Ứng dụng chu trình pdca tại doanh nghiệp nông sản đạt chuẩn hữu cơ usda. nghiên cứu tình huống tại công ty tnhh tiềm năng sinh thái Hòa Lạc
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THEAPPLICATION OFTHE PDCACYCLE INAGRICULTURAL
ENTERPRISES MEETING USDAORGANIC CERTIFICATION
ACASE STUDY OF HOALAC POTECO CO., LTD
ỨNG DỤNG CHU TRÌNH PDCA TẠI DOANH NGHIỆP NÔNG SẢN
ĐẠT CHUẨN HỮU CƠ USDA. NGHIÊN CỨU TÌNH HUỐNG
TẠI CÔNG TY TNHH TIỀM NĂNG SINH THÁI HÒA LẠC
Nguyễn Mạnh Tiến; Nguyễn Thị Thanh Huyền; Nguyễn Thị Chung Anh
University of Economics and Business, VNU
Abstracts
This paper presents the importance of organic products, introduces USDA Organic certi-
fication and discuss some practical issues for Vietnamese organic producers to achieve this cer-
tificate. This study uses the 4E1M concept and Ishikawa fishbone diagram to analyze the specific
regulations being gained through the field study of Hoalac Poteco. The findings show that there
are some ineffective points in the process of applying these standards in Hoalac Poteco. Thus,
this paper suggests solutions for Hoalac Poteco in particular and Vietnamese agricultural en-
terprises in general by applying the PDCA Cycle to meet standards of USDA Organic Certifica-
tion effectively and efficiently.
Keywords: organic food, USDA certification, PDCA cycle, 4E1M concept, Ishikawa
diagram.
Tóm tắt
Bài viết này chỉ ra tầm quan trọng của các sản phẩm hữu cơ, qua đó giới thiệu một tiêu
chuẩn hữu cơ của Mỹ - USDA Organic, đồng thời thảo luận các vấn đề cốt lõi khi áp dụng tiêu
chuẩn USDA Organic. Nghiên cứu sử dụng cách tiếp cận 4M1E và sơ đồ xương cá Ishikawa để
phân tích các quy định cụ thể trong chứng nhận USDA Organic thông qua nghiên cứu thực
nghiệm tại Công ty TNHH Tiềm năng Sinh thái Hòa Lạc. Kết quả nghiên cứu chỉ ra rằng trong
quy trình sản xuất sản phẩm của Công ty TNHH Tiềm năng Sinh thái Hòa Lạc vẫn còn tồn tại
một số yếu tố hoạt động chưa hiệu quả. Do đó, nhóm tác giả đề xuất một số giải pháp cho doanh
nghiệp sản xuất Hòa Lạc nói riêng và các doanh nghiệp nông sản Việt Nam nói chung bằng cách
áp dụng chu trình PDCA trong vận hành doanh nghiệp để đáp ứng các tiêu chuẩn khắt khe của
chứng nhận hữu cơ USDA một cách hiệu quả.
Từ khóa: thực phẩm hữu cơ, chứng nhận hữu cơ USDA, chu trình PDCA, 4M1E, sơ đồ
xương cá Ishikawa.
1. Introduction
Vegetables play an irreplaceable role in human diet. According to the World Health Or-
ganization (WHO), each person should consume 400g of vegetables and fruits per day (Kinder-
sley, D. 2015).
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In recent decades, the demand for agricultural products and the prices of such products are
on the rise under the shifts in the population structure and environmental factors. Indeed, the cur-
rent world population is 7.4 billion and is projected to reach 9.5 billion by 2050 (United Nation,
2012). This is compounded by the fact that the world’s population is not only increasing, but also
getting wealthier. Particularly, only 1.4 billion people in the world were middle class in 2000,
but this figure is estimated to increase to 3.25 billion by 2020 (Kharas, H. & Gertz, G. 2010).
Since the middle class consumes more and requires better-quality products, the agricultural sector
is expected to grow considerably with a larger market. Besides, some factors regarding climate
change, industrialization and urbanization have a substantial impact on the resources of this sector.
