In about 10 years, when domestic and foreign forest plantation projects have begun to harvest, the dependence on external raw materials will certainly decrease. Thus, production capacity will increase, and businesses will be more proactive in production and business.
3.4.2 Solution 2: Manufacturing enterprises must regularly maintain transaction activities with partners to increase proficiency and facilitate the promotion of cooperative relationships.
3.4.2.1 Solution objectives
Through the relationship between the enterprise and its partners in the industry, once the relationship has reached maturity, it means that the enterprise has the ability to predict supply and demand and control the partners effectively through aspects such as habits, transaction practices regarding payment methods, delivery facility conditions, delivery methods. From there, it helps the business relationship of the enterprise become effective.
3.4.2.2 Implementation measures
* Forecast raw material demand as accurately as possible
The wood processing industry of Vietnam in general and enterprises in the research area in particular depend heavily on input materials. The source of raw materials for the production of wood products for export and domestic consumption in Vietnam has shifted from relying mainly on natural forests to relying on imported wood and planted wood.
Table 3.4: Demand for wood materials for the processing industry
Unit: million m3
Year
2005 | 2010 | 2015 | 2020 | |
- Wood demand for domestic consumption and export | 5.3 | 8.0 | 10.2 | 11.9 |
- Total demand for industrial wood (large wood) includes all | 2.0 | 2.5 | 2.9 | 1.6 |
Refined products | 2.5 | 4.51 | 7.2 | 10.9 |
- Small wood for particle board, MDF and wood chips for | 0.09 | 0.12 | 0.16 | 0.20 |
pulp demand |
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Solution: Choosing the Right Service-Object Pairs for Public Utility Enterprises
(Source:[20]).
Raw materials for each product group serving the wood processing industry in Vietnam in general and the research area in particular are as follows:
- Wooden furniture (tables, chairs, cabinets, beds, shelves): mainly made of teak, oak, pine, beech, rubber wood exported to Japan, France and the United States.
- Outdoor wooden furniture (tables, chairs, benches, loungers, wine carts): mainly made of teak, eucalyptus, oil, acacia, mahogany, yellow cottonwood... exported to the markets of England, France, Spain, Germany, Netherlands, Greece, Finland, Denmark, USA, Brazil, Mexico, Argentina, South Africa, Australia, Japan, Korea, Hong Kong. This item is often combined with metal frames, glass, granite, textiles with quite high requirements on safety standards.
safety, fashion and convenience. The trend of using FSC certified materials or equivalent is increasing, while less certified materials due to their origin from natural forests such as oil and teak are decreasing.
- Wooden flooring for indoor and outdoor use: mainly made of Teak, Rosewood, Rosewood, and Cong wood, exported to Japan, Italy, Spain, Italy, the United States, and Australia with high quality requirements.
Practice shows that the Southeast region has a huge demand for wood panel materials, on average each year Vietnamese wood furniture enterprises have to spend about 41% - 43% of total export turnover on importing wood materials [23]. Such heavy dependence on wood materials (large quantity, diverse types) has significantly reduced the economic efficiency of the industry as well as the initiative of enterprises. Therefore, to reduce dependence on imported materials, enterprises need to pay attention to the following measures:
- Based on the raw material demand of the industry, make a detailed plan for the enterprise to be proactive in the supply source. This means linking to build supply chains, focusing on building a stable source of raw materials for the wood processing industry, boldly investing in domestic forest planting and linking with markets near Laos and Cambodia that corporations have pioneered such as Hoang Anh Gia Lai, Truong Thanh,
Savimex; and markets as far away as Canada as SADACO 26 is implementing, to protect and
Exploiting forests according to a reasonable and effective process. Enterprises can plant softwoods such as Rubber, Acacia, Eucalyptus for quick harvest time. In addition, other products can be exploited from Rubber, Acacia, Eucalyptus, contributing to economic efficiency.
- Vietnamese enterprises can, through various methods, through State agencies or directly contact forest owners in Canada and Laos and cooperate with them in exploiting wood materials in a certain way, through bilateral agreements signed between Vietnam and forested countries. When implementing this measure, it is necessary to carefully study the advantages and characteristics of each different forest plantation area depending on the soil, climate, and policies of the forest-growing country to be able to calculate the scale of raw materials that can meet the long-term production and business plans of the enterprise itself.
