PRODUCTION MANAGEMENT AND PRODUCT QUALITY IMPROVEMENT AT x20 JOINT STOCK COMPANY

GENERAL ISSUES OF MATERIALS MANAGEMENT1.1 The concept and role of materials management 1.1.1 The concept of materials management Materials management includes all activities in order to

INTERNATIONAL EXECUTIVE MASTER OF BUSINESS ADMINISTRATION PROGRAM

IMPROVE THE MATERIALS MANAGEMENTAT

X20 JOINT STOCK COMPANY

DETAILED OUTLINE OF THESIS

INTRODUCTION 01

1 The need for research 01

2 Research issues 03

3 Study objectives 03

4 Object and Scope of the study 04

5 Overview of research issues 04

6 Research methodology 04

7 The new point of the essay 05

8 Structure of the essay 05

DEFINITIONS 07

CHAPTER 1 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

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

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 3 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

3.3.3 Assess the effectiveness of the application EOQ model to the Company’s

storage management 80

CONCLUSION 81

REFERENCES 82

APPENDIX 83

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 Overhere, I would be deeply grateful to the teachers’s PGSM's MBA program By hislove and passion for this job, the teacher imparted to us the precious and practicalknowledge

In particular, I would like to thank a profound teacher, Dr Tran Van Hung,director of the center of Small and Medium Enterprise Development NationalEconomic University for enthusiastic guidance and helping me completely thisthesis Sincerely, thank the officials and leaders Corporation X20 for feedbackingand helping me completely this thesis

Graduate students class MBA.B01,

Nguyen Trung Hieu

1 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 thedepletion of "resistance"of all businesses In 2008, Vietnam inflation began to risealong with interest rates rise (lending rates sometimes up to 21-25% / year)increased the input costs of the business Economic picture "brighter" than in 2009thanks 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 provideddirectly to businesses through commercial banking system, the government does nottake measures to withdraw funds when the economy has stabilized Inflation,interest rates remain high that impact business input costs to be high, resulting inhigh production costs People's income growth rate lower than the price increase,people tend to save, limited spending, this reduces the purchasing power of themarket Production of high prices, sales difficulties, therefore, the enterprises facedwith 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 hasstrong measures to reduce the interest rate to a reasonable level (12% / year) to helpbusinesses overcome difficulties

Along with the efforts of government, businesses are trying to overcomedifficulties, now take all measures to cut costs in order to maintain businessoperations and improve the competitiveness of enterprises One of the measuresused to reduce the cost of business is the management of materials at reasonablelevels, reduce inventory costs at the maximum Materials management consists ofvarious stages: supply, storage, quality control and use of materials

In the context of the current economic difficulties, the textile industry facedstiff competition at the domestic market and international market As announced bythe 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%

This is a remarkable achievement in the context of purchasing power in the worldmarket fell, exports of some other staples of Vietnam fell However, the textileindustry make great efforts to reduce dependence on imported raw materials (about85%) The domestic market has great potential due to the tastes of consumersbelieved in Vietnam textile, textile enterprises see the domestic market as a cure incrisis period As announced by the Ministry of Industry and Trade, in 2011, Vinatexrevenue from the domestic market reached 17,200 billion, growth of 15% or theproducts "Made in Vietnam" to be choosed by consumers Vinatex target towardsthe domestic market growth in 2012 is 18-20%.

The first target set in 2012 for Vietnam's garment and textile exports is toconquer the $ 19 billion mark Results of the first seven months of 2012, the totalexport value of $ 9.2 billion, just over $ 1.3 billion on average every month Due tothe difficult situation of the global economy, the textile industry reduced theindustry's export target to $ 17 to 17.5 billion ($ 2 billion lower than the first plan

of the year) The reason is that the enterprises of the textile industry faced with alack of capital, lack of raw materials and input costs increase, while output pricesdecline Compared with the same period last year, exports of textile products isreduced by 20% Price decreased sharply, but not easy to find export contracts Thenumber of small businesses (in textiles industry) face difficulties in finding theoutput 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 theeconomic crisis, the textile industry goes down, the raw material marketfluctuations, increases in input costs, stiff competition, therefore, need to reducecosts as a precondition for reducing production costs, enhance the competitiveness

of products in the domestic and international market And one solution to cutproduction costs are materials and resource management of the Company by meansof: construction of additional channels providing inputs, looking for new materials,

building effective material norms, at the same time ensuring that the productionprocess is ongoing.

Materials management, in addition to factors such as the search for newmaterials, new suppliers, the quantity of reserves, the volume of orders thecompany should pay attention to the quality control of materials Strictly control thequality of inputs is one of the important measures to improve product quality,reduce defect rates leading to lower production costs, increase competitiveness ofthe products

Comes from the state of the economy, the textile industry and in the case ofmaterials 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 ".