Therefore, it can be seen that the new approach for food production needs to address the issues
of quantity, quality and sustainability.
Organic agriculture is one of the promising models meeting the above conditions. Organic
foods are particularly appealing to health-conscious consumers as they are cultivated without the
involvement of chemicals. The global organic food and beverages market is projected to reach
$327 billion by 2022, about three times more than $115 billion in 2015 (Dwivedi, D. 2016). Sim-
ilarly, the domestic market itself shares the same tendency as Vietnam’s economic growth is main-
tained at a high level, averaging 6.5% per year (The World Bank, 2019). In addition, the growing
concern over food contamination has been making fresh produce, especially organic food, gain
more traction among customers.
Vietnam is a tropical country with many favorable conditions to develop the agricultural
industry. With geopolitical incentives, agriculture is considered a strategic sector of the country.
In fact, 37.6% of Vietnamese laborers are involved in this sector (General Statistics Office of
Vietnam, 2018). However, the prestige and quality of Vietnamese agricultural products have not
been guaranteed because the production process focuses too much on productivity and crop in-
tensification, and farmers’ awareness is still low. Consequently, those farmers may use toxic
chemicals at their will, which adversely affects the health of consumers as well as the environ-
ment. Gradually, customers will lose confidence in Vietnamese agricultural products.
Currently, small and medium-sized enterprises (SMEs) in organic production in Vietnam
are facing challenges of market pie when cheaper agricultural products from large-scale producing
countries are imported into Vietnam. Also, it is the cost that is a problem making such companies
unable to compete in traditional markets. Indeed, the primary market segmentation for these com-
panies is the middle class and upper class usually living in metropolitan areas. Therefore, im-
proving the quality and brand of the product is considered a strategic priority for these SMEs.
In particular, an establishment of standards for agricultural production will help businesses not
only build a good production model which greatly contributes to the quality improvement, but
also gain customers’ trust immediately (National young farmer coalition, 2014).
Improving the quality, output and sustainability in agricultural production helps businesses
gain consumers’ confidence. In today’s globalized world, promoting international trade is in-
evitable. Free trade agreements established between Vietnam and many other countries will be
golden opportunities if the domestic production capacity is good. For example, the European
Union Vietnam Free Trade Agreement (EVFTA), taking effect in 2020, has paved the way for
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increased trade in many economic sectors, especially in the organic food industry, between Viet-
nam and the EU which accounts for 29% of the global market share of organic foods (EU Agri-
cultural Markets Briefs, 2019). As a result, it can be said that improving the quality of agricultural
products is a strategic opportunity for Vietnam in order to bring this sector to the global market.
Therefore, applying organic farming with organic standards for crop production is a po-
tential solution for businesses to respond to the requirements of yields, quality and sustainable
development. In this study, we selected the USDA organic regulations, which is considered the
most rigorous and highest standard in organic production. In Vietnam, there are currently only
114 organizations meeting this standard. By researching on this most advanced organic certifi-
cation, authors want to bring out the significant issues that get in the progress of achieving organic
approval in general and propose appropriate solutions for these issues.
Hoa Lac Potential Ecological Company Limited was established in 2010, and up to now
the company has been operating for 10 years under the organic model. In December 2018, this
company was certified organic by the U.S. Department of Agriculture (USDA). HOALAC
POTECO is one of the few direct manufacturers among 114 firms that certified by USDA in Viet-
nam, the rest are distributors and processors. The study focuses on analyzing the resources to
meet the USDA organic regulations and finding ineffective points in the process of applying stan-
dards of this company, thereby drawing experience and solutions for this company (HOALAC
POTECO CO., LTD) in particular as well as other organic producers in general in order to apply
organic regulations effectively.
2. Literature review and Methodology
2.1 Literature review
Definition of organic production
In 1995, the National Organic Standards Board (NOSB) defined organic agriculture as “an
ecological production management system that promotes and enhances biodiversity, biological
cycles, and soil biological activity.”
