The stock shortage of finished goods at warehouse a case of pasteur street craft beer and restaurant co , ltd

List of product sale in Ho Chi Minh City wholesale channel in 2019 Keg 20 liters Can 330 ml Bottle 330 ml Source: PSB company Sale department From the above table, we found that in whole

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Pham Hong Phuong

THE STOCK SHORTAGE OF FINISHED GOODS AT WAREHOUSE:

A CASE OF PASTEUR STREET CRAFT BEER AND RESTAURANT CO., LTD

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2020

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Pham Hong Phuong

THE STOCK SHORTAGE OF FINISHED GOODS AT WAREHOUSE:

A CASE OF PASTEUR STREET CRAFT BEER AND RESTAURANT CO., LTD

CONTENTS

EXECUTIVE SUMMARY 5

Acknowledgments 6

List of tables 7

List of figures 7

1 INTRODUCTION 8

1.1 Overview of the craft beer industry 8

1.2 Company introduction 9

2 SYMPTOM 10

2.1 Sale volume does not achieve planned sale volume 12

2.2 An increasing of the number of customers stop buying Pasteur Street beer 13

2.3 An increasing number of customer complaint 15

2.4 Stock shortage 16

3 PROBLEM ANALYSIS 18

3.1 The initial cause-effect map 18

3.1.1 Customers stop buying Pasteur Street beer 18

3.1.2 Feedback from customers about the quality 19

3.1.3 Stock shortage 24

3.2 Updated cause-effect map 28

3.2.1 Inefficient marketing activities 28

3.2.2 Ineffective sale activities 29

3.3 Problem validation 32

4 PROBLEM JUSTIFICATION 33

4.1 Problem definition 33

4.2 Problem existence 35

4.3 Problem importance 37

5 CAUSE VALIDATION 39

5.1 Potential causes 39

5.1.1 Lack of information sharing 42

5.1.2 Shortage of materials 44

5.1.3 Inaccurate sale forecasting 47

5.2 Cause validation 49

6 ALTERNATIVE SOLUTIONS 50

6.1 Alternative solution 1: Applying Sale & Operation Planning 51

6.2 Alternative solution 2: Applying Enterprise Resources Planning 52

6.3 Solution justification 54

7 CHANGE PLAN DESIGN 55

7.1 Objectives 55

7.2 Targeted Outcome 56

7.3 Action plan implementation 56

8 CONCLUSION 57

9 SUPPORT INFORMATION 58

9.1 Methodology 58

9.2 Interview guide 58

9.3 Transcript 60

9.4 Organization of Pasteur Street Brewing Company 72

EXECUTIVE SUMMARY

Recently, the financial statement of Pasteur Street Craft Beer and Restaurant Co., Ltd has experienced a drop in revenue, in specific, the sale volume of the wholesale channel in Ho Chi Minh does not achieve planned sale volume To discover the problem that Pasteur Street Craft Beer and Restaurant Co., Ltd is facing, meeting with the CEO of the company,

interview relevant persons such as Sales Director, Marketing Executive, Distribution

Manager, and Production Manager, as well as pertinent data of 2019, was collected

Through interview relevant persons, analyzing data from the company, and use related

theory, the main problem was identified as the stock shortage Finished goods are not

available at Ho Chi Minh warehouse to deliver to customers that lead to a decrease in sales revenue of the sale department Toward the main problem of out of stock, three potential causes had been found out are the lack of information sharing, the shortage of material, and the inaccurate forecasting After analysis, the main cause that chosen to solve is the lack of information sharing This study will propose solutions to solve the problem in order to help the company improve business performance

Acknowledgments

I would like to send my appreciation to my advisors Dr Nguyen Phong Nguyen, who

encourage, instruct, and support me to accomplish this master thesis project It has been a pleasure working with you on this project

I would like to send my appreciation to other teachers during my journey in ISB I got a lot of education and experience in the past two years That is meaningful education and experience, and I can apply this knowledge in my work to improve my performance as well as develop

my career roadmap in the future

Also, I would like to thank my friends and family for greatly supporting me while I was

working on my studies

List of tables

Table 1: List of product sale in Ho Chi Minh City wholesale channel in 2019

Table 2 Actual sale volume in 2018 of the wholesale channels in Ho Chi Minh area

Table 3 Sale volume of the wholesale channel in Ho Chi Minh City in 2019

Table 4 Number of customers stop buying Pasteur Street beer in Ho Chi Minh

Table 6 List of customers who stop buying Pasteur Street beer

Table 7 List of products which receive customer complaints

Table 8 Stock shortage of Pasteur Street beer in 2019 in Ho Chi Minh City

Table 9 Cost for hiring Planning Manager and Planning Executive

Table 10 Cost for investing ERP software

Table 11 Action plan

List of figures

Figure 1: Number of customer stop buying Pasteur Street beer per month

Figure 2: Number of customer complaints about Pasteur Street beer per month

Figure 3 Initial cause-effect map

Figure 4 Cause and effect map

Figure 5 Level of production planning at Pasteur Street Brewing

Figure 6 Fishbone diagram of the main problem in PSB

Figure 7 Final cause and effect map (Author synthesis)

1 INTRODUCTION

1.1 Overview of the craft beer industry

Since the 1970s, craft beer companies first appeared on the US market, and since then, the number of craft beer companies has increased rapidly in the long-term beer markets such as the US and Europe Successful craft beer in the world market can be attributed to the

following reasons One is that consumer tastes are increasingly seeking diversity and

originality in flavor, something that mass-produced beer products do not have Besides, craft beer companies are more flexible in terms of changes in consumers' tastes and preferences due to their small-scale production lines On the other hand, the market of large breweries and craft breweries is not completely duplicated, since craft beer companies offer a wide range of products at different prices However, in recent years, large breweries have begun to penetrate the craft beer market by acquiring small breweries themselves or creating their craft beer line Besides that, small craft beer companies also can grow thanks to the trend of

changing consumer tastes Thus, craft beer becomes a competitive market

In Viet Nam, craft beer has only developed in the past few years Currently, there are 30 big craft beer brands in Viet Nam, in which Hear of Darkness, East-West, Platinum, Biacraft, Pasteur Street, Te Te, Fuzzy Logic, Seven Bright, etc