2 Research issues:

The essay focuses on the research of materials management at X20 Joint StockCompany in the context of the current economic crisis, including the input stage,input quality assessment, inventory and monitor inventory quality to ensure efficientand continuous production activities, as well as the base for products price decrease

3 Study objectives:

Implementation of the essay with the following objectives:

- Analysis of the current situation and identify shortcomings in the materialsmanagement at X20 Joint Stock Company to identify measures to improve thematerials management

- Measures to search for new materials, new suppliers and evaluation of rawmaterials and suppliers to ensure enough materials for production and businessprocesses continuously, without interruption

- Apply ABC analysis techniques to arrange the materials from warehouse toincrease utilization factor, reduce time for materials transitting, create convenience

in the course of inspection, control and monitoring materials

- Control the parameters of the raw materials from which to makerecommendations for vendors and production units used materials This goal helpsstable production and have timely solutions for each shipment.

- Application suitable materials reserve model to calculate the number for theorders of raw materials and the appropriate time of order to minimize the costs oforders, increase efficient use of working capital

4 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 3 of X20 JSC

5 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 upwith some solutions to improve the efficiency of materials management Due to thecomplex nature of the materials management, therefore, in various economicfluctuations, it will have different materials management process to ensure businesscontinuity, minimize waste, cost savings, improve the competitiveness of products

In difficult economic context, competition in the textile industry has put alltextile firms facing cost-cutting problem and from that the textile enterprises have toimprove their management And one of the issues that need to pay attention is thesource of materials management With the urgency of doing so, the research essayfocuses on the current materials management of X20 JSC, which give somesolutions to improve the management of materials, improving efficient productionand business activities

6 Research methodology:

The essay uses syn methods in the research process: analytical method,comparative method, indicators method, statistical method, assessment method,optimization method.

Secondary data are taken from the production report and business activities ofthe Company This data is used to analyze and compare the use of that materials is

to use the materials norms compared to the actual use of materials, the supply ofmaterials from suppliers

ABC analysis techniques are used to classify the materials stored in thewarehouse of the company This method requires information on the rate of use ofmaterials per unit of product, the value of each type of materials, classification ofmain materials and auxiliary materials

Have panel of suppliers assessment through standards such as quality stability

of materials, price standard , delivery time Technical standards or the parameters ofmaterials that to be highest evaluated, then to the criterias such as price or deliverytime

Optimization method(EOQ) is applied in the analysis of quantirty of oneorder, time to order to ensure the lowest purchase cost The data to be collected are:purchase costs, warehousing costs, ordering costs, storage needs

7 The new point of the essay:

The essay focuses on the analysis and assessment of the state of materialsmanagement at X20 JSC This essay addresses the problems existing in materialsmanagement at X20 JSC, find out the causes of these problems and come up withthe remedy

8 Structure of the essay:

In addition to the preface, table of contents, general conclusions and a list ofreferences, the essay is structured into 3 Chapters

Chapter 1: The general theoretical issues of materials management

Chapter 2: Status of materials management at X20 JSC.

Chapter 3: Recommendations to improve the management of materials in

X20 JSC

- The process of sewing techniques: is a tables which records time manufacturing

and used equipment for producing

- Hard Form: product’s details is printed from the software to paperboard.

- Soft form: the product’s details designed on paper.

- Mini Template: The details collection of a product is zoomed down by a certain

- MODEL: detailed statistical tables of a product.

- Colour Table: The table shows the color of all the details on a product.

- List: clearly document about types, the number of materials in each code

provided by the company

CHAPTER 1 GENERAL ISSUES OF MATERIALS MANAGEMENT

1.1 The concept and role of materials management

1.1.1 The concept of materials management

Materials management includes all activities in order to control the movement of the flow of materials in the business cycles, which is the identification

of materials requirement, materials source planning, procurement organizations and management activities of reserve materials source, settlement, analysis and evaluation process.

The main tasks of materials management:

- Defining the minimum demand of materials for production and businessactivities of company to help these activities to be ongoing

- Planning for materials procurement , daily, monthly and quarterly

- Prepare materials and technical orders and signing supply contracts withsuppliers; follow and monitor the implementation of the signed contract

- Searching for additional sources of materials to fully meet the needs of thecompany and looking for other source of materials in order to create competitiveadvantage for suppliers

- To receive materials in quantity, quality and have good materials storage

- Monitor regularly the status of using, reserve materials for the productionprocess to be ongoing and in any case must have specific preventive measures andtimely to ensure the production not be interrupted by lack of materials

- Ensure materials according to limitation for factories and other departments

in company and regularly check the use of the materials to be delivered

- Record materials and monitor - assess the quality of materials and report toensure materials for company

1.1.2 The role of materials management

Production process of the enterprise is the process that company usesworkers through labor tools to impact on labor subjects, basic change in shape, size,

physical chemical properties of the labor objects to create new products to meet thediverse needs of people.

