VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY

International University - School of Business

SUBJECT: LOGISTICS AND SUPPLY CHAIN MANAGEMENT

PROJECT TITLE: RESEARCH ON COFFEE SUPPLY CHAIN ACTIVITIES

OF TRUNG NGUYEN LEGEND GROUP CORPORATION

GROUP 11

GROUP MEMBERS:

1. Võ Thị Thanh Ngân BABAWE18506

2. Mai Thảo Nhi BABAIU18149

3. Trần Đỗ Ngọc Hân BABAWE18343

4. Trần Kim Quỳnh BABAWE18062

5. Lê Ngọc Quỳnh BABAWE18268

Table of Contents
1. Introduction ........................................................................................................................ 3
1. General information ........................................................................................................ 3
2. Elements in the supply chain .......................................................................................... 3
2.1. Suppliers .................................................................................................................. 3
2.2. Manufacturers .......................................................................................................... 4
2.3. Distribution .............................................................................................................. 5
2.4. Final customers ........................................................................................................ 6
3. Trung Nguyen’s Supply chain model ............................................................................. 6
4. Products lines .................................................................................................................. 6
5. Problems of supply chain .............................................................................................. 10
2. Methodology ........................................................................................................................ 10
3. Solution and recommendations ............................................................................................ 11
3.1. Difficulties in outsourcing services ............................................................................... 11
3.2. Solutions in outsourcing services .................................................................................. 13
4. Contribution form (%) ......................................................................................................... 14
References ................................................................................................................................ 14
1. Introduction

1. General information

Trung Nguyen Legend Group Corporation, founded in 1996, is one of Vietnam's largest
and most profitable roaster and packaged coffee brands. This company was a Vietnamese
pioneer in the use of franchising models. It accomplished significant milestones in establishing
a brand in domestic and international markets and exporting goods to more than 60 countries
in the United States, the European Union, and Asia. Indeed, the company has 1000 franchised
shops within Vietnam and different foreign countries, namely the U.S., Japan, Singapore,
China, Thailand, Cambodia, Poland, and Ukraine.

Trung Nguyen now covers all 63 provinces in Vietnam. Trung Nguyen has also
established a chain of 1,000 G7 Mart convenience stores and distribution centers across the
country, with approximately 1,000 franchisees and eight locations. Trung Nguyen's primary
product was G7 Mart, which was widely distributed and exported to other countries. Trung
Nguyen has three coffee factories, two instant coffee factories, 600 coffee shops in Vietnam,
121 exclusive dealers, 700 sales points, and 59,000 retail items.

2. Elements in the supply chain

2.1. Suppliers

Suppliers are an essential part of every company's supply chain because they provide
supplies (raw materials) for the production process. As a result, suppliers directly impact the
product quality and price (final products).

Coffee beans are a necessary component of the Trung Nguyen brand's success. Indeed,
coffee beans are carefully selected from four different locations: Buon Ma Thuot Robusta,
Jamaica Arabica, Ethiopia, and Brazil. Trung Nguyen has many advantages in gathering raw
materials because of its location in Vietnam's coffee capital. There are two ways of purchasing
coffee beans:

1. Purchasing products through other private enterprises.

2. Directly purchasing from farmers.
 Due to the certain drawbacks in the first methods, Trung Nguyen found a new direction
for the inputs, that is to say, investigate and directly control coffee beans farms, then make
them become a part of the business, thereby helping the company to be proactive in strategic
raw materials, contributing to strengthening the relationship between businesses and farmers.

Packaging suppliers: Phuong Nam Packing Trade Co., ltd, Vinapackink Viet Nam
Packing, and Printing Company. The equipment supplier is from Neuhaus Neotec – The
world’s leading coffee processing company in Hoykenkamp – Germany.

2.2. Manufacturers

The interesting combination of modern technology and Eastern mystical secrets is the
crucial factor that creates the uniqueness for the Trung Nguyen brand. Thanks to the technology
transfer of leading corporations globally, Trung Nguyen Vietnamese coffee became a reputable
company with a solid infrastructure system.

Trung Nguyen has four factories, including 2 Instant Coffee Factories:

• Sai Gon coffee factory: purchased from Vietnam Dairy Products Joint Stock Company
in 2010.
• Bac Giang coffee factory: the total investment is 22,000 billion VND. The first phase
focuses on processing and packaging G7 instant coffee products.

Besides, there are two roaster coffee factories in Dak Lak, and Binh Duong province.

• Buon Ma Thuot, Dak Lak Factory :

o Coordinate: 12.734331, 108.082648
o Total investment capital: 40 million USD.
o Capacity: 60,000 tons/year.
o 80% of total production is used for exporting.
• Binh Duong Factory:
o Coordinate: 11.1268, 106.6207
o Total investment capital: over 10 million USD
o Capacity: 3,000 tons/ year.
 2.3. Distribution

• Traditional distribution system

Distributors, suppliers, and finally, final customers will receive the finished goods. Trung
Nguyen has built a sophisticated distribution system that ensures that the company's goods are
available to consumers. The company has established a network of over 121 distributors, 7,000
points of sale, and 59,000 retail stores across the country and many other countries. Some
examples of Trung Nguyen's distributors: Blue Way Joint Stock Company, Ngoc Ha Trading,
and Service Joint Stock Company, etc.

• Modern distribution intermediaries

o G7 Mart system

This is Vietnam's first franchising retail scheme. For the entire chain of G7 stores across the
country, there are 200 suppliers. According to Trung Nguyen, the most notable aspect of G7
mart is that it caters to Vietnamese shopping habits; people prefer to shop in small grocery
stores or retailers close to their homes.

As a result, G7 marts are usually set up on a small scale, similar to a grocery store, and wind
their way through the alleyways. G7 mart, on the other hand, overcomes the disadvantages of
conventional distributions, such as low-cost groceries, uniformity and assurance, and the use
of technology in the management process. The introduction of the G7 mart system shows the
strategic reach and ambition to gain a firm position in the distribution system of Vietnam.

o Supermarket system

For its delivery infrastructure, Trung Nguyen relied on vertical distribution networks.
Previously, each retailer has its distribution channels; currently, G7 distribution centers serve
as the central hub for supplying products to the entire G7 Mart distribution chain, including
regular G7 Mart stores and other member stores. This strategy would lower total costs and
eliminate certain intermediaries, resulting in lower total costs, which would favor customers.
In the long term, all consumer goods and services would be distributed by a single mechanism,
resulting in a high level of professionalization.
 2.4. Final customers

Trung Nguyen's customers are mainly individual customers who purchase goods at
retail points or enjoy cups of coffee in Trung Nguyen's chain of stores.

3. Trung Nguyen’s Supply chain model

4. Products lines

Trung Nguyen Vietnamese Coffee has been divided into 3 product lines.
1.Distinctive Weasel Coffee: The total production
Coffee of this coffee bean worldwide is only
200 kilograms per year, thus Weasel
Coffee is a rare and the most
expensive specialty in the world.

Legendee Coffee: Unique bio-

fermentation technology

Creative Coffee 8

2. Medium - Filter Coffee (1,2,3,4,5)

High Coffee:
Creative Coffee (1,2,3,4,5,8)

Espresso

Blend (I, S, N, Premium Blend,

Gourmet Blend, House Blend)

G7 Passiona: the low level of caffeine

 G7 Cappuccino

G7 instant coffee (G7 3in1, G7 2in1)

3. Common
Coffee

G7 Strong X2

G7 Pure Black

G7 White Coffee
 5. Problems of supply chain

Trung Nguyen Legend Group Corporation is the first brand in Vietnam to produce
coffee in a fully integrated manner using its coffee processing factory and machinery. As a
result, the primary issue is with input supply, both in terms of quantity and efficiency. Trung
Nguyen typically buys raw materials from farmers, small businesses, or merchants. However,
many manufacturers face problems in this day and age, which has a significant impact on the
whole system's manufacturing chain. A lack of raw materials, whether temporary or permanent,
would directly negatively impact the market.

If the quantity of inputs is inadequate, the productivity and reliability of the whole
operation will suffer significantly. As a result, the stage of supplying coffee goods for sale
(franchisees, supermarkets, etc.) and final customers is inevitably delayed. As a result, it is one
of the most significant reasons causing the lucrative reduction in particular and impacting
Trung Nguyen Legend's entire logistics infrastructure in general.

2. Methodology
In fact, Trung Nguyen Legend coffee is racing to expand its physical store nationally
and can be commonly worldwide in the near future. With its dominant position in the domestic
market in recent years, Trung Nguyen Legend Corporation focuses on expanding international
markets in more than 80 countries and territories, especially crucial markets: China, America,
Korea, Russia, and Europe...
Due to that issue, one of the famous and incredible coffee brands in Vietnam has to deal
with various difficulties and challenges in controlling the stable quality of input resources when
the demand is growing too fast. The company has been based on purchasing through private
enterprises, traders, and directly purchasing from farmers. With this kind of input resources,
private enterprises or purchasing agents face many barriers, and many bankrupted agents
directly affect the supply, which cannot meet both quantity and quality. Besides, they are also
influenced by external factors such as weather conditions, water, soil, etc. Therefore, Trung
Nguyen has limited the use of this supplier.
As a result, to solve the mentioned issue, several ways have been suggested:
1. The company should maximize the manufacturing and product consumption process,
and the inappropriate stages should be redesigned the most reasonable and make the
production process automatic.
 2. It is recommended that they should synchronize all the stores in their franchise chain.
3. It is essential for them to associate with the distributors to bring the products directly to
the customers, limit the intermediation costs, and organize the transportation and
distribution of goods reasonably to guarantee that the quality of goods is not varied and
damaged during the process. In addition, they should save and reduce unnecessary
costs. Savings and cost reduction here must be understood as maximizing
rationalization without affecting the product’s quality and still delivering the qualified
products to customers, which maintains customers’ trust in the product.
4. It is crucial to be cautious about expanding product range and recruitment. Maintain a
good relationship with partners and customers to gain more benefits when the hard
times pass. Besides, the company may promote its strength of product quality, bring
actual values to customers and harmonize the advantages among shareholders,
employees, and customers.

