PM launches new vision for agribusiness

However, if such a vision is to be realized, one of the first things the government and business community with the assistance of academia must focus on is developing world class supply chains both domestically and globally, say leading market analysts.

Presently, inconsistent quality and availability of transportation infrastructure is impeding not only the flow of goods in the country but is adding significant cost to logistics operations and creating a variety of other losses such as post-harvest spoilage.

These groups working collectively must devise and implement a long-term strategy to enhance the industry’s supply chain capabilities if they intend it to be a serious competitor in the world market.

To this end, the Prime Minister has rolled out a new national policy making achieving excellence in supply chain education, research, and decision-making.

The strategy aims to encourage agribusinesses to sell substantially all of their products utilizing e-commerce in the domestic market and through foreign distribution networks in overseas markets in just five short years.

The project also launched a business support program providing funding from the state budget, autonomous private businesses such as from the EU along with a variety of other funding sources.

This is a formidable undertaking as it results in the upper echelons of management of these agribusinesses learning to understand the local customers and local customs in each and every country they serve.

Vietnam would be wise to pattern themselves after US based Walmart, some leading market analysts have suggested.

Over the past ten years, Walmart has become the world’s largest and arguably most powerful retailer with the highest sales per square foot, inventory turnover, and operating profit of any discount store in history.

According to Supply Chain Digest, this retail giant stocks product made in more than 70 countries and at any given time, operates more than 11,000 stores in 27 countries around the globe, and manages an average of US$32 billion in inventory.

Leading analysts laud Walmart as one of the world’s greatest logistical and operational triumphs and its transition from a regional retailer to global powerhouse in such a short time frame has made its name synonymous with the concept of successful supply chain management.

However, as recently as 2006 Walmart was forced to exit the German and Republic of Korea (RoK) markets because the management team failed to take the necessary steps to understand the habits of the typical customer and losses overwhelmed the giant company.

This lack of understanding of local customs and customers is in direct contrast to what is happening in the US, where Walmart has been highly successful and very aware of customer views and shopping habits.

It is not easy for a Vietnamese company to join Walmart’s supply chain for agriculture food and related products in foreign supermarkets, according to Le Quang Hung, Chairman of Garmex Saigon.

Under a Walmart supply chain initiative called Vendor Managed Inventory (VMI), for example, Vietnamese companies would be responsible for managing their products in Walmart’s warehouses.

Cross docking is also a logistics practice that is the centrepiece of Walmart’s strategy to replenish inventory efficiently.

It means the direct transfer of products from inbound or outbound truck trailers without extra storage, by unloading items from an incoming semi-trailer truck or railroad car and loading these materials directly into outbound trucks, trailers, or rail cars (and vice versa), with no storage in between.

Suppliers deliver products to Walmart’s distribution centres where the product is cross docked and then delivered to Walmart stores. Cross docking keeps inventory and transportation costs down, reduces transportation time, and eliminates inefficiencies.

In addition, Vietnam will have to expand the number of personnel that possess effective communication skills in English and other foreign languages as well as business management skills to effectively manage such a sophisticated supply chain within Walmart’s logistic masterpiece.

On the other hand, distribution and retail systems in a few countries in Europe have purchasing directors and getting goods in foreign supermarkets is much easier than Walmart, said General Director Nguyen Van Thinh of Viet A Chau Investment & Development Corporation (VITACO).

In its relentless pursuit of developing a state-of-the-art supply chain it will be necessary for Vietnam agribusiness to embrace technology, and become an innovator in the way that domestic stores track inventory and restock their shelves, thus allowing them to cut costs.

Suppliers and manufacturers within the supply chain will also need to synchronize their demand projections under a collaborative planning, forecasting and replenishment scheme, and connect every link in the chain through technology that includes a central database, store-level point-of-sale systems, and satellite networks.

The new approach will mean frequent, informal cooperation among supermarkets, distribution centres and suppliers and less centralized control.

Furthermore, the nation’s supply chains, by tracking customer purchases and demand, will allow consumers to effectively pull merchandise to stores rather than having the companies push goods onto shelves.

Supply chain management is all about moving the right items to the right customer at the right time by the most efficient means and the new initiative by the Prime Minister certainly presents a daunting challenge to the entrepreneurial talent in agribusiness.