VIETNAM NATIONAL UNIVERSITY HCMC

INTERNATIONAL UNIVERSITY
SCHOOL OF INDUSTRIAL ENGINEERING & MANAGEMENT

PROJECT
LAM HONG CONSTRUCTION - TRADING JOINT STOCK
COMPANY’S SUPPLY CHAIN
Module code: IS055IU
Module name: Principles of Logistics and Supply Chain Management
Lecturer: Mrs. Ngo Thi Thao Uyen

GROUP 10
Nguyễn Ngọc Khánh Linh IELSIU21111 Nguyễn Vĩnh Toàn IELSIU21055
Phan Trung Hiếu IELSIU19155 Ngô Hùng Minh Trí IELSIU21167
Thái Ngọc Mai IELSIU21035 Phạm Huỳnh Minh Triết IELSIU21168
Từ Yến Nhi IELSIU21040 Ngô Nhật Vinh IELSIU19321
 TABLE OF CONTENTS

I. INTRODUCTION........................................................................................................ 3
1. General information ...................................................................................................................3
2. Technology process characteristics............................................................................................3
3. Business results and assess advantages and disadvantages in business ....................................3
II. METHODOLOGY ...................................................................................................... 5
III. SOLUTION AND RECOMMENDATIONS ........................................................... 12
1. For raw material (coal) ............................................................................................................12
2. For end customers ....................................................................................................................13
IV. CONTRIBUTION FORM (%) ................................................................................. 15
V. REFERENCES........................................................................................................... 15

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 I. INTRODUCTION
1. General information
Lam Hong Construction - Trading Joint Stock Company, located on Chu Huy Man Street,
Phong Dang Hamlet, Hung Hoa Commune, Vinh City, Nghe An Province, is formerly known
as Lam Hong Co., Ltd., was established on March 22 nd, 1995 and registered to convert on

December 1st, 2003 prior to official activation on January 1st, 2004.

Company has a long history in many fields, particular in producing and processing honeycomb
charcoal, agent to buy and sell coal. Its business also includes construction of civil, industrial
and traffic works (bridges, roads, ect.), irrigation (lakes, dams, canals, ditches), and electricity
(lines, substations, etc.). Moreover, it also buys, sells, and works as an agent of petrol, gas stove
besides mining of all kinds of stones.

Additionally, transport of goods by sea (domestic and international), by road; or exploration,

exploitation, minerals trade, cargo handling services, and warehousing are also on its flow.
Eventually, repairing and building new ships and means of road transport as well as
construction of bridges and ports are also the indispensable fields of the company.

2. Technology process characteristics

Wharf port Processing all

Buy coal Processing
(company kinds of coal bran
(Quang Ninh)
warehouse) 3, 5, 6

Brick and
Buy coal bran cement company
3, 5, 6

Graph 1 – Coal exploitation procedure

3. Business results and assess advantages and disadvantages in business

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 Code
No. Criteria 2021 (VND) 2020 (VND)
number
Revenue from sales of goods and
1 01 149,962,869,193 127,068,093,317
services
2 The deduction from revenue 02 231,145,668
Net revenue from sales of goods
3 and services 10 149,962,869,193 126,836,947,649
(10 = 01 – 02)
4 Cost of goods sold 11 96,354,949,448 81,299,301,144
Gross profit from sales and service
5 20 53,607,919,745 46,077,646,505
(20 = 10 – 11)
6 Financial activities income 21 42,118,292 62,860,700
Financial expenses (interest
7 22 1,852,794,433 1,606,711,400
expenses)
8 Administration expenses 24 49,783,773,066 41,934,619,075
Net profit from business activities
9 30 2,013,470,538 2,599,116,730
(30 = 20 + 21 – 22 – 24)
10 Other incomes 31 169,806,069 80,952,381
11 Other expenses 32 30,000,000 46,000,000
12 Other profit (40 = 31 – 32) 40 139,806,069 34,952,381
Total profit before tax
13 50 2,153,276,607 2,634,069,111
(50 = 30 + 40)
14 Corporate income tax 51 538,319,200 460,962,094
Profit after corporate income tax
15 60 1,614,957,407 2,173,107,017
(60 = 50 – 51)

Table 1 – Report of business results in 2020 and 2021

Sales revenue margin in 2021, 0.357%, is nearly equal to 0.359% of 2020, indicating the
stability in profit margin from sales and the income of this company.
Business activities profit: = Net revenue – Cost of goods sold – operating expenses
= 149,962,869.193 – 96.354.949.448 – 49.783.773.066
= 3.824.146.600 (VND)
Therefore, this shows that the target of the company is high business profits with low cost.

