The gap in supply chain management at golden sea company

Unit: Kg Source: Internal report Figure 2: PE material data from June 2020 to November 2020 The chart of PE key materials shown over the 6-month period in 2020 shows that there is no co

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Le Thi Thu Thao

THE GAP IN SUPPLY CHAIN MANAGEMENT AT GOLDEN SEA

COMPANY

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2021

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Le Thi Thu Thao

THE GAP IN SUPPLY CHAIN MANAGEMENT AT GOLDEN SEA

COMPANY

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: DBA Phan Thi Minh Thu

Ho Chi Minh City – Year 2021

Table of contents

Table of Contents

EXECUTIVE SUMMARY 1

CHAPTER 1: PROBLEM CONTEXT 2

1.1 COMPANY OVERVIEW 2

1.2 PROBLEM CONTEXT 5

1.2.1 The gap in supply chain management 5

1.2.2 Symptom validation and justification 7

CHAPTER 2: PROBLEM IDENTIFICATION 9

2.1 POSSIBLE PROBLEMS 11

2.2 PROBLEM IDENTIFICATION 13

2.2.1 Ineffective Forecasting 13

2.2.2 Financial problem 14

2.2.3 Ineffective supplier management 16

2.2.4 Poor inventory management 18

2.3 MAIN PROBLEM VALIDATION 19

2.3.1 Problem definition 19

2.3.2 Justify the important of main problem 23

CHAPTER 3: ALTERNATIVE SOLUTIONS 25

3.1 CAUSE VALIDATION 25

3.1.1 No over quotas by level 27

3.1.2 No involvement in formal Win-loss reviews 28

3.1.3 Inappropriate/ Ineffective winning sales process 28

3.2 SOLUTIONS 31

3.2.1 Solution 1: Implement OKRs Model (Objectives and Key results) management in Sales department 31

3.2.2 Solution 2: Implement SMART goals model in Sales department 33

3.3 SOLUTIONS VALIDATION 34

3.4 ACTION PLAN 39

3.4.1 Objectives 39

3.4.2 Timelines and estimated cost 42

CONCLUSION 44

REFERENCES 45

SUPPORTING INFORMATION 48

Figures

Figure 1: The company organizational structure 4

Figure 2:: PE material data from June 2020 to November 2020 6

Figure 3: PP material data from June 2020 to November 2020 7

Figure 4: The gap between Planning figure and Execution Figure/ Procurement figure in PE material 8

Figure 5: The gap between Planning figure and Execution Figure/ Procurement figure in PP material 9

Figure 6: The Initial cause and effect map 12

Figure 7: The Updated Cause and Effect Map 22

Figure 8: The relationship between Forecasting and Planning 23

Figure 9: Forecasting the demand in JIT manufacturing systems 24

Figure 10: The second updated cause and effect map 26

Figure 11: The final cause and effect map 30

Figure 12: The similarities and differences between OKRs and SMART model 36

Figure 13: The advantages and disadvantages of OKRs and SMART model 37

Tables Table 1: Main material data from June 2020 to November 2020 6

Table 2: Timelines of solution 42

Table 3: Estimated cost of solution 43

Images Image 1: Key actions being taken by supply chain professionals 16

Image 2: Relationship with key suppliers 17

Image 3: Ability to resolve unexpected events with suppliers 17

Image 4: OKRs Model 32

Image 5: SMART model 33

ACKNOWLEDGEMENT

A completed study would not be done without any assistance and support Therefore, the author who conducted this research gratefully gives acknowledgment to the people gave support and motivation during the time of doing this research as a requirement of completing my MBA degree

First of all, I would like to express my thanks and gratefulness to my supervisor DBA Phan Thi Minh Thu Her kindly support and valuable advices went through the process of completion of my thesis Her encouragement and comments had a significantly enriched and improve my work The thesis cannot be done without her help and her experience in many fields

Secondly, I would like to thank Golden Sea company for giving me time to research and staffs for taking their precious time for interviews Without the support of the company and the employees in the company, this thesis would not have been completed

