SCLM 429 Supply Chain Risk

Management
Logistics situation in Vietnam

Group members:
Lê Hoàng Điền 1432300015
Phạm Lê Gia Bảo 1532300410
Lê Hoàng Anh 1432300190
Phạm Lê Phương Nhi 1332300070

Presented to Mr. Kha & Ms. Giang,

Lecturer at Becamex Business School, Eastern International University
Binh Duong, Vietnam
Contents
1. Categorising Risk .................................................................................................................................. 2
2. Current Risk of Supply Chain in Vietnam ............................................................................................ 3
2.1. Process .......................................................................................................................................... 3
2.2. Control .......................................................................................................................................... 4
2.3. Demand ......................................................................................................................................... 5
2.4. Supply ........................................................................................................................................... 5
2.5. Environment .................................................................................................................................. 6
3. Dealing with the Risk............................................................................................................................ 7
4. References ............................................................................................................................................. 9

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1. Categorising Risk
There are many different ways to categorized supply chain risk. To analyze the situation of
Vietnam logistics better, we based on the original framework made by Mason-Jones & Towill. At
the simplest way, there are three categories of risk. Then, it can be further sub-divided to five
categories (Christopher, 2004):
 Internal to the firm
o Process
o Control
 External to the firm but internal to the supply chain network
o Demand
o Supply
 External to the network
o Environmental

Definition of five categories:

Processes are the sequences of value-adding and managerial activities undertaken by the firm.
When companies do these processes, it may immediately dependent on internally owned or
managed assets and on a functioning infrastructure. Thus, they have to check internally owned or

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managed assets and the reliability of supporting transport, communication and infrastructure
carefully. Process risk relates to disruptions to these processes (Christopher, 2004).
“Controls are the assumptions, rules, systems and procedures that govern how an organization
exerts control over the processes. In terms of the supply chain they may be order quantities, batch
sizes, safety stock policies etc. plus the policies and procedures that govern asset and transportation
management. Control risk is therefore the risks arising from the application or misapplication of
these rules” (Christopher, 2004).
“Demand risk relates to potential or actual disturbances to the flow of product, information, and
in this instance cash emanating from within the network, between the focal firm and the market.
In particular, it relates to the processes, controls, asset and infrastructure dependencies of the
organizations downstream and adjacent to the focal firm” (Christopher, 2004).
“Supply risk is the upstream equivalent of the above, it relates to potential or actual disturbances
to the flow of product or information emanating from within the network, upstream of the focal
firm” (Christopher, 2004).
Environmental risk is the external factor to the network. It can impact the whole network from
the focal firm or on those upstream or downstream, or indeed on the marketplace itself. It can
reduce or alter the inherent quality of the product (e.g. milk contamination caused by storing
products in high temperature). Moreover, it can cause to the discontinuous or difficulties when the
product are storing or moving (e.g. as the result of an accident, direct action, extreme weather or
natural disasters). It can be the result of sociopolitical, economic or technological events many
miles or organizations removed from the focal firm’s own supply chains, but may have carry-over
effects through linkages to other industry networks (Christopher, 2004).

2. Current Risk of Supply Chain in Vietnam

2.1. Process
The technology and the production line of many Vietnamese companies are backward so it
is risk to manage the error products and unstable performance.
- According to statistic data from the ministry of science and technology, nearly 600,000
businesses with more than 90% businesses are normal and small size. Most of them used out of
dated technologies compared to average requirement of the world from 2 - 3 generations.

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Moreover, 76% of the machines and production line belong to in the 60s and 70s, 75% of
equipment has been depreciated.
Many companies in Vietnam are labor intensive so it leads to an unstable performance
- The data from The General Statistics Office show that in the first two-month of 2017, Industry
production index only increased by 2.4% compared to the last year, much lower than 6.6% of the
first two years. This is because many businesses of Vietnam using too much on labor force with
the problem that the rest time of workers for Tet holiday increase, so this leads to the modifying
and creating sections grew by only 6.6% and the mining sector dropped sharply by 13.5% down
to 2.9% in overall growth.

2.2. Control
Vietnam Companies are very weak in planning the inventory level. Especially Government
companies, their ability to forecast is poor. It may lead to some serious situation such as over
the budget and push them to an over control situation.
- After updating factors show that the capital increase mainly due to the fluctuation of the price of
some raw materials, fuels, minimum increase salary in last 3-year period (2006 - 2009), making
the capital expenditure of the packages increased by 40%. Specially, the progress of the project is
delayed until completion in 2020. It also changes the conditions for calculating total investment
(exchange rate, interest expenses, provisions, risks, 2019).
Vietnam don’t have enough employees with high skill and knowledge about logistics.
- Based on the report of HCM city development Research Institute about quality of human resource
in logistic, 53.3% businesses don’t have employees with high skill and knowledge about logistic,
30% businesses need to re-train employees and only 6.7% businesses satisfy with their employees.
Moreover, 80.26% logistic employees are trained by daily work, 23.6% logistic employees are
trained by domestic trainers, 6.9% are trained from abroad experts and only 3.9% of employees
are trained from overseas training center. This data shows that the human resource working in
logistic major only low on quantity but also low in quality. This sounds not right with a service
that has been put in 22 billion of dollar and take over 20.9% of GDP in Vietnam.

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2.3. Demand
Many domestic companies did not diversify the market; also, we depend too much on the China
market. It is risk if the market has just a little fluctuate. For example, the situation of watermelon
stagnation at the border gate, Mr. Phung Quang Hoi said that a number of causes leading to
watermelon stagnation, such as failure to comply with the recommendations of the authorities, the
Chinese policy applied only to 10 enterprises import through Pò Chài border gate, inspection and
quarantine take 4-6 hours to clear 1 car, watermelon price is not stable, so businesses have to wait
for negotiations. (Người Lao Động, 2015)
Vietnamese people prefer using markets or groceries, so it is hard to collect data and predict the
demand, it increases the risk. With advantages of convenience, origins of goods clear and do not
have to bargain, easy to find the products but supermarkets are not competitive with traditional
markets. The frequency of consumers shopping for food is still chosen in traditional markets rather
than in supermarkets, convenience stores. Commodity prices in supermarkets are more expensive
than groceries, also take longer time for payment and parking. For example, Vinamilk Gold step
4900 grams at the groceries is 217,000 VND, at BigC is 235,000 VND. A Nomal carton of milk
900 grams is 170,000 VND and 190,000 VND respectively. (KYNA)

2.4. Supply
Many Vietnamese enterprises face difficulty to find source because the supporting industries
is very weak.
- Only 300 businesses in Vietnam can adapt to join the supply chain in manufacturing industry.
This major is being control by companies with high investment from outsiders.
- For cloth industry, the supply chain is also “break”. Because only 17% of 3700 cloth industry
businesses is weaving, 6% is yarns, 4% is dye. More specific, Vietnam need to import cotton to
satisfy 99% of demand and 70% artificial fiber. Moreover, 65% created yarns need to be export
because Vietnam is weak in this industry. Then they must import 5.2 billion of meter of yarn to
adapt the demand
- For shoes industry, it isn’t in different situation, right now Vietnam can create sole and some
accessories in shoes industry. However, if the customer needs accessories from oversea countries
so Vietnam still need to import them.
- Agriculture industry in Vietnam is in the same situation. For example, the fertilizer market of has
some unstable at the peak periods of crop production. The connection between the suppliers in this

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supply chain is overlapping, so the cost has been pushed up a lot in the distribution phase, leading
to unreasonable selling prices to farmers.
Vietnam farmers usually break the contract with domestic manufacturers if they see the
price in the market or from other companies is higher. It is very risk for those firms because
they usually drop into a difficult and unexpected situation.
- Many China businesses try to buy seafood, eggs in Vietnam market which make the supply in
the country going down and price is very high, and inflation is increased. China traders try to buy
lychee. Chinese traders only choose good products, but they make many strict regulations, but the
farmers in Bac Giang still prefer the price because of higher prices than domestic sales.