In 2002, the National Organic Program (NOP) defined organic agriculture as “Organic pro-
duction [is] a production system that...respond[s] to site-specific conditions by integrating cultural,
biological, and mechanical practices that foster cycling of resources, promote ecological balance,
and conserve biological diversity” (Pamela Coleman, 2012).
USDA organic regulations
Organic certification verifies that organic producers (farmers) or organic handlers (proces-
sors) anywhere in the world has complied with organic regulations of the U.S. Department of
Agriculture (USDA) and allows them to sell, label and represent their product as organic. These
regulations describe the specific standards which are necessary for producers to label their food
or fibre products with the USDA organic seal. The National Organic Program (NOP) administers
these regulations (National Organic Program, U.S. Department of Agriculture, 2012).
A product is required to adhere to very strict rules and standards to be certified organic by
the U.S. Department of Agriculture (USDA). Regulations can be found under Title 7, Part 205 of
the Code of Federal Regulations (Title 7 deals with agriculture, one of 50 broad topic areas that
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are subject to Federal regulation.). (Electronic Code of Federal Regulations, Title 7 → Subtitle
B → Chapter I → Subchapter M → Part 205). In this study, we focus on cultivation criteria to
match the research subject of Hoa Lac Potential Ecological Company Limited.
The application of the USDA organic regulations can bring about some following benefits:
(1) Providing a generally accepted standard, (2) Acting as an effective means of communication
with customers (3) Gaining new customers confidence immediately, (4) Marketing and identifying
products easily, (5) Explaining the price of products easily and (6) Acting as a guarantee for the
quality of products (Oakley, E. 2014).
The factors of production
Production is the process of combining physical and non-material inputs, such as plans,
know-how, etc., to create products for consumption (outputs) (Kotler, P., Armstrong, G., 2006).
In particular, factors in production are 4Ms (Man, Machine, Method, Material) which are
widely used for root-cause analysis. In a production environment, this pattern is widely applied
to control production operations or product improvement (Long Bao, 2019). Also, 4Ms is one
of the key tools for leading manufacturers (Schiraldi, M. 2013). In this article, the authors use
a more extensive analytical framework called 4M1E or 5Ms (man, machine, method, material,
environment).
Ishikawa Fishbone Diagram (The cause and effect diagram)
This cause analysis tool was named after the Japanese man called Ishikawa Kaoru and
made well-known in the 1960s. In fact, he was a pioneer of the quality management process in
the Kawasaki shipyards and has been considered one of the leading fathers of modern manage-
ment. Because of the shape resembling the side view of a fish skeleton, the diagram is also known
as a fishbone diagram.
The technique is used as a diagram-based approach for brainstorming all of the possible
causes of a problem. By using this diagram, situations can be analyzed carefully. In particular,
this tool consists of four stages: (1) Identify the issue, (2) Find out the main involved factors, (3)
Identify the possible causes and (4) Analyze the diagram (Liliana, L. 2016).
In order to identify these sources of variation, we group causes into main categories. Typ-
ically, such categories include: people, methods, machines, materials, measurements and envi-
ronment (DK Publish, 2014).
In 1990, Ishikawa and Loftus defined the diagram as “a graphic representation that schemat-
ically illustrates the relations between a specific result and its causes” (Ishikawa, K. & Loftus, J.
H. 1990). In particular, the fish head is the negative problem while the fish bone structure helps
to describe the potential causes and the sub-causes. Therefore, the diagram clearly reveals the re-
lations between a problem identified in a product and its potential causes.
The PDCA Cycle
PDCA (Plan – Do – Check – Action), used in company for the control and continuous im-
provement of processes and products, is an iterative four-step management method (Tague, N.
R. 2005).
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The actual results of an action are compared to a set point or a target in a central process.
Then, the discrepancy between the two is noted and if the difference is considerable, some cor-
rective measures are adopted. The repeated and continuous nature of continuous improvement
follows this usual definition of control and is repeated by the PCDA (Plan - Do - Check - Act)
cycle (Basu, R. 2004).
This is also referred to as the Deming cycