Table of Content

Introduction-------------------------------------------------------------------------------4
Ishikawa Analysis------------------------------------------------------------------------8
Ishikawa Analysis----------------------------------------------------------------------8
Manpower--------------------------------------------------------------------------------------------9
Machinery--------------------------------------------------------------------------------------------9
Material----------------------------------------------------------------------------------------------10
Method----------------------------------------------------------------------------------------------10
Recommendations--------------------------------------------------------------------12
Manpower-------------------------------------------------------------------------------------------12
Machinery-------------------------------------------------------------------------------------------12
Material----------------------------------------------------------------------------------------------12
Method----------------------------------------------------------------------------------------------12
SOP Flow chart-------------------------------------------------------------------------13
Current SOP---------------------------------------------------------------------------13

Proposed SOP-------------------------------------------------------------------------15

Executive dashboard with KPI--------------------------------------------------------16

Cost Reduction------------------------------------------------------------------------17

Inventory to Revenue----------------------------------------------------------------18

Downtime Causes--------------------------------------------------------------------19

Cost Avoidance-----------------------------------------------------------------------19

Cycle time-----------------------------------------------------------------------------20

PERT Chart------------------------------------------------------------------------------21
Return on Investment and Break-even point----------------------------------------23
Return on Investment----------------------------------------------------------------24

Break-even point----------------------------------------------------------------------25

Conclusion-------------------------------------------------------------------------------26

1
 Table of Figures
Chart 2.1: Ishikawa Diagram........................................................................................8
Chart 2.2: Milk quality regarding nutrition.................................................................11
Chart 3.1: Current SOP...............................................................................................13
Chart 3.2: Proposed SOP.............................................................................................15
Chart 4: Executive Dashboard.....................................................................................16
Chart 4.1: Cost Reduction...........................................................................................17
Chart 4.2: Inventory to Revenue.................................................................................18
Chart 4.3: Downtime Causes.......................................................................................18
Chart 4.4: Cost Avoidance..........................................................................................19
Chart 4.5: Cycle time..................................................................................................19
Chart 6.1: Break-even point graph..............................................................................23
Y

Picture 1.1: Vinamilk products......................................................................................4

Picture 1.2: Vinamilk Global Distribution....................................................................5
Picture 1.3: Vinamilk Global Distribution....................................................................5
Picture 1.4: Vinamilk certified farms............................................................................6
Picture 1.5: Vinamilk dairy factories.............................................................................6
Picture 1.6: Vinamilk charities......................................................................................7

YTable 1.1: Decision Matrix

Table 3.1: Detail milk production process of Vinamilk.............................................14
Table 5.1: PERT Chart...............................................................................................20
Table 5.2: PERT Chart...............................................................................................21
Table 6.1: Current ROI..............................................................................................22
Table 6.2: Proposed ROI............................................................................................23
Table 6.3: Break-even point.......................................................................................24

2
 Executive Summary
This report is conducting a newly proposed plan for Vinamilk - a Vietnam Dairy
Company - to achieve cost savings and quality enhancement. Detailedly, with a firm
basis, it is estimated that Vinamilk can save 690,000 USD, contributing approximately
30% of the total loss cost.

Vinamilk is the top-leading Dairy Company, also the Top 15 largest company in
Vietnam, which has 13 cattle farms and nearly 220,000 directly operated stores
throughout the country. The condition of Vinamilk is now quite stable, with the total
revenue increasing from over 1.748 million USD in 2015 to nearly 2.597 million USD
in 2020. However, Vinamilk is losing over 2.3 million USD per year mainly due to
inefficient quality management in the manufacturing process.

This report includes Vinamilk’s current situation, ongoing problems, Standard

Operation Procedure with Key Performance Indicator, and our proposal
implementation for the Company.

With the Ishikawa Diagram, we have identified some major causes of Vinamilk’s
unstable product quality, including Manpower, Method, Machine, and Material.
However, the Material and Method factor affects the revenue the most. Therefore,
changes in the Standard Operation Procedure needed to be taken to cut down costs and
fix those problems.

