UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Vo Thi My INEFFICIENT SALES PLAN AT AMANN VIETNAM CO., LTD MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR. NGUYEN PHONG NGUYEN Ho Chi Minh City – Year 2019 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS Executive Summary. 1 PART 1: COMPANY BACKGROUND. Overview about Amann Group and Amann Vietnam Co.
Overview about Amann Group. Overview about Amann Vietnam Co. Decrease in gross profit margin. Increase in COGS.
The initial cause-effect map. Updated cause-effect map. Expanding local business by import goods. Recruitment process is not good.
Ineffective system management. Inefficient sales plan. A discussion to eliminate some potential central problems and focus on a central problem of interest. A discussion to eliminate some potential central problems.
Expanding local business by import goods. Recruitment process is not good. Ineffective system management. A discussion to focus on a central problem.
28 PART 2 – PROBLEM JUSTIFICATION. Definition of “inefficient sales plan”. Measurement to measure the degree of the problem in the organization. 32 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.
33 PART 3 - CAUSES VALIDATION AND SOLUTIONS. List of real causes. The initial list of causes of the central problem using the literature. List of the new caused obtained from the company (via interviews).
A full list of real causes of the central problem. The relative importance of the real causes. Lack of market orientation. Lack of middle thread sizes.
Applying price centralized decision-making structure. No factory in Vietnam. The set of solutions. 52 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com List of Tables Table 1: Export Turnover of Vietnam by Commodity Group in 2016.
7 Table 2: Gross profit margin of AVN in 2017 and 2018. 9 Table 3: Gross profit margin of AVN by month 2018. 11 Table 4: Gross profit margin of AVN by product type in 2018. 12 Table 5: Gross profit margin of AVN by customer in 2018.
13 Table 6: Amann available thread sizes. 17 Table 7: Overtime payment for employee in 2018. 22 Table 8: Average selling price of AVN from 2016 to 2018. 25 Table 9: GKA forecast of AVN from 2020 to 2024.
30 Table 10: Competitor list of Amann Vietnam. 32 Table 11: Estimated costs for organizing meetings among top managers and junior managers. 42 Table 12: Estimated costs for proposal of price decentralized decision making structure. 44 List of Figures Figure 1: Sales turnover of AVN from 2015 - 2018.
5 Figure 2: 5-year sales plan 2018-2022 of Amann Vietnam. 6 Figure 3: Vietnam export structure of goods in 2016. 7 Figure 4: Segmentation and value proposition. 8 Figure 5: Income statement of AVN in financial year 2018.
9 Figure 6: Gross profit margin of AVN in 2017 and 2018. 10 Figure 7: Gross profit margin of AVN phasing by month 2018. 10 Figure 8: Key garment types of Vietnam Textile & Garment export 2017. 29 Figure 9: Sales-Operation-Planning Framework.
33 Figure 10: Antecedents and consequences of a market orientation. 39 Figure 11: Senior management factors and market orientation. 40 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com List of Diagrams Diagram 1: Organizational structure of AVN in 2019. 5 Diagram 2: The initial cause - effect map of Amann Vietnam.
19 Diagram 3: Planning outputs by Henry et al. 23 Diagram 4: The update cause - effect map. 26 Diagram 5: The final cause - effect map. 38 List of Pictures Picture 1: Amann headquarter in Bönnigheim.
2 Picture 2: Amann Vietnam Sales office in Hochiminh City. 3 Picture 3: Amann Vietnam factory. 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com List of Abbreviation AVN: Amann Vietnam B2B: Business-to-Business BOM: Board of Management CAGR: Compounded Annual Growth Rate CEO: Chief Executive Officer CFO: Chief Financial Officer COO: Chief Operating Officer COGS: Cost of Goods Sold CS: Customer Service FOB/OEM: Original Equipment Manufacturer GKA: Global Key Account GKAM: Global Key Account Management GPM: Gross Profit Margin HR: Human Resources JIT: Just-In-Time OT: Overtime RFC: Revenue Forecast S&OP: Sales and Operations Planning SAP: System Application Products SMEs: Small Medium Enterprises SOP: Standard Operation Process TAS: Technical Advisory Service LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EXECUTIVE SUMMARY For manufacturing enterprise, sales plan is very important because it provides operation team with the demand forecast for production, HR department headcount budget, financial department cash flow, etc. The thesis indicates the central problem of Amann Vietnam based on analyzing income statement of financial report 2018 and collected data from interviews of all sales members and related departments.
There are 3 relevant symptoms including increase in COGS, decrease in profit margin and negative profit. The central problem is inefficient sales plan that comes from two main causes including lack of market orientation and applying price centralized decision-making structure. Two sets of solution are suggested in the thesis, they are: • Narrow the gap between what top managers say and what they do • Propose price decentralized decision-making structure Total cost of solutions is estimated at USD16,500 which can brings benefits in terms of both qualitative and quantitative perspective as followings: Ø Qualitative - Enhance communication among chief executives, junior managers and staff. - Erase ambiguity of junior managers and other departments in business strategy of the organization - Adapt quickly to the changes at local market - Shorten price approval process to increase service level to customers - Increase work efficiency of sales people - Improve profit margin and profitability - Enhance the competitiveness in local market Ø Quantitative - Improve gross profit margin from 26% to 30% in 2020 - Increase the number of customers from 150 to 200 in 2020 and to 300 in 2023 - Achieve CAGR at 38.5% for the period of 2019 and 2024 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com PART 1: COMPANY BACKGROUND 1.