However, many craft beers start joining the craft beer market because of the benefit of this market, and it is not difficult to joint this market Thus, the craft beer market in Viet Nam become more competitive, and customers have multiple choice that is also a pressure for a craft beer company in Viet Nam Moreover, craft beer company is facing with the limited policy from government such as the National Assembly passed a landmark bill on preventing harmful effects of alcohol, which includes blanket ban on driving after drinking for all types

of vehicles and decree No 100/2019/ND-CP dated 30th, December, 2019 that impact

significantly to business operation of the companies which sell alcohol drink In the fact that number of consumer is decline when the decree No 100/2019/ND-CP is implemented

1.2 Company introduction

Pasteur Street Craft Beer and Restaurant Co., Ltd (PSB) is a private beer manufacturing

company based in the Viet Nam, supplying craft beer to an outlet such as luxury hotel,

restaurant, and their restaurant called Taproom The company's mission is to produce

high-quality craft beer by combining the best Vietnamese ingredients with professional American

craft brewing know-how The company employees nearly 150 people across a production site

and 5 Taprooms PSB was established in 2015 and grow faster in 2018-2019, and this rapid

growth that shown some gaps or trouble of the company during its operation In the fact that

in 2019 sale volume does not achieve the target of sale, even company set a target of sale

based on historical data and business planning that is the reason why we need to find out

problem and cause of this symptom to suggest a set of solution to solve this problem to gain

PSBC's Vision: To become a craft beer company leading in Vietnam market

PSBC’s Vission

To become craft beer company leading in Viet Nam market

PSBC’s Mission

- To produce high quality craft beer by combining the best Vietnamese ingredients with

professional American craft brewing know-how

Create beer, test boundaries, and excite beer

drinkers with new ideas to ensure we remain

leaders in South East Asian craft brewing

• Local

Keeping us true to our origin, we use Vietnamese sourced ingredients including jasmine, lemongrass, cocoa and passionfruit to add intrigue to our core range of beers

2 SYMPTOM

By interviewing with the CEO of PSB through intake meetings, he proposes that the current symptom of PSB is that the actual sales performance of wholesale channels in the Ho Chi Minh City area is lower than the sales target in 2019

Over the past five years, we have successfully carried out our mission of bringing out the best of Vietnamese ingredients for awesome craft beers to make Vietnamese

drinkers understand this lovely fresh quality and appreciate the joy of craft beer However, in 2019 sales volume in the Ho Chi Minh area in the wholesale channel does not achieve the target as we planned, and we still receive negative feedback from our customers about our product We need to review each aspect that influences our low sales: Sale operation, Marketing activity, Quality of product, and Production

operation to find out the most effective solutions

Firstly, we understand the product and distribution channels of PSB In PSB, it has nine core beers, such as Jasmine IPA, Passion Fruit Wheat Ale, Saigon Saison, Viet Wiet, Irish Stout, Pasteur Street Pale Ale, Dragon Fruit Gose, Double IPA, Cyclo Stout, and three seasonal beers will be alternative Almost Pasteur Street beers are packed in the kegs 20 liters, and some Pasteur Street beers are packed by can or bottle to diversify and create convenience for customers and consumers In the domestic market, Pasteur Street beers were distributed by two channels that are Taproom of PSB and wholesale Wholesale include Ha Noi, Ninh Binh, Sapa, Hue, Hoi An, Da Nang, Ho Chi Minh, Nha Trang, Phan Thiet, Phu Quoc In which the sale volume of Ho Chi Minh City area contributes 50% in total nationwide sale volume of wholesale channels and sale volume of Ho Chi Minh city in wholesale channel contribute 30% in total nationwide sale volume of both wholesale and Taproom channels Thus, the sale volume of wholesale in Ho Chi Minh city does not achieve sale targets that impact to sale volume of the company and impact to sale revenue as well as the profitability of the

company Therefore, the improvement of the sale volume of the wholesale channel in the Ho Chi Minh City area has a significant advantage In addition, understanding the problem, the root cause of the wholesale channel in the Ho Chi Minh City area, we can apply for other areas, such as Ha Noi, Hoi An-Da Nang, as a reference

We collect the list of products that were sold in the Ho Chi Minh City area by the wholesale channel, as the table below

Table 1 List of product sale in Ho Chi Minh City wholesale channel in 2019

Keg 20 liters Can 330 ml Bottle 330 ml

(Source: PSB company Sale department)

From the above table, we found that in wholesale in the Ho Chi Minh City area, sale team sale eight core beers per nine core beers of company and one seasonal beer per three seasonal beers of company and total 16 SKUs (Stock Keeping Unit) In the wholesale channel in Ho Chi Minh City, Pasteur Street beer was distributed to outlets where customers buy and sell to consumers, such as hotels, beer clubs, bars, and restaurants As information from the Sale department, the total outlet in Ho Chi Minh is about 150 outlets, and PSB does not have an authorized outlet The number of outlets fluctuates by monthly basis because some outlets stop buying Pasteur Street beer and some outlets were developed by sale team Almost outlets are in central of the city where have many foreigners and tourists At the outlets, PSB will supply machine to pour the beer from keg 20L to glasses and provide maintenance service for these machines, such as line cleaning of the device, fix issuer of the machine as well as PSB also provide CO2, glasses, some point of sale material for the outlet In addition, the sales team offers products in can or bottle for outlets to sell to consumers

