Decision Making at Co-Op Supermarkets of Vietnam.

Authors Avatar by gga0844 (student)

Nguyen Thanh Le – Lucy – F02A – ID: F02-086

Table of contents:

I.            Executive Summary:        

II.        Introduction:        

III.        Co-op Supermarket - A reliable shopping place - Friend of all families        

1.        Forecasting techniques:        

1.1        Calculations:        

1.1.1.        Least squares regression method:        

1.1.2        Additive model        

1.1.3        Proportional model        

1.2        Report:        

2        Management Information Systems (MIS) Report        

3.     Inventory control        

3.1        Economic Order Quantity and the annual savings        

3.2        Inventory control systems, cost minimizing order size for Co-op Supermarket and the best course of action for the company        

4.        Material Requirements Planning        

5.        Project Management plan        

5.1        Critical path and duration:        

5.2        Event times        

5.3        Float time:        

5.4        Gantt chart:        

6.        Investment Appraisal Techniques        

6.1        Net Present Value (NPV)        

6.2        Internal rate of return (IRR) method:        

6.3        Other Financial tools        

IV.      Conclusion        

V.            Recommendation:        

VI.        References:        


  1. Executive Summary:

Co-op Supermarket is one of the best organizations of Vietnam which has high performance and good services. Dearly and friendly feeling, comfortable and full of add-on services are common features of Co-op Supermarkets (Co-op Mart, 2006). In order to achieve high performance, Co-op Supermarket’s managers have been trying to improve the professional business decision making process. Therefore, this report is going to show the general view about this process of making business decision of this organization.

First, the information in appropriate formats for decision making in Co-op Supermarket context are considered. According to the sales of four weeks, it is possible to forecast the sales for week 5. By using least squared regression method, addictive method and proportional method, the company has the best idea of the likely reliability of the forecasts produced. After that, a presentation material and a report will be produced to summarize the sales forecasts for week 5. Finally, the recommendation will be made in which the proportional method would be the most reliable to use.

Secondly, the software generated information to make decisions at operational, tactical and strategic levels in Co-op Supermarket will be discussed. The management information systems are suggested to be used in order to control the performance of the company. The 6 information systems divided into 3 levels. The top/executive level uses Executive Support Systems (ESS), while middle/management level uses Management Support Systems (MSS), Decision Support Systems (DSS), and finally, lower/supervisory level uses Knowledge Work Systems (KWS), Office Automation Systems (OAS) and Transaction Processing Systems (TPS).

In order to control the inventory of the company, Co-op Supermarket must have to consider the systems which manage this task carefully. In this part, the Economic Order Quantity and the annual saving are considered with the suggestion for the cost minimizing order size which brings the Supermarket the most benefit.

Since Co-op Supermarket produce their own products to local customers, the company have to consider the material requirements planning. According to a product structure tree, the report is able to calculate and set up the most effective plan to order the requirement for the company to produce 300 end items on time.

Co-op Supermarket has a plan to build a new cafeteria. In order to complete the Cafeteria Project successfully, the network diagram, critical path and float times for all non critical activities are provided. In this part, the duration was used to find out the critical path. Moreover, event times include earliest times and latest times are considered. After finding the critical path of the project, the float time for non critical activities are calculated. From the information from above step, the Gantt chart will be produced in order to control every activity in the project.

Final part of the report will cover the financial tools which Co-op Supermarket can use to evaluate, assess and finally make decision on its investment for three projects A, B and C. The Net Present Value (NPV) and Internal Rate of Return (IRR) and other financial tools such as Modified IRR (MIRR) and the benefit-cost ratio B/C are considered with the application on three different projects. Finally, project C was chosen since it reach the highest level of effectiveness and can bring the most benefit to the company.

Since all above material are taken care of the company, with the slogan “Quality products, Best prices and Best Service”, Co.op Mart becomes the best place for shopping and relaxing for more and more families.


  1. Introduction:

Over the last 21 years, Co-op Supermarket has experienced various pressures, difficulties and problems from many different areas. However, the organization still is one of the best businesses in Vietnam. The reason that makes Co-op Supermarket be one of the strongest organizations is that the company knows how to apply all the most effective techniques and systems into their organization. Therefore, the purpose of this report is to show the techniques and business decision making process of the company.

First of all, the decision making in Co-op Supermarket process are made according to various information in appropriate formats. In this report, the forecasting technique will be considered as an information format for Co-op Supermarket to make decision. According to the sales of four weeks, by using least squared regression method, addictive method and proportional method, the company can forecasts produced the sale for week 5. A presentation material and a report after the calculation part will summarize the forecasts sales for week 5 the most reliable model to use.

In order to control the performance of the organization, the management information systems are used by Co-op Supermarket effectively. The 6 information systems divided into 3 levels. The top/executive level uses Executive Support Systems (ESS), while middle/management level uses Management Support Systems (MSS), Decision Support Systems (DSS), and finally, lower/supervisory level uses Knowledge Work Systems (KWS), Office Automation Systems (OAS) and Transaction Processing Systems (TPS).

Co-op Supermarket also considers the Inventory control systems very carefully. The third part explain the Economic Order Quantity and the annual saving are considered with the suggestion for the cost minimizing order size which brings the Supermarket the most benefit.