Overview about Amann Group and Amann Vietnam Co. Overview about Amann Group Amann Group, which was founded by Alois Amann and Immanuel Böhringer in 1854 in Bönnigheim, Germany, is one of the global leaders in the manufacturing and distribution of sewing and embroidery threads for a wide range of industries from clothing and underwear sectors, shoes and leather goods, home textiles and technical applications. The Group has been present in more than 100 countries worldwide with over 2,300 employees. Its production facilities are located in Europe and Asia, which ensures the basis for maximum flexibility and customer proximity.
Picture 1: Amann headquarter in Bönnigheim 1. Overview about Amann Vietnam Co., Ltd Amann Vietnam Representative Office was established in June 2011 and has operated as a trading company since August 2012. Its sales office now is located at 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 1st Floor, Aloha Building, 68 Hong Ha Street, Ward 12, Tan Binh District, Hochiminh City. Picture 2: Amann Vietnam Sales office in Hochiminh City Amann Group organized a groundbreaking ceremony for its Vietnam factory covering 45,000 square meters at Tam Thang Industrial Park (Quang Nam) on July 27, 2018.
The facility will produce sewing threads for garment, leather and footwear industry with a total annual capacity of 2,300 tons in 2023. Its investment capital for phase one is US$13.8 million and this phase will go into operation in June 2019 with a capacity of 1,000 tons per year. Phase two will be in line from 2023 with additional capital of US$6.2 million, raising the total invested capital to US$ 20million. The factory in Vietnam will produce high-quality sewing threads in accordance with European standards, which also apply for all other production facilities of Amann worldwide.
Therefore, Amann’s customers can trust consistent product quality anywhere in the world. Amann Vietnam (AVN)’s major customers are famous brands such as Adidas, Puma, Nike, Hugo Boss, Prada, Coach, etc. 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Picture 3: Amann Vietnam factory Organizational structure of Amann Vietnam AVN is under the progress of setting up new factory in Tam Thang, Quang Nam. Its current Hochiminh office will operate as sales office right after factory construction complementation.
To build up human resources for AVN when the company is able to produce its products locally, it has recruited new sales team members who have enough qualifications and great experiences in thread manufacturing industry. Amann Vietnam (Hochiminh office) currently has 5 departments: 1 sales & marketing department (including Global Key Account Team, Industrial Sales Team, Technical Advisory Services Team, Customer Services Team), 1 HR department, 1 Finance and Accounting, 1 Production Department, and 1 Project Department. 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Managing Director Sales HR Finance Production Project Director Manager Manager Manager Manager 3 GKA 3 D. Sales 1 Sales 1 TAS 1 CS Managers Managers Manager Manager Manager Diagram 1: Organizational structure of AVN in 2019 AVN built functional organizational structure in which roles and responsibilities are divided by function.
This traditional structure supports the communication among departments to ensure all the functions to understand the mission and the strategy of the company. Sale revenue of AVN Sales turnover of AVN has continuously increased for the last 4 years from 2015 to 2018 with the average growth rate at 150% as the figure below: Sales Turnover 40,000 158% 200% 153% 30,000 150% 125% 20,000 100% 10,000 50% - 0% 2015 2016 2017 2018 NR (Mil VND) Growth (%) Figure 1: Sales turnover of AVN from 2015 - 2018 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com AVN expects when it has local production in Tam Ky, its turnover will achieve the figure as 5-year sales plan below: 5-year sales plan $18,000,000 $16,764,000 350% 322% $16,000,000 293% $14,134,000 300% $14,000,000 $11,339,000 250% $12,000,000 $10,000,000 200% $8,000,000 150% 125% $6,000,000 119% $3,517,000 100% $4,000,000 $1,200,000 50% $2,000,000 $0 0% 2018 2019 2020 2021 2022 Sales Target Growth (%) Figure 2: 5-year sales plan 2018-2022 of Amann Vietnam Because Amann Vietnam will officially have local production from June 2019, it sales forecast increases significantly from June 2019 and in 2020, then the growth will be slow down in 2021 and 2022. Industry overview Amann mainly operates in garment and textile, footwear and leather industry manufacturing and supplying polyester and nylon thread. Textile, Garment and Footwear ranks the second and the fourth biggest industry of Vietnam, accounting for 23% total export turnover of the country.
6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Telephones, mobile phones and parts thereof Textiles and garments 19% Computers, electrical products, spare-parts & 26% components thereof Footwear 16% Machineries 7% Wood & wooden product 4% Sea food 4% 11% Agriculture products 6% 7% Figure 3: Vietnam export structure of goods in 2016 Assuming that threads contribute 1% on total FOB price of garment and shoes, the total potential demand in Vietnam market will be US$240 million for garments and US$160 million for footwear delivering US$400 million for thread demand in Vietnam market. Jumping into Vietnam market quite late after Coats, Amann as well as other companies enjoy a small market share in both apparel and footwear sector. Export Value Commodity Group (US$ billion) Telephones, mobile phones and parts thereof 34.32 Textiles and garments 28.30 Computers, electrical products, spare-parts & components thereof 18.14 Wood & wooden product 6.67 Table 1: Export Turnover of Vietnam by Commodity Group in 2016 7 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Plenty product range Local supplier s High price Low price Limited product range Figure 4: Segmentation and value proposition 2.