SITUATION AND SOLUTION OF IMPROVED EFFECTIVE MANAGEMENT
OF IT APPLICATIONS IN VINAMILK FOR THE PERIOD 2015-2020
General introduction about Vinamik:
Vietnam Milk Joint Stock Company was established following Decision No.
155/2003QD- BCN dated October 1, 2003 of the Ministry of Industry for converting
Vietnam Milk State Enterprise to Vietnam Milk Joint Stock Company. converted dairy
company Vietnam Dairy Products Joint Stock Company Vietnam.
Full name: Vietnam Milk Joint Stock Company
Abbreviated name: VINAMILK
Head Office: 36-38 Ngo Duc Ke, District 1, Ho Chi Minh City
Office for transaction: 184-186-188 Nguyen Dinh Chieu, District 3, Ho Chi
Telephone: (+08) 49300 358
Fax: (+08) 49305 206
o Manufacturing and trading canned milk, powdered milk, nutrition,
bread, fresh milk, soy milk, soft drinks and other dairy products;
o Sales of food technology, equipment and spare parts, supplies,
chemicals and materials;
o Housing business, broker for real estate and leasing, business in
warehousing, parking, business in automobile transportation, loading
and unloading goods;
o Manufacturing and trading alcohol, beer, beverage, food processing, tea,
o Manufacture and sale of packaging, print on packaging;
o Manufacture and sale of plastic products;
• Vinamailk business strategy:
In the past years, despite the competition of dairy products in country and abroad,
Vinamilk with its effort maintain its leading role in the domestic market and effective
competition with foreign milk brands. Revenue of local increased annualy at average of
20% - 25%. According to a vote of 100 most powerful brands in Vietnam (organized by
Saigon marketing magazine), Vinamilk is the number one food brand of Vietnam, leading
market share, is trusted by consumer and consecutively voted top a TOPTEN Vietnam
high quality goods. One of Vinamilk’s success is a diversification of products to meet the
needs of all customers from infants, children, adolescents, adults and those with special
Total revenue (Billion VND)
Profit before tax (Billion VND)
Picture 1: Sales result of Vinamilk from 2009-2013
• The advantaged competition of Vinamilk comparing to other firms in the
Vinamilk brand name become familiar with the consumer;
The Vinamilk’s products are diverse, many kinds of products to meet the needs
of many different ages;
Vinamilk has large-scale production with dairy system across throughout the
Modern production technology, applying international standards;
Picture 2: The market share of dairy enterprises in 2013
Application of Information Technology in Vinamilk:
Today, Information Technology (IT) is present and plays an important role
indispensably in the process of administration, governance of the business operations in
each corporation. The development and application of the Internet has changed the
models and business activities of enterprises, the shift from traditional transactions to
electronic transactions have affected the position, role and the needs of all related parties
(customers, suppliers, investors ...).
1. Model for Application of Information Technology in Vinamilk during the
The IT investment activities in corporations serve the business goals such as
support for operational activities, support for management decisions, support the
development of strategies to achieve beneficial competition, ... There are many models
for IT investment in corporation, each model has different approach but all share the goal
that to help corporation to identify investment route and the relationship between the
components in the overall picture of the application of IT in business. Each corporation
needs to choose their own appropriate IT investment model to promote efficiency
investments to serve business objectives and match fishing capacity of business
IT investment model in communications Board of Vietnam Textile & Garment
Corporation can be combined in 4 different stagest: investments of IT infrastructure;
enhancement of operating applications; application for comprehensive capacity and
production management; Investment to transform business and create competitive
advantage internationally. At each stage, it has specific objectives and follow the
fundamentals of IT investment that investment must be consistent with the business
objectives of the enterprise; investment must be effective; sufficient investment for
people to use and promote investment in technology.
Stage 1: Investment of IT infrastructure
This stage is initial investment of business on IT including equipped basic
hardware, software and human resource. “Basic” level could be in-consistent, however, it
should meet some major requirement about IT infrastructure (hardware & software) such
as: computers, LAN, WAN network, Internet connection, communication environment
between departments internally and partners; human should be trained to use the basic IT
infrastruction and apply it for management of corporation’s business so that the
“background” could be established for next IT investment stage
Stage 2: Enhancement of operating applications
The objective of this stage is to improve IT investment performance, support for
functional department in corporation, namely activities of functional departments or work
groups as assigned. This is a natural development of most businesses, because the volume
of information to be handled increases, and having necessary skills for application of IT
in the previous stage. The investment to automize operational processes for improving
business performance such as to deploy applications to meet each field operation and to
management, other functional applications.