Thirdly, I would like to express my gratitude to my classmates for sharing, helping and encouraging each other during this MBA course And last but not least, I would like to give my specials thank to my family always beside me and give me encouragement so that

I can finish my thesis

EXECUTIVE SUMMARY

Golden Sea Company is a company with 100% investment capital from Thailand and is also currently the top company in the production and distribution of rope and net products

in Vietnam today Golden Sea Company is using 2 main types of plastic materials: PP and

PE plastic The source of plastic beads produced in the country is currently not enough to meet the demand, plastic enterprises have to import from abroad

Especially, the increase in import tax on plastic to 3% from January 1, 2017 also makes the costs incurred by plastic businesses increase significantly The import of plastic materials also makes businesses "worry" about fluctuations in exchange rates in the market Not only

is the company interested in the price of raw materials, but the quality of raw materials is also a top priority The company always choose the leading suppliers of plastic materials, both domestic and imported in order to ensure the quality of production inputs to help the Golden Sea brand always be highly appreciated by consumers, creating trust for future growth Not only the fluctuation of raw materials in the current market, Golden Sea Company is also facing supply chain problems within the company There is a difference between the forecasting, planning and actuality from the Sales, Planning, Purchasing and Production departments Although the company can still manage during the "Coronavirus" pandemic occurred from the second quarter of 2021

However, the gap between forecasting, planning and actuality is often much different, which will have many impacts on production plans, waste operating costs and importantly, not meet the demand of customer about finished products Through interviews and research from theoretical frameworks, the author has discovered the root cause of the problem being faced at Golden Sea company is that there is no over quotas by level Finally, the author proposes a solution with reasonable estimated cost that is to apply the OKRs model to the Sales department so that each employee can know what their individual goals are, which

is committed by staff level and management levels

CHAPTER 1: PROBLEM CONTEXT

Golden Sea Company was formed with 100% capital investment from Thailand and was established on 18/7/1995 to be the top manufacturer of Thailand for rope and net used for fishing, maritime transportation, industrial and agricultural sectors, etc… With 60 years

of accumulated experience in production Golden Sea' business reputation and product quality are not only famous domestically but also spread abroad

With the main vision of bringing the highest technology and the most affordable products

to contribute to the development of the Vietnamese economy, especially in fisheries, agriculture and some manufacturing industries With technical products, Golden Sea has affirmed its strength compared to other manufacturers Modern technology and production machinery system with German, Italian, Japanese, Spanish, Indian and Thai technologies can produce ropes with diameters from 1.5mm - 120mm and capabilities bearing (breaking force) up to 100 tons Golden Sea currently has 4 factories: 1 factory at Ho Chi Minh City and 3 factories at Long An Province with high productivity

Products with leading quality currently in the Southeast Asian market and recognized worldwide (of which the brand currently accounts for 89%, the market share of ropes accounts for 40% (surveyed by axis) of the rope market for fishing in Vietnam) and is currently favored by customers around the world such as Matai (Japan), And always at the forefront in the development of technology to produce fishing gears with traditional rope products as well as Fishery - Instrument materials; Antifouling paint and high-pressure lamps are used in fisheries, agriculture and some other applications

Vision: Making Golden Sea become one of the top suppliers of fishery nets and fishery products in the Asia

Mission: Golden Sea always finds the bond between the benefits of our customers, the community and our company important Golden Sea believes in offering the satisfaction for the customers and community by strategic, creative, unique and effective

ideas based on advanced technology and local tradition The result that brought in by Golden Sea is the added value for the customers, community, company and its employees Golden Sea believes in changing the view of the world regarding the image of Vietnam in the field of fishery nets and tools Golden Sea believes in creating products with the quality lasting through the time under the slogan “A steady faith lasting through ups and downs” Golden Sea believes that developing people is the most important goals of the humanity civilization Golden Sea always gathers, develops, encourages and maintains talented individuals We provide sufficient work environment, competitive benefit policies and worthy compensation for their contributions to the success of the company and the benefit

of customer and community Golden Sea shares the responsibility with the community