The current SOP consists of 3 main stages with 14 single steps from processing raw
milk to distributing it to supermarkets and operated stores. Nevertheless, we find some
steps that can be improved to save cost and cover given issues from the Ishikawa. For
this reason, we propose a new SOP that adds 3 more steps that control the quality of
output products, along with recycling defective products. Besides the 2.3 million USD
of cost-saving, the Return on Investment (ROI) is 20% and Vinamilk can break even
with 340 million milk cartons sold in a year.

3
Finally, we have made a time-based plan named PERT Chart that represents our
process of implementing a new plan to Vinanmilk. The whole process takes 23 to 25
days including evaluation time.

Introduction
Established August 20, 1976, Vietnam Dairy Products Joint Stock Company, also
known as Vinamilk, has become Vietnam's leading company in the processing and
supply of dairy products and was ranked in the top 10 strongest brands in Vietnam. 

Table 1.1: Decision Matrix

Vinamilk occupies approximately 50% market share of domestic milk, providing a

wide range of high-quality products, including fluid milk, powdered milk, and
sweetened condensed milk, along with yogurt, frozen yogurt, ice cream, cheese, and
infant nutrition flour. Other products include soy milk, rice milk, bottled coffee, sugar,
bottled juice, and other non-alcoholic beverages. Vinamilk 100% Organic fresh milk
is produced from the milk of organic cows grazing naturally on the vast grassy hills of
Da Lat. All processes for taking care of cows and producing raw milk are guaranteed
to strictly comply with the "3 No" regime of the European organic standard: No
growth hormone is used for cows, no antibiotic residues, no pesticides (Nguyen,
2013).

4
 Picture 1.1: Vinamilk products

Not solely dominating the domestic market, Vinamilk also exports its products to
many countries around the world such as America, France, and Canada, more than 45
nations in various regions were “penetrated” by the Vietnamese Dairy giant. The
Company has invested in the premises of the U.S, Poland, and New Zealand to
position itself as a relatively strong player with both power and resources. Vinamilk
labeled products can now be found around the globe, as the brand is substantially
more and more familiar to foreign consumers.

Picture 1.2: Vinamilk Global Distribution

5
 Picture 1.3: Vinamilk Global Distribution

Vinamilk has 12 cattle farms, 10 of which matched the Global Gap, and the others are
Certified Organic farms by European standards, and continues to invest in cowherds,
technology, and product quality to enhance the company’s dominance and position.
By using imported production lines (Tetra Pak’s Technology) and implementing
advanced automation manufacturing processes across all 13 factories located
throughout different regions of the country (Northeast, Central, and Southeast
Vietnam), each Vinamilk mega factory can produce approximately 24,000 milk boxes
per hour, 2.2 million liters every day and 800 million liters of milk every year (Phan,
2021).

Picture 1.4: Vinamilk certified farms

6
 Picture 1.5: Vinamilk dairy factories

Vinamilk also involves itself in the contribution to the nutritional status improvement
of the young generation and charity work. “Every child drinking milk every day”
mission and “A pair of loving leaves” program are two remarkable highlights of the
company’s valuable support to the public (HCWA, 2019).

Picture 1.6: Vinamilk charities

The program “A pair of loving leaves”, letting the “healthy leaves” support the
“ragged leaves”, spreading the loving values for a bright future and for Vietnam to
rise, is carried out by Vinamilk in association with the Stand Tall Vietnam Milk Fund
in the past five years. On the mission of “giving the opportunity of school, giving the
7
opportunity to change lives” to children in difficult circumstances across Vietnam.
Not only bringing the joy of drinking milk to many children through the activities of
the Stand Tall Vietnam’s Milk Fund in cities and provinces, but Vinamilk has also
awarded many scholarships and practical gifts to support their lives under this
program. These scholarships are a solid foundation for students in the future, because
“giving the opportunity to go to school” is contributing to “giving the opportunity to
change life”. Just like that, the loving arms of Vinamilk and the Stand Tall Vietnam
Milk Fund, through the program “A pair of loving leaves”, have raised many children
in difficult circumstances across Vietnam to maturity. The program has successfully
helped many poor students who have entered universities while many others are
currently studying overseas (vietnamnews.vn, 2020).