- Timely grasp the needs and consumption trends of the market, especially the world market. To do this, businesses must regularly research and forecast the consumption market in terms of value, type, partners, etc. For example, every year there are
26 Information was shared directly from 2 managers of wood processing corporations: Mr. Vu Duy Tien (Deputy General Director of SAVIMEX) and Mr. Tran Quoc Manh (General Director of SADACO - Vice Chairman of HAWA) with the thesis author in May 2010.
There are many furniture fairs in the world. If a business wants to export to a market, it should choose those places to visit to see the designs as well as learn about business methods, and proactively meet with retailers. It is especially important to note that the products displayed at the fair are new products or very common products, their strategic products are often not displayed at the fair. Therefore, businesses should research deeper at the showrooms of retailers to understand the products that are actually consumed. Only by doing so can the business be proactive in trading activities and demonstrate that the business has a clear understanding of its partners.
* Actively connect with domestic and foreign suppliers to control partners' supply activities.
Enterprises in the industry, through the role of local industry associations, link together for the purpose of promoting investment, promoting trade, exchanging technology information, technical training, production experience, exchanging sales experience, especially information on the supply of raw materials and accessories for wood furniture production, and jointly proposing to build a common strategy for the industry. Forming distribution centers or wood import hubs from abroad with enough power and strength to easily negotiate with suppliers on price, quantity, quality and reasonable delivery time. Thereby helping enterprises in the industry reduce costs and be proactive in production and business activities.
3.4.2.3 Expected results
Once the links are established, for input material suppliers as well as output product distributors, it will certainly create favorable conditions for businesses to maintain and expand their scale. At the same time, through regular transactions, the understanding between businesses and partners will increase, which will help businesses easily negotiate and agree on aspects such as price, payment methods, purchase of raw materials and delivery of products in a reasonable manner. Therefore, businesses will to some extent achieve certain efficiency in their transactions.
3.4.2.4 Some recommendations for businesses when implementing measures
During the transaction process, proficiency will increase in direct proportion to the level of understanding and predicting the supply and demand of the partner with certainty. However, in the current volatile business context, predicting demand and controlling partners effectively, in addition to the subjective factors of the enterprise, also depends on objective factors from the outside such as policies from the partner's Government, changes in economic, political, social conditions and
Even natural conditions…, also have a significant impact on business forecasts. Therefore, businesses must always pay attention to both internal factors (predictability, control) of themselves in their relationships with partners and external objective factors to always be proactive in attracting connections from partners in the supply chain.
3.4.3 Solution 3: Businesses must focus on building corporate image to increase credibility in transactions with partners.
3.4.3.1 Solution objectives
Credibility in the research direction of the thesis includes brand, financial capacity, payment method, payment method, delivery method, shared information and the ability to flexibly respond to changing needs. In which, affirming the brand value in the development of the Vietnamese wood processing industry with promoting the application of technology in business, improving production techniques and constantly focusing on improving product quality and proactively sourcing raw materials for processing.
3.4.3.2 Implementation measures
* Building and affirming the brand
To promote the building of Vietnamese wooden furniture brands, businesses need to boldly master technology, be flexible and keep up with tastes to be able to design product models that suit market requirements, improve the marketing capabilities of businesses to respond to continuous changes in the market. To have a brand, businesses must be proactive in design to create Vietnamese wooden furniture products that are increasingly diverse in types, product quality must meet international standards, the source of raw materials used must have a clear origin, prices must be competitive and move towards being proactive in delivery and sales without depending too much on commercial intermediaries. This means that businesses must achieve FSC, CoC, ISO9000:2000 certificates, bringing all production and business processes into scientific and effective standards. In addition, businesses must pay attention to applying clean production technology, protecting the environment, maximizing the use of clean energy sources to save production costs. Enterprises need to develop in the direction of prioritizing the use of advanced technology, investing in depth towards diversifying and improving product quality to enhance product competitiveness and build the "Vietnamese Wood" brand. Reality shows that over 90% of Vietnamese wood products must be sold through intermediaries and are mainly produced, processed, and manufactured according to orders and designs from foreign customers. Among the enterprises exporting wooden furniture, only 30 enterprises have the ability to market internationally and sell directly to retail chains around the world without
must go through intermediaries, including the businesses mentioned in this study, such as Truong Thanh and Khai Vy. Therefore, to create a brand, businesses need to focus on quality and design. In addition, there needs to be synchronous coordination in trade promotion to enhance the promotion of the image of Vietnamese wooden products in the international market.