“The company chooses the same side with the environment” “the loving bridges”

“warming home”

Figure 1: The company organizational structure

Supply chain function includes all logistics management activities including planning and managing all activities related to sourcing and Procurement, including all logistics operations More importantly, it also includes coordination and collaboration with partners

in a comprehensive supply chain, which could be suppliers, third-party service providers, and customers In essence, supply chain management integrates supply and demand management within and between different companies A function that integrates with the responsibility of linking key business functions and business processes within companies into a cohesive and high-performance business model It includes all logistics management activities noted above, as well as manufacturing activities and promotes the coordination

of processes and activities of the marketing, sales, and design departments products,

finance, information technology

1.2.1 The gap in supply chain management

During the period of 2020, especially the 6-month period from June 2020 to November

2020, Golden Sea Company has many fluctuations in the supply chain management situation Typically, planning figure, procurement figure and execution figure have differences with each other Based on the data of some internal reports, it can be seen that there did not have a synchronization of main materials using plan at Golden Sea company Data used for analysis are data for all major material codes related to Polyethylene and Polypropylene NPE is an item code for Polyethylene and NPP is an item code for Polypropylene, 2 main type materials using for production

Unit: Kg Source: Internal report Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20

Table 1: Main material data from June 2020 to November 2020

With the data table presented above, two bar charts will be formed in order to present the discrepancy of the data in the period from June 2020 to November 2020

Unit: Kg Source: Internal report

Figure 2: PE material data from June 2020 to November 2020

The chart of PE key materials shown over the 6-month period in 2020 shows that there is no common trait about three-digit trends in planning figures, procurement figures and execution figures at Golden Sea company It can be seen that the number of Procurement has fluctuated up or down markedly The highest figure was in July 2020 with more than 700 tons and the lowest figure was in September 2020 with just over 100 tons For the other two trends of Planning figure and Execution figure, although there are no common features of these two trends, the gap between these trends was not too large

Unit: Kg Source: Internal report

Figure 3: PP material data from June 2020 to November 2020

With the data chart of the main material PP, it can be seen that there is a tendency between these numbers to be heterogeneous There are specific months that in July 2020 and November 2020, the execution figure is much higher than the planning figure And although the procurement figures have a huge difference even in August 2020, there is no transaction activity about this main material But transaction activities in the remaining months can ensure that there is no shortage of using for production activities

1.2.2 Symptom validation and justification

What will happen to businesses when planning figures, procurement figures and execution figures do not match up? And this symptom can be clearly seen at Golden Sea Company with the gaps between these number shown below

Unit: Kg Source: Internal report

Figure 4: The gap between Planning figure and Execution Figure/ Procurement figure

in PE material

The above bar chart represents that the gap between Planning figure and Execution figure / Procurement figure in PE materials from June 2020 to November 2020 Positive figures indicate that the Planning figure is higher than the Execution figure / Procurement figure On the contrary, the negative figure can be understood that the Planning figure is lower than the Execution figure / Procurement figure In July 2020 and November 2020, the gap between planning figure and Execution figure in PE material showed negative fluctuations and this indicates that the supply chain process system goes from planning, procurement to execution There is still no synchronization

And this is no exception for the main material PP, which is more volatile than the PE material Positive figures indicate that the Planning figure is also higher than the Execution figure But with this chart, the fluctuation between Planning and Procurement figure have

an obvious differences with the number from 200 tons to 300 tons Besides, the negative

2020-Jun 2020-Jul 2020-Aug 2020-Sep 2020-Oct 2020-Nov

The gap of PE material

Planning vs Execution Figure Planning vs Procurement Figure

figure can also be understood that the Planning figure is lower than the Execution figure / Procurement figure

Source: Internal report

Figure 5: The gap between Planning figure and Execution Figure/ Procurement figure

in PP material

CHAPTER 2: PROBLEM IDENTIFICATION

In order to investigate the problems leading to the gap between Planning Figure and Execution Figure/ Procurement Figure at Golden Sea Company Some interview was conducted to figure out some potential problems of this symptom