Stage 3: application for comprehensive capacity and production management
If stage 2 is considered as partial digitalizer, stage 3 shall be whole digitalizer of
business. Transforming from partial to whole digitalizer is the most issue of this stage 3.
Regarding IT infrastructure, it needs wide area network covering business, ensuring the
smoothy information flows between departments, parts; Integrated software and
databases throughout the company are the key tools for the support and operational
management; deployment of synchronous solutions help companies change the internal
quality management, improve operating capacity, improve efficiency and increase
competitiveness as ERP, SCM, CRM, ... Digital Culture which is built and gradually
developed in two stages before has became reality good, contributing to the culture of the
enterprise business, which is the standard foundation work, the size measure new job, the
system of rules and tools to ensure the full implementation of the standards in the
Stage 4: Investment for transforming business and creating competitive advantage
This IT investment stage is to achieve advantage competition in the modern
business environment, ie investment in IT products and services to create cost
advantages, to make up the difference, and the other products in accordance with the
competitive strategy of enterprises. Currently, the business issues in the Internet age,
specifically, the use of technology and Internet services in business, have a decisive role:
building an intranet to share information inside enterprise, extranet to connect and
selectively share information with partners, suppliers, customers... Using Internet to form
relationships of e-commerce such as B2B, B2C and B2G. Inheriting strength on the basis
of data and business processes that have formed in business to raise the business to higher
level, global business. IT is an effective tool in the implementation of business strategy.
2. Current status of the application of Information Technology in Vinamilk:
National Information Technology Committee has surveyed the application of
information technology in 217 companies and the results has made a surprise to all
peoples. Currently, Vietnam enterprises have invested only a small cost ranging about
0.05-0.08% of revenue for information technology, while the average number is 1.5% in
the U.S. Investment policy for the information technology is still insufficient. Most
enterprises have invested only once for information systems and upgrade applications,
thus it is low investment and its performance is even lower.
The survey also showed that up to now there are still some enterprises having any
applications of information technology. Among state enterprises, they are about 10%,
while other business components, there are up to 60% which have not applied
information technology in their work. 40% of enterprises have not strongly invested in
information technology because there are enough qualified staff to manage and exploit.
Enterprises have initially aware of the importance of information technology but the
numbers where can now applied deeply capabilities of new information technologies are
still small numbers. It is not surprise that the most important programs, the most widely
used in the enterprise are financial and accounting management. Approximately 88% of
enterprise applying information technology application uses financial accounting
software, but only about 20% of the software satisfies their needs.
Procedure for management of input and output is completely manual and
this has led to a number of consequences, such as excessive inventory while the output is
too slow consumption or the use of machinery and workers have not reached full
capacity... all these things have caused costly in the manufacturing process of vinamilk,
directly affect the company’s profitability.
Procedure for control of manufacturing, order processing, cost accounting
is not uniformity causing the increase of production costs, warehousing costs, inventory.
When tanking into account, manual accounting often have encounter errors
as employees always do. With manual account, Vinamilk’s managers have not easily
checked steps and processes. The amount of paperwork is large, in many cases it is
unavoidable loss or damage.
Vinalmilk’s System of Information distribution is majorily executed
between the Company and the Agent.
3. Role of IT application in enterprise:
So far, companies have acknowledged that IT has contributed significantly to their
development. In addition to keeping records, documents, Companies also use IT in
enterprise management, rapid reporting and exchange with partner ... Use of IT in online
businesses has been applied in enterprises in developed for many years, however it is not
common in Vietnam. Selling online not only saves labor but also the cost over the
traditional way of selling. While the company has to consider cutting maximum expenses
but they need to spend a lot for selling products following trandition way, this issue need
to be well study and consideration by the company.
• Information Technology & The fundamental change in business:
Globalization in the 1990s gave an important social trends that is the transition
from industrial society to a knowledge society which information and keep critical role.
Today, the development and application of IT has forcasted a new era of great social
change. IT is likely a common technology in all areas - economic society.
IT will change the market conditions and the position of the partners in the supply
chain structure. Consumers will keep essential important role in this whole chain. This
will have a tremendous impact on the structure inside and outside of the company.