3. Solution and recommendations

3.1. Difficulties in outsourcing services

Vietnam currently does not have a coffee processing chain or any institutional enterprise that
owns a comprehensive coffee processing factory to produce final products like Trung Nguyen,
but only at the raw production level in coffee-growing households. Therefore, Trung Nguyen
has to create itself from natural coffee purchasing to processing and distributing products. This
makes it difficult to continuously source goods as consumers' demand for the company's coffee
products increases, especially instant coffee G7 and G7 cappuccino products regularly run out
at retail stores because many customers favor them.

Trung Nguyen Legend is the first brand in Vietnam which has their own coffee processing
factory and coffee making equipment to process coffee in a comprehensive way. The first step
in the process is importing raw material source, coffee beans purchasing from farmers who
associate with Trung Nguyen to create Trung Nguyen coffee Farm. The farmers, coffee farms
had provided raw material inputs for factories. The coffee bean was purchase from the farm
must reach the quality standard and was signed the contract of Trung Nguyen and the local
farm.
Besides many advantages in purchasing raw coffee, there is one problem can exist. Trung
Nguyen buy coffee in the main way → Buy from private enterprises, traders, or buy directly
from farmers.

While private enterprises or purchasing agents are facing many difficulties, many insolvency
agents directly affect the supply, which cannot meet both quantity and quality, so Trung
Nguyen has limited in using this way. When the quantity needed to provide for manufacture is
not enough, this will lead to reduce productivity and efficiency of a whole process, delay the
process of providing coffee product to franchises and customers, tremendously affect to all the
logistic process and reduce company profit.
 3.2. Solutions in outsourcing services

The company has found a new direction for input materials: to invest and directly manage the
farmers's coffee farms, making the coffee farms a part of the business, thereby helping the
company to be proactive in strategic raw materials, contributing to strengthening the
relationship between companies and coffee farmers. Trung Nguyen believes the coffee beans
are purchased from small coffee farmers who have certified sustainable farming practices and
that the company buys at preferential prices from them.

Trung Nguyen has farms in Ea Tul, C Mgar, Dak Lak that uses Israel's advanced drip irrigation
system and YARA fertilizer technology. This system distributes water directly to each coffee
tree. It integrates fertilizer through the irrigation system with automated control valves, multi-
stage filtration that saves 60% of water volume and helps increase coffee yield by over 30%
over the previous design.

The commodity supply chain plays a critical role in delivering a high-quality product that meets
the consumer's needs. As a result, Trung Nguyen's primary mission is to ensure the supply of
raw materials is always reliable, high-quality, and available at very reasonable prices for new
strategy providers and abroad.

Advantage: Trung Nguyen has a significant advantage of having a factory located in Buon Ma
Thuot, the capital of coffee; transportation is not a problem. In addition, Trung Nguyen has
built its coffee farm to supply raw materials. Hence, transportation and purchase prices are
reduced as low as possible.

Limited of the material supply chain: Trung Nguyen must spend a considerable amount of
money on an investment supporting suppliers, training, and support for coffee growers.
4. Contribution form (%)

Name ID Number Contribution Signature

Võ Thị Thanh Ngân BABAWE18506 100%

Mai Thảo Nhi BABAIU18149 100%

Trần Đỗ Ngọc Hân BABAWE18343 100%

Trần Kim Quỳnh BABAWE18062 100%

Lê Ngọc Quỳnh BABAWE18268 100%

References
(2021, May 7). From Trung Nguyen Legend: https://trungnguyenlegend.com/
(2021, May 7). From Trung Nguyen E-coffee: https://trungnguyenecoffee.com/
(2021, May 2). From Vietnam economic times:
https://www.vneconomictimes.com/article/business/trung-nguyen-boosts-distribution-
in-china
(2021, April 25). From Vietnam Economy: http://vneconomy.vn/doanhnhan/vinamilk-ban-lai-
nha-may-ca-phe-cho-trung-nguyen-20100913011827204.htm
(2021, May 1). From Neuhaus neotec: https://www.neuhaus-neotec.de/en/neuhausneotec-
coffee/products/shop-roaster/
Hypermarket, C. (20211, April 28). From Cafe.net: http://www.cafe.net.vn/en/coffee.html