2.5. Environment
Lengthy Customs Processes
The customs requirements of Vietnam are more complex and cumbersome than in other Asian
countries. These are mainly due to a number of ineffective customs procedures, including cargo
inspections that have attracted criticism for lack of transparency and consistency. Although
Vietnam's customs procedures are being modernized that means a new e-customs clearance system
has been launched in April 2014. For example, it takes 21 days to export goods from Vietnam,
compared with 14 days for Thailand and 11 days for Malaysia. That affects much in Vietnamese
logistic, it takes long time to receive the shipment, incur many cost of demurrage and detention,
reduce competitiveness and not attract international business, long-stay vessels cause
congestion… (HKTDC, 2015)
Natural disaster
In this year, there are 15 storms and tropical depression in East Sea. National Centre for Hydro -
Meteorological Forecasting said that the average temperature from May to October on the national
scale is higher than the average for many years, especially in the north. Some kind of products will
be damaged by high temperature such as vegetable, fruit, meat, milk. In the transition period,
thunderstorms, cyclones, hail often occur especially in the midland, mountainous areas of the
North, North Central and Central Highlands, South. The infrastructure will be destroyed, boats
will be damaged and the lead time will take longer than schedule. (Tuổi trẻ online, 2017)

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Finally, in Vietnam, there are other things which included to the environment risks such as political
risks, policy risks, regulation risks, credit risks, bribery and corruptions, organized crime and
inflation. (ANT Consulting HCMC, 2015)

3. Dealing with the Risk

We suggest that companies can follow 5 things below to reduce the risk:
 Visibility
o The company should improve the resilience by using analytics and visualization
tools to improve the visibility of partnerships.
o Companies using the risk-based measure to divide the supplier according to their
risk level and adjusts it approach to allocating resources and manage suppliers
effectively.
 Flexibility
o The company should identify alternative suppliers are able to produce the product
key in case of disruption
o Should have a production line to manufacture more products
o Have ability to determine the materials to meet changing needs
 Collaboration
o The company should have plan to cooperate with suppliers and potential customers
o Cooperative design products to meet the demand of customers and supplier
capabilities
o Access the last inventory of supply chain management and supplier capacity
constraints
 Control
o Have ability to develop products with high quality and safety to meet the demand
of customers
o Have ability to protect the company’s products in order to avoid tampering, theft
and counterfeiting.
o The company should have regulatory, legal and social compliance policies.
Moreover, companies need to choose the mode of transport that suitable for each good, country
and quantity with low cost to prevent the risks. In addition, the human resources in Viet Nam do

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not enough, so they need to focus to develop the quality of labor by professional courses or training
in universities, especially in IT to help businesses reduce costs and improve productivity.

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 4. References
ANT consulting, 2015. Risk Management Necessity in Vietnam? Retrieved from:
http://www.antconsult.vn/news/how-to-manage-risks-in-vietnam.html
Công thông tin điện tử chính phủ, 2017. Năm nay có khoảng 15 cơn bão và áp thấp nhiệt
đới trên biển Đông. Retrieved from: https://tuoitre.vn/nam-nay-co-khoang-15-con-bao-
va-ap-thap-nhiet-doi-tren-bien-dong-1299420.htm
(Hà Đan, 2011). Trung Quốc ồ ạt thu mua gom vải thiều. Retrieved from:
https://kinhdoanh.vnexpress.net/tin-tuc/vi-mo/trung-quoc-o-at-thu-gom-vai-thieu-
2713415.html
HoàngLan, 2011. Doanh nghiệp điêu đứng vì Trung Quốc thu gom nguyên liệu. Retrieved from:
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thu-gom-nguyen-lieu-2713551.html
Lê Tấn Ý, 2016. Khủng hoảng thiều nhân lực ngành logistic. Retrieved
from:http://logistics4vn.com/khung-hoang-thieu-nhan-luc-nganh-logistics/
Trần Phan, 2015. Hai dự án metro tại TPHCM đội vốn khủng hơn 2 tỷ USD. Retrieved from:
https://laodong.vn/kinh-te/2-du-an-metro-tai-tphcm-doi-von-khung-hon-2-ti-usd
395378.bld
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2017072109169432.htm
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Nguyễn Quỳnh, 2017. Công nghiệp tăng trưởng thấp khi quá phụ thuộc vàokhai khoáng.
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Thế Trần, n.d. Số đông người Việt vẫn chọn mua hàng ở chợ và đại lý truyền thông. Retrieved
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