The sales department is the department that makes forecasts about the number of sales, so this is the link between the problems occurring in the supply chain system And Mrs Duyen

- Assistant to Deputy Commercial Director is a person who has the ability to give some discussion about the gap between Planning Figure and Execution Figure/ Procurement Figure She mentioned the timing of forecasting as well as how the forecast quantities are sent to the Supply Planning Department The Sales Department will forecast the number

of sales each quarter, while the sales department send the plan at the beginning of the month

2020-Jun 2020-Jul 2020-Aug 2020-Sep 2020-Oct 2020-Nov

The gap of PP material

Planning vs Execution Figure Planning vs Procurement Figure

to the Supply Planning Department so that the Supply Planning Department will plan and notify all relative departments However, about the change in sales volume, it will depend

on market demand forecasts (sales volume and input materials) In addition, sales volume also depends on the customer's orders (usually exported sales orders)

The Procurement Department is one of the most important department in the supply chain system, cause this is the department that directly works with suppliers to meet the schedule of production plan and generate production according to sales forecast Besides,

Mr Quoc Danh is a staff monitoring of the inventory of raw materials and plans to buy raw materials and some discussion to Mr Quoc Danh can be mentioned about the gap between Planning Figure and Execution Figure/ Procurement Figure According to Mr Quoc Danh – Procurement staff in charge of main materials: Due to limited financial capacity, many contracts are required to change their payment terms However, some suppliers do not agree to the change terms, resulting in unsuccessful transactions, and the Procurement department is forced to look for an alternative supplier Next, there are many cases where materials have been negotiated for production plans, but because the storage capacity is limited and the loading and unloading workers are low, it is not possible to unload and store these materials Moreover, the unqualified of input materials is also one of the reasons leading to the delay in production

Although the finance department is not part of the supply chain, the procurement activities are highly dependent on this department The company currently has the parent company and branches but according to the policy set out by the Board of Directors, all raw material purchases will be transacted from the newly established company According

to Mrs Phuong Trang – financial executive: Because a newly established company is an affiliated company, the new company's finances are facing several difficulties As a new company, the loan limitation as well as the loan procedures and the ability to manage cash flow are limited There are some periods when trading activities are dense and lead to the company's cash flow exhausting The Finance Department is required to borrow money from the bank Waiting time until the bank disburses also takes a lot of time, so there are

some periods when the Finance Department cannot guarantee the payment term of many purchase orders for input materials

In order to explore more information about the warehouse issue, a small interview was conducted with Mrs Hong Thanh - Warehouse Leader Warehouse department plays

an important part not only in preserving raw materials but also supplying raw materials to the factory for production The problem here is, the productivity is increasing, the storage capacity remains unchanged and the number of employees is decreasing According to Mrs Hong Thanh, the current workforce of the Warehouse Department has been reduced compared to early 2020 The number of loading and unloading workers in Warehouse 1 is

3 people and Warehouse 2 is 5 people In addition, the Warehouse department also has to give priority to export container shipments, so it is difficult to arrange to receive multiple containers of raw materials - especially those without pallets Occasionally, in some cases

of transporting goods, the packing of raw materials had trouble However, this number is also negligible

2.1 POSSIBLE PROBLEMS

Based on information from interviews with employees at Golden Sea Company, the initial cause and effect map is formed as below:

Figure 6: The Initial cause and effect map

Unexpected orders

Overdue problem or re-negotiation with

suppliers about payment term

The limited loan procedures for all activites

Damaged materials left in stock

Not enough storage space and worforce to

manage materials

Wasting opex when there is not enough raw materials for production

The gap between Planning Firgure and Execution Figure - Procurement

Figure

Consequences that business has with the problems outlined above are: delayed production planning, wasted operating expenses when there is not enough raw materials for production and finally not enough finished products to meet customer needs These are serious consequences that Golden Sea business has to face with if the symptoms last long And it can be seen that no manufacturing enterprise can avoid serious consequences if the enterprise does not consider the causes to come up with appropriate solutions.