In the next sessions, the author will collect secondary data such as sales quantity compare to the target of the sale, and associated symptoms like the number of customers stop buying products, feedback of customers about the quality of the product, and stock shortage

2.1 Sale volume does not achieve planned sale volume

Firstly, we collect data of sale volume for the wholesale channel in Ho Chi Minh area in 2018

as the table below

Table 2 Actual sale volume in 2018 of the wholesale channels in Ho Chi Minh area

Month Actual sale volume 2018 (L) Number of outlets The ratio of sale (L)

(Source: PSB company Sale department)

From the above table, we found that the wholesale channel in the Ho Chi Minh City area has about 120 outlets per month in 2018, and PSB does not have any authorized outlets in this area Also, one outlet sold from 68 L per month to 88L per month and an average of 80L per month per outlet Moreover, target sale volume in 2019 of the wholesale channels in the Ho Chi Minh City area was set up based on actual data of in 2018 and business plan in 2019 of PSB Sale volume in 2019 for the wholesale channel in the Ho Chi Minh City area forecast to increase by about 10% to 20% compared to 2018 To achieve this objective, the sales

department will develop more outlets in Ho Chi Minh City, such as Circle-K, Aeon

However, the actual sale volume in 2019 of the wholesale channels in Ho Chi Minh area is lower than the target sale volume as the table below

Table 3 Sale volume of the wholesale channel in Ho Chi Minh City in 2019

Month Target sale volume

in 2019 (L)

Actual sale volume

in 2019 (L)

Variance (%)

Number of outlets ROS

(Source: PSB company Sale department)

We see that actual sale volume is lower than the target volume as the above table even

through target sale volume in 2019 for the wholesale channel in Ho Chi Minh area was set up based on actual sale data in 2018 and an increase in sales volume for each area as well as

expand business plan Almost, actual sale volume does not achieve the planned sale volume and except in June sale volume higher than the target Sale volume does not reach a target

impact directly on the financial performance of the company and turnover of a salesperson as well as effects indirectly on production operation, and purchasing plan even expands business planning Some factors might lead to sale does not achieve targets such as customer stop

buying product, customer complaint, shortage of finished goods to deliver to customers

Moreover, we will understand these factors in the next sections

2.2 An increasing of the number of customers stop buying Pasteur Street beer

We collected data from the Sale department for the wholesale channels in Ho Chi Minh area

Table 4 Number of customers stop buying Pasteur Street beer in Ho Chi Minh

2.3 An increasing number of customer complaint

We collected data on customer complaints from the market within one year from January

2019 to December 2019 in the wholesale channel in the Ho Chi Minh area The observation

indicated that the number of customer complaint increase by quarterly

Table 5 Number of customer complaint in 2019

Customer complaint Quantity Increase Sale volume (L) Increase

(Source: PSB company Sale department)

Even the sale volume is increased However, the ratio of customer complaint increases

significantly and figure 2 indicate that the trend of customer complaint is increasing

(Source: PSB company Sale department)

Figure 2 Number of customers complaint about Pasteur Street beer per month

We will find out more detailed customer complaints in 2019 as below

Firstly, in the first quarter of 2019, we have no customer complaints Secondly, in the second quarter of 2019, five customer complaints were recorded in the quality report Next, in the third quarter of 2019, six customer complaints were filed in the quality report Finally, in the fourth quarter of 2019, eleven customer complaints were recorded in the quality report Sale volume increases by monthly basis; however, customer complaint increases significantly compared to the speed of sale volume In the next sessions, we will analyze more detail about the above customer complaint

2019, sometimes, we did not have finished goods at Ho Chi Minh warehouse to deliver to customers for some SKUs that is the stock shortage

Secondly, we find out that we are out of stock Irish Stout beer to deliver to customers in January for one week Next, there is a lack of Dragon Fruit Gose beer to provide to the outlet

in February for one week Moreover, we are out of stock of Jasmine IPA in a bottle in March

In May, Pasteur Street Pale Ale is out of stock to deliver to customers Besides that, in June, Viet Wit beer in a bottle is out of stock for one week Furthermore, in July, we lack Double IPA beer to deliver to customers In September, we are out of stock Jasmin IPA beer in a bottle Finally, in October, we are out of stock for God Water beer

In summary, we had eight times a stock shortage for the wholesale channels for the Ho Chi Minh City area in 2019

These above symptoms have a significant influence on the production and business plan of the company due to the following reasons

Firstly, actual sale volume does not achieve a target impact on the financial performance of the company and the turnover of sale person in the sales department Secondly, customers stop buying products of the company leads to losing customers or consumers Outlet stops buying PSB beer impact to revenue of the company because the sales team takes time to open

a new outlet to cover sale volume and impact to cost of distribution and technical service to evict the machine from outlet to warehouse Next, customers' complaints about the quality of

product impact on the loyalty of customers or consumers Finally, the stock shortage of finished goods to deliver to customers directly impacts the revenue of the sales department and the profit of the company

To achieve the performance of the sales team, we must find the causes of these symptoms and the root cause of these problems to solve this issue to develop the company sustainably

3 PROBLEM ANALYSIS

3.1 The initial cause-effect map

From these symptoms, as mentioned above, the author did an in-depth interview to

understand what the potential causes of these symptoms are The author conducted 5 group interviews with the CEO, Sales Director, Marketing Executive, Distribution Manager, and Production Manager

3.1.1 Customers stop buying Pasteur Street beer

As mentioned, some customers stop buying Pasteur Street beer of wholesale channels in Ho Chi Minh area in 2019, we discuss with Sale Director, and he said that

In 2019 some months we achieve sale volume as the target; however, some outlets they stop buying our product, some outlet does not make sale volume as commitment

We collect data of customers who ended buying PSB beer in 2019 as the below table

Table 6 List of customers who stop buying Pasteur Street beer

Month List of customers stop buying PSB beer

January Equatorial D5, The Liquid House,

February Hippie Beer, Bia Cao Boi, The rabbit

March Spoon Bar, 21 lounge, Beer Graden D2

April Auparc Propaganda, Home Saigon Restaurant, Savoo

May Oysters Bar, Beer Craft D3, Citadel

June Chanh Bistro, Remi bar, The Rabbit,

July Game on, CirCO Coworking Space, SAGO BISTRO, BEER GARDEN, 21

LOUGE, Bia Cao Bồi, August Lush Burger, Saigon Outcast, Italian BBQ 2, Primier, Next Bar, Lix Bar,

Malan pub

September Rogue, Tap D7(chiller), Icorda (Nitrotap), Kha Khu, LIX BAR, Marlan

Pub, Amazing Coffee

October Relish d1, D-two sports Bar, Sky 9, Brewlilant, LAPIS CINE, LIFE

HOTEL, PIZZA 4PS Xuan Thuy, PIZZA Hai Ba Trung, November LEFE, Pizza Phan Ke Binh, Marlan Pub, The Hill Station River Cottage,

Auback chillGrill, December Saigon Le Van Sy, LIFE Hotell, BANANA MAMA, Level 1, Hyatt,

Santorino,

(Source: PSB company Sales department)

Firstly, we understand the impact when customers stop buying Pasteur Street beer The Sale Director share that

When the sale team develops a new outlet and inform to admin team after that

technician team will set up a machine for outlet and delivery team will deliver the beer when outlet order beer via admin team If the outlet stops buying our beer

technician will come this outlet to evict machine, the delivery team will come to evict beer if have and sales team needs to develop another outlet to ensure a number of outlet and sale volume as well It takes time and loses sales revenue when the outlet stops buying Pasteur Street beer

Then we discuss with Sale Director about the reason's outlet stops buying Pasteur Street beer,

he response that

Some outlet feedback that they do not receive any support activity from selling

Pasteur Street beer at their outlet that leads to the speed of sale plodding Some outlet indicates that the company does not have an attractive discount program And some outlet they stop buying Pasteur Street beer because they want to develop their brand that means they want to sign the contract with Pasteur Street to produce the product with their brands, such as BiaCraft or Pizza 4P

Next, we interview the Sale director to understand sale status supporting activity for an outlet

We do not have much support activity in the marketing department in 2019 In 2019 we had only a promotion program that is Jasmine IP month in June, and this month, we sell much beer We need more same promotion programs to push sales revenue

Finally, we discuss with Sale Director how to solve this problem, he concludes

To reduce the number of customers stop buying sale team need to develop a potential outlet before sign the contract, the company will provide discount regularly and

promotion program to encourage outlets as well as a marketing activity to improve sale volume and keep the loyalty of a customer

With this action plan from the sale team and supporting from Marketing team and company,

it can reduce the number of customers stop buying Pasteur Street beer

3.1.2 Feedback from customers about the quality

Quality of product plays an essential role during the supply chain from company to customer and consumer When we ask the CEO about the role of quality of the product, and he said that

The quality of products plays the most important role in making customer satisfaction and bring success for the company Additionally, if the quality of the product is stable, the sales team, marketing department, and outlet will be confident to introduce products for end-users Besides that, durable quality products will bring satisfaction to

customers

And Sale director amend about quality of product and customer complaint

However, we received feedback or customer complaint from the outlet when they have

an issue with our product

From the above information, we collected data on customer complaints from the market within one year from Jan 2019 to December 2019 in the wholesale channel in the Ho Chi Minh area

In the first quarter of 2019, there is no complaint from the wholesale channel in Ho Chi Minh from January to March in 2019

In the second quarter of 2019, five customer complaints were recorded in the quality report Firstly, in April, there is only one customer complaint, an outlet in which they feedback that Passion Fruit Wheat Ale product has a weird sour tasted The number of customer complaints increases in May with two customer complaints, that are Pullman in District 1 complaint that Passion fruit Wheat Ale product is too much foam, the taste is terrible, and another outlet response that Irish Stout product is too much foam

Customer complaint in June focuses on Jasmine IPA Firstly, BiaCraft D3, located in Tu Xuong street, the complaint that Jasmin IPA tastes are different, and the second customer complaint from Buddha-Bar also complaint Jasmine IPA tastes different, flat

In the third quarter of 2019, six customer complaints were recorded in the quality report In July, there is only one customer complaints and focus on Jasmine IPA product They sent the feedback that Jasmine IPA beer has a strange color, too hazy, and the taste is very flat In August, there are two customers complain that Jasmine IPA beer is hazy, the taste is flat, bad smell or strange color from Ut Ut Xuan Thuy, Bia Craft District 2 In Sep, there are three customer complaints One complaint to Jasmine IPA beer is hazy than normal and another customer complaint about God Water beer that this beer is low carbonation and poor head retention as well as another outlet complaint that yeast particle inside Jasmine IPA can

In the fourth quarter of 2019, eleven customer complaints were recorded in the quality report

In October, there are three customer complaints in which two complaints to Jasmine IPA can like low fill volume of Jasmin IPA can, squishy can with Jasmine IPA can Also, in October,

an outlet in Ho Chi Minh city gives feedback that God Water beer is low carbonation In November, there are five customer complaints In which two complaints related to taste, color, the appearance of Jasmine IPA from Republic, The Color and such as JIPA is hazy than usual, tastes of JIPA is flat, or the beer is not normal with taste is strange (50% same jasmine IPA ) and the color is hazy A customer complaint from outlet Five Star Coffee and Craft Beer to Irish Stout beer is over-carbonated and a customer complaint from the internal sales team that wonky label for Jasmine IPA beer in a bottle In December, there are three customer complaints One customer complaint from Yobe Craft Beer about Jasmine IPA in a bottle has a white liquid after opening, and another customer outlet in District 3 complains that Jasmine IPA beer does not have an expiry date on the collar The last complaint to