In the manufacturing process, materials play a very important andindispensable factor for the formation of the production process to create wealth.Materials as tools of labor, they are expressed in the form of machinery andequipments, tools, at that time materials are characterized to be used repeatedlyseveral times during the production cycle Materials under this form, they aregradually transformed into products through depreciation of fixed assets and at thistime materials are major factor promoting increased labor productivity, improveproduct quality, cost savings

Materials serve as the object of labor, they manifest in the form of rawmaterials involved from the beginning to the end of the production cycle With thisrole, the material is transfered one time into product and then using materialseffieciently will directly affect the efficiency of production and business process.Reasonablely using of materials and savings will help reduce the costs of capital inbusiness

Materials are guaranteed in full, uniform, quality is the prerequisite conditionthat decides the ability of reproduction of the enterprise Materials are parts thatdirectly create products, which accounted for about 60-70% of the production costs,

so the materials play a very important role in reducing business costs and is thebasis to reduce production costs

From the above role of materials shows the great significance of the activity

to ensure materials for production; materials must fully synchronized and timely toensure continuous production process With any irrationality in the supply ofmaterials such as inadequate materials, not ensure quality will disrupt productionactivities, this is the cause of a violation of the economic relationship to beestablished between business partners and leading to the financial loss

Ensure good materials for the production process to meet the requirementsfor the quantity, quality and correct specifications, type, timely and synchronization

This directly affect the productivity of the enterprises, the quality of products, to therational use and saving materials, production efficiency, the financial situation ofthe enterprise and furthermore to the existence and development of the enterprise.

1.2 Contents of materials management

1.2.1 Identify materials needs

1.2.1.1Norm of materials consumption

Norm of materials consumption is the maximum amount of materials to be needed to produce a unit of product in a given economic and technical condition The method to establish norms of materials

Experienced laboratory method

In fact this method is based on the experimental results in combination withthe experience gained in the production process to build the plan period Depending

on the characteristics and properties of materials and production characteristics ofthe product to determine the content and scope of the experiment, details as follows:

- Testing in production (experimental): that is, conducting trial production inthe actual manufacturing conditions to collect and analyze data and drawconclusions about the plan for plan period

- Experiments in research facilities (laboratories): ie conducting trialproduction within laboratory, find out the consumption rate for plan period inpermit conditions of the facilities

Analytical method to calculate

The essence of this method is to calculate the level for each product based onthe study of key factors influencing the cost of materials, calculate all materialsconsumed in production and sum up for the plan When conducting this method, itrequires meticulous research of production technology process and financialstatistics report on the use of materials Steps:

- Collect research and analysis of original documents including: Statestandards on product quality, product design and manufacturing technology process,

research the actual conditions in equipment and technical conditions of productionand technical standards, the reports on the use of materials of the previous year.

- Identify each component of consumption: Based on production technology

to be identified, check the progress of the method, quality control, productstructures and in turn determine the choice of product weight or useful wastegenerated from an initial amount of materials

- Identify technology waste , identify materials waste caused by subjectivefactors such as the unreasonable organization of production

- Sum up the materials norms for one product:

Based on the waste components to be identified above, we synthesized thelevel (M1) according to the following formula:

M1 = P + H1 + H2

In which: M1M1 is the consumption level for plan period

P is useful waste

H1is materials waste related to production technology

H2 is materials waste related to the level of production andbusiness management

The materials norms determined by this method show the details of the costquantities Therefore, the results determine the materials norms that ensure theadvanced factor

1.2.1.2 Material needs of the enterprise

Material needs are the needs for raw materials, machinery and equipment to perform certain business tasks.

Method of determining materials needs

Materials needs to be based on the use of materials for a product unit andproduct output

Vncj= (1)

In which: Vncjis materials requirement of type j of the planning period ;

Qiis the product i to be produced during the planning period

Vdmijis the consumption rate of materials J for product i

n is the number of items produced

Cost of materials type j: Cj= Vncj.Pj= ∑QiVdmij.Pj(tiền)

Total costs of materials: Cvt= =

Pj Price of materials type jj= is the number of types of materials of company

For manufacturing enterprises, in addition to the materials listed above,enterprises need to identify additional needs for repairment of equipment, plants andmaterials needs for scientific research,materials needs for construction and storageneeds of the enterprises These materials needs should be specified at the beginning

of the business (usually at the begginning of the year) and must be clearlyquantified, give a specific time to build financial planning accurately andefficiently

Sources to meet the needs of materials for enterprises

Inventory sources at beginning

Due to the time of plan for materials procurement for production at a timewhen the yearly report does not end yet, the inventory at the beginning period isdetermined by the estimate, details as follows:

Dđk= Dtt+ Nh– X

In which:

Dđkis estimated inventory at the beginning of planning period

Dttis the actual inventory at the time of planning

1.n

Nh is the estimated amount of input since the time of planning to theend of the yearly report.

X is the estimated amount of output at the same time

Sources originating at the internal of the enterprise

When conducting business activities, market participants have a "power", aparticular advantage and fundamental differences between the enterprises that are

"internal strength" Every enterprise has its own potential and not all the enterpriseswill develop that potential

And materials resources mobilized by the enterprises thanks to their intrinsiccapability is to show the enterprises develop "internal strength", available potentials

of themselves, source materials include:

- Materials sources have been organized by the enterprises from production,processing, gathering materials

- Source materials to be back and reuse of discarded materials and products

- Materials sources from processing organizations at the enterprises

Normally, for manufacturing enterprises, this is the source of additionalmaterials, it occupies no so much

Sources to be bought on the market

Materials sources are purchased in the market as the sources with largeproportion, it can be purchased in the country or imported (foreign suppliers) Theenterprises always pay attention to the materials quality at top because this is crucialfactor to products quality and labor productivity of the enterprises Plan to purchasematerials required to be given details in order to save the costs in the business

1.2.2 Planning for materials procurement

Materials procurement planning process will help enterprises save capitalcosts related to inventory The process of planning the procurement of materialsneeds to go through the steps, the details as follow:

The preparation:

This is an important stage that decides on the quality and content of materialsplan At this stage it is necessary to study and collect information about the market,the factors of production; prepare documents for production and business plans andmarketing plans; consumption of materials, requirements of factories, theproduction team and enterprises

Identify the materials needs of enterprises

To have the exact and scientific plan for materials purchase requiresenterprises to determine the full range of materials needs for production This is animportant basis to determine the amount of materials needed to buy for theenterprises

In the market economy, with policy of self-financing and have profit tosurvive and develop, properly identifying the type of demands has great economicsignificance

Determine the amount of materials inventory at the beginning and at the end of the enterprises

For the enterprises, the amount of these materials are usually determined bythe periodic inventory method and statistical data on the use of materials of theprevious periods, and based on the production plan and the norms of materialsconsumption to determine the amount of materials inventory

Determine the amount of materials required to purchase

This need of the enterprise is determined by the balance method, ie:

=

In which:

is the demand of materials used for purpose j

P is the total of materials i respond j

Procurement needs should be logically calculated, consider all potential ofthe enterprises In such conditions, the objectives of the materials purchase plan are

to ensure the amount of materials purchased to be at a minimum while ensure therequirements of the business as well

1.2.3 Materials reserve at the enterprises

Reserve activities are activities appear in daily life and it plays a veryimportant role for individuals and families Why do I need to reserve? Reserve forwhat purposes? Indeed, reserve is for only one purpose, that is to ensure life going

on stablely, especially when life happens with major events affecting income, to thefinancial resources of individuals, family

Materials reserve activities at the enterprises come from the purpose is toensure the production process taking place continuously, without interruption Anyshortage of materials and even the smallest can also lead to disruptions inproduction, it affects the production schedule, delivery schedule and more willaffect the reputation of the enterprises in business Volume of materials reservemust be calculated specificly and clearly planned in each stage of productionbecause a lack of materials will interrupt the production process or materials storageexceeding the demands will increase the costs of storage, reducing productionefficiency

Thus, the reserve plays a very important role in the production and businessoperation of the enterprises, materials reserve management must always be focused

by its decision and the reasons that must manage reserves well are:

- The suppliers do not meet the materials and goods needs of the enterprisesand materials provided with incorrect amount, types, quality and especially not atthe right time according to the required progress of the enterprises This will lead toproduction interruptions, affecting output contracts signed by the enterprises, thatlead to financial loss and reputation of the enterprises

- In the case of having big fluctuation on price on materials and goodsmarket, capturing information, analyzing the market situation and price trend

judgments of materials and goods will help the enterprise to have good reserve plan.And in some cases, increasing reserves when prices go down can help theenterprises earn high profits.

- One of the mandatory requirements for storage of materials that is to havematerials warehouse, the size of the warehouse should be calculated in order toavoid waste At the same time, the arrangement of materials in the warehouseshould be scientific, not arranged warehouse with spontaneous style to createconvenience when using the materials in warehouse and avoid the waste of spaceusing of warehouse

Enterprises have good materials and goods inventory management will helpthe process of business and production take place continuously, reduce costs related

to inventory, quality management of input-output and raise efficient production

1.2.3.1Reserve management system

In reserve management always exist two questions are: When to order? orderand how much volume? Can use the two common storage management system are:

+ The system has a fixed quantity and changing cycle (system of orderpoint)

+ The system has fixed cycle and changing quantity (periodic reserveregeneration system)

The first system to order a number of identified materials Q to determinewhen the reserve level reduced to a certain level called the reorder point The date

of order perfoemance changes, if requirement of reduction of the order point getslater

In the second system, at a fixed time, monthly, quarterly, for example, theenterprises assess the remaining reserves and order with a specific quantity so thatthe level of reserves achieve a fixed level that to be called reserves regenerationlevel Order level is usually equal to the amount of the previous requirements

1.2.3.2The types of materials reserve in the production

All present materials reserve is pending to put into production called reserveproduction Production reserve consists of three parts: regular reserves, insurancereserves and prepared reserves.