2.2 PROBLEM IDENTIFICATION

From the above initial cause and effect map, there are seven potential problems identified from the interviews that are:

o Unexpected orders

o Inappropriate forecasting in sales data

o Overdue problem or re-negotiation with suppliers about payment terms

o The limited loan procedures for all activities of the company

o Suppliers delivery unqualified materials to the warehouse

o Damaged materials left in stock

o Not enough storage space and workforce to manage materials

Thus, deeper analysis of the interview results and literature theories are supporting to figure out the main problem leading to the gap between Planning figure and Procurement figure/ Execution figure at Golden Sea Company

2.2.1 Ineffective Forecasting

According to Hendricks & Singhal (3), the phenomenon supply chain glitches is explained

as mismatches between supply and demand, which have shown to affect to company’s short and long-term profitability And one of the primary reason lead to supply chain glitches is the inaccurate forecasting And Fisher & Raman (3) also stated that “the perfect forecast is usually impossible although demand forecast are important Cause the demand

is affected by a variety of factors and the level of uncertainty is large.”

As the study of Oliva and Watson mentioned about two potential sources of forecast bias are intentional and unintentional, that lead to huge effect to forecasting performance About intentional biases, which were driven by incentive misalignment and differences in the disposition of power On the other hand, unintentional biases were driven by cognitive limitations Different departments are evaluated according to separate criteria, performance and are rewarded on the completion of those activities Thus, forecasts might be biased in such a way to benefit one’s own agenda

Forecasting is critical for the business and for all governance decisions Forecasting is also fundamental to planning and control In the production planning, finance and accounting functions, forecast figures are the basis for cost control and budgeting The manufacturing and operations department uses forecasting data to make periodic decisions about supplier selection, process selection, capacity planning, facility layout, decision making and continuous on purchasing, production planning, scheduling and inventory control

Regarding this problem Mrs Tuong Lan gave the opinion that: “Each month the Planning Department will receive a forecast of sales volume from the Sales Department The Planning Department will then calculate the quantity of materials for production and send an email at the beginning of the week detailing the quantity of these materials to relevant departments to capture, eg: Sales Department, Purchasing Department, Department Warehouse, Factory…

When there is a change in Production / Production output from the Sales Department, the Planning Department recalculates the quantity of raw materials to promptly notify the relevant departments However, there are some instances where productivity changes from management direction (as market volatility will increase or decrease).”

2.2.2 Financial problem

According to Trevor Miles (6) – one of the commentators and the consequences from the SCM World Chief Supply chain officer report survey 2010 clearly indicated the importance and benefits of closing the gap between Planning figure and Procurement Figure/ Execution Figure The business driving factors behind this demand starts from customer expectations of reduced order-to-delivery lead times and the competitive pressure to launch new products to market in shorter and shorter cycles However, the gap is even wider than

just between supply chain planning and execution And this is caused from the gap between financial planning and supply chain planning And this can be considered that financial problem – payment procedures problem in particular is also one of the problems causing the current symptoms of Golden Sea Company

Min and Zhou 2002 (1) mentioned about finances issue in supply chain that “A supply chain network transfers information, products and finances between different suppliers, manufacturers, distributors, retailers and customers The supply chain is characterized by a forward flow of goods and a reverse flow of information Typically, a supply chain consists of two main business processes: materials management and physical distribution

Different entities in a supply chain often operate autonomously with different goals and constraints However, when it comes to improving critical performance, increasing quality, or reducing costs, they become very much interdependent It is the flow of material, resources, information, and finance that provide the force of engagement

Source: SCM World Chief Supply Chain Officer Report Survey 2010

Image 1: Key actions being taken by supply chain professionals

With the image 1 “Key actions being taken by supply chain professionals, it can be seen that financial arrangements with customers or suppliers is one of the most important activities occurring at company And that proves that financial problems - specifically about payment procedures have a big impact on the symptom “The gap between Planning figure and Execution figure/ Procurement figure

Mrs Phuong Trang – financial executive shared that: “As a new company, the loan limit as well as the loan procedures and the ability to manage cash flow are limited Many L / C payment procedures for foreign payments are also difficult - the allowable limit is low and the payment value of the contract is high

There are some periods when trading activities are dense and lead to the company's cash flow exhausting The Financial Department is required to borrow money from the bank The time to wait until the bank disburses also takes a lot of time, so there are times when the Financial Department cannot guarantee that the payment term of many purchase orders for input materials.”