Ishikawa Analysis 
Ishikawa Analysis 

Chart 2.1: Ishikawa Diagram

8
Based on the data that we have collected from newspapers and Vinamilk’s annual
reports, Vinamilk has generated $2.597 billion in revenue each year on average for the
last 5 years. However, due to inefficient quality management, the yearly average of
defective products accounted for $2.3 million which is approximately 0.1% of total
revenue (Vinamilk, 2021). This issue became more and more drastic because of the
recent accusation of Vinamilk on vague ingredient composition in products so-called
“fresh milk”, causing the nation's biggest dairy company to become embroiled in
social media rumors. Consumers continuously encountered problems and incidents
related to the quality of Vinamilk's products being rotten and having a sour taste even
before the products have reached the expiring date (Thanh, 2019). 

Consequently, we need to uncover distinct elements to pinpoint the origin of the

problem by evaluating the production process. Eventually, 4 main causes came up
which are manpower, machine, material, and method. Each of them plays a vital role
in

the outcome. As a result, several recommendations to mitigate the failure are brought
to the table.

Manpower

As a leading dairy company in Vietnam, Vinamilk always strives to automate all

production processes in order to reach the trough on time-consuming and minimize
the errors in which humans can cause more frequently (Vietnam PFA, 2020).
Therefore, Vinamilk has not yet fully utilized the human resources of their company.
It is this underutilization that leads to a waste of resources, if being placed in the right
place, it could lead to better quality products and lower defective products.

Machinery

Vinamilk is well-known for its international standard assembly line and modern
manufacturing facilities with groups of skilled engineers controlling mechanical
systems. The machinery, however, will unavoidably occur breakdown in some parts at
a particular time. The major rationale behind this problem is the lack of periodical
maintenance that simultaneously causes malfunction during the manufacturing

9
process. Specifically, in Vinamilk’s automatic production line (fully robotic devices
installment supervised by staff), one pause in any steps will lead to the whole process
interruption and disconnection, which exerts negative impacts on their product
quality. 

Material

Consumers trust Vinamilk due to the general popularity of the labels "organic milk"
and "100% fresh milk." However, the brand has been embroiled in a series of
controversies involving the provenance of fresh milk, which is still unknown to
customers. As a result, the firm has said that the goods are manufactured entirely of
fresh milk, in accordance with government regulations. 

Nonetheless, statistics from the Ministry of Agriculture and Rural Development's

Department of Livestock Production showed that the total supply of raw fresh milk in
the country is just under 200,000 tons per year (roughly 22% of domestic demand)
and that this material was supplied to the processing factories, inadvertently causing
Vinamilk's dairy milk output data (1.000 tons per day for 130.000 dairy cows)
becomes inconsistent (Nguyen, 2020). 

Method

There are three main reasons associated with some sub-causes to explain this
methodological category. Initially, with the aim of bringing core products to
consumers in a fast and effective way, Vinamilk has its own methods in order to reach
the fastest manufacturing and inventory working flows. The methods include
maximizing the usage of technological equipment which downsizes their labor forces
at the same time. This target has been achieved at the present time by operating the
automatic self-contained production line. Although it is undeniably beneficial, the
firm itself encounters a trade-off: inefficient quality management. 

Subsequently, Vinamilk has recently encountered devastating rumors and doubts from
their customers who questioned the product quality. The consumers start wondering
where this problem originated from. In 2020 and 2021, Vinamilk yogurt is

10
consecutively accused of being mildewy and spoiled even though the yogurt was
before its expiration date (Thử Nghiệm Ngày Nay Online, 2021). The company
posted an explanation to blame for the defective delivery process. However, another
article in 2019: ‘Vinamilk hit by not-so-fresh milk accusations’ (Thanh Mai, 2019)
was concurrently mentioned again. In detail, Vinamilk had been accused of vague
ingredient composition in producing so-called “fresh milk”, causing the public’s
controversial topic - “Is Vinamilk milk quality affected by transportation or by their
producing methods and original ingredients?”.

Chart 1.2: Milk quality regarding nutrition

1 Poor 2 Average 3 Good 4 Very good

According to a survey with a participation of 200 people, the nutrition rate of milk
quality, through the graph, illustrates more than half of Vinamilk’s customers are not
sure about the quality of the ingredients and give negative feedback (Nguyen, 2020).
Therefore, the quality issues can be blamed on uncertain origins. 

Lastly, in the current manufacturing method, the quality checking step solely appears
at the beginning of the process to test whether the provided milk - from farmer
suppliers and Vinamilk’s farms - meets their quality standard scheme or not. With the
possibility that Vinamilk trusts completely on their modern technological production

11
line, they do not include a double-check step after milk is processed and packed. This
issue, generally, is disadvantageous for the company’s revenue and reputation owing
to the risk of unpredictable faulty products. And a non-optimal utilization of
technology and humans for final product checking will be blamed for this.

Recommendations
Manpower

Initially, humans are precious assets. For this reason, it is mandatory for utilizing
human resources to double-check quality management procedures to avoid unwanted
mistakes. Moreover, special training courses should be applied in order to make
humans join hands in the quality checking field. Then, human beings will have the
authority and immense knowledge to take over operating machinery and equipment.

Machinery

According to the current situation, we recommend that Vinamilk should have frequent
maintenance for their machinery, three times a year, generally for the aim of ensuring
an uninterrupted manufacturing process, and specifically for trouble prediction as well
as risk management. Besides, to avoid discontinuance, there should be human
supervision in every single step to timely tackle any sudden malfunction.

Material

In order to thoroughly solve this problem, at first glance, Vinamilk should be honest to
its own customers, the ingredients should be clearly defined and processed based on
the standardized procedure. Secondly, the visualized label is a great move because it
can provide the customers a better view of the products’ ingredients and make them
more assured. This method not only decreases the number of faulty products but also
the customers' trust will be regained.

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Method

Vinamilk ought to adequately utilize machine power and human resources by

involving manpower in some specific stages such as testing or checking. These phases
require an overall and direct view of the human perspective whilst a machine does not
have enough ability to satisfy the requirement.

The producing method inevitably needs a quality checking step for final products,
which will be discussed more detailedly in the SOP section. 

SOP Flow chart

Current SOP

Chart 2.1: Current SOP

The milk production process of Vinamilk is completely closed with three main
stages: milk transferring process, manufacturing process, and distribution process. 

The first stage consists of two steps: collecting raw milk from farms and delivering it
to the factory. The qualified raw milk is transported promptly to the nearest plant to
preserve the milk’s nutrients and fresh taste (Vinamilk, 2017).

The second stage is the manufacturing process including eight steps from raw
material input to finished product output. First, the raw milk will be tested for quality
with an automatic measuring and filtering device then qualified raw milk will enter
into a cold storage tank system. From the cold storage tank, raw milk will undergo a

13
skimming process. After that, raw milk will move to the centrifugal separator to
eliminate the most harmful bacteria effectively then be put into fat standardization.
Milk will be pasteurized to deactivate organisms and enzymes. The next step is
sterilization - the most important process using the ultra-high-temperature (UHT)
treatment to destroy all harmful bacteria remaining in milk and extend the life-shelf.
After heating up to 140℃ for  2 to 4 seconds, milk will be cooled down to be ready
for the last step which is filling and packaging (Vinamilk, 2018).

The last stage has 3 steps consisting of arranging milk boxes into the pallets, moving
them to the smart warehouse, and distributing. In the second step, a hazard is likely to
occur. Specifically, when being transferred to trucks by forklifts, there is a relatively
high probability of milk cartons falling during the delivery process due to the lack of
concentration and training. This issue exerts dire consequences regarding the staff’s
safety insurance.

Steps Process

1. Origin: From the dairy cow imported from Australia, New

Zealand, and the US.
Raw milk
2. Characteristics: Nutritious and meets Vinamilk’s quality
standards.

Raw milk is transferred by a modern cold tank truck at

Deliver to the factory storage temperature below 6ºC to the nearest dairy factory to
keep the full fresh flavor and essential nutrients.

This is an important step to ensure that the raw milk meets the
Measuring and Filtering
standards before putting it into production.

The qualified raw milk is always stored cold in 3 modern

Cooling
tanks with an impressive capacity of 150m3 per tank.

Raw milk is skimmed with advanced technology to reduce fat

Skimming
and keep nutrients.

Move to the centrifugal - Eliminates most harmful bacteria effectively and preserves
separator  the milk’s wholesome nutrients and natural flavors.
and - Adjust the fat content in milk.
fat standardization

Milk is treated at 75℃ in 15 seconds to deactivate organisms

Pasteurization
and enzymes.