* Encourage and have preferential policies for businesses investing in technological innovation, modern machinery and equipment that do not pollute the environment.
Through the role of the Ministry of Science and Technology, Associations such as HAWA, and functional agencies such as Vifores, seminars are regularly organized to introduce and update information on new technological equipment, helping businesses choose suitable technology and machinery for production, introducing some modern machinery from successful businesses and pioneers in technological innovation such as Khai Vy, Truong Thanh, Tran Duc, Phu Tai, Vinafor. The Government - mainly through financial institutions - has and should continue to have credit support policies for wood industry businesses to borrow to import modern machinery and equipment for production and processing.
- Build and develop a program to support and transfer new technology to improve product quality. Encourage support for organizations and individuals to research science and wood processing technology. Connect with organizations such as GIZ, which Truong Thanh has been working with, and with ITTO to be updated with some new experiences and technologies.
- Support the construction and capacity enhancement of product research and design centers.
Wood products with state science and technology funding.
- Support training on information technology, building and applying FSC, CoC certificates,
ISO…
* Develop flexible and efficient payment and delivery services
To be able to pay and deliver on contract, the first problem is finance,
Indeed, the Government needs to continue to have policies to support wood industry enterprises, especially wood export enterprises, for enterprises that are eligible to participate in the 1,500 billion VND capital financing program with special preferential interest rates, flexible collateral; to issue L/C (Letter of Credit) with flexible deposit rates; to receive preferential export financing before and after delivery with diverse products, with a high rate of up to 95% according to the L/C method that BIDV, VIB and ACB did in 2010.
* Create an operating environment where sharing of experience and information within the industry is convenient and useful.
In today's volatile business environment, market demand changes constantly as well as input materials contain many changes in quality, price, and type. In order for businesses in the industry to grasp and master their business activities, businesses must be willing to share information with each other, including information about orders, input material prices, distribution markets, etc. Information sharing can be done through industry forums organized by local industry associations or trade promotion departments, or through group seminars between related businesses in the industry based on the criteria of mutual trust.
3.4.3.3 Expected results
A business's reputation can only be achieved when it has a strong brand, is equipped with advanced machinery and equipment, is proactive in designing models, has an increasingly expanding scale, and has a reputable and effective way of trading, demonstrated through aspects such as on-time delivery, meeting large orders, and transparent payments. Once reputation is established, it will make partners trust and willing to cooperate. This will continue to help businesses be stable in production and business and achieve the desired results.
3.4.3.4 Some recommendations for businesses when implementing measures
In order for the wood processing and trading industry to be considered a driving force for the development of Vietnam's forestry economy, businesses need to develop in the direction of prioritizing the use of advanced technology, investing in depth towards diversifying and improving product quality to enhance product competitiveness and build the "Vietnamese wood" brand. However, when businesses receive support policies from the Government, they must be very careful to avoid falling into a situation where importing countries use self-defense measures and file lawsuits about dumping, export subsidies, etc. The wood processing industry must be planned to develop in concentrated areas with a large enough scale, ensuring economic efficiency and environmental protection. A business is trusted by partners when it meets the following criteria: a clear financial system, exporting to both large and small customers; diversifying markets across five continents; focusing on the domestic market; outlining a long-term business strategy; capital size, transparency, liquidity.
3.4.4 Solution 4: Manufacturing enterprises must proactively increase the frequency of transactions between actors in the wooden furniture supply chain, including suppliers, distributors and between manufacturers in the industry.