2.2.3 Ineffective supplier management

The research was conducted by Peerless Research Group (PRG) (7) on behalf of Supply Chain Management Review and Logistics Management for E2open indicated that “In

general, many interviewed believe that the working relationship with suppliers is very reliable and that they are a perfect match for their partners or keep in regular contact when dealing with any issues in supplying outsource materials at company However, one-third (33 percent) disclosed that they were dissatisfied with their suppliers, said that some partners may not be proactive or react promptly when necessary, or that they simply fall short in full-filling requests”

Source: Peerless Research Group

Image 2: Relationship with key suppliers

The research stated that “Many of our key suppliers are neither responsive nor timely Due

to the uniqueness of our product line, holding suppliers accountable is challenging!” Sourcing & Procurement; Healthcare; $1B-$9.9B

Source: Peerless Research Group

Image 3: Ability to resolve unexpected events with suppliers

The above theories partly explain the problem of supplier management of businesses today Not only Golden Sea Company but also many other businesses are facing this same problem

With the sharing from Mr Quoc Danh - Purchasing executive: “The inspection of input materials

is also quite rigid, leading to many times when the materials are already in stock but have not been used yet because the QA department has not yet released the test results

Occasionally, Supplier deliveries of poor quality Sometimes, the order is urgently needed for production, but when the supplier arrives, it does not meet the quality.”

2.2.4 Poor inventory management

According to William Brandel (2): “In today's difficult and volatile business environment, distribution-intensive companies such as retailers and distributors have to match supply with demand - not only to a competitive advantage but also to survive Achieving that goal requires operational approaches (such as implementing buffer inventory) that might sometimes contradict the tradition of inventory management: cost control and efficiency This finding (2) is also concerned about shift in strategy means that cost reduction, the key marker of inventory efficiency, now runs a distant second to improving service levels This does not mean that companies are adopting a demand-driven strategy that ignores cost However, the road to demand-driven inventory management will put a great deal of pressure on companies' ability to control costs

Source: SCM World Chief Supply Chain Officer Report Survey 2010

Image 1: Key actions being taken by supply chain professionals With the research by SCM World chief supply chain officer 2010, key action about laid off people from the supply chain organization took the fourth place, with 33 percent responded

by C-level and 31 percent by others

And this case is also the same with the mention of Mrs Hong Thanh - Warehouse leader: “Because

in 2020, the workforce of warehouse was cut compared to the previous times Although production capacity of the company is higher, but due to the cut cost policy, warehouse workforce was also cut following by the requirement from Board of Director.”

2.3 MAIN PROBLEM VALIDATION

2.3.1 Problem definition

According to the definition about Forecasting of Cambridge (5), forecasting is the job or activity of judging what is likely to happen in the future, based on the information have now In order to have a better understanding about this definition, another explanation from Corporate finance Institute (4) will be more specific in the economic sector “Forecasting

refers to the practice of predicting what will happen in the future by taking into consideration events in the past and present Basically, it is a decision-making tool that helps businesses cope with the impact of the future’s uncertainty by examining historical data and trends It is a planning tool that enables businesses to chart their next moves and create budgets that will hopefully cover whatever uncertainties may occur”

Anwar (8) stated that “Forecasting is one of the oldest management activities The choice

of forecasting method must start by a clear statement of the purpose for which the forecast

is being made Forecasting is also an effective part of inventory management Furthermore, forecasting is the prediction or estimation of the occurrences of uncertain future events Besides, forecasting offers an organization some foresight in the premeditation of appropriate courses of action

