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Production and operations management case study

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MANAGEMENT
ANDOPERATION
Case study: VINACAFE BIEN HOA JOINT STOCK COMPANY

Lecturer: Ph.D Pham Hoang Hien

Student name: Nguyen Tuan Kiet

Submission date: 14thJune 2021
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Table of Contents

1.An introduction to the key operations of the organisation:
............................................................3
2.Detail each of the key operational functions, identify the roles and responsibilities of managers
in the key operational functions:
...............................................................................................................4
3.Explain the key operational approaches to operations management and their value:.................6

4.An evaluation of the impact of external business environment factors that affect decision-
making by leaders and managers by conducting the PESTLE analysis, Poster’s Five Forces model
and SWOT analysis:.................................................................................................................................12

4.1.PESTLE analysis:.....................................................................................................................12

4.2.Poster’s Five Forces Model:.....................................................................................................17

4.3SWOT analysis of Vinacafe:....................................................................................................19

5.Explain how operational efficiencies can be improved to successfully meet business objectives
using appropriate management and leadership approaches:...............................................................22

6.Discuss and produce the conclusions and supported recommendations for future
improvements to be taken by the Vinacafe:...........................................................................................22

7.Prepare a report and a 15-minute presentation which covers both content of assignment 1 and
2 to present in front of the Board of Management:...............................................................................24

References:.................................................................................................................................................31

Appendix:..................................................................................................................................................33
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1.An introduction to the key operations of the organisation:

Operations management(OM) is the administration of business practices to create the highest level
of efficiency possible within an organization. It is concerned with converting materials and labor
into goods and services as efficiently as possible to maximize the profit of anorganization.
Operations management teams attempt to balance costs with revenue to achieve the highest net
operating profit possible.

Operations management involves utilizing resources from staff, materials, equipment, and
technology. Operations managersacquire, develop, and deliver goods to clients based on client
needs and the abilities of the company.(Investopedia,2018)

Operations management (OM) is the business function responsible for managing the process of
creation of goods and services. It involvesplanning,organizing, coordinating, and controlling
all the resources needed to produce a company’s goods and services. Because operations
management is a management function, it involves managing people, equipment, technology,
information, and all theother resources needed in the production of goods and services. Operations
management is the central core function of every company. This is true regardless of the size of
the company, the industry it is in, whether it is manufacturing or service, or is for-profit or not-for-
profit.(The Definitive Guide to Manufacturing and Service Operations,2014)

As mentioned in the previous mission,with more than 54years of history and more than 46years
of building and developing a brand, as a dynamic and creative company.VinacafeBien Hoa is
considered the No. 1 instant coffee producer in Vietnam, successfully developed two brands of
Vinacafe and Wake-Up, accounting for 41% of the instant coffee market share. In addition,
Vinacafe Bien Hoa is also the national leaderin product quality, business efficiency, technology
innovation, creation, and successful application of science and technology. Currently, Vinacafe
Bien Hoa is operating two factories: Bien Hoa and Long Thanh, completely replacing imported
instant coffeeand enhancing automation of production stages, increasing recovery rate, reducing
loss, the process of improvement activities as well as stabilize input materials at competitive prices.
As a result, production efficiency increases significantly. In addition, the product distribution
system of Vinacafe Bien Hoa (under Masan's beverage distribution system) is considered the
strongest, deepest and widest distribution system in the country with 130,000 beverage retailers,
3,000 employees, 08 distribution centers to ensure goods in 63 provinces and cities nationwide. In
the coming time, the Company will continue to maintain instant coffee as the main product and
build a business list not only domestically but also in the world.(Vnr500,2020)

According to information that the writer found in annual reports and Vinacafe websites, they have
a very good track record inTotal Quality ManagementandSupply Chain Management. To
have the success in business as it is today, Vinacafe has had to put a lot of effort into making
production plans, strengthening the quality management system, investing in research and
development as well as managing the supply chain in the production process.(Vinacafe,2019)
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2.Detail each of the key operational functions, identify the roles and
responsibilities of managers in the key operational functions:

“The purpose of all managers is to achieve results with and through the activities of other people
in the most effective and efficient way possible”.

To be successful and remain competitive in today’s dynamic global environment, every
organisation needs effective managers.

Operation is an integral part of any business. Whether that business operates in any field such as
manufacturing products, distributing goods, providing services. Operations management performs
a task by converting inputs (materials or information) into outputs (goods or services) and
providing them to customers.

In order to well implement the organization's goals, Vinacafe's CEO and managers must have a
solid operating foundation. Because the managers clearly know how to meet and customer needs
and they understand what Vinacafe can and cannot do. To accomplish goals effectively, managers
performthefollowingfourfunctions:Planning,Organizing,Leading,Controlling.
(Leadershipmanagement,2019)

Planning:

Of the four functions of management, planning is the firstfunction.Planning helps defines and
determinesthe goals of the organization, department, and team. One of the fundamental activities
forthemanagementfunctionistodecidethefuturedirectionoftheorganization.
(Leadershipmanagement,2019)

This is the stage of deciding what the members of the organization should do, by whom the
decisions should be made, to whom the employees should report and what their common goals
should be, what different parts of the organization must do. In organizations often divided into
small groups or small units, based on different functions, each unit will have different tasks such
as sales, production, human resource management, financialaccounting, etc.

For example, for Vinacafe company, the annual sales target must increase at least 20%. Especially
for products such as Wake-up cafe Saigon, Wake-up coffee with mink flavor, and Wake-Up 247
coffee-flavored energy drink, the company has seta sales target of 25% per year. In addition,
Vinacafe believes that 2021 will still have many difficulties due to the impact of the epidemic,
VinaCafé Bien Hoa aims to be flat with the lowest net revenue of 2,900 billion VND and the highest
3,000 billionVND. Profit after tax distributed to the company's shareholders is estimated at the
lowest 710 billion VND and the highest 730 billion VND. Right now, Vinacafe's general director
will make specific plans for each department to work together to accomplish the organization's
common goals. The finance and accounting department must prepare enough budget to promptly
mobilize available capital for production and business activities. The human resources department
must recruit, train, evaluate effectiveness, motivate employees, internal communication, and work
safety for employees. For the marketing department, it is necessary to research the market,
forecast customer needs, implement product introduction programs, etc.(Cafef,2021).
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Organization:

The organizing function is centered on the acquisition and deployment of resources to achieve
operational goals.

Organizing determines an organisation’s division of labor into specific departments and teams as
well as what tasks are to be done, who is going to do them, and how they will be grouped.
Organizing also encompasses deciding the formal chain of command, operational processes,
reportingstructures,anddecision-makingauthoritythatwillbeused.
(Leadershipmanagement,2019)

In short, like planning, the organization is purposeful in the sense that it ensures all the tasks
necessary to accomplish the assigned goals. The purpose of organizational structure is to create an
environment in which people perform at their best. The structure must define the task to be
performed. Such established rules must also be designed based on the capabilities and motivations
of those available.(Iedunote,2019)

For example, the main task of Vinacafe's managers is to make plans to meet the company's
common goals such as allocating assigned resources, decentralization, project planning, and
reasonable time allocation. Have the supervisor continuously check the finished product. Tasks
will be sorted by priority. Vinacafe project managers will meet with their project teams to discuss
time,resources, costs, methods to quickly achieve organizational goals. (Aiuniv,2018)

Leading (Coordinating):

Leading is the ability to influence and inspire people to achieve organizational goals because they
want to, not because they have to.

Leadership creates and determines the culture and values of an organisation, department or team.
Quality leadership is also an integral component in creating and maintaining a high-performance
work environment.(Leadershipmanagement,2019)

The leadership positions in thecompany will have different powers and responsibilities, helping
the company to coordinate and administer tasks such as chairman of the board of directors, general
director, chief executive officer, director HR, CFO, Marketing Manager, etc. In today's ever-
changing business environment, having the right leader with the right expertise and timing will be
an extremely important factor. Today, to have a successful leadership ability, leaders must
combine the power of their own title and personal power with the respect and trust of those they
are leading.(Leadershipmanagement,2019)

For example, Vinacafe's project managers work with their team to brainstorm decision-making
options for a range of new products. For example, how will important decisions be made?
(unilateral, cooperative, or unanimous?). Who will make the information? Who will make the final
decision? And who will do it? Vinacafe's managers will be based on the qualifications and skills
of each member. They will direct each member to know what to do, where, when, and how to work.
Managers can cooperate with members and see them as partners or can empower them to make
their own decisions.
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Controlling:

Controlling is the last but not least of the four key management functions. Controlling involves
thecontinuous monitoring of actual performance against planned performance.

This function entails the constant and systematic monitoring and regulating of organizational
activities and processes to ensure they are consistent with predetermined goals, plans and key
performance indicators.(Leadershipmanagement,2019)

Controlling is a function of management that involves measuring achievement against established
objectives and goals. It also requires managers to be able to identify sources of deviation from
successful accomplishment and to provide a corrective course of action. Managers first establish
objectives and goals, then measure achievement of them, identify anything that is keeping the
company from achieving them and provide means of correction if necessary.

Controlling does not necessarily involve achieving only monetary goals and objectives. It can also
relate to nontangible goals and objectives like meeting a production quota or reducing customer
complaints by a certain amount. (Smallsbusiness,2019)

For example, Vinacafe's managers regularly monitor whether the company's operations are going
smoothly, whether the staff's performance is guaranteed, and the quality andeffectiveness of the
project.Through monitoring and information management activitiesto measure employee
performance and job performance. The manager of Vinacafe must know the working frequency,
business results of each department, leave time, working hours, KPI, etc. Strict control will help
Vinacafe's goals go in the right direction andhelp them make the right and timely decisions.