This step makes Vinamilk dairy products fresh and safe for 6
Sterilization
months without any preservatives.

14
 Milk is cooled down to 20℃ and taken into the cold storage
Cooling
tank.

After the packaging and filling machine are sterilized, milk

Filling and Packaging
will be filled in a sterile environment and sealed.

Arrange milk boxes into pallets Milk boxes are arranged into pallets by robots.

Robots move pallets of finished products to the smart

Deliver to the smart warehouse warehouse.

Distributing to major distributors Major distributors and supermarkets receive Vinamilk

and supermarkets products then sell them to customers.
Table 3.1: Detail milk production process of Vinamilk

Proposed SOP

Chart 3.2: Proposed SOP

In the proposed SOP, we want to add 3 necessary steps to control the product output
more tightly and create a more saving and productive process for Vinamilk.

Because the big problem of Vinamilk is inefficient quality management (in 2.

Ishikawa Analysis), we want to add the “Quality check” step before filling and
packaging. This step plays an important role to minimize defective products and save
several resources like packaging materials. If the amount of milk meets the standards
after the Quality Check process, it will be filled and packed. On the contrary, in terms
of unqualified milk, we recommend the Recycling step to handle this product. As we
research, milk diluted with water brings many benefits to plants (Eva.vn, 2021) and

15
Vinamilk can refer to this way. Otherwise, Vinamilk should recycle the unqualified
milk for other purposes to ensure no waste of resources as well as contribute to
environmental protection. 

In addition, the packaging of liquid dairy products is quite susceptible to impacts

during transportation, affecting the quality of milk. Therefore, we suggest adding a
layer of styrofoam into the milk boxes. That layer will avoid direct contact between
the milk carton and the inner sides of the milk boxes to protect products from
deformation during delivery.

Our recommendations regarding the current hazard include hiring qualified warehouse
employees and training them carefully in order to minimize the chances of boxes
falling.

Executive dashboard with KPI

16
 Chart 4: Executive Dashboard

The provided executive dashboard illustrates the Inventory KPI Management and
Cycle Time after implementing the new SOP. The modifications in Production Cost
and Inventory to Revenue are changing considerably.

Cost Reduction

Chart 4.1: Cost Reduction

The two graphs above demonstrate the cost reduction in the percentage of four
elements including Delivery, Inventory Carrying, Waste Treatment as well as Return
and Exchange Cost and the amount of money that Vinamilk can save through quarter
by applying our new SOP. Delivery Cost will account for the highest proportion
(40%), followed by Inventory Carrying cost which will make up nearly one-third of
the total cost reduction and Return and Exchange Cost at 20%. The rationale behind
these changes is our proposed steps: checking quality and adding a layer of styrofoam
into the milk boxes. Besides, the Waste Treatment cost will diminish slightly at 11%
due to the added step of recycling defective products. 

By decreasing all of those costs, we can forecast how much money Vinamilk can save
by reducing production costs within a year. As can be seen from the chart, at the
17
beginning of the year, cost reduction will be around $117,000 then rise to over
$227,000 at the end of the year.  

Inventory to Revenue

Chart 4.2: Inventory to Revenue

This line graph shows the decline in the quantity of days to turn Inventory to Revenue
in each quarter. In the current situation, the Inventory to Revenue days quarterly is 62,
56, 53, and 60 respectively. After implementing the proposed SOP, it is estimated that
Vinamilk can reduce 7 days in each period. Particularly, in the first quarter, the
number of days will fall to 55. This number will continue decreasing in the next two
periods, 49 days for the former and 46 days for the latter, then go up to 53 days in the
last quarter. The reason for this increase is that the number of days it takes to turn
inventory to revenue with the current SOP is also rising, therefore, it goes the same
when applying the new SOP.

18
Downtime Causes

Chart 4.3: Downtime Causes

This pie chart illustrates three main factors that cause losing time in the production
process. As can be seen, delivery comprises most of the time delay, with the
percentage of approximately a half. One of the main reasons is that Vinamilk's
transporter has not been provided with any storage devices on the vehicle during the
transportation process, which will exert negative effects on the products. Another
significant element is Improper Manufacturing Equipment Maintenance, contributing
nearly two-fifths of the total time. Last but not least is Machinery Errors. Due to a lack
of maintenance, the creation of defective products took the company more time to fix,
nearly one-sixth.