Organizations typically rely on two types of forecasts, concrete judgments and statistics The best forecasts are often made from a combination of these methods Some companies still un-necessarily rely on predictive forecasts Makridakis et al (9) stated that any alternative involving predictive forecasting is bound to fail because the amount of effort and the monotony of the work involved preclude the possibility that any individual who does the job without feeling bored and unproductive Predictive judgment is greatly influenced by fantasies and special considerations Furthermore, judgmental bias is common in forecasting This finding was found by Hogarth and Makridakis (10); Moriarty and Adams (11) and Schnaars (12) Judgmental forecasts can lead to large and systematic errors due to bias in the way information about the future is processed

With the analysis of each potential problems, the author can see that the Forecasting can cover all given problem, for example: Sales forecasting, demand forecasting, financial forecasting… In conclusion, following some interviews were conducted with Golden Sea company staff and literature reviews, there are four central problems which include ineffective forecasting, financial problem, ineffective supplier management and the last is

poor inventory management As a consequence of analysis, the updated cause and effect map has been shown as below with the main problem is ineffective forecasting

Figure 7: The Updated Cause and Effect Map

Unexpected orders

Overdue problem or re-negotiation with suppliers about payment term

Damaged materials left in stock

Not enough storage space and worforce to

manage materials

The gap between Planning Firgure and Execution Figure - Procurement Figure

Wasting opex when there is not enough raw materials for production

Poor inventory

management

2.3.2 Justify the important of main problem

In today's market economy, forecasting is extremely important to businesses because it provides the information needed to detect and allocate future resources in a radical and realistic way With the information that forecasts allow policy-makers as well as business leaders to make decisions about investment, production supply, savings and consumption, financial policies and economic policies Forecasting not only creates a scientific basis for policy making, for the formulation of development strategies, for master plans, but also allows review and evaluation of plan implementation and plan revision The relationship between forecasting and planning is shown in the following figure:

Figure 8: The relationship between Forecasting and Planning

Demand forecasting in a manufacturing company is very important to the company as a whole as it provides the basic input into the planning and control of all functional areas including logistics, marketing, production, and logistics export and finance The level of demand and its timing greatly affect the capacity level, financial needs and general structure of the business Each functional area has its own special forecasting problems such as material delivery and plant capacity etc Lines (13) shared that the driving force for

Management's objectives

Advantages

decisions

Resource allocation and commitment Disadvantages

Implementation and regulatory policies

a firm's performance is a forecast demand that will have to be met Without a forecast, there

is no basis for determining what to stock, what to ship, or what to produce

As the research of Anwar (8) that in terms of just in time system (JIT), it is important consider that customers often expect timely product deliveries a right place and in the right quantity In any industry if the manufacturing company's lead-time is greater than the customer's lead-time, it is essential to predict customer's demand and manufacturing to stock This phenomenon is clearly shown in this below figure:

Figure 9: Forecasting the demand in JIT manufacturing systems

An effective business forecasting affects business growth positively, but ineffective use of

an appropriate method of forecasting may affect business growth negatively, because it is assumed that non satisfaction of consumers taste will lead to negative or law demand for the goods and services offered to the consumers This is one way of determining effective business growth forecasting and its usefulness And in supply chain management, the field

of forecasting plays a very important part: Good supplier relations and price discount for

materials and parts depend on accurate forecasting The forecast must strive to get the right items in the right quantity, at the right price and at the right time

In terms of the current state of Golden Sea Company, the Board of Directors and managers have made forecasts about sales volume as well as production and raw material purchasing plans However, because these data are not linked and consistent with each other, it has also led to the fact that the supply chain at this enterprise is not synchronize This problem also keeps happening between month to month If the situation is not big, it will not

Manufacturers Lead Time Customer's (2) Lead Time (can have pure JIT system)

Customer's (1) Lead Time

Time (Must anticipate or forecast demand)