- Frequent reserve is used to secure materials for the production of

enterprises conducted continuously between two continuous supply periods of theenterprise This reserve has characteristics that its quantity varies from maximum tominimum Maximum when put into the warehouse and minimum when starting thenext input period

- Insurance reserves required in the following cases:

+ There is a change in the production plan due to improving the organization

of production and technical production or consumption of raw materials increase

+ The amount of materials input in reality less than anticipated amount whilethe daily average consumption of materials as before

+ Actual supply cycle is longer, while the supplied amount and the dailyaverage consumption as before

- Prepared reserve is the preparatory works related to the reasonable use and

saving materials such as: classification and gather same materials, screening, soaked

in bleach, dry, cutting, and the other processed materials before they are put intouse Prepared reserve quantity is relatively stable

The seasonal nature of the production, consumption and transportation ofmaterials requiring seasonal storage at all stages of materials circulation Characteristics and the nature of the influence of seasonal conditions leading to theneed to increase all types of reserves

1.2.3.3 General principles of reserve management

Reserves policy (reserve levels, supply plan) is negotiated between:

- Trading system must meet quickly the needs of customers requiring highreserves of goods

- The production managers want to operate manufacturing departments well,

it requires appropriate materials reserve level due to the large amount of wasteproducts

- The financial managers considers the reserve level as a factor in increasingworking capital needs, so they want a minimum reserve level

However, with large reserves, it will increase general costs (such as financialcosts, freight forwarding, warehousing arrangements, damage loss, etc.), so to usethe reserves management methods that take into account the issues receiving andprocessing available information and data

1.2.3.4 Reserve level for production

Norms of production reserve is the regualation of necessary quantity ofmaterials according to plan at the enterprises to ensure that the production process

of the consumption units to be carried out continuously and regularly, at the sametime reducing the costs of reserves due to exceeding the necessary reserve

Determine the level of production reserve must base on several principles:Determine the minimum necessaryquantity: the reserve quantity must besufficient to ensure the production process of the enterprise not to be interrupted inany situations, avoid big reserve leading to accumulation of materials, reducing therotation speed of capital

- Determine the reserve quantity based on calculating all the influentialfactors in the plan period For example, to determine the amount of materialsconsumed in an average day, need to have norms of materials consumption,production planning, demand for materials for repairment

- Define the quantity form specific to general Only fully calculate the supplyand consumption conditions for specific category of materials, which can calculatethe correct amount of production reserve

- Regulation for the maximum production reserve and minimum productionreserve for each type of materials Maximum production reserve is the total of

preparation reserve plus insurance reserve plus the maximum regular reserve;minimum production reserve equal to preparation reserve and insurance reserve.

Method of calculating components of production reserve:

The method for the needs of regular reserve:

Maximum regular reserve, absolute calculated by the formula:

Vtx max= Vbq x Ttx

Vtx maxis the maximum regular reserve calculated by actual artifacts

Vbq is the amount of materials for average daily use, equal to the need formaterials in the planning period(N) divided the number of days in the periodaccording to the following formula:

Vbq= N (year) = N (quarter) = N (month)

Ttxis the number of days of regular reserve

The way to identifyTtxcan base on experience or calculation

 Identify by experience, based on the need of the year, high demand,storage time is short and vice versa

 Identify by calculation to be based on the optimal model, the reserveamount of the enterprises is shown as follows:

T

Figure 1.1: Graphs define T tx of the enterprise

The method for needs of insurance reserve

Insurance reserve is the amount of necessary materials to prevent troubles inbusiness by suppliers that do not make the commitment, it is difficult to determinethe proper insurance reserve Relatively insurance reserves are calculated by thefollowing formula:

Vbh= Vbqx Tbh

Tbhis the time of insurance reserve (days)

Method for the storage needs of enterprises

- The maximum reserve to determine the storage area

- The amount of minimum reserve

Ddt min= Dbh Alarm for materials supply

Method for the production reserves as above used to define productionreserve levels according to specific types of materials

1.3 Models of materials management, technical analysis and control charts

1.3.1 Optimum storage model (EOQ)

- Optimal order quantity is the number of minimizing the total cost of storage(order costs, preservation costs) Optimal order quantity can only be achieved whensecure the total of the two following types of costs to be at minimum:

- - Cost of inventory (including warehouse depreciation , electricity costs and

to preserve materials, treasurer wages, inventory management costs) increase withthe purchasing price of materials and the amount of reserve To reduce these costs,

it needs to conduct the input of materials many times (order many times in a year)with small quantities

- The cost to make an order or once in production increases in proportion tothe number of orders and so must input few times with large quantities in eachinput

Determine the optimal order quantity and the total cost of storage

Materials reserve can also be calculated according to the quantity ordered onetimes This quantity is determined on the basis of minimizing the costs related to theacquisition and preservation of the order

Hình 1.2: Graphs of the model EOQ.

The question for the enterprises is with the identified target of materialssupply, they have to order how much for per order so that the costs for perchase,transports and storage of that order to be at the minimum If :

Total costs of purchase:

∑TCpurchase= Dix Ci

In which: D is the demand for product / production cycle (product)

C is the cost per unit of product

The total cost per one order:

∑TCorder= N x L = x L

In which : Q is the number of products per one order

N is the number of orders per production cycle

L is the cost of order for one time

The total preservation cost per unit of product:

∑TCpreservation= k.∑QiCi= k.∑DiCi

In which: k is the coefficient of storage.

