Paris Graduate School of Management Thai Nguyen University INTERNATIONAL EXECUTIVE MASTER OF BUSINESS ADMINISTRATION PROGRAM THESIS TITLE: PRODUCTION MANAGEMENT AND PRODUCT QUALITY IMPROVEMENT AT X20 JOINT-STOCK COMPANY FOCUS ON: IMPROVE THE MATERIALS MANAGEMENTAT X20 JOINT STOCK COMPANY Student’s name: NGUYEN TRUNG HIEU Intake I 2012 Nguyen Trung Hieu – Class MBA.B01 DETAILED OUTLINE OF THESIS INTRODUCTION 01 The need for research 01 Research issues 03 Study objectives 03 Object and Scope of the study 04 Overview of research issues 04 Research methodology 04 The new point of the essay 05 Structure of the essay 05 DEFINITIONS 07 CHAPTER GENERAL ISSUES OF MATERIALS MANAGEMENT 08 1.1 The concept and role of materials management 08 1.1.1 The concept of materials management 08 1.1.2 The role of materials management 08 1.2 Contents of materials management 10 1.2.1 Identify materials needs 10 1.2.1.1Norm of materials consumption 10 1.2.1.2 Material needs of the enterprise 11 1.2.2 Planning for materials procurement 13 1.2.3 Materials reserve at the enterprises 15 1.2.3.1Reserve management system 16 1.2.3.2The types of materials reserve in the production 16 1.2.3.3 General principles of reserve management 17 1.2.3.4 Reserve level for production 18 1.3 Models of materials management, technical analysis and control charts 21 1.3.1 Optimum storage model (EOQ) 21 i Nguyen Trung Hieu – Class MBA.B01 1.3.2 Technique of ABC analysis 23 1.3.3 Graph for materials quality control 25 1.3.3.1Checking 25 1.3.3.2 Process control 25 1.3.3.3 Control chart 26 1.4 Analysis of the materials management 27 1.4.1 Analysis of the status of materials supply 27 1.4.2 Analysis of materials reserve status 28 1.4.3 Analysis of tatus of materials using 29 CHAPTER 2: ACTUAL STATUS IN MATERIALS MANAGEMENT AT X20 JOINT STOCK COMPANY 31 2.1 Overview of X20 JSC 31 2.1.1 Overview of the process of formation and development 31 2.1.2 Business tasks 32 2.1.3 Structure of X20 Joint Stock Companies 33 2.1.4 Functions, the basic tasks of the management department 34 2.1.5 Characteristics of business organization 35 2.1.5.1Structure of business organization 36 2.1.5.2 Functions and tasks 36 2.1.6 Characteristics of technology process of production 37 2.2 General introduction of materials management 39 2.2.1 Characteristics of the organization of materials management 39 2.2.2 Classification, quality standards, maintenance supplies 40 2.2.2.1 Classification of materials 40 2.2.2.2Quality standards 43 2.2.2.3 Preservation and materials input and output 43 2.3 Work of materials supply plan 49 2.3.1 The work of production planning and identify the needs of materials 49 2.3.2 Determine the quantity of materials needed to buy 51 ii Nguyen Trung Hieu – Class MBA.B01 2.3.3 Cycle of materials purchase 52 2.4 Analysis of the use of materials 53 2.4.1 Analysis of the use of materials in general 53 2.4.2 Analysis of the supply situation 55 2.4.3 Analysis and inventory reserves 55 2.4.4 Analysis of the use of materials 56 2.5 General comments on the management of materials of X20 JSC 59 2.5.1 Strengths of the materials management 59 2.5.2 Limitations in the materials management 60 CHAPTER SOME RECOMMENDATIONS TO ENHANCING THE MATERIALS MANAGEMENT 61 3.1 Measures to enhance the supply materials for the Corporation X20 61 3.1.1 Search for new sources materials’ supply to add or replace part of imported materials, increase business efficiency 61 3.1.2 Completing the purchasing materials contracts 63 3.1.2.1 Base problems 63 3.1.2.2 The solutions 63 3.1.3 Review regularly the Company’materials suppliers 64 3.2 ABC method in classifying the inventory 68 3.2.1 Basis and methods 68 3.2.1.1 Basis of measures 68 3.2.1.2 Content of the solutions 68 3.2.2 Evaluation of the effectiveness of ABC method 70 3.3 Applicating the EOQ model to calculate optimally the reserve materials for production 71 3.3.1 Basis of measures 71 3.3.2 Content of the measures 71 3.3.2.1 Based on the demand plan calculating the required reserves materials 71 3.3.2.2 Making the total reserves cost function and optimum production order 71 iii Nguyen Trung Hieu – Class MBA.B01 3.3.3 Assess the effectiveness of the application EOQ model to the Company’s storage management 80 CONCLUSION 81 REFERENCES 82 APPENDIX 83 iv Nguyen Trung Hieu – Class MBA.B01 ACKNOWLEDGEMENTS After a period of study and research in PGSM's MBA program, I have gained a lot of useful knowledge, with highly practical applications for current job Over here, I would be deeply grateful to the teachers’s PGSM's MBA program By his love and passion for this job, the teacher imparted to us the precious and practical knowledge In particular, I would like to thank a profound teacher, Dr Tran Van Hung, director of the center of Small and Medium Enterprise Development National Economic University for enthusiastic guidance and helping me completely this thesis Sincerely, thank the officials and leaders Corporation X20 for feedbacking and helping me completely this thesis Graduate students class MBA.B01, Nguyen Trung Hieu v Nguyen Trung Hieu – Class MBA.B01 INTRODUCTION The need for research: Vietnam's economy is in long-term crisis, the dual impact of the recession: inflation lasted from 2008 to 2011 and deflation six months of 2012 was the depletion of "resistance"of all businesses In 2008, Vietnam inflation began to rise along with interest rates rise (lending rates sometimes up to 21-25% / year) increased the input costs of the business Economic picture "brighter" than in 2009 thanks to the economic stimulus package of the government but it is also the cause of inflation in 2010-2011 The government's interest supporting capital is provided directly to businesses through commercial banking system, the government does not take measures to withdraw funds when the economy has stabilized Inflation, interest rates remain high that impact business input costs to be high, resulting in high production costs People's income growth rate lower than the price increase, people tend to save, limited spending, this reduces the purchasing power of the market Production of high prices, sales difficulties, therefore, the enterprises faced with problems of cutting costs to reduce costs In the first eight months of 2012, recognizing the difficulties of the enterprises, government and the State Bank has strong measures to reduce the interest rate to a reasonable level (12% / year) to help businesses overcome difficulties Along with the efforts of government, businesses are trying to overcome difficulties, now take all measures to cut costs in order to maintain business operations and improve the competitiveness of enterprises One of the measures used to reduce the cost of business is the management of materials at reasonable levels, reduce inventory costs at the maximum Materials management consists of various stages: supply, storage, quality control and use of materials In the context of the current economic difficulties, the textile industry faced stiff competition at the domestic market and international market As announced by the Vietnam Textile and Apparel Association (Vitas), 2011 textile trade surplus of $ 6.5 billion, up $ 1.5 billion compared to 2010 and raise the localization rate of 48% Page Nguyen Trung Hieu – Class MBA.B01 This is a remarkable achievement in the context of purchasing power in the world market fell, exports of some other staples of Vietnam fell However, the textile industry make great efforts to reduce dependence on imported raw materials (about 85%) The domestic market has great potential due to the tastes of consumers believed in Vietnam textile, textile enterprises see the domestic market as a cure in crisis period As announced by the Ministry of Industry and Trade, in 2011, Vinatex revenue from the domestic market reached 17,200 billion, growth of 15% or the products "Made in Vietnam" to be choosed by consumers Vinatex target towards the domestic market growth in 2012 is 18-20% The first target set in 2012 for Vietnam's garment and textile exports is to conquer the $ 19 billion mark Results of the first seven months of 2012, the total export value of $ 9.2 billion, just over $ 1.3 billion on average every month Due to the difficult situation of the global economy, the textile industry reduced the industry's export target to $ 17 to 17.5 billion ($ billion lower than the first plan of the year) The reason is that the enterprises of the textile industry faced with a lack of capital, lack of raw materials and input costs increase, while output prices decline Compared with the same period last year, exports of textile products is reduced by 20% Price decreased sharply, but not easy to find export contracts The number of small businesses (in textiles industry) face difficulties in finding the output market X20 stock company is a unit of the textile industry, the Company's products: Easter, uniforms, clothes for Defense; shirts, jackets, attire; exports clothes(jackets, motorcycle racing clothes, etc.); fabric, socks, towels, etc in the context of the economic crisis, the textile industry goes down, the raw material market fluctuations, increases in input costs, stiff competition, therefore, need to reduce costs as a precondition for reducing production costs, enhance the competitiveness of products in the domestic and international market And one solution to cut production costs are materials and resource management of the Company by means of: construction of additional channels providing inputs, looking for new materials, Page Nguyen Trung Hieu – Class MBA.B01 building effective material norms, at the same time ensuring that the production process is ongoing Materials management, in addition to factors such as the search for new materials, new suppliers, the quantity of reserves, the volume of orders the company should pay attention to the quality control of materials Strictly control the quality of inputs is one of the important measures to improve product quality, reduce defect rates leading to lower production costs, increase competitiveness of the products Comes from the state of the economy, the textile industry and in the case of materials resource management of the Corporation X20, combined with the knowledge to be learned, I have decided on a topic for my essay, "Improve the materials management at X20 Joint Stock Company " Research issues: The essay focuses on the research of materials management at X20 Joint Stock Company in the context of the current economic crisis, including the input stage, input quality assessment, inventory and monitor inventory quality to ensure efficient and continuous production activities, as well as the base for products price decrease Study objectives: Implementation of the essay with the following objectives: - Analysis of the current situation and identify shortcomings in the materials management at X20 Joint Stock Company to identify measures to improve the materials management - Measures to search for new materials, new suppliers and evaluation of raw materials and suppliers to ensure enough materials for production and business processes continuously, without interruption - Apply ABC analysis techniques to arrange the materials from warehouse to increase utilization factor, reduce time for materials transitting, create convenience in the course of inspection, control and monitoring materials Page Nguyen Trung Hieu – Class MBA.B01 - Control the parameters of the raw materials from which to make recommendations for vendors and production units used materials This goal helps stable production and have timely solutions for each shipment - Application suitable materials reserve model to calculate the number for the orders of raw materials and the appropriate time of order to minimize the costs of orders, increase efficient use of working capital Object and Scope of the study: a/ Objects of study: The work of materials management at X20 Joint Stock Company b/ Scope of research: - Time of research from January, 2011 to June, 2012 - Space research at the garment factory of X20 JSC Overview of research issues: Essay is to explore and gather previous studies on materials management Previously there were some research essays on materials management and came up with some solutions to improve the efficiency of materials management Due to the complex nature of the materials management, therefore, in various economic fluctuations, it will have different materials management process to ensure business continuity, minimize waste, cost savings, improve the competitiveness of products In difficult economic context, competition in the textile industry has put all textile firms facing cost-cutting problem and from that the textile enterprises have to improve their management And one of the issues that need to pay attention is the source of materials management With the urgency of doing so, the research essay focuses on the current materials management of X20 JSC, which give some solutions to improve the management of materials, improving efficient production and business activities Research methodology: Page Nguyen Trung Hieu – Class MBA.B01 Processing (BM.01.XN.02) and tabulated size products according BM.01.XN.03 Summative assessment results are written on BM.08.XN.07 form - Setting the detailed statistical tables by BM.01.XN.04 form - 01 for PX - Change paper to fit the product - Separating the details coordinate each type of product - Identify the support cut, seam position - Determine the level of product material, writen on BM.01XN.13 form Step 9: Modeling & Transfering Technology 9.1 Modeling - Employees may receive samples of paper, the original form, technical documents, raw materials from the leader (use BM.01.XN.07 form) Checking the quality of raw materials before cutting, if detecting inconsistencies, they must notify the leader to solve - The customers have to give comments, additions and approve with the completed sample products, then, these need to be writen to BM.01.XN.08 form 9.2 Transfering Technology - The technical staff introduce to each workshop To note the difficult parts - Monitor the quality of each part of the chain - Coordinate with customers to review the first completed products, additional ideas changes are writen to BM.01.XN.08 form Step 10: Cutting – Sculpted sample - Getting the plan from the leader - Copy exactly as the original sample - In the processing, if losing any details samples, not make the other copies, it should be reported tho the technical department to get additional samples Step 11: The sample - The Deputy takes technical documents from the leader, checking the accuracy of the hard sample Checking the amount of necessary raw materials Page 85 Nguyen Trung Hieu – Class MBA.B01 - Determine the level of raw materials, the customers have to confirm in BM.01.XN.10 form Step 12: Mornitoring The Supervision and Monitoring department has responsibility for testing products Step 13: Review - Planning - General Department - The Chief of Planning - General Department set up the production plan - Check the delivery of materials report - Check the color palette and accessories If there is a mismatch, the Dept reports to the Director - Technical - Quality Department Technical - Quality Manager checks the form of raw materials and other requirements of the client, if it is appropriate, go on to the 5.15, if not fitale, turn back from 5.4 Step 14: Reviews of the customers The Planning - General Department send the colour table and the supplies reception reports and urge the customers approve to carry out processing If no matched, back from 5.4 Step 15: Decide After receiving confirmation of the customers and the report of the Head of Planning - General & Technical Manager Enterprise Manager reviews and decides to deploy to the production team Page 86 Nguyen Trung Hieu – Class MBA.B01 Appendix 2: Card stock SJC X20 S12 – DN Form Phuong Liet, Thanh Xuan, Hanoi (Issued under the Decision No 15/2006-BTC dated 20/03/2006 of the Finance Minister) CARD STOCK The issuing date Warehouse Supplies name From Reserves : from 1/08/2012 to 31/08/2012 : Materials Warehouse : C99 kate wood K1, 25 Fabric Materials : 08/01/2012 to 08/31/2012 : 8102.8 Unit: meter Document No SH NT Interpretation InOut date 07/08 Temporary - TT 07/08 supplies 08/08 HDSX No 44108/08 20 men's CB 15/08 Enter Fabric Co 15/08 28 25/08 HDSX number 25/08 37-5000 shirt men LQ 27/08 Enter back cloth 27/08 (PX66 / 2) - SPS Community - Total This book page, numbered from 01 to Quantity In (Signature, and full name) Invento ry 1.600 5.502,8 800 5.702,8 6.400 12.102,8 144 6.544 2.400 Opening date: Storekeeper Out Signat ure of accou nting 12.246,8 31/ 08/ 2012 Chief Accountant Director (Signature, and full name) (Signature, and full name) Page 87 Nguyen Trung Hieu – Class MBA.B01 Appendix 3: reference rotation Book SJC X20 REFERENCE ROTATION BOOK 08/2012 Commo Mater Un Opening dity ials it name name Rotated in 08 Balance balance 08 08/31 In Out Quant amo Quant amo Quant amo Quant amo ity ity ity ity unt unt unt unt Total 31/ 08/ 2012 Prepared by Chief Accountant (Signature, and full name) (Signature, and full name) Page 88 Nguyen Trung Hieu – Class MBA.B01 Appendix 04: BM.06.XN.01 Form: "Document delivery" Garment factory Processing Dept DOCUMENT DISTRIBUTION LIST No Number Type of of document release Cutting workshop Date Number Signature Accessories warehouse Workshop I &II Date Page 89 Number Signature Date Number Signature Nguyen Trung Hieu – Class MBA.B01 Appendix 05: BM.06.XN.04 Form "Fabric size." Garment factory Cutting workshop Date month year FABRIC SIZE To: Engineering Department We have the honor to inform you the approved Fabric size as follows: No Name of code Type of material / color Fabric size as a measure of average Note No Name of code Type of material / color Fabric size as a measure of average Note Page / MANAGING DIRECTOR ACCOUNTING OF CUTTING WORKSHOP Page 90 Nguyen Trung Hieu – Class MBA.B01 Appendix 06: BM.06.XN.05 Form "The actual reception accessories book" Garment factory SOCIALIST REPUBLIC OF VIETNAM Planning-General Dept Independent - Freedom - Happiness Hanoi, month year RECEIPT OF MATERIALS RECORDS Today, on hour minute on month We are: unit unit unit Together to draw up a report on the situation of receiving supplies as follows: No Type CUSTOMER Unit List or form COMPANY Page 91 Actually received MANAGER +/_ Note THE MAKING RECORD Nguyen Trung Hieu – Class MBA.B01 Appendix 07: BM.07.XN.02 Form “Inappropriated material report” INAPPROPRIATED MATERIAL REPORT Code: Location found: Type of material: To: Mr (Mrs) Cc: We would like to inform him (her) about the inappropriated material from the following: No Description Unit Error Quantity Note So Mr/Mrs consider respectfully The proposer Accountant Day…… Month Year Manager The reception Decision-making process: CUSTOMER IN –EX DEPT Page 92 Date ./ / TECHNICAL DEPT Nguyen Trung Hieu – Class MBA.B01 Appendix 08: BM.06.XN.06 Form " Allocation materials Book" GARMENT FACTORY Processing Dept ALLOCATION MATERIAL BOOKS Date / month Team /Group Code Page 93 Vote Sign Nguyen Trung Hieu – Class MBA.B01 Appendix 09: BM.01XN.03 Form " Finished products Report" SJC X 20 ENTERPRISE TRACKING THE SYNCHRONIZATION OF SUPPLIES AND TLKT EXPORT OF EACH CODE To:- Director of the Company - Board of Directors - Customer Dept, Dealers - Import Export Company - Customers Goods/materials No and lack of code names Un it The Equivalent number of product lacks Estimated date for next materials Note A- The code is in-line production I – THE CODE: MX – 2063/1.500 PRODUCT II- THE CODE: E05508/785 PRODUCT B- The preparation code for processing I- THE CODE: MX- 2074/2005 PRODUCT II- THE CODE: MX- 1752/530 PRODUCT Date month year Customer dept The reported Page 94 Nguyen Trung Hieu – Class MBA.B01 Appendix 10: BM.01XN.05 Form "Colourful Table " COLOURFUL TABLE - CODE Output: Product Type Main fabric Colored (A) Colored (B) Colored (C) 1 1 Main fabric Colored (A) Colored (B) Colored (C) 2 2 Main fabric Colored (A) Colored (B) Colored (C) 3 3 Cotton body Cotton hand Lined body Lined bag Up # Fabric link Soft Panels Accessories 1.Lock a) Fasteners wire Straps a) a) b) b) button stamp a) b) Sanding stick a) b) Rubberband a) b) attached buttons a) Sewing a) b) b) b) Mark a) 10 Card a) b) The code’size rate Page 95 b) Nguyen Trung Hieu – Class MBA.B01 Appendix 11: BM.01XN.06 Form "Materials distribution vote" GARMENT FACTORY Customer dept MATERIALS DISTRIBUTION VOTE Item (s / #): Total output: Distribution : Output: Number of votes: Type Characteristics Processing chief Size Colour Unit Đ/M Đ/M Quantity Demand Demand Date month year Recipient Preparer Storekeeper Page 96 Gap Nguyen Trung Hieu – Class MBA.B01 Appendix 12: BM.01XN.10 Form " The fuel Table." GARMENT FACTORY TECHNICAL DEPARTMENT APPROVED NORMS • Item (s / #): • Output (q'ty): • Usually the number (size): No Items Operational norms Size (inch) Long (Yds) The actual level Long Size (inch) (Yds) Note 10 11 12 Above is the level of our reality norms, please check, confirm and resend Enterprise before h day months years If h days months years Company has no opinion, it is considered to agree and we will put into production to catch up plan Date months year REPRESENTATIVE CUSTOMER TECHNICAL DEPT Page 97 Nguyen Trung Hieu – Class MBA.B01 Appendix 13: BM.01.XN.12 Form "The pressed parameters mex" THE PRESSED PARAMETERS MEX Code: Fabrics: Type mex: Shaper Type: Injectiontemperature: Pressure: Speed: Day month year Technical Manager CHECKING PROCESSING PRESSED MEX CODE: PRODUCTION: Date/month/year Checking content Page 98 Approved of the checker Product in day Nguyen Trung Hieu – Class MBA.B01 Appendix 14: BM.01.XN.13 Form "Accessories norm" GARMENT FACTORY TECHNICAL DEPARTMENT ACCESSORIES NORMS / 1PRODUCT Code: Description: Customers: Size: ……Output: No Name Colour Unit Quantity Note The other materials as norms in TLKT Date months year TECHNICAL DEPT Page 99