Cost Avoidance

Chart 4.4: Cost Avoidance

Cost avoidance is a measure that reduces the potential future costs of the company.
This is a really important metric to build good strategic plans, especially when we
want to improve the production process without spending extra money on useless
things (Thời Báo Tài Chính Việt Nam, 2021). 

19
The bar chart shows the percentage of four types of costs that Vinamilk can avoid in
the future with the new SOP. The Cost Avoidance in Delivery will account for the
largest proportion (13%) whilst the figure of Waste Treatment will be the lowest,
representing 4%. The two remaining factors: Inventory Carrying and Return and
Exchange Cost will reduce by 10% and 6% respectively in comparison with the
current expenses.

Cycle time

Chart 4.5: Cycle time

In the Ishikawa analysis, we found that the core issue of Vinamilk is inefficient
quality management, so we added some steps in the proposed SOP to minimize the
possibility of defective products. This is the reason why the cycle time will increase
by 1 minute to manufacture 1000 milk products. 

PERT Chart

20
Let's talk a little bit about the history of this chart type, the PERT network diagram
(Program Estimation and Evaluation Technique, or Project Estimation and Testing
Technique), is a method that applies a combination of statistical probability theory
(for estimating work duration in projects where the work has an unspecified duration),
with the critical path network diagram using graph theory. This method was
developed by the Americans in 1958 (Wikipedia.org, 2011).

This PERT chart shows our plan for how we work, plan and estimate the duration of
each task on this project.

After discussing, we used the following steps to draw a PERT diagram: 

Table 5.1: PERT Chart

As you can see, for each activity we have indicated the earliest start date and the
estimated time it will take to complete it. For Sequential Task Sequencers, we have
shown the stage on which it depends.

Step 2. Sketch the activity as a diagram

21
 Table 5.2: PERT Chart

The diagram shows all the tasks that will take place on the project, in which each large
square denotes a project task with components such as ES (Early Start), EF (Early
Finish), LS (Late Start), LF (Late Finish) and T (Duration). The arrows connecting the
large squares represent the sequence of tasks performed. By convention, all arrows run
from left to right (Nguyen, n.d.).  Initially, what we need to do is create a matrix table
to decide which company we will conduct profound research on. This took us 5 days
to complete and eventually, Vinamilk was picked. The next task we need to do is to
make slides to provide general information about Vinamilk, which took 3 days to
complete. After that, we spent 4 days doing a Ishikawa analysis to figure out the main
causes of Vinamilk’s problem in the production process. Besides, we determined that
the work in parallel with accomplishing task B is to create the 1st flow chart, the 2nd
flow chart, and the safety contingency plan. These 3 jobs accounted for 1 day, 2 days,
and 1 day respectively. As you can see from the above sheet, task H depends on 3
tasks which are C, F, G. So, until we've completed all three of those tasks, the H task
can begin. All of the above lasted until the 14th before moving to task H. After task H
finished, we determined the next task to do is to create a financial rationale. 
Moreover, a set of tasks must be accomplished until reaching the end of the road,
which are writing the conclusion, writing the project summary, doing the final exam,
and making the PowerPoint completed in the above order. Finally, our last task is to
present and submit a report about Vinamilk. By combining all the tasks duration we
found that this project lasted 22 days in total. To determine the critical path on the
PERT chart, we need to define EF, LF of each task that is the same. So we have
activities namely A, B, C, H, I, J, K, L, M, N  which would form our critical path here.

22
For the project to be completed on schedule, these activities need to be strictly
managed. After calculating all the tasks in our project including the total float of each
task, we found that tasks such as creating a flow chart, creating a safety contingency
plan, or creating a PERT chart... can be delayed within the time allowed because the
total float of each task is different from "0". Procrastinating or completing those tasks
on time has no effect on the final result of our project.

Return on Investment and Break-even point

Return on Investment
According to Investopedia, “Return on Investment (ROI) is a performance measure
used to evaluate the efficiency of an investment or to compare the efficiency of a
number of different investments (Fernando, 2021). ROI tries to directly measure the
amount of return on a particular investment, relative to the investment’s cost. To
calculate ROI, the benefit (or return) of an investment is divided by the cost of the
investment. The result is expressed as a percentage or a ratio.” (James Chen, 2019).