Passion fruit Wheat Ale beer in a can because this can was damaged

We summary number of complaints from customers as the table below

Table 7 List of products which receive customer complaints

Month List of products which receive customer complaints Quantity

There is no customer complaint in January, February and March 0

September Jasmine IPA, God Water, Jasmin IPA in can 3

November Jasmine IPA (2 times), Irish Stout (2 times), JIPA in bottle 5

December JIPA in bottle, Jasmine IPA, Passion Fruit Wheat Ale 3

(Source: PSB company Sale department)

From the above table, we found that customer complain focus on Jasmine IPA beer, Passion Fruit Wheat Ale and Irish Stout, God water with 6 SKUs per 16 SKUs in wholesale channel

in Ho Chi Minh area

When we receive feedback or complaint from customers via admin team, sale team will come

to the outlet to check the quality of beer and feedback to customers, make a quality report and return a product if any to the brewery and at brewery production department will do

traceability to find the root cause of the issue and feedback to sale team and then sale team feedback to customer

However, sometime the problem does not come from the quality of the product For example, customers complain about Irish Stout is too much foam and salesman come this outlet to check, and they found that the pressure of machine or temperature of beer does not meet the standard After that, technicians deal with the issue of the device and beer pours as normal Alternatively, sometimes we receive customer complaints that Passion Fruit Wheat Ale is sourer than usual, but we return those kegs and test at our Taproom with some experts they

do not find the discrepancy with the standard sample Maybe it is the first time a consumer they trial Passion Fruit Wheat Ale, and they find that this beer is sourer than they expect Furthermore, in some cases, we only receive customer feedback that Jasmine IPA has a different taste, but we cannot take a sample to taste the beer because this product was sold out after that we check the quality of product with the same batch, and we do not receive any feedback from another location such as Ha Noi, Hoi An or Phu Quoc

With these problems come from customers or unclear, the sales team will explain to

customers with support from brewery also to satisfy customers

Besides that, some customer complaint that is a real issue, such as Jasmine IPA too hazy, God Water is low carbonation and low head retention and another issue We discuss with the Production Manager about those issues He explains why customer complaint about the quality product of Pasteur Street beer in 2019 as below

In 2019 there are many mistakes or breakdowns in production Firstly, the keg

washer machine broke on 17/05/2019, and the next malt was milled too fine compare

to standard because of the wrong set up of two rollers mills on 18/06/2019 The temperature of Bright Beer Tank is higher than standard because the sensor is default 23/06/2019, or the operator forgets to add an ingredient in the boiling step

PC broken on 13/08/2019, and finally, the boiler was broken on 21/09/2019

These mistakes and breakdowns in production may lead to unstable quality of the product is, and when we deliver products to customers, we receive customer complaints about the

quality of products as mentioned

He admen that

Inefficient quality control process Until now, PSB has not applied any quality

management system, such as ISO 9001, ISO 22000, or HACCP As normal food companies use these quality management systems to maintain and improve the quality

of products With the current quality control process, some characteristics of products that have not measured frequently and only check aspects of products when they have

an issue or feedback That is the reason why the problem reoccurred

When asked how to solve these issues relate to the quality of products, the Production

Manager points out

With a specific issue which we receive from customers, the production department does traceability and uses five whys tools as well as 5Ms (Machine, Method,

Manpower, Measurement, Material) to analyze and find the root cause of the issue to solve the problem For example, to solve the problem of Jasmine IPA and God Water, the Production Manager suggests that changing the recipe and add one step that filters the beer before staging in the production procedure The consequence we do not have any customer complaints about God Water from November and customer complaints about Jasmine IPA reduces significantly from December

For a long time, to reduce the mistake from the operator and the breakdown in production, Production Manager indicate that

We establish the checklist of each step to ensure that operators complete their tasks without the mistake and check the machine frequently as well as prepare the spare parts to fix machines immediately to avoid discontinuing production

With the above action from the production department, the quality of products is under control and improved

In summary, in 2019, PSB received some customer complaints from customers of the

wholesale channel in the Ho Chi Minh City area In which some claims come from the

customers, and the others come from the product of the company, and the production

department takes action to solve all the problems to ensure that they provide products with the standard quality

3.1.3 Stock shortage

In 2019, sometimes we did not have the finished goods to deliver to the customers for some SKUs this issue impact on the sale volume and the sale plan as well as the production plan Firstly, we are out of stock Irish Stout beer to deliver to the customers in January for one week, and the demand for this beer is 10 kegs per week The volume of one keg is 20 liters Secondly, lack of Dragon Fruit Gose beer to delivery to the outlet in February for one week and demand for this beer in this area is 10 kegs per week Next, we are out of stock of

Jasmine IPA beer in a bottle in March, and the demand for this beer is 20 cases per week In May, we lack Pasteur Street Pale Ale to deliver to the customers, and demand for this beer is

15 kegs per week Besides that, in June, Viet Wit beer in a bottle is out of stock for one week, and demand for this beer is 20 cases per week Furthermore, in July, we lack Double IPA beer to deliver to customers, and demand for this beer is 10 kegs per week, and in September,

we are out of stock Jasmin IPA beer in a bottle Moreover, in October, we are out of stock for God Water beer The demand for this beer is 10 kegs per week

Table 8 Stock shortage of Pasteur Street beer in 2019 in Ho Chi Minh City

April No stock shortage

August No stock shortage

November No stock shortage

December No stock shortage

(Souce: PSB company Distribution department)

A shortage of finished goods to delivery to the customer that impact directly to the sale

revenue and the profit of the company as CEO point out

We have stocked out of beer 3 of the 4 weeks that I have been back to work, and the risk to our business is too great to continue the way things have been done

