NATIONAL ECONOMICS UNIVERSITY

BUSINESS SCHOOL

----------

OPERATIONAL MANAGEMENT

FINAL REPORT

Lecturer: Prof. Soren Kirchner

Group: 6

Phan Thi Minh Cham

Bui Thi Hai Yen
Dinh Thi Giang
Vu Le Khanh Chi
Nguyen Thi Thu Huong
Nguyen Thanh Mai
Tran Duc Anh
---- EBBA 10.3 ----

Ha Noi, 11/2020
 Table of Contents
I. Executive summary.....................................................................................................1
II. Company introduction.................................................................................................1
III. Fishbone analysis.....................................................................................................1
1. Problem....................................................................................................................2
2. Causes......................................................................................................................3
IV. SOP Flowchart.........................................................................................................5
V. Executive Dashboard...................................................................................................5
VI. Recommendation and Proposed SOP flowchart.......................................................7
VII. Gantt chart................................................................................................................ 8
VIII. Return on Investment...............................................................................................8
 I. Executive summary
In this report, our group is going to give Chuong Duong Beverage Joint Stock Company
(Cdbeco) some recommendations on improving its operation management, which will
help the firm cope with its current problems of manufacturing and save up to …
However, before proposing the solutions, a broad view of Cdbeco production process in
terms of prevailing issues and causes, SOP flowchart, Executive dashboard will be
delivered. Besides, we also aim at constructing a Gantt chart for the operation
improvement project as well as estimating related costs and profit of it.
II. Company introduction
Chuong Duong Beverage Joint Stock Company (Cdbeco) was formerly Usine Belgique
Factory of B.G.I Group (France) before being officially transferred the ownership and
handed over to the state under the name of Chuong Duong Fresh Water Factory in mid-
1977. In 2004, Chuong Duong officially changed to operate as a joint-stock company and
listed on HOSE two years later. Over the past 60 years of operating in the beverage
industry, Chuong Duong has become one of the top 5 beverage brands in Vietnam.

The company's market share accounts for about 5% of the carbonated beverage industry.
The main product of the company is still sarsi. Thus, revenue depends entirely on this
product, which can be an advantage but also a risk for the company when the
consumption trend changes.

Currently, the company faces many difficulties in production such as high input prices;
productivity, low output, which negatively affect company's operation processes and the
profitability of the company.

III. Fishbone analysis

The following Ishikawa diagram modelizes major problems facing Cdbeco currently and
their causes. As described in the diagram, problems related to materials, man power,
method and machinery have led to two main issues - low production output and high
production cost, which results in the corresponding loss of more than 5 billion VND (≈
216093.50 USD) in 2017.
 1. Problem
During the period from 2016 to 2019, the production output of Sabeco has seen a
decrease from nearly 40 million litter in 2016 to about 20 million litter in 2019. However,
the production cost remained high from 250 to 300 billion VND in the same period.
Consequently, the increase in total cost was incommensurate with the reduction of
production, which led to the corresponding loss of over 5 billion dong in 2017.
 2. Causes
2.1 Materials
The recorded prices of input materials shows a tendency of a significant increase with a
heterogeneous rate over the years. This can be seen clearly in 2018 when the price of
input raw material increased compared to the planned price in 2017.

According to the annual report of Cdbeco in 2019, some of the main types of raw
materials have registered price growth rates. To be specific, the price of aluminum cans
and sugar increased 4% and 0.16% respectively. Furthermore, water, an important type of
input to soft drinks production, is limited according to the city’s policy on limiting and
banning exploitation of underground water in the inner city in 2018. As a result, the
extension of underground water exploitation permission will be affected, which
consequently would lead to a difficulty in input quantity and water input cost.

2.2 Method

In terms of method, Cdbeco copes with a big problem of outdated methods. Being a
traditional company, Chuong Duong succeeds in maintaining the traditional flavor of the
drinks such as: sarsi, soda, orange juice,… However, this method is now acting as a
barrier for the company to apply new techniques of producing products with different
flavors to target other customer segments in the market.

2.3 Machinery

Being invested in 2000, Chuong Duong’s equipment is no longer able to meet the
production requirements of producing qualified products besides sarsi in order to meet
the market demand as well as lower the price of products to compete. Besides the
problem of machinery’s inability to produce diversified products, degraded storey houses
and factories also act as another issue for Cdbeco to solve. The main factory area consists
of three story houses which were built in 1952 with the area of 4,379 m2 and have been
degraded after using for a long time. From 2008 to now, due to the policy of relocating
the factory, the factory has not been repaired, which leads to several signals of
degradation (leaks , weak walls , floods , etc.). Therefore, Cdbeco has to incur high cost
of maintenance as well. On recognizing that the machinery system is operating with poor
capacity, ineffective working and unable to diversify products, Chuong Duong has
planned to install and build a new factory since 2007. The project’s supposed completion
time was in September, 2020, however, because of Covid pandemic outbreak, relocation
of factories has been put off.

2.4 Manpower

In relation to manpower, Cdbeco is struggling with three main problems, which are
unskilled labor, high labor cost and lack of technical training. Most of the factory workers
in Cdbeco are of unskilled labor, who are difficult to train and lack the ability to adapt
new technology in manufacturing. At the same time, as the company’s manufacturing
process involves much manual work, the cost of labor will be higher compared to other
companies that are highly automated in the manufacturing line. Moreover, using most
technology in production requires proper technological training for workers, which also
costs the firm a lot of time and effort to have a qualified workforce.

IV. SOP Flowchart

The existing SOP flowchart of the company consists of 8 steps. At first, all types of input
have to go through a step of preparation. Pure water is subjected to sophisticated filtering,
softening and disinfecting to remove all impurities. Sugar is added, along with the appropriate
beverage concentrate to produce syrup, the basic component for the soft drink. Other ingredients
and materials will be washed and rinsed before mixing and blending with syrup concentrate.
After the mixture is saturated with carbon dioxide at a low temperature and under high pressure
to give the drinks their renowned ‘fizziness’, its quality will be checked. If the mixture is
qualified, automated machinery will dispense it in precisely calculated quantities, into sterilized
bottles. Next, bottles will be automatically capped and sealed. Finally, bottles and cans are
packaged and transported to machines which pack them in cartons or boxes before being stored
in the warehouse for delivery.

V. Executive Dashboard
The above dashboard illustrates the operation condition of Cdbeco from 2016 to 2019.

1. Cost and Profit

During the period from 2016 to 2019, the cost incurred by Cdbeco saw some
fluctuations. In terms of total cost, the company successfully brought down from
about 422 billion VND in 2016 to about 256 billion VND in 2019. The same
situation can be witnessed in the case of maintenance cost. After a gradual
decrease in 2017 and 2018, Cdbeco made a significant reduction to approximately
1.6 billion VND in maintenance cost in 2019. Unlike the two aforementioned
types of cost, the input cost of the company still went up sharply from 2016 to
2018 until a substantial decline of 260 million VND in 2019.
In relation with profit earned in this period, Cdbeco had suffered from a loss of
roughly 2.2 billion VND in 2017 before registering an increase in 2018 and 2019.
 2. Production cycle time, downtime by causes and production volume

The production of Cdbeco includes 7 different processes. Every step occurs in

about half an hour on average. Among them, syrup concentrating process accounts
for most time (0.8 hour) and quality checking takes up the least time (0.3 hour).
Currently, in Cdbeco downtime has been mainly attributed to four main reasons,
namely broken machines; missing parts; overload and cleaning & switching. Due
to outdated machinery, the problem with broken machines results in the most
dead-time (about 2-3 hours).
In the last four years, Cdbeco observed a considerable decrease in production
volume. In 2017, a reduction of about 22% compared to 2016 was seen in the
firm’s production volume. As the company tried to improve the situation, in 2019,
the decreasing percentage was brought down to 14% compared to 2018.

3. Warehouse capacity

According to the statistics recorded in the period, the average warehouse capacity
of Cdbeco was 65%. Due to the degraded state of store houses, Cdbeco
occasionally faced up with the difficulty in having enough input for
manufacturing.

VI. Recommendation and Proposed SOP

flowchart
 From the SOP flowchart of Chuong Duong Beverage Company, our group proposes two
changes to decrease the production expenses and maximize the profit for this company.

Firstly, after washing and rinsing the mixture of ingredients and materials, we add a stage
to classify beer and soft drinks. If the mixture is beer, the company should deliver it to
Sabeco to finish the next steps. Because Chuong Duong is a branch of Sabeco, a big beer
company in Vietnam, hence, we believe that Cdbeco can make use of the Sabeco’s
modern technology for producing beer of Sabeco to finish the beer products and lose no
expense. And if the mixture is soft drinks, it will be gone through all the former stages of
production.

The second change is the adding inspection before packing and warehouse delivery. This
stage helps Cdbeco check the perfection of soft drink products before selling them. This
will decrease the ratio for errors in filling and capping such as lacking (or excessing) the
standard mass of products, which will reduce the expenses of withdrawing the package of
error products.
VII. Gantt chart
 Before applying two above proposed changes in SOP flowchart, there are 8 steps of
preparation which should be taken by the company.

In terms of sorting materials of beer and soft drinks, the first step to take is negotiating
with Sabeco to reach an agreement on shared purchase of input and some technological
process. This step is expected to last in 5 days. After reaching an agreement with Sabeco,
the company needs to plan on the required budget and start buying machines. At the same
time, Cdbeco can begin to train employees on classification process. These two steps will
happens in 3 days and a week respectively. The next step of installing classification
machines will occur after buying machines step and in 3 days. The last step is to
construct a channel of materials exchange between Cdbeco and Sabeco. This will
happens in 14 days, start together with the very first step of negotiation with Sabeco.

In terms of inspection procedure, Cdbeco should firstly install inspection an inspection

machine before the packaging. This step has an estimated duration of 3 days. Other step
to be taken by the firm is training staffs on inspection, which is supposed to last in 7 days.

VIII. Return on Investment

IX. References