Co-op Supermarket can produce their products to local customers. Therefore, the company has to consider the material requirements planning. According to a product structure tree for the end item, the report will calculate and consider the most effective plan for Co-op Supermarket to order the requirement for the company at the right time and with correct quantity to produce 300 end items in period 6.

To motivate and improve staff morale, Co-op Supermarket has decided to set up a Cafeteria Project to replace the existing canteen with a modern cafeteria. In order to complete the project, the network diagram, critical path, float times for all non critical activities are provided. The duration and event times include earliest times and latest times were used to find out the critical path. Depend on the critical path and the float time, the Gantt chart is produced in order to control every activity in the project.

Finally, the investment appraisal techniques that Co-op Supermarket uses will be considered.  The company has to choose the most effective project within three projects A, B and C to invest. Therefore, it has to use financial tools to assess and evaluate them. The Net Present Value (NPV) and Internal Rate of Return (IRR) and other financial tools such as Modified IRR (MIRR) and the benefit-cost ratio B/C are used to calculate different values of three projects.


  1. Co-op Supermarket - A reliable shopping place - Friend of all families

  1. Forecasting techniques:

  1. Calculations:

  1. Least squares regression method:

In order to produce the forecasts for week 5 of Co-op Supermarket, the least squares method is applied. The least squares method of linear regression analysis provides a technique for estimation the equation of a line of best fit (BPP Professional Education, 2004, p137).

Moreover, the method of least squares assumes that the best-fit curve of a given type is the curve that has the minimal sum of the deviations squared (least square error) from a given set of data (eFunda, n.d). To form the equation of the best fit line for week 5, the following factors are calculated.

n is the number of pair of data. In this solution, n = 24.

The least-squares line uses a straight line which has the form 

y = a + bx

Where        x and y are related variables

        x is the independent variable which is day position

        y is the dependent variable which is actual volume of sale

a is the intercept of the line on the vertical axis

        b is the gradient of the line

The following formulae are used to calculate the values of a and b

a =                         = 38.33667

b=                                 = 0.59391

After applying the relevant value into the formula, we get the linear model is

y=38.33666+0.59391x

Where x=0 in Monday week 1; x=1 in Tuesday week 1and so on.

Using this trend line, predicted sales in Monday Week 5 (quarter 24) would be y=38.33666+0.59391 x 24 = 52.59058

Using this trend line, predicted sales in Tuesday Week 5 (quarter 25) would be y=38.33666+0.59391 x 25 = 53.18449

Using this trend line, predicted sales in Wednesday Week 5 (quarter 26) would be y=38.33666+0.59391 x 26 = 53.77841

Using this trend line, predicted sales in Thursday Week 5 (quarter 27) would be y=38.33666+0.59391 x 27 = 54.37232

Using this trend line, predicted sales in Friday Week 5 (quarter 28) would be y=38.33666+0.59391 x 28 = 54.96623

Using this trend line, predicted sales in Saturday Week 5 (quarter 29) would be y=38.33666+0.59391 x 29 = 55.56014

Using the trend line, predicted sales in week 5 would be as follow:

With least square method, the sales forecast in week 5 of Co-op Supermarket will be about $324,452.17

From the above data, we have the following lines of best fit for forecast sales of Co-op Supermarket in week 5:

  1.  Additive model

A time series is a series if figures or values recorded over time (BPP Professional Education, 2004, p150). Using time series, the seasonal variation will be found. There are two models to find the seasonal variations include addictive and proportional model.

First of all, the addictive method is applied to find out the seasonal variation and include the forecasts for the daily sales in week 5. Addictive model for time series analysis assumes that the component of the series are independent of each other, an increasing trend not affecting the seasonal variations (BPP Professional Education, 2004, p 159)

The formula for addictive model for time series analysis is

Y = T + S + R

Where Y is value of the changing valuable which is the actual volume of sale

        T is trend

        S is season

        R is residual component

We assume that the residual component is 0, therefore, the seasonal component is

S = Y – T

The seasonal variations for week 1, 2, 3 and 4 are as follows.

We can now average the seasonal variations

These might be rounded up or down to:

Monday -21.35111, Tuesday -8.82333, Wednesday -2.24000, Thursday 3.87111, Friday 15.37111 and Saturday 13.17667

The trend line is plotted by using the figures on Thursday of Week 1 (44.16667) and Wednesday of Week 4 (46.83333). Therefore, the trend rose and the average daily rise can be calculated as follow:  

Trend rose = 46.83333 - 44.16667 = 2.66666

The average daily rise = 2.66666 / 17 = 0.15686

Taking 0.15686 as the daily increase in the trend, the forecast of sales for week 5, before seasonal adjustments (the trend line forecast) would be as follows.

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Seasonal variations should now be incorporated to obtain the final forecast for week 5

Therefore, using additive model method, the sales forecast in week 5 for Co-op Supermarket will be about $287,121.97

        From the above data, we have the following chard for Co-op Supermarket’s sales in week 1 to 4 and the forecasting sales for week 5 as follow:

  1. Proportional model

Another method to calculate the seasonal variation is proportional or multiplicative method. This model for the time series analysis expresses each actual figure as a proportion of the tren (BPP Professional Education, ...

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