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 ❖ Assess advantages and disadvantages in enterprises:
• Advantages
The company's operating area is concentrated with departments, so the operation process is
very convenient in synthesizing data and departments, helping leaders always capture timely
information, make decisions. As a joint stock company established from shareholders who are
individuals directly operating in the company, the company's leadership always makes the
company work with its best efforts, always striving to achieve the goal. Moreover, it always
facilitates employees being worked in an energetic, fair, and positive environment for
employees. The relationship between members is always friendly, and they are willing to
support each other in both work and life such their work always goes smoothly and is completed
on schedule. Finally, the staff is also enthusiastic about work and strives to achieve the target.
• Disadvantages
Since the supplier is too far away from Quang Ninh, it takes time and costs to transport. In
some cases, customer needs cannot be responded to in a timely manner. Moreover, there is a
huge amount of competitor enterprises in the same industry, which often puts pressure on the
income for the management board as well as employees.

II. METHODOLOGY
In 2015, the world came together to sign the Paris Agreement on climate change, which set the
goal of keeping the global temperature rise this century below 2°C and pursued efforts to limit
it to 1.5°C. The agreement sets out limits on the amount of CO 2 that can be released into the
atmosphere. This practice has been leading to a wide range of difficulties for Vietnam and the
world in general in terms of coal imports and exports.

This is also the main problem of many companies and others in Vietnam. In detail, this fact
leads to certain problems in the output: the mass bankruptcy of brick companies leads to
unsolvable after–production goods. There is also a second constraint that comes from the main
supplier. Import sources mainly come from Indonesia, must be imported from abroad and
shipments are subject to high import tax (Quang Ninh can minimize tax but cannot import bulk
goods like Indonesia). Hence the proper methodology that should be used to solve the issue is
Aggregate Planning, specifically Chase Demand. Chase Demand will control production equal
to demand, in line with the current general situation of the company. Importing and exporting
goods is difficult, so the company needs to have a specific plan to ensure there is no surplus or
shortage in the Inventory.

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To be more specific, the process of coal production is basically shown in the following flow
chart.

Graph 2 – The process of coal production

First, the raw coal is transported from the mines of five suppliers (shown in table 1) to Lam
Hong’s factory by ocean shipment. Then it is issued to the warehouse before being cleaned and
screened by machines. The next step is to mill coal and mix it well. After that mixed coal is
qualified by professionals in a third party called Vinacontrol Vinh Quality control center –
Branch Dong Bac corporation. This step will take a short time prior to exporting finished coal
to wait for the shipment to customers (shown in table 2), which can be end users if they have
high demand.

Figure 1 – Vessels using in sea freight shipping

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Figure 2 – Coal excavator Figure 3 – Coal loader

Figure 4 – Coal screen Figure 5 – Coal breaker

a) Before processing b) After processing

Figure 6 – Assessment certificate before and after processing

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 Figure 7 – Trucks using in transporting coal

In addition to this basic production technique, coal bran – another product of the company is
produced in a quite different process. After mining, it is first qualified there prior to transporting
to the warehouse by ocean or sea. The doubled – quality control may help the coal to be in the
highest condition. Meanwhile, the following steps will be the same as those in the previous
process from cleaning to delivery.