Moreover, when labor is mainly based on the knowledge, the content and its form will
IT trend to blur the border, not recognizing the isolation, open space for a wider
variety of creative participants. Therefore, IT applications is creating the new game, with
new rules, forcing participants to accept. The pressure of this type of business must have
quite big impact to Vietnam enterprise business operation. IT as a challenge as well as an
important technology shall promisively help businesses rapidly integrate Vietnam into the
global economy. IT will be a major resource to create important breaks of Vietnam
economy - the economy 97% of GDP from SMEs, to find their place in the global
competition. The problem is to find the direction to the path to IT penetration, spreading
fastest in SMEs, improving the competitiveness of SMEs.
• Information Technology – an improvement in tehcnology:
Based on the improvement process, it can divided into the improvements on the
basis of knowledge, new technology, also known as the tech improvements, and
improvements based on exploitation of existing technologies called extended and
Improved technologies relates to improving both product technology and process
improvements. This distinction is important, because:
Firsly, it helps acutely aware of the relationship between additional product
enhancements and process.
Secondly, improvements generally have greater influence with the system of social
technologies and innovative perspective.
Thirdly, between acceptance and application of improvement and product have
differences. This suggests that awareness of the specific conditions, the implications of
innovation is a prerequisite for the acceptance and application, the successful application
of innovative products or processes.
We will insist on process improvements through information technology, because
the improving processes is essential for the professionalisation of the industry in the long
term and therefore, it contributes to improving competitive position of SMEs to large
enterprises. Moreover, most SMEs lack the necessary knowledge about strategic
application of process improvements such as information technology.
• IT create competitive advantage for enterprise:
During more than 40 years, the use of information technology in manufacturing
systems and services has made great changes. The first applications of IT in the 1960s
focus the advantages of efficiency in the management process. With information
technology, the traditional calculation is done faster, more reliable and more accurate.
The relatively cheaper machines will replace human labor. To date, IT has very extensive
intrusion into the business process, not just the manufacturing automation and flexible
manufacturing, the development of management information systems become decisive
support system bringing more and more competitive advantage to the organization. An
overview, competitive advantage can be seen in three ways:
− Product Development: offering new products or services on the market. Technologies
such as automated production lead to improved product or service packs.
− Market development: ie to reach new markets with present products or services. With
the use of applications such as telemarketing, it can reach new markets through new
− Diversification: offering new products or services in new markets. Through the
application of information technology and add more on such product or service
creating a new service for existing customers. This service can also attract to
organizations that can penetrate new markets.
Customers increasingly require timely deliveries with high quality. This requires
integrating automated flexible manufacturing, with automatic management. Specially,
Internet plays a key role in this process. The network is beyond the limits of an
organization, aims to optimize across disciplines, or fields of supply chain. This type of
improvements makes it possible to serve customers more frequently for more suitable
products, more reliable, faster. Customers will increasingly become the focus of activities
in the supply chain. Supply chain will have nearly the same characteristics of the old
manual system, but information technology allows production to meet customers more
effective. For this purpose, the organizational structure of the enterprise was transformed
into the less structure; more flexible with staff having sufficient training, the new type of
labor which is more independently also appear. The partners in the supply chain have
different functions and their relationship became closer and often in the form of the
cluster. Because of the changes in the supply chain, SMEs can not grow beyond the
improvements due to the application of information technology .
III. Solution for application of ERP in Vinamilk:
1. Curretn status of deploying ERP in Vinamilk:
In order to meet the increasing demands of consumers, in recent years, Vinamilk
has un-interuppedly innovated technology, invested machinery and modern equipment,
advanced management and quality products. In 1999, Vinamilk has successfully applied
the quality management system according to international standards ISO 9002 and is
currently applying quality management system according to international standards
9001:2000 - the latest version of the world. Besides, Vinamilk has also strongly invested
in information technology and currently successful applications of software for business
administration Oracle EBS 11i ERP, SAP CRM software (System Customer Relationship
Management) and BI (reporting system).
1.1 Current status of Technology:
• Application of ERP in distribution process for Vinamilk’s products
Management of distribution channels is always the challenge for businesses. The
system can operate efficiently not only helps manage the process closely, providing
extensive services, but also timely approach quickest consumers to create competitive
advantage in the market of business.
Due to IT applications, Vinamilk has effectively managed product distribution
channels. Vinamilk is currently applying three international ERP solutions including
Oracle, SAP and Microsoft. How to master and integrate all three solutions?
Picture 3: Integrated information system ERP
• Change the distribution process
Vinamilk is one of few Vietnam enterprises applying management solution for
customer relationship (CRM-Customer Relationship Management) by SAP. This project
is the second phase of ERP implementations of this company. After eight months, the
second phase of the ERP project has been accepted to the core (SAP CRM) after
deployment to more than 40 distributors and expects all the other distributors will be
integrated into this system.