=> The total storage cost is::

TC = ∑DiCi+ N.L +  minThe TC function above reaches the minimum value, we use the first derivativeaccording to N, namely:

= L

-1.k.∑DiCi= 02N2

N*= the optimal number of orders for materials group

On that basis, we calculate the number of optimal materials for every order ofeach type of material:

Q* = Di = (Q*

is the optimal order quantity)

N*

So we have the total cost of the optimal reserve if ordere types of materials

1.3.2 Technique of ABC analysis

Materials management need to determine the amount of reserve materials forproduction and need to track the changes, timely grasp the amount of reserves toappropriate adjustment measures to meet business needs and ensure the highestfinancial performance This is a very complex problem due to the amount ofproduction reserve materials always in a state of fluctuation, the calculation ofreserve reports only for the time, reserve materials fluctuate every day Theorganization and arrangement for each employee who work tracking, materialsmanagement requires the ability to distinguish, identify excess reserves andredundant reserves Excess reserves is the reserve amount is higher than themaximum level of production reserves Redundant reserves are reserves of materials

no longer needed for production of the enterprise To ensure the right productionreserves for the norms of consumption, it needs to organize monitoring of theformation and timely adjustment for production reserve However, not all types ofmaterials reserves also play the same role, the same interest in their preservation To

meet the requirements of economic efficiency in the storage, the enterprise shouldapply ABC analysis method in the classification of materials, goods storage.

ABC analysis technique is proposed based on the Pareto principle ABCanalysis technique calssifies the reserve goods of the enterprise into three groups:Group A, Group B and Group C Based on the relationship of the annual value withthe number of categories

Annual goods reserve value is determined by the multiplication of betweenthe price of a reserve unit with annual reserve amount

The anual number of categories is the number of reserve goods of theenterprise anual

Group A consists of the reserve goods with the highest annual value, they arevalued from 70-80% of the total reserve value, but in terms of the number ofcategories , they account for about 15% of the total reserve categories

Group B consists of all kinds of reserves with average annually , their value

is from 15-25% of the total reserve value, but to the number of categories, theyaccount for about 30% of the total number of categories reserve

Group C consists of all kinds of goods reserve with small annual value,annual value is only about 5% of the total value of goods reserves, however thenumber of categories account for about 55% of the total number of reserve

ABC analysis technique in the reserve management has the followingeffects:

The funds used to purchase group A need to more than C, so it needs aproper priority on management of group A

The goods of group A should be prioritized in the layout, inspection andcontrol of objects The establishment of accurate reports of Group A must be doneregularly to ensure the safety of production

In the forecast for reserve demand, we need to apply different forecastingmethods for different groups Group A needs to be forecasted more carefully thanothers

ABC analysis technique also promote the level of employees constantly, theyoften perform the testing cycles, check each of goods group.

Summary, ABC analysis technique will give us better results in predictionand control to ensure the feasibility of the supply source, optimizing the storage

In addition to relying on the annual value of reserves to classify groups, wealso consider other criterias such as:

 Issues of changing forecast technique;

 Issues of supply;

 Quality of reserve goods;

 The price of reserve goods.

These standards may change the reserve position The reserve group analysis

as a basis for proposing separate control policies of each reserve goods

1.3.3 Graph for materials quality control

1.3.3.1Checking

The level of inspection: For most the enterprises, the entire checking isexpensive or unnecessary costs and instead just check one part of details Thedetails taken out for checking partly is called the sample, quality control process ismainly based on the sample to perform checking One of the first consideration is todetermine the sample size Sample size must be sufficient to assess the processcorrectly However, more get and more often, the more expensive the cost andtime

Position for checking: Materials that are worse then the products quality will

be poor and waste of materials into the product So we need to find out theimportant positions for inspection, at that position, materials easy to detect errors orthat materials do not guarantee input requirements

1.3.3.2 Process control

This method is focused on the sampling process from which we see theaverage of the process lies in the limited inspection according ti statistics or not Ifthe average of the process beyond the limits, the process was considered likely to be

beyond our control and we need to find out the cause to fix If the average of theprocess lies in the limit, then we do not need intervention but still continue tomonitor.

Quality metrics, variables, properties need to be controlled: You can evaluatethe quality of the products or by the measurement of the variables One productproperties and also the product characteristics such as color, surface can evaluatethe visual properties quickly and thus can give the definitive answer as good or bad,whether or not to accept Even when extensive quality characteristics, we can alsouse to check to properties if the materials have mistakes or not

A number of variables measuring the characteristics of raw materials arechecked such as quantity, length

1.3.3.3 Control chart

Control chart is a graph to see if the individual sample results are within thelimited control according to statistics We have two basic purposes, the first is todetermine the process control limits , then monitor the process to see only when theprocess goes out of control Has control graph only for properties, graph forvariables, in each kind, it has different types such as x chart average, deviation Rgraph for the variables, chart p and c chart for properties Although these charts aredifferent in way of measurement in the control process, they have the samecharacteristics They are the same in appearance, has a center line to indicate theaverage value of the process and the two parallel lines above and below the averageline represents the upper limit and lower limit of the process

The process is in control when:

 No points fall outside the control limits;

 Most of the points lie close to the average line, there are not too manypoints near the control limits;

 Number of measurement points distributed over and below the twoaverage lines approximately equal;

 The random distributed pionts around the average line does not make aspecial shape.

