UNIVERSITY OF UEH

BUSINESS SCHOOL
FACULTY OF INTERNATIONAL BUSINESS - MARKETING

FINAL PROJECT
SUBJECT: SUPPLY CHAIN MANAGEMENT IN ERP

Instructor: MSc. Quang Canh Trinh Huynh

Class Code: 22C1BUS50313701
Student: Nguyen Phuong Uyen
Grade - Class: K46 - FTC01
MSSV: 31201024693

Ho Chi Minh City, November 15th, 2022

 DECLARATION

This essay is developed and processed by students alone, not copied from any other
organizations and individuals' articles..

Signature

Uyen Phuong Nguyen

LECTURER’S NOTE

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TABLE OF CONTENTS

DECLARATION ..........................................…................................….......................1

LECTURER’S NOTES…….............................…..............….....................................1

1. Transport problem .........…………….....................................................…...........4

1.1 Situation creation......................................................................................….....…4

1.2 Application………………..................................................................................…5

1.2.1 Present your current shipping plan...................................................................6

1.2.2 Determine what is the transportation problem of your scenario …………...6

1.2.3 Create a table of unit cost / unit profit for your scenario...…….................…6

1.2.4 Construct and solve your problem using Excel Solver & QM …...............…7

1.2.5 Explain your results……..........................................................………….....….9

2. Inventory problem ....................…....................................……………………….11

2.1 Scenario creation …........................................................................................….11

2.2 Applications ……...............….........................................................................….11

2.2.1 Basic EOQ model .........................…....................................................………11

2.2.1.1 Present your basic EOQ model .........................................................….......11

2.2 Identify your inventory problem ….........................................………..............12

2.2.1.3 Calculate, create a graph using QM for Windows….................….............12

2.2.1.4 Present your inventory anomalies ...................................…………………13

2.2.1.5 Calculate, create a graph using QM for Windows (if possible) that
represent your inventory situation, present your answer and your opinion……14

Reference ..........................................…................................…....………..................15

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 LIST OF TABLES

Table 1.1 Numbers of goods supplied by the factory

Table 1.2 Capacity of each warehouse

Table 1.3 Current transportation plan

Table 1.4 Table of unit cost

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 MAIN TEXT OF THE ESSAY

1 Transportation problem

1.1 Based on the P&T Co. Scenario, you should build a similar situation with
information about the field of operation, the latest business results and especially
the transportation problem that your business has to solve.

The Ajinomoto Company is a wholly owned subsidiary of the Ajinomoto Group.

The company offers a diverse range of spices, nutritional foods, and beverages that
meet the highest quality and safety standards and are appealing to Vietnamese
consumers. Ajinomoto currently owns 35 different types of popular food products that
are well-known throughout the country. Ajinomoto MSG, Aji-delicious seasoning,
Aji-mayo Mayonnaise, Instant drinks, Aji-Quick seasoning, Canned coffee are among
the featured products.

Ajinomoto products are manufactured in two factories (Bien Hoa and Long Thanh)
and then trucked to four distribution warehouses to be distributed throughout the three
regions (warehouse in Ho Chi Minh City, Da Nang, Hai Duong, and Can Tho).

Transportation problem: Every month, Ajinomoto produces products at two

factories and transports them to four warehouses to consume products to the market
quantity of 250 tons of products of all kinds. They are shipped from the factory to the
depots using the truck transport service (5 tons/vehicle).

*Below are frieght data tables:

Factory Quantity

Bien Hoa 23 trucks

Long Thanh 27 trucks

Total 50 trucks

Table 1.1: Number of goods supplied by the factory

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 Warehouse Capacity

Ho Chi Minh City 15 trucks

Da Nang 12 trucks

Hai Duong 13 trucks

Can Tho 10 trucks

Total 50 trucks

Table 1.2 : Capacity of each warehouse supplied by the factory.

1.2/ Application:

1/ Present your currency shipping plan in your 1.1 scenario

*The current transportation plan is:

- Bien Hoa factory is closest to the Ho Chi Minh City warehouse, so it should
transport the full amount of goods from Bien Hoa distributed to the warehouse in Ho
Chi Minh City, the remaining balance will be transferred to the warehouse in Da
Nang.

- The missing part of the Da Nang warehouse is transported from the Long Thanh
factory, and the rest of the Long Thanh factory will fully distribute to warehouses and
move to Hai Duong and Can Tho.