No. Suppliers Customers

Dong Bac Coal Transport and
1 Dien Chau Brick and Tile Joint Stock Company
Processing Joint Stock Company

Nghe Tinh Coal Trading Branch of Thien Son investment and development
2
Company company - Nam Thai tunnel brick factory
3 Tuan Hao Like Coin Co., Ltd Rao Ngang Brick Production Joint Stock Company
4 Hung Khoi Co., Ltd
5 Nghe Tinh Coal Trading Company
6 Hung Nguyen Brick and Tile Joint Stock Company
7 Duc Hien Vinh Trading and Service Co., Ltd
8 30-4" Brick and Tile Joint Stock Company
Toan Thang General Construction Joint Stock
9
Company
Thanh Ngoc Trading and Building Materials Joint
10
Stock Company
11 Tu Anh Duc Co., Ltd
12 Vinh Airport Base Battalion

Table 2 – Main suppliers and customers of Lam Hong

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To clearly control the production, four tables of main products including Indonesian coal, coal
bran, limp coal, and processed coal bran are made with some unchangeable cost in table 3.

Criteria Cost Per unit

Hiring and training cost 4,000,000 VND per worker
Layoff cost 9,000,000 VND per worker
Working days 5 days/week
Working hours 8 hours/day
Safety stock 15% of forecast demand

Table 3 – The unchangeable cost in coal production

In the coal production process, inventory holding cost, excess holding cost, the regular-time
cost in the first month, and the rest of the months, the number of fulltime workers and starting
inventory are changeable and listed in Table 4.

Criteria Cost Per unit

Inventory holding cost 120,000 VND per ton
Excess inventory cost 500,000 VND per ton
Regular-time cost (First month) 40,000 VND per hour
Regular-time cost (the rest of months) 60,000 VND per hour
Full-time workers (already had) 15 workers
Production rate per worker 4 tons/week
Starting inventory 100 units

Table 4 – The changeable cost in Indonesian coal production

From these costs and the forecasted demand in 9 months, the following table is made to
calculate the total cost to produce Indonesian coal.

The production requirement is equal to the sum of forecasted demand in tons and safety stock
in that month minus the beginning inventory. With the calculated amount of required coal, the
workers needed is a rounded number of that number divided by the production rate per worker,
which is 16 tons per month. If it is rounded up, the extra amount of coal will be excess
inventory, which is always positive. Then this would help to measure the number of workers
need to hire and laid off to produce the exact amount of coal required. Finally, the ending
inventory equals the addition of actual production and beginning inventory subtracted from
demand. In the final calculation, some different kinds of costs are gotten.

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 Table 5 – The cost of Indonesian coal production applying Aggregate planning

The second product is coal bran. The changeable costs are shown in the below table.

Criteria Cost Per unit

Inventory holding cost 100,000 VND per ton
Excess inventory cost 400,000 VND per ton
Regular-time cost (First month) 45,000 VND per hour
Regular-time cost (the rest of months) 55,000 VND per hour
Full-time workers (already had) 20 workers
Production rate per worker 6 tons/week
Starting inventory 200 units

Table 6 – The changeable cost in coal bran production

Doing the same calculation as the first product, five types of total costs are calculated in table
7. Since the difference in demand and the inventory cost, the total cost of coal bran production
in 9 months is much lower than that of Indonesia coal (2,724,600,000 VND compared to
5,173,580,000 VND)

Table 7 – The cost of coal bran production applying Aggregate planning

Moreover, the third product is limp coal which is defined as bituminous coal in the large lumps
remaining after a single screening that is often designated by the size of the mesh over which
it passes and by which the minimum size lump is determined. This is manufactured with a quite
different set of cost.

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 Criteria Cost Per unit
Inventory holding cost 100,000 VND per ton
Excess inventory cost 500,000 VND per ton
Regular–time cost (First month) 45,000 VND per hour
Regular–time cost (the rest of months) 70,000 VND per hour
Full–time workers (already had) 15 workers
Production rate per worker 3.5 tons/week
Starting inventory 400 units

Table 8 – The changeable cost in limp coal production

Table 9 – The cost of limp coal production applying Aggregate planning

The production requirement is calculated by the addition of forecasted demand and safety stock
minus the beginning inventory. After that, the workers needed is round to that number divided
by the production rate per worker, which is 14 tons per month. Then the number of workers
need to hire and laid off can be measured to produce the relative amount of limp coal required.
Finally, the ending inventory equals the sum of actual production and beginning inventory
subtracted from demand. Therefore, the total cost of this process will be 6,461,600,000 VND
in 6 months, which is relatively high compared to the first two products.

