to accurately forecast demand.

Benefits of applying Just in time
 Minimize the phenomenon of inventory, capital stagnation.
 Reduce warehouse area.
 Increase product quality.
 Reducing scrap, defective products.
 Increase productivity by reducing waiting times.
 Flexibility in changing production processes, changing product designs.
 Workers are deeply involved in improving and improving productivity and product
quality.
 Reduce indirect labor.
 Reduce customer pressure
Just in time mainly helps to reduce inventory. Reducing inventory means reducing costs. The
benefit factors here are better capital management, less inventory costs, less overhead, and less
product defects or obsolescence. Two main benefits of the company applying just in time:
React faster
Product design changes will progress through the system faster, errors will be detected earlier
towards the end stages, production plan adjustments can be more responsive,
More space in the factory
With JIT, companies can reduce inventory, especially around processes where space is most
valuable. It doesn't matter when the part departs. The company doesn't need to reduce inventory
along the entire supply chain, but only at the last stop where raw materials are consumed. The
benefit of reducing the inventory around a company's machines and processes can also be
achieved just by storing documents elsewhere, without reducing the overall material. Of course,
reducing inventory still has many other benefits and is often worth it.
However, JIT has advantages with smaller companies over big companies. Petrolimex is a large
corporation, but the Company has a bureaucratic, and inflexible operating apparatus. It is
difficult to change the technology line due to high conversion costs. 1 Solutions The company
tends to switch to expanding cooperation with local associates to manufacture and supply spare

parts and components in the value chain of products. Both reduce costs to make products more
competitive, while being able to flexibly change the process when you want to create new
products. Towards customer satisfaction, Petrolimex will offer many options for customers to
choose from. Increasingly, customers are directly involved in the product design process, they
want their products to be different.
The Covid 19 pandemic has caused a practical disruption to JIT use. Pandemic interrupted
supply while lack of storage to handle the problem.