According to the CEO's point of view, the stock shortage is a severe problem, and it has many risks to the business of the company, and he is very concerned about this issue as well

as this issue needs to be precise After discussing with the sales department, distribution department, and production department to elaborate on this issue, we find that there are three factors related to a stock shortage that is the bad cooperation between production,

distribution, sale teams and they have no rule of safety stock as well as material shortages Firstly, we understand the bad collaboration between production, distribution and sale team Sale Director feedback about support activity from production and distribution

Sometimes we are out of stock to deliver to our outlet that impacts the sale planning, and we can lose a customer because we commit to provide within one hour from the customer order as the delivery policy when some outlets stopped buying our beers that impact to the sale planning, and we must find a new customer to cover the sale target Sometimes we do not receive the stock level from the production department, and we do some promotion activities after that we are out of stock

Distribution Manager explain stock availability

Sometimes we do not have the updated demand for each area lead to we transfer with the wrong plan to Ha Noi and Hoi An after that; we are out of stock in the Ho Chi Minh City area

Production Manager explain out of stock

The sales department has not updated the sale demand for some SKUs that impact to the production plan to build inventory

And CEO concludes that

We do not have the good collaboration between production, sale, and distribution department, we need to do regular S&OP meeting between the production, sale, and distribution department to align the production planning to avoid the stock out

From the above information, we find out that the communication between the sale team, distribution team and production team that is not enough Therefore, information about the demand plan, promotion activity and stock level of production that information needs to be shared, discuss and align between the sales department, distribution department and

production department to avoid stock shortage

Secondly, we found that there is an inaccurate sale forecasting

Production Manager claims that

The sale forecasting is not correct that leads to production planning and the stock shortage as well

According to the Production Manager's point of view, the variance of sale forecasting leads to the wrong production planning and the finished goods are not ready at the right time to

deliver to the warehouse as well as the stock shortage occurred

After that, the CEO decides:

The sale department will make a sale forecast for twelve weeks and confirm the sale plan for four weeks in order to the production department make an effective

production plan

Establishment sale forecasting is accurate and the production department can follow this principle to make the production plan to fulfill the sale demand in order to avoid stock

shortage related to production planning

Finally, we discuss the material shortage In this section, we will address the lack of raw material and the shortage of steel keg

Production Manager said that

Sometimes, we do not have the raw material on time to brew the beer and we must change the production plan to wait for the material from the supplier

Purchasing Manager explains that

All the materials for brewing we must import from foreign by the suppliers and the

suppliers only import to the stock based on the material demand which signed between the PSB and the suppliers at the beginning of the year

For the shortage of steel kegs, Production Manager feedback that

Sometimes empty keg returns from the market that is not enough for the packing plan to kick out tank for the new batch that impacts the production plan and leads to out of stock

of some SKUs

As the above information, we see that a shortage of material and steel kegs affects the

production plan and might lead to a stock shortage

From the in-depth interview and primary data, we have an initial cause-effect map as below

Inaccurate sale forecasting Lack of information sharing

Shortage of material Stock shortage (Symptom 4)

Break down in production

Customers stop buying PSB (Symptom 2)

Unattractive discount

Figure 3 Initial cause-effect map

3.2 Updated cause-effect map

From the interview relevant persons in the company, we define that three factors impact on the sale results, such as the customers stop buying PSB, customer complaints, a stock

shortage, and we have an initial cause-effect map However, the initial cause-effect map only based on data and experience in the company to update the cause-effect map we need to use theory from the literature

3.2.1 Inefficient marketing activities

Konieczna1 state that 'Strong brands powerfully affect consumer experiences' Marketing Executive admitted that

We do not have a successful marketing plan to build a brand of Pasteur Street beer PSB attends some events with the same craft beer company We have simple Public

Relationship activity; in 2019, we have only one activity that is 'Turtle lake clean up' on

28 November

Marketing Executive amend that

In 2019, we stopped marketing even "meet the brewer" every month because Master Brewer stops working for PSB from March that impacts the marketing activity Meet brewer that event conducts every month at our Taproom to introduce to consumers how

to brew the beers This event is exciting and attracts many people

According to Abel et al2 [We are innovating] through differentiation, with a product that has

a different flavor and image to those fashions yet is still attractive to consumers The new product has a vital role in appealing consumers to try and use new craft beer because

consumers want to enjoy unique beers with a distinctive taste Marketing Executive in

Pasteur Street admitted that

In 2019 we had many new products However, we do not have a breakthrough product in this year We attend some international craft beer competition and get a gold prize and sliver prize, but that are current products

And Sale Director amend that

In 2019 we expanded our product category by developing packing such as bottle and can We launch some new products as JIPA in a bottle, Pasteur Street Pale Ale in a bottle, Dragon Fruit Gose in can, God Water in can However, the performance of these new products is not as good as we expected to support sale team improve sale volume

We see that Marketing activity of Pasteur Street in 2019 is not good as expect and CEO conclude that

We need to speed up to hire a Marketing Manager to build a marketing plan for our company in order to support the sales team and our outlets to appeal and keep our

customers and consumers

From the above discussion, we find that little of the budget for marketing activity, stop

monthly meet brewer program and no breakthrough product lead to ineffective marketing activity

3.2.2 Ineffective sale activities

The promotion has a vital role in sales to appeal to customers to buy a product Doyle et al3stated that 'sales promotion is commonly used to have sales increase in the short term by using money off coupons or special offers or free goods, and it is used because results are quick.' However, these kinds of promotions were not used as the strength of Pasteur Street Beer to improve their sales results

Sale Director admitted that

Giving a little budget for promotion or discount for customers, and we have only one promotion in June and for only one product, that is Jasmine IPA Besides that, we only support POSM for the customers such as glasses, logo, lighting This promotion is not attractive

Kotler4 defined place "as a set of interdependent organizations that caters to the process

of making a product available to the consumers," and according to Rozhkov et al5 "given that any place (considered a product) is a specific bundle of goods, services, environments, and locations."

The Sales Director said that in 2019, we decided to close some outlets because the performance of these outlets does not achieve our expectations We did not analyze carefully before developing outlets

From the above information, we determined three factors impact to the ineffective sale

activity such as little of the budget for discount, unattractive promotion, and ineffective business place

In summary, there are five factors that impact the sale result, such as customers stop buying Pasteur Street beer, customer complaints, ineffective marketing, and public relationship,

unproductive sales activity, and stock shortage All these problems are updated on the

updated cause-effect map as below

After getting an in-depth interview and collect from literature we have the updated cause-effect map

Ineffective Marketing and PR Ineffective Sale activities

Customers stop buying Customer complaint Stock shortage

Figure 4 Cause and effect map

Low sale result of Pasteur Street beer

Increase turnover of sale department

Little of budget for marketing activity

Stop monthly

meet brewer

program

No breakthrough product to support sale team

Unattractive promotion program

Ineffective business place

Mistake in production

Ineffective quality control process Inaccurate sale forcasting

Lack of information sharing

Shortage of materials

Little of budget for discount

Negative impact

to financial performance

Unattractive

discount

Breakdown in production

Besides that, other problems such as marketing, sale, or quality play an important role in sales performance However, these problems are not central problems for some reasons Firstly, the quality problem There are a lot of external factor impact to this problem such as the condition of storage or transportation, perception of customer or condition of beer filler machine For example, sometimes we receive customer complaint about beer is too much foam, but the technician come to check and adjust the temperature or pressure of machine then the beer becomes normal Alternatively, some consumers they trial craft beer for the first time, and the feedback this beer is bitter or hazy, but the style of this beer needs bitter or hazy Next, we will understand sales and marketing problems There are a lot of external factors impact this problem such as competitive rivals, legal aspect or perception of customer

or consumer, so it is difficult to solve this problem with a limited resource of the company

From the above explanation in this paper, we will focus on out of stock to find out the causes

of this problem to provide a appropriate solution for PSB

4 PROBLEM JUSTIFICATION

4.1 Problem definition

In this part, we investigate the out of stock issue from the theoretical aspect First, we define the term out of stock; these factors attribute to out of stock and impact of out of stock to result and operation of the company There are many definitions and indicators can be used for describing out-of-stock situations, and some main concepts will be mentioned in this paper as below

Firstly, according to Aastrup, stock-out situations are scenarios where the stock or final inventory in a retail outlet is not available on the shelf for a customer to purchase6 Gruen at

el make more detail this concept that there are two kinds of out of stock that is stored out of stock and shelf out of stock Out of stock occurs when the store is entirely out of inventory and shelf out of stock occurs when there is inventory in the store, but the item is not on the shelf7 Thus, there are two kinds of out of stock

Next, according to Roland Berger Strategy Consultants, as cited by Gubor, indicate that three different forms of out of stock: classical, dual placement, and delisting out-of-stocks In which, classical out of stock means that the item is not available on the labeled shelf-place Dual placement out of stock occurs when the item can be found on the shelf but not on the other placement site (for example, a special place in the case of promotion) and vice versa Delisting out of stock appears when consumers cannot reach the desired item because it was taken by store staff8

However, according to Holman et al cited by Gubor, the author indicates that there are five specific out of stocks, such as an empty shelf, stock present, but no help available, stock present, but no access, promo price mismatch, and any other reason8 Moreover, the author defines each of the outs of stock like that empty shelf – when the consumer cannot find the specific product on the marked shelf space Stock present, but no help available – when the consumer can see the product but cannot reach it (because it is locked or placed on a high shelf), while there is no store staff help available Stock present, but no access – in this case, the consumer finds store staff to help, but they cannot get the product either (for instance, they do not have access to the location where the product is stocked) Promo price mismatch – the consumer does not purchase because the price/offer in the store does not match that advertised Any other reason (except lower expenses and the four reasons above) because of which the consumer decides to leave the store and not buy the desired product8

Finally, according to Jacob et al., as cited by Gubor, that8 out of stock is defined as a situation

in which demand is not met, and the order is canceled

From the above information, we can understand that out of stock that means finished good is not available to delivery to customer if they want to buy or order and to define out of stock Gruen at el state that there are three different kinds of stock-out identification could be used: (1) audit of physical inventor, (2) analysis of point of sale data, and (3) us of perpetual

inventory data7 In which, audits count instances observed at a point in time (when the audit took place), analysis of point of sale data that mean measuring out of stock estimates directly the number of times a consumer intends to purchase the SKU and does not find it and the third method for measuring out of stock is using PI data PI systems track sales, and when sales = 0, the item is out of stock7

As cited by Avlijas et al., the attributes usually examined are promotion activities, product price, availability at the distribution center, sales speed, variation in demand, case pack size, and shelf life9

Out of stock will impact to the decision of consumer as Van indicate that customers will do one of the following when faced with a stock-out in a retail store: (1) switch stores to locate the same product, (2) change brands to get a similar utility out of the same product, (3)

postpone the purchase to a timing when the product becomes available or (4) altogether drop the purchase, resulting in a lost sale to the store10 Thus out of stock may have an impact on a financial result, because it might lead to a loss of sales as consumers decide to delay or cancel the purchase or switch to another store and a study of Corsten indicate that out of stock can result in an average financial loss of up to 4 % of the total sales11 In the short-term out of stock impact directly to sale performance, however, stock-out does not only impact directly to sale result but also impact indirectly to the loyalty of customers because they will switch to another brand that will consequence to performance of the company in the long-term

From the above information, we can understand that out of stock that means finished good is not available to delivery to customer if they want to buy or order and many factors impact to out of stock such as demand, sale speed, characteristic of finished goods itself as well as out

of stock impact directly and indirectly to performance of the company in the short-term and long-term

In the next part, we will understand the problem that exists in the PSB

Work in progress = Closing work in progress/weekly demand ≥ 3

The stock of finished goods = Closing stock/next week demand ≥ 2

We will find more detail out of stock in the next parts

From the definition of the central problem, in theory, we will collect more data and interview relevant persons in PSB to find out the problem that exists in this company

Step 3:

Production department make a material plan based

on production plan and send to

purchasing department

Step 1:

Sale department update forecast

base on previous data and

business plan

Step 2:

Production department make a production plan to fulfill demand plan based on production

capability and stock

Step 1:

Production department make a production plan to fulfill demand based on

production capability and stock

With the current production planning and the stock control management, sometimes we did not have finished goods to delivery to customer for some SKUs this issue impact sale plan and production plan CEO said that

We have stocked out of beer 3 of the four weeks that I have been back to work

Moreover, the Sale Director provides the following feedback to point out the stock shortage and its impact

Sometimes we lack finished goods for delivery to customers For example, we have received orders as the information below: 1 keg of Pasteur Street Pale Ale 20L for Bia Craft Nam Ky Khoi Nghia and 1 keg of Pasteur Street Pale Ale 20L for Bia Craft Phan Xich Long Delivery time: 24/05/2019 However, it is out of stock now

It is embarrassing for the company and for me to have to tell a good client (as I had to

do today) that the Dragonfruit that they wanted to try at their bar was unavailable and that the Wit that they would like to try instead of the Dragonfruit was likewise

unavailable

Distribution Manager explains more about out of stock

The forecast is not correct lead to out of stock For example, the sale is better than we think as we see that we still have 14 cases on Friday, so we think that on Monday, we will inform Brewery for filling bottles However, it is finished on Monday We will get experience for both demand plan as well as stock preparing over the weekend

Production Manager:

We out of stock in the brewery to pack because of the breakdown of production As

planned, DIPA will be ready on 09/07/2019) However, we have an issue with glycol for this tank consequence temperature of this tank did not go down as a plan that means DIPA will not be ready on 09/07/2019

We collect more data from the sales department to investigate this problem

Firstly, we are out of stock Irish Stout beer to deliver to the customer in January for one week, and demand for this beer is 10 kegs per week The volume of one keg is 20 liters Secondly, there is a lack of Dragon Fruit Gose beer in February for one week and the demand for this beer in this area is 10 kegs per week

Next, we are out of stock of Jasmine IPA beer in a bottle in March, and the demand for this beer is 20 cases per week

In May, we lack Pasteur Street Pale Ale is out of stock to deliver to customers, and demand for this beer is 15 kegs per week Besides that, in June, Viet Wit beer in a bottle is out of stock for one week, and demand for this beer is 20 cases per week

Furthermore, in July, we lack Double IPA beer to deliver to customers and demand for this beer in one week, and demand for this beer is 10 kegs per week, and in September, we are out

of stock Jasmin IPA beer in a bottle Furthermore, in October, we are out of stock for God Water beer; the demand for this beer is 10 kegs per week

In the policy of the PSB, we will deliver to the customer within one hour from the customer order

4.3 Problem importance

The consequences of out of stock can be shown in many aspects of the company

The stock shortage is one of the biggest problems because they lead directly to lost sales volume, reduced sale revenue, profit, and the potential loss of customers According to

Campo et al as cited by Breugelmans indicated that stock-out hurt's retailers, both directly (on category sales and profit) and indirectly (on customer satisfaction, store loyalty, and retail image)12

Besides that, out of stock impact to the loyalty of customers according to Gruen as cite by Breugelmans maintaining sufficient inventory levels and ensuring the availability of each stock-keeping unit (SKU) are among the best ways of increasing satisfaction and loyalty.7 The company always ensure that product is available to delivery to customers all the time when customers place orders As a policy of PSB, the delivery men will deliver products to customers within one hour from receiving a purchase order from the customers If we cannot deliver products to customers, they can change their decision to choose another product or brand as Sloot indicate that customers may switch to another brand in the short term for a product that is highly substitutable in the same store13

Campo et al14 consider the reaction "brand switch" as part of the reaction "item switch," although these reactions basically can be very different While Emmelhainz et al report an adverse effect of perceived availability of alternatives on the brand switch15

The consequence of the problem can be serious if continuous stock-outs occur, consumers will switch stores permanently, leading to a diminishing customer base, poor customer

retention, loss of store loyalty, reduction in sales turnover, and diminishing profits in the long run10

According to Colaccio et al.loyalty and customer satisfaction are two of the most important factors in increasing the sales and profitability of each product category16

Fitzsimons et al finds that out of stock lowers customer satisfaction in general, and even more so if the out of stock option is in the consumer's consideration set17 Similarly, Pizzi et

al show that participants are more dissatisfied when they learn about the out of stock after, rather than before, deciding18

Out of stock lead to loss of sale volume and finance loss A studies6 conducted since the 1960s have shown that the average stock-out rate (percentage of the SKUs not in stock at the time of the audits) is generally constant at a level of around 7 to 8 % This can result in an average financial loss of up to 4 % of the total sales11 Gruen et al find that overall sales losses caused by the out-of-stock amount to 3.9% at the global level, 3.8% in the United States, and 3.7% in Europe19

According to Roland Berger Strategy Consultants (2003), 9% of consumers who face an of-stock situation cancel their purchases And the resulting gross margin losses for retailers are estimated to lie between 7 and 12 billion dollars per year in the US20

out-To sum up, out of stock consequence directly financial benefit and operational activity as well as indirectly such as customer satisfaction, loyalty brand The level of importance of the problem increases if the problem reoccurs So, the company needs to find out the root causes

of the problem and develop solutions that link to the root causes accordingly to gain

sustainable development because Berger states the out-of-stock phenomenon still occurs too frequently in the sales of consumer products21.Finally, stock-outs will negatively affect sales and competitive advantage in the alcohol retail industry22