3.4.4.1 Solution objectives
Increasing frequency means increasing the number of transactions between businesses and their partners.
in the chain. Once transactions take place regularly, it will strengthen the level of cooperation between enterprises and partners. Because the Vietnamese wood processing industry currently ranks 4th in the top export industries, however, to achieve an export turnover of billions of USD, enterprises in the industry must import about 80% of the raw materials. Therefore, the characteristics of enterprises in the industry are both importing raw materials and exporting finished products. The scale is calculated as follows:
Table 3.5: Vietnam Forestry Development Strategy for the period 2006-2020
Target
Unit of measure | Target by 2025 | Perform the phase 2010-2015 period | Percentage | |
1 | 2 | 3 | 4 | 5=(4/3)x100 |
Total sawn timber capacity | Million m3 / year | 7.0 | 4.5 | 77.1 |
MDF board production | m3 products /year | 1,350,000 | 750,000 | 55.6 |
Particle board production | m3 products /year | 300,000 | 100,000 | 33.3 |
Imported wood volume | Million m3 | 3.0 | 4.0 | 133.3 |
Export turnover | Million USD | 8,000 | 4,200 | 52.5 |
Source: Data from calculations and forecasts of Vifores, 2010
3.4.4.2 Implementation measures
* Establish long-term, regular relationships with key suppliers and distributors
- For foreign suppliers: Selecting raw material suppliers both domestically and internationally, in the near future, focusing on foreign suppliers from nearby markets such as Laos, Cambodia, China and Malaysia; distant markets but with stable sources such as Brazil (Klabin), Ghana (Olam), Uruguay (Arbor), South Africa (Timber Two), Togo (Citip), Chile, Nigeria, the United States, Canada, Australia, New Zealand. In the process of selecting and searching for suppliers, pay attention to whether they are real manufacturers or trading companies? to limit purchasing through too many intermediaries, which will reduce efficiency for the business. For domestic suppliers (Gia Lai, Nghe An), establishing relationships to purchase domestic raw materials mainly includes types of wood such as cork, rubber, xoan dao, cho chi, and cajuput, which are raw materials that account for a low proportion in wood processing and manufacturing activities. Raw materials are imported from foreign countries by long-term, reputable partners, so businesses are proactive in importing raw materials for storage to stabilize production. Note that the policy of developing afforestation is very strong in many countries such as Sweden, the United States, Canada, Brazil, India, China, Finland, New Zealand, etc., ensuring abundant supply for current and future needs.
- For distributors
For the international market, proactively choose reputable distribution channels such as the world's leading supermarket systems as well as the leading ones in each country such as Carrefour, Metro, Tesco, Cosco, Homebase... Combined with supplying to smaller chains of stores but with strong brands and requiring high quality products such as Alexander Rose, Alinéa, Lapeyre, Hartman,
For the domestic market, urgently establish a network of level 1 agents and showrooms in provinces and cities across the country. Enterprises need to have a positive view of the potential domestic market, have support policies for agents and stores or boldly consign goods through distributors such as Nha Dep, Pho Xinh, Vietmay Depot systems.
* Actively and regularly search for and select reputable and potential suppliers and distributors.
Manufacturers and distributors of products in the wood industry have been working together for a long time, but both have not yet found a common voice to promote the consumption of wood products, especially domestic wood products. The connection between manufacturing and distribution enterprises needs to be quickly implemented because many international distributors and retailers have, are and will penetrate. Therefore, in the context of an ever-changing business environment, enterprises in the industry, in addition to establishing and maintaining regular relationships with traditional partners, must proactively seek and develop relationships with new suppliers and distributors with potential and reputation to avoid dependence on a few suppliers and distributors, which affects the strategy and business performance of the enterprise.
3.4.4.3 Expected results
Establishing and maintaining regular relationships with key partners in the chain will help businesses stay proactive, limit dependence and be oppressed or face trade barriers from partners. Effectively implementing the above measures will help increase revenue, reduce costs and gradually expand international markets and even domestic markets.
3.4.4.4 Some recommendations for businesses when implementing measures
The wood processing industry mainly serves export, therefore, the enterprises themselves have underestimated the potential of the domestic market while this is a relatively easy market compared to the strict requirements from exporting a lot. Besides, in the purchase of raw materials, enterprises still focus on import sources. Therefore, in order to establish long-term and effective regular relationships, enterprises