- Before having SAP CRM system:
Information about Vinamilk distribution was mannualy collected between the
company and the agent.
• At Current:
System of information for report and decision serving leadership (Business IntelligenceBI) is set in the center to manage distribution channels and sales promotions. The
distributor can be connected directly to the transmission system through the Internet
using SAP program, or in the form of offline connection using Microsoft Solomon
Software. Agents using software are developed by FPT for PDAs to record the
transaction. The sales staffs using PDA connect to the distribution system in order to
update the information.
The program has helped CRM system in the company's distribution channels through
software applications. This process supports staff to enhance capability, professionalism
and ability to capture the best market information through the use of shared information
across systems.Vinamilk has also managed the price, promotion in the distribution
system. Meanwhile, the enterprise’s objective is an important end-customers who also are
beneficial from the increase of gradually improved quality service.
• Application of ERP in accounting
When taking account, manual accountant of Vinamilk often encounter errors that
employees always do. With manual account, Vinamilk’s managers have not easily
checked steps and processes.
From the specific reasons, Vinamilk has found solutions to overcome a situation
effectively by using information systems ERP.
(ERP application model in service field)
With host system running SAP CRM software in the center, the database is
managed concentratively (Master Data), intergrated following standard of daily data from
distributors, from slaesman’s handheld mobile PDA system. A information system focus
on reporting the inventory status, goods, sales, liabilities… of each distributor. On this
basis, the staff at the center can analyze the situation of consumption to make the
processing direction, targets and distribution plans as accurate as possible.
SAP System is built based on the SAP NetWeaver technology platform. In Vinamilk,
NetWeaver integrates information from ERP systems using Oracle EBS along with
Solomon system used by distributors and application on PDA for sales staff . These three
applications are integrated into the system NetWeaver (BW-Business Warehouse) to
serve for intelligent reporting system, helps leaders to have accurate information about
the situation and online operations across the national.
1.2 Process status:
ERP systems using Oracle E Business Suite Oracle provided by Pythis and
commenced from 03.15.2012 comprise of financial - accounting, procurement
management - sales management, management production and analysis of operating
results (Business Intelligence - BI). The technology transfer takes place across the
Vietnam Dairy Products Joint Stock Company - Vinamilk with 13 locations, including its
headquarters in Ho Chi Minh City, warehousing and enterprise branch plants across the
The process of implementing ERP in Vinamilk has 3 main stages. So, there is situation
in whole Vinamilk company that some organizations hae used vinamilk have used ERP,
some have not. Therefore, there is a problems arose in the reporting system, company
operation. Besides the three main ERP modules, Vinamilk also receive a software system
to extract intelligent data BI (Business Intelligence). Pythis has programmed on 300
forms of Vinamilk’s reporting process. This is a large intellectual property resulting from
The splitting process helps companies access the system easier, resolve arosen
problems with related parties, help for the next extension scales, more application of new
technology minimizing the risk, more smoothly and successfully.
Surveying the description of current process has been conduted as follow:
Vinamilk IT Department was established with 26 staff dividing into several groups:
computer support, network group, server database group, the programming team and
Solomon support group (Solomon is a microsoft software).
The process of implementing ERPf follow ERP’s standard processes which are
widely applied in production and trade enterprise under the enthusiastic help of the
deployment Pythis, an independent consulting firm KPMG, Oracle solution providers and
has been particularly facilitate maximum from vinamilk leadership.
1.3 Current status of human resource:
The company has a plan to deploy trained manpower to operate the system by
sending a highly qualified, competent group for training.
Leaders create motivation, confidence for staff, and for a common goal along with
the rules, mental discipline in compliance with operating procedures.
Regarding the company’s organizational structure, beside enhancement of
employee’s knowledge, the system has met the needs of the user. The management
becomes easier and controllable.
1.4 Budget status:
To implement ERP systems, the enterprise must determine to arrange a big budget.
The largest expenses in the budget are for implemention of ERP. Estimation of cost items
will help ensure the implementation progress and quality, otherwise, it will be easy to get
loss expenses. Cost for ERP software includes many categories, depending on the
deployment. However, the basic cost is usually for licensing costs, deployment support,
consulting, and maintenance, operation of the system ... and cost of IT infrastructure in
general applications such as hardware, network infrastructure.