If violate the above four principles, the process can spiral out of control, somust find out the cause and if not random reason, they must fix the problem

1.4 Analysis of the materials management

1.4.1 Analysis of the status of materials supply

Analysis of the status of materials iput is to analyze the actual process ofimplementation of the contracts of sale between the units supply materials and theunits consume materials according to the quantity, quality, and time and eachbusiness unit

- Analysis of materials supply according to the quantity : This is the mostbasic criateria refers to the process of materials input, this indicator shows thequantity of certain types of materials input during the planning period from allsources To analyze the status of materials supply in terms of quantity, should takeinto account the percentage (%) finishing supply plan of each type of materials,according to the following formula:

The percentage of finishing

supply plan about materrials

quantity type i (i = )

=

Materials quantity type iactual input in periodMaterials quantity type ineed to purchased(as plan in period)

Materials quantity type i need to purchase according to the plan during theperiod defined in many ways The most common way is the calculation of thematerials quantity to be used according to the following formula:

Mi= q x mi

In which: Mithe demand for quantity of materials type i in the period

q is the products quantity in the period;

mi is the level of consumption of materials i per unit of product

The purchase of materials does not complete the plan for several reasons:

- The enterprises reduce production contracts → reduce the amount ofmaterials required to supply

- Enterprises reduce procurement contracts on the basis of saving wastematerials to be achieved

- Failing to perform purchase plan, the enterprises have difficuties infinance, transports or the enterprises use alternative materials

1.4.2 Analysis of materials reserve status

Reserve materials in the enterprise is to ensure continuous production

The analysis of reserve materials is actually comparing the level of reserveswith the actual inventory, analysis of reserve storage, the level of reserve and thereserves changing process over the years

Reserve materials include all materials, auxiliary materials, fuel, labor toolsand existing small businesses, are waiting to be put into production Talk aboutmaterials reserve quantity means that talking about absolute quantity of materials instock

To analize the status of absolute materials reserve quantity, they comparethe existing materials in the stock with the regulated level of reserve Reserve levelsconsit of maximum and minimum reserve If materials of enterprises above themaximum level, they must take measures to reduce the amount of that materials

If the materials are less than the minimum reserve, it needs to report to theinvestment planning department for timely increase In addition to the analysis ofmaterials in stock, we will have to analyze the level of reserve materials ie analizewhether that materials quantity have the ability to ensure production to be carriedout how many days

Level of materials reserve (relative indicator of materials reserve) is thequotient between available materials quantity on the average consumption in a day

To analyze the relative reserve indicator, we compare this criteria with the reservecalculated on specified date

When analize the indicator of inventory quantity at the beginning of theperiod will indicate the present amount of inventory to ensure the productionprocess to be continuous or not, and to take timely corrective measures Theindicator of inventory quantity at ending help us to assess that amount of inventorycan ensure the production process in the reporting period.

When analyzing the situation of materials reserve of the enterprises, it needs

to understand the process of changing reserve over the years and calculate theamount of materials to be released by the relative reserve eduction Calculate thisrelative level of reserve by taking the average of the year divided by the amount ofmaterials consumed during the year Through the process of changing reserve ofmany years, we can assess the situation of materials reserve of the enterprises

1.4.3 Analysis of tatus of materials using

Basic criteria used to evaluate the use of materials in the reporting period isthe criteria of actual materials consumption per unit of product If (C) is the actualnumber of materials for production and (Q) is the number of products producedfrom that materials, the actual consumption criteria (H) for a product unit, it iscalculated by the following formula:

mj is the consumption per unit of product;

Cqj is total of materials consuption for production Q product j;

j is the product stand j

If i <1 and I <1, ie the actual consumption during the period for one unitlower than the specified product and from which to save or multiples charge

The analysis does not stop at understanding the status of materials use, butrequire to find the strengths, weaknesses, find out the causes of the budget deficit orsaving the materials to take the necessary measures to rational use and savingmaterials

Coefficient of using materials shows the efficient materials use It isrepresented by the following formula:

K =

In which: K Coefficient of using materials ;

Qtinh the weight of the product;

Qtt is the actual materials consumption per unit of product;

If K is closer to one , the expression of useful materials to be used as much,

ie the number of actual materials more involved products

CHAPTER 2: ACTUAL STATUS IN MATERIALS MANAGEMENT AT X20 JOINT STOCK COMPANY

2.1 Overview of X20 JSC

2.1.1 Overview of the process of formation and development

Name: X20 Joint Stock Company

International transaction name: Gatexco 20., JSC

Address: No 35 - Phan Dinh Giot street – Phuong Liet- Thanh Xuan, Hanoi.February 18th , 1957, "Hang Ky Garment Factory", hereinafter referred to asX20 - the predecessor of X20 Joint Stock Company was born December 1962, theGeneral Logistics Department tasked X20 according to the policies of the DefenseEnterprise By April 1968, the General Department of Logistics had decisionNo.136/QD classification 5 light industrial garment factory for X20