3.Explain the key operational approaches to operations management and
their value:

An operational approachis an approach that is borrowed from Bridgman’s work; this approach
attempts to bring together the knowledge of management that is related to the functions of
management. The operational approach brings together management concepts, principles, and
techniques in the management practice (Fleet et al. 76). According to Koontz and Weihrich,
management involvesdesigning and maintaining a working environment where individuals or
people working in groups achieve their objectives efficiently.

This means that management cannot be successful without a strategic plan, proper coordination of
activities and direction,as well as a reasonable control of decision-making processes; therefore,
managers should be equipped with skills in managerial competence as well as effectiveness in
human resource management, administration,problem-solving and leadership.(Ivypanda,2019)

Operations managementis chiefly concerned with planning, organizing, and supervising in the
contexts of production, manufacturing, or the provision of services. As such, it is delivery-focused,
ensuring that an organization successfully turns inputs to outputs in an efficient manner. The inputs
themselves could represent anything from materials, equipment, and technology to human
resources such as staff or workers.Choosing the right approach to managing a project is crucial
for successful project delivery.(Tim Dhoul,2021)
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-Lean production:

Lean production aims to cut costs by making the business more efficient and responsive to market
needs.Thisapproach sets out to cut out orminimise activities that do not add value to the
production process, such asholding of stock, repairing faulty product and unnecessary movement
of people and product around the business.(Tutor2u,2019)

-Apply Lean production inVinacafe:

Define value:

Value is always defined by the customer’s needs for a specific product. For example, what is the
timeline for manufacturing and delivery? What is the price point? What are other important
requirements or expectations that must be met? This information is vital for defining value.
(Asme,2019)

In the production process of thecompany, the activity that customers pay for is the activity that
creates value. The most important thing for Vinacafe is to determine which activities are valuable
and which are not. Value is built on the basis and perspective of customers. Vinacafe needs to
focus on what customers need. In other words, they must understand what customers need and
create products that customers want. If Vinacafe can determine the relevant values, the scope of
the project will be shortened, understanding what customers arewilling to pay for, in order to
maximize profits and save costs and resources.

Figure1: Lean production principles
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Value stream:

In this step, the overall goal is to utilize the customer’s value as a reference point and locate areas
that correlate with their values. Any activities and processes that do not add value to the end
customer are considered wasteful. The waste can be broken into two categories: non-value added
but necessary and non-value & unnecessary. The latter is pure waste and should be eliminated
while the former should bereduced as much as possible.(Planettogether,2021)

Vinacafe considers that extended delivery times and late delivery deadlines as key weaknesses
when it comes to identifying potential reasons for a company's performance decline. Vinacafe may
consider the following factors: order preparation stage, order lead time, late delivery by staff or
suppliers, quality control problems or excessive production leading to increased inventory. Process
changes, for the most part, can result in waste. Statistical tools including the six sigma method
may be suitable for dealing with the above wastes. So lean and sixsigma are not exclusive but
complementary.(Vietquality, 2019)

CreateFlow:

After removing the waste from the value stream, the following action is to ensure that the flow of
the remaining steps will run smoothly without interruption or delays. Some strategies for ensuring
that value-adding activities flow smoothly include methods such as re-configuring production
steps, leveling out the workload, or creating cross-functional departments.(Planettogether,2021)

Vinacafe must remove all barriers and obstacles during production and operation. Vinacafe must
ensure that the material runs through the process without waiting or clogging at any stage. At this
stage, Vinacafe will identify and improve the execution time to ensure a smooth from receiving
orders to delivery. Creating flows is critical to seeing waste and eliminating it.(Vietquality,2019)

Establish Pull System:

Inventory is one of the biggest wastes within a production facility. The overall goal of a pull-based
system is to limit inventory and work-in-process (WIP) items while ensuring that the requisite
materials and information are available for a smooth workflow. A pull-based system allows for
Just-In-Time delivery and manufacturing where products are created at a time they are needed and
in the quantities needed. By following the value stream and working backward through the
production system, you can ensure that the products produced will be able to satisfythe needs of
customers.(Planettogether,2021)

Customers can “Pull” products from Vinacafe as needed (usually within weeks, instead of months).
Therefore, the product does not need to be built in advance or stocked with materials. The concept
of pull in production is meant to allow customers to buy products from Vinacafe instead of
consumer-oriented products. In a project, this means that the company should consider whether
the project needs to be implemented to meet the needs of the customer. The Pull concept can also
be applied to project activities. The most common tool to apply the concept of Pull is to use a
Kanban board.
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