We calculate with the following formula (Beattie, 2021):

The following are current Net Income and Cost of Investment per quarter. All of them
are counted for 3 months.

Current Net Income $120.65 million

23
Current Cost of investment $678.21 million
ROI (%) 17.8%
Table 6.1: Current ROI

After analyzing the tremendous impact of inefficient quality management (in 2.

Ishikawa Analysis), we have come up with the proposed SOP (in 3. SOP Flow chart).
Following the 3 steps added, the net income has a significant upswing to $136.25
million. However, it is witnessed that the cost of investment slightly rises by 0.32%.
As a result, we have the following proposed Net income and Cost of investment which
is also counted per quarter. All of them are counted for 3 months.

Current Net Income $136.25 million

Current Cost of investment $680.35 million

ROI (%) 20%

Table 2.2: Proposed ROI

Therefore, with the new SOP, Vinamilk is able to increase net income as well as

ROI, along with an inconsiderable rise in the cost of investment.

Break-even point
Break-even point is a term often used in business studies. Companies need to generate
revenue above breakeven to cover all variable and fixed costs from operations. The
breakeven point is the level of production at which the costs of production equal the
revenues for a product.

Chart 6.1: Break-even point graph

24
To calculate a break-even point based on units, we divide fixed costs by the revenue
per unit minus the variable cost per unit (Egan, 2019):

Fixed costs are ones that typically do not change, or change only slightly.
Examples of fixed costs for a business are monthly utility expenses and rent.

Revenue per unit: This is how much a company is going to charge consumers for
just one of the products that the calculation is being done for.

Variable costs are costs directly tied to the production of a product, like labor hired
to make that product, or materials used. Variable costs often fluctuate and are
typically a company’s largest expense (FreshBooks, n.d.).

The following table shows the difference of break-even point between the current SOP
and the proposed SOP:

  Current Proposed
Fixed Cost (billion) $0.16 $0.18

Revenue per unit $0.52 $0.78

Variable Cost per unit  $0.208 $0.26

Break-even point 0.5 0.34

Table 6.3: Break-even point

According to the result, we can see that the break-even point quantity is 0.34 billion
units, which means with 340 million milk cartons sold, Vinamilk will reach the break-
even point and start to make a profit. 

25
 Conclusion
On the basis of the above evaluation and analyses, it can be concluded that there are a
considerable number of problems facing Vinamilk in its product quality management.
These significant issues resulted in defective products contributing to an estimated
$2.3 million loss in the company’s total revenue each year. Hence, Vinamilk needs to
implement new encountering measurements in order to minimize the amount of cost
lost.

The Ishikawa Diagram is utilized to identify major pinpointing elements, eventually

leading to four main causes which have a profound impact on the final outcome:
manpower, machine, material, and method. Subsequently, three additional steps to be
taken into consideration and implemented are included in our new complementing
Standard Operational Process (SOP). By adding these recommended steps, the
company can control the product output more tightly and mitigate the current
unproductive and material-wasting process, saving a total of $690.000. 

The current Net Income and Cost of Investment per quarter are $120.65 million and
$678.21 respectively, and the Return of Investment (ROI) is 17.8%. If proposed steps

26
in the SOP are implemented and followed, the company will be able to increase Net
Income up to $136.25 million, ROI to 20% with a rise in Cost of Investment to
$680.35 million. Ultimately, Vinamilk will reach the break-even point and receive
profit after the sales of 340 million units of milk cartons.

As the new SOP implementation project involves numerous tasks, the PERT chart is
used to provide a distinctive visual representation of its timeline and details so that
managers and their teams are able to understand what needs to be conducted, when
and how to conduct so as to complete each activity on schedule.

References
1. Beattie, A. (2021). How to Calculate Return on Investment–ROI. [online]
investopedia.com. Available at:
https://www.investopedia.com/articles/basics/10/guide-to-calculating-roi.asp
[Accessed 29 Oct. 2021].
2. Egan, C. (2019). Break-Even Analysis 101: How to Calculate BEP and Apply
It to Your Business. [online] Square. Available at:
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