On February 2nd, 1992, 20 garment factory was converted into the 20garment company July 1996, the 20 garment company established KnittingFactory, in late 1997 established textile factory By this time, the company had 02manufacturing industries that are mainly textiles and garments

March 17, 1998, the Minister of Defense issued Decision No

319/1998/QD-QP on the renaming of 20 Garment Company by 20 Company Fourth quarter of

2001, the 20 Company receiving factories 198, 199 of the 198 company – TheGeneral Staff People’s Army and My Dinh factory of the Company 28 – GeneralLogistics Department Third quarter of 2003, the Company received additionalfactories 20B, 20C from Lam Hong Company - Military Zone IV and Binh MinhGarment Factory from Viet Bac Company - Military Zone I

On July 1st, 2005, the Ministry of Defense had Decision No 1360/QD-BQP

on equitization of 20 company under the General Department of Logistics.December 28th , 2007, the Ministry of Defense had the Decision No.3967/QD-BQP

on the approval of plan and transfer 20 Company of the General LogisticsDepartment into Joint Stock Company On January 1st , 2009, the company

officially operated as a joint stock company under the new name X20 Joint StockCompany.

After more than 50 years of operation, up to now, the Company was honoredtwo times with the title of the Hero of Labor in 1989 and 2001 The company'sproducts present across the domestic market and many countries around the world:Germany, UK, France, Netherlands, USA, Japan, Spain, Argentina, Switzerland,Canada, South Korea The company's products have been awarded with manyprizes such as gold, silver in industrial fairs, Vietnam Fashion Fair, repeatedly woninternational awards for quality, technical, commercial prestige Qualitymanagement system of the company is provided with certification ISO 9001/2000

by BVQI of UK and QUACERT quality certification Centre of Vietnam certifiedwith ISO 9001/2000

The company is the most reliable address for military logistics industrytowards military products The company is also the trusted, prestigious partner withproducts such as uniforms, attire, motorcycle racing clothes, Jacket, Complet Thecompany is willing to cooperate, development investment, joint venture withenterprises, customers in the country and abroad on the principle of equality andmutual benefit cooperation

2.1.2 Business tasks

According to the certificate of business registration and tax registrationnumber 0100109339 by Department of Planning and Investment of Hanoi May17th, 2010, X20 Joint Stock Company is responsible for:

- Manufacturing and trading of textiles, dyeing, sewing, textile materials;

- Sales of machinery, equipment, spare parts of textile, dyeing, sewing;

- Consulting services in management and technical in the textile, dyeing andsewing;

- Fuel business, chemicals, dyestuffs for production and consumption;

- Supermarket business, store systems;

- Training Services for textile employees, dyeing, sewing and labor supply;

- Import and export of commodities that company does business

With the task of such production and business, X20 Joint Stock Company hasthe following main products:

- Easter, military uniforms, clothes for Defense;

- Shirts, jackets, attire;

- Export clothes: Jacket, motorcycle racing clothes, etc.;

- Fabrics, socks, towels

2.1.3 Structure of X20 Joint Stock Companies

The organization chart of the company:

Figure 2.1: Diagram of the organization of the Corporation X20.

Garmen t Factory 20B

Trading Factory Garment

Factory 20C

Kindergarte n

Real Eastate Factory

Textile Factor y

Souther n Branch es

Binh Minh Garment Factory

Finance-Import-Export Depart.

Technique Depart.

Quality-Politics Depart.

Office

General-Vice Technique Director General-Vice Business

Based on the mechanism of state management, the Enterprises Law, thecharter of company and regulatory requirements in each period, the Board ofshareholders will decide on the reorganization of the Company, the ManagementBoard decide to structure the organization properly.

2.1.4 Functions, the basic tasks of the management department

- Board of Shareholders: According to Business law and the Charter of theCompany, the Board of Shareholders is the highest authority of the Company.Board of Shareholders decide to reorganize and dissolution of the Company,development-oriented decisions of the Company, appointment and dismissal ofmembers of the Board of Management, members of the Supervisory Board

-The Board of Directors: is the highest governing body of the Company, havefull authority to act on behalf of the Company to decide issues related to the goalsand interests of the Company, except for the problems belong to the power of theBoard of shareholders Board of Management elected by the Board of shareholdersSupervisory Board: elected by the Board of shareholders, and on behalf ofshareholders to control all of the business operation, management andadministration of the Company

- Board of Directors: including General Director, Deputy General Director andChief Executive Officer, appointed, dismissed by the Board of Management

+ General Director is the legal representative of the company and is the highestexecutive in the company, responsible to the State, the Ministry of Defense, GeneralLogistics Department, the Board of Management and shareholders of the Companyfor all activities of the Company

+ Deputy General Director and CEO: is authorized by General Manager orassigned responsibility in a number of areas of professional anagement, andresponsible to the Party Committee, General Manager, the Board of Managementand shareholders on the results of performing the assigned tasks

- Planning department- Organization of production: is the consultantdepartmenr for General Manager in all aspects, including direct responsibility for