Currently in Vietnam, there are only large, stable operation enterprises could spend
huge budget to invest in such building this ERP system. Most other small and medium
enterprises in Vietnam have not yet deployed it.
From 2012 to now, Vinamilk has invested for IT system totaling U.S. $ 4 million. (A
large amount of which is invested in ERP systems)
2. Comment about Vinamilk’s deployment of ERP:
2.1 Received interest and sucess:
After 8 months of operation across the company ERP, Vinamilk could preliminary
conclude about effective applications. The system helps companies to control operation
closely, avoiding risk in accounting; with clear decentralization, accounting have better
operation more than before. The management of warehouse, distribution and
administration of the business, customer relations and production has been better
managed, significantly reducing risk; there is better operation and coordination between
sales and distribution; monitoring are carried out following correct and real time.
IT staff qualification in Vinamilk have improved ever than before. IT
infrastructure is consolidation, synchronization, standardization and consolidation. From
2012 to now, Vinamilk has invested about $ 4 million (including ERP) for IT system and
confirmed that by deep and widely investment, Vinamilk has capacity to absorb large
Vinamilk has particularly successes in the distribution channel. The distributors can
connect directly to the transmission system through the Internet using SAP program, or
in the form of offline connection using Microsoft Solomon Software. Agents using FPT
software are developed by FPR for PDA to record the transaction. The sales staffs using
PDA connect to the distribution system in order to update the information.
We have also unified the business processes with distributors in accordance with the
distribution requirements such as pricing management, promotion, distribution plans, and
SOPs for sales staff with PDA.
2.2 Some weakness:
Lack of human resources: When deploying ERP, human resources take a top priority.
Not only Vinamilk but also almost all enterprises deploying ERP have difficulty in
staffing issues. Especially lacking staff having ERP knowldgement. That's why most
businesses have to send staff for training.
Large investment costs: Although, Vinamilk is one of leading and big enterprises in
Vietnam, ERP is still an expensive system for enterprises and Vinamilk has spent a large
expense for this investment.
2.3 Experience of deployment:
Although Pythis is a specialized business providing software solutions in Vietnam,
Pythis’s ability to supply entire ERP process for Vinamilk is not enough. It could be seen
that being a leading supplier, Pythis’s human resource, technology and capability are
limit. Pythis is a stragetic partner of Oracle in Vietnam but for the purpose of using all
Oracle capability in big enterprise of Vinamilk is not realistic.
Therefore, Vinamilk has purchased software solutions from both Oracle and SAP
to complete technology management capabilities at a high level. Vinamilk may want to
buy Oracle solutions for core management competencies and personal CRM (Customer
Relationship Management) SAP to strengthen customer management capabilities at the
The input data from customers and suppliers is updated by staff receiving
documents from partner employee. Therefore, there are latency and inaccuracy.
Cost for investment of ERP and put it into operation is relatively large for not only
not only hardware, but also software human capacity. The hardware system needs to be
greater investment in oder to be capable of running all modules. Software system is also
regularly updated to the latest version for the most effective management. Once the
hardware and software system can be purchased, the other important issue needs to be
mentioned is human to operate that systems. If Vinamilk want to use the ERP system, it
must not only invest in infrastructure but also to focus on human resources having
sufficient qualification to implement the system. This human resource is not only
understand about Vinamilk business but also having capability to operate system.
Therfore, Vinamilk must train staff to have enough qualification to use the system and
create a chance for staff to practice on real systems so that they could accumulate more
experience to achieve the highest efficiency when using systems.
Deployment of CRM and distribution for vendor are the other module different
from the central core module of Vinamilk purchase. Profession has reached to control
market, personnel capacity, competitive control of enemy ... It's so strange to deploying
employees and consultants of ERP.
In addition, Vinamkil is simultaneously applying three international ERP solutions
from Oracle, SAP, and Microsoft. Therefore, how to combine them effectively is also a
• Reason for sucess
- Strong commitment and support of Vinamilk’s leadership.
- Vinamilk has arranged specialized staff to participate in project implemetation.
- Vinamilk IT team has worked professionally and procedure complied.
- In addition, the project is supported by the production management system of
Vinamilk, provider of Oracle solutions and an independent consultant firm
- Main experience shared by Pythis is that involved parties (Pythis vinamilk, Oracle
and KPMG) clearly defined objectives but does not go into too much detail on
unimportant matters. Concurrently, there are always people who could solve
problems that arise incidentally.
 Dr.Tran Thi Song Minh, 2012. Management Information System. Ha Noi. National
Economy University Publisher.