In the final one, the product is also the coal bran but is processed, which means it needs higher
production cost. To be more specific, the primary cost sees a slight change.

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 Criteria Cost Per unit
Inventory holding cost 100,000 VND per ton
Excess inventory cost 350,000 VND per ton
Regular-time cost (First month) 40,000 VND per hour
Regular-time cost (the rest of months) 50,000 VND per hour
Full-time workers (already had) 19 workers
Production rate per worker 6 tons/week
Starting inventory 135 units

Table 10 – The changeable cost in processed coal bran production

With higher excess inventory cost, hiring and firing cost, the total cost of processed coal bran
production in 9 months increases to 2,565,800,000 VND.

Table 11 – The cost of processed coal bran production applying Aggregate planning

Considering these facts, Aggregate planning is critical to accomplishing the organization's

long–term goals. Moreover, by lowering overall variable costs and boosting the bottom line,
financial objectives can be achieved, maximizing utilization of available manufacturing
capacity, matching demand, shortening client processing times, and providing customer
satisfaction. Consequently, lower inventory levels and backlogs are advantages of the chasing
approach, however, actions need to be taken to solve the poor productivity drawback of this
planning strategy to enhance the service level of this supply chain.

III. SOLUTION AND RECOMMENDATIONS

1. For raw material (coal)
In the upcoming years, it is anticipated that domestic demand for coal would rise as the result
of a number of coal–fired thermal power plants that have been completed or are now under
development; the continual advancement and expansion of cement, building supplies,
chemicals...

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As domestic mining no longer produces enough coal to meet the national demand, one
suggestion is that Lam Hong Company can switch to importing coal from other countries to
effectively reduce the risk of shortage. Address the factors affecting production lines and
energy use to effectively address the shortage of domestic supply.

Due of the post–covid–19 pandemic and the Russia – Ukraine war, transportation expenses are
higher than before. Consequently, it is essential to select a reliable provider and to save
shipping expenses by sea.

Here are the three largest coal mining and exporting markets in the world:

- Coal imported from Indonesia (sustainable coal import market).

- Coal imported from the Australian market (the ideal source of coal for the quality of
supply).
- Coal imported from the Russian market (one of the three main sources of supply for the
domestic development strategy).

Price
Coal Transportation (40ft cont – 26 tons)
Market

Indonesia $136/metric ton $7000

Australia $180/metric ton $11000

Russian $117/metric ton $7500

Table 12 – Price of importing coal of the three strong coal – exporting countries

From the table, it can be seen that the Indonesian coal is more expensive than Russian’s,
although it costs less to transport.

2. For end customers

Since coal fuels the heating process in producing brick, a shortage in coal input might disrupt
the brick production of Lam Hong company as a result. The proposed solution to maintain
steady coal input in the above section will ensure the disruption will be minimized.

Because of Vietnam’s commitment to reducing CO2 emissions (currently during COP26), Lam
Hong company needs to find a safe, sustainable fuel source for brick kilning besides its main
source: coal. In the short term, Lam Hong company can still import coal as transitioning and
investing for technology and infrastructures to support an alternative fuel source is costly and
takes a long time to do so. As proved during the conflict between Ukraine and Russia (Feb

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2022 – now), natural gasses and fossil fuels are not as safe as they were in terms of supply and
price security; therefore, in the long run, Lam Hong company should strive partly to fully
transition to biofuel.

Since the in–depth discussion about biofuel is out of this report paper’s scope, the availability
of biofuel will solely be discussed. In the role of a biofuel material producer, Vietnam has
decent potential as one with its strong agriculture culture. Several widely grown plants that can
be used to produce biogas are sugarcane, cassava, maize, and jatropha.

Cu M’gar Quang Hiep Tan Canh

Type Average
(Dak Lak province) (Dak Lak province) (Dak Lak province)
KM 140 38.7 35.5 32.0 35.0
KM 98–5 35.6 34.6 28.7 33.0
KM 98–1 24.3 25.5 26.7 25.5
KM 94 31.5 28.9 26.0 31.0

Table 13 – High–yield Cassava in Vietnam (ton/ha)

As abundant as the materials are, the cost of biofuel should be justifiable for companies to
consider. As for technology–wise, with the commitment at COP26, Vietnam will receive
technology transfers from capable countries to help develop greener fuel sources so Vietnam
can achieve its goal said in the commitment. As a result, biofuel–related technology
(producing, transporting, storing, et cetera) will be covered in a short time period. Hence, Lam
Hong company will have the chance to transition their main fuel source for kilning brick to
biofuel.

For brick output, multiple brick–producing (specifically) companies had and might disappear
due to Vietnam's CO2 emission commitment, which restricts and stresses the use of fossil fuel
– a widely used fuel in kilning brick in Vietnam – usage, which results in sharp increases in
coal price. As a result, the competitive factor in the brick industry might decrease in the number
of competitors, and that will be Lam Hong company’s chances to broaden its customer reach.

Lam Hong company uses oceanic shipment, which is also the strength of Vietnam’s long
coastal line. Moreover, Lam Hong company is based in Nghe An province, which has four
international harbors. As shipment prices fluctuate widely during this period and the lack of
trustworthy data, shipping costs will not be covered. To conclude, Lam Hong company should
reach outside Nghe An province, where most of their current customers are, to central and
southern Vietnam to increase their brick sales.

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 IV. CONTRIBUTION FORM (%)
No. Team member Student ID Contribution (%)
1 Nguyễn Ngọc Khánh Linh IELSIU21111 100
2 Phan Trung Hiếu IELSIU19155 100
3 Thái Ngọc Mai IELSIU21035 100
4 Từ Yến Nhi IELSIU21040 100
5 Nguyễn Vĩnh Toàn IELSIU21055 100
6 Ngô Hùng Minh Trí IELSIU21167 100
7 Phạm Huỳnh Minh Triết IELSIU21168 100
8 Ngô Nhật Vinh IELSIU19321 100

V. REFERENCES
[1] Tra cứu doanh nghiệp (2021) 2900579400 - Công ty Cổ phần Xây Lắp - Thương Mại Tổng
Hợp Lam Hồng. Available at: https://tracuudoanhnghiep.vn/com-400155/cong-ty-cp-xay-lap-
thuong-mai-tong-hop-lam-hong.htm (Accessed: December 9, 2022).

[2] Tran, Quynh Dinh (2010) Xây dựng chiến lược kinh doanh cho Công ty Cổ phần Xây lắp
– Thương mại tổng hợp Lam Hồng, giai đoạn 2010 – 2015. Available at:
https://123docz.net/document/936485-xay-dung-chien-luoc-kinh-doanh-cho-cong-ty-co-
phan-xay-lap-thuong-mai-tong-hop-lam-hong-giai-doan-2010-2015.htm
(Accessed: December 9, 2022).

[3] Kho Tri Thức Số - khotrithucso.com (2015) Báo cáo Công ty Cổ phần Xây lắp – Thương
mại tổng hợp Lam Hồng. Available at: https://khotrithucso.com/doc/p/bao-cao-cong-ty-co-
phan-xay-lap-thuong-mai-tong-hop-lam-hong-1532777 (Accessed: December 8, 2022).

[4] Workman, D (2022) World's Top Exports – Coal Exports by Country. Available at:
https://www.worldstopexports.com/coal-exports-country/ (Accessed: December 8, 2022).

[5] Trinh, A.T. and Le, L.T.P. (2018) High-yield cassava in Vietnam (tonne/ha) | Researchgate,
Trinh Tu Anh. Available at: https://www.researchgate.net/figure/High-yield-Cassava-in-
Vietnam-tonne-ha_tbl1_324470939 (Accessed: December 8, 2022).

Note: Data is provided by the director of Lam Hong’s company, so the sources of reference
are limited.

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