From/ To Warehouse

Factory Ho Chi Minh Da Nang Hai Duong Can Tho

Long Thanh 0 4 13 10

Bien Hoa 15 8 0 0

Table 1.3: Current transportation plan (unit: truck)

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2/ Determine what is the transportation problem of your scenario (cost or
profit?)

The transportation problem to be solved in this scenario is to find a suitable

transportation plan, save maximum total transportation cost and find transportation
routes from factories to warehouses to best suit the company’s constraints. Based on
the lecture note, we have to fulfill the folllowing assumption:

 The Requirements Assumption: Each source has a fixed supply of units, where
this entire supply must be distributed to the destinations. Each destination has a
fixed demand for teams, which must be received from the sources.

 The Cost Assumption : The cost of distributing units from any particular source
to any particular destination is directly proportional to the number of units
distributed.

We can conclude that the total quantity shipped from each manufacturing plant must
equal its output (supply) and the total amount received at each warehouse must equal
its allocation (demand).

3/ Create a table of unit cost / unit profit for your scenario

From/ To Warehouse

Factory Ho Chi Minh Da Nang Hai Duong Can Tho

Long Thanh 6 24 41.5 10

Bien Hoa 4 22 39 12

Table 1.4: Table of unit cost

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4/ Construct and solve your problem using Excel Solver & QM

* Excel Solver:

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* QM for Windows:

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5/ Explain your result

We call Xij the number of trucks transported from the Factory (I) to the warehouse (j)
with each i=1,2 and j=1,2,3,4

*The objctive is to choose the value of the 8 variable to gain the minimum cost:

Minimize cost = 6X11+ 4X12+ 41.5 X13 + 10X14 + 4X21 + 22X22 + 39 X23+ 12
X24

*The constraint of the problem:

X11 + X12 + X13+ X14 = 27

X21 + X22 + X23 + X24 = 23

X11+ X21 =15

X12+ X22=12

X13+ X23=13

X14+ X24=10

*Conclusion: To optimize transportation costs from two factories (Long Thanh, Bien
Hoa) to four warehouses (HCMC, Da Nang, Hai Duong, Can Tho) need to divide the
freight as follows: Hai Duong warehouse is farthest away, so it will be prioritized to
put all goods transported from Bien Hoa factory because the cost from Bien Hoa to

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Hai Duong is cheaper than from Long Thanh factory to Hai Duong, transporting 13
trucks from Bien Hoa to Hai Duong.

The remaining goods of Bien Hoa factory are 10 trucks that will be transported to
the warehouse in Ho Chi Minh City. Long Thanh warehouse divides trucks evenly to
the remaining locations, specifically: 5 trucks to HCMC warehouse, 12 trucks to Da
Nang warehouse, 10 trucks to Can Tho warehouse. After calculating the most optimal
solution, it will bring a total cost of 965 (million VND)

2.1 .Based on the ACT Co. Scenario, you should build a similar situation with
information about the field of operation, the latest business results and especially
the inventory problem that your business must solve.

Vietnam National Oil and Gas Group (Petrolimex) has the main business of
importing, exporting, and trading in petroleum products and investing in other related
businesses. Petrolimex has a nationwide warehouse system that supplies more than
17,000 retail stores and more than 5,500 petrol stations in its distribution system.
According to the results of the 2020 sustainability report, the total amount of
petroleum imported by Petrolimex and imported and domestically purchased petrol
and oil is 9,664,509 (m3/ton), in which the proportion of imported petroleum accounts
for more than 38%. Petroleum is imported mainly from major suppliers such as
Trafigura, SK Energy, Lukoil, etc.

Nha Be Petroleum Warehouse is a very large-scale storage tank in Petrolimex's

storage system, with an area of 200 hectares and a capacity of 730,000 m3 of
warehouse specializing in import, export, preparation, and distribution of petroleum
directly to the market. domestic petroleum, especially in the South and Central
Highlands.

Due to timely and sufficient supply to distribution systems and other units, Nha Be
General Warehouse must always ensure that there is enough to supply. When the
inventory level of gasoline is low, Nha Be warehouse will import more gasoline from
foreign sources, and the time to ship an order is usually 15 days from the date of the
order. Assuming only the quantity of petrol and oil imported from abroad, each month
Nha Be regularly has about 40,000 tons of petroleum for sale. Because in order to
ensure that there is no shortage of gasoline, Nha Be warehouse must import 80,000
tons of gasoline, every 2 months after the inventory level decreases from 80,000 tons

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to 0. The cost of importing gasoline is $490/ 1 ton. The cost to ship a shipment
including staff costs, warehouse costs, office space, and other related costs is
estimated at $2,450. Estimate the average expense ratio relative to the cost of storing
imported petroleum until it is sold at around 20%, resulting in a holding cost per unit
(ton) of gasoline of 20%* 490 = 98 USD/1 ton. The final cost that can be incurred is
the cost of the inventory shortage, there are many reasons for this cost such as late
delivery from the supplier or maybe the order quantity exceeding the average level.
often. Nha Be Petroleum depot has estimated the cost of inventory shortage to be
about USD 165.

2. Inventory problem

2.2 Applications

2.2.1 Basic EOQ model

1 Present your basic EOQ model for your 2nd scenario – mainly annual demand,
lead time, holding cost, setup cost, etc.

* Basic EOQ model:

- Annual demand rate (D) = 80.000*6 = 480.000 (tan).

- Lead time (L) = 15 days

- Unit Holding cost (h) = 98 USD

- Set up cost (K) = 2.450 USD

- Total working day per year (WD) = 200

L 15
- Reorder point = D* = 480000* =36.000
WD 200

D
- Annual Setup cost = K*
Q

Q
- Annual Holding cost = ℎ ∗
2

- Total Variable cost = Annual Setup Cost + Annual Holding Cost

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2 Identify your inventory problems

The problem to be solved of the Basic EOQ model problem is to calculate the
optimal order quantity to import gasoline into storage so that it can both save the most
costs and ensure meeting the demand sales when needed

3 Calculate, create a graph using QM for Windows that represent your

inventory situation, present your answer and your opinion

* Calculate using QM for Windows:

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* Graph illustration:

* Present the answer:

After calculating the Basic EOQ problem of Petrolimex's Nha Be through QM, we
can conclude the most optimal figures for each specific order as:

- Optimal order quantity for each order: Q = 4899 (tons)

- Total variable cost is: Total Variable Cost = $480100

- Reorder point: Reorder point = 36000 (tons)

Whenever Petrolimex's Nha Be Warehouse has a reorder point of 36,000 tons of

petroleum, they will place a new order with an optimal order quantity of
approximately 4899 tons of gasoline to store petroleum for distribution but still have
to ensure optimal annual variable costs at as low as $480100.

4 Present your inventory anomalies (planned shortages / gradual replenishment)

* EOQ model with planned shortages:

- Annual demand rate (D) = 80,000*6 = 480,000 (tons).

- Unit Holding cost (h) = 98 USD

- Set up cost (K) = $2,450

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- Unit Shortage cost (p) = 165 USD

D
- Annual Setup Cost = K *
Q

Q− S Q− S
- Annual Holding Cost = h*( )* ( )
2 Q

S S
- Annual Shortage Cost = p * ( )*( )
Q 2

5 Calculate, create a graph using QM for Windows (if possible) that represent
your inventory situation, present your answer and your opinion.

* Calculate using QM for Windows

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* Present your answer:

After calculating the problem of EOQ with planned shortages of Petrolimex's Nha Be
Petroleum using QM, we can conclude the most optimal figures for each specific
order as:

- Optimal order quantity for each order: Q* = 6185 (tons)

- The maximum shortage is: S = 2304.69 (tons)

- Total cost is: Total Variable Cost = 380273.3 $

- Maximum inventory level is: Maximum Inventory Level = 3880.3 (tons)

Petrolimex's Nha Be Warehouse should order 6185 tons of petroleum and maintain a
maximum shortage of 2304.69 tons of gasoline/year to reduce total annual variable
costs to the lowest level in case of shortages occur.

Reference

Lecture notes

(n.d.). Retrieved from Tập đoàn Xăng dầu Việt Nam - Petrolimex :
https://www.petrolimex.com.vn/index.html

(n.d.). Retrieved from Ajinomoto Việt Nam:

https://www.ajinomoto.com.vn/vi/gioi-thieu-chung-ve-ajinomoto/ajinomoto-viet-nam

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(2020). BÁO CÁO PHÁT TRIỂN BỀN VỮNG 2020. Petrolimex.

TEXT BOOK -ERP - SCM. (2020).

UNIVERSITY OF ECONOMIC OF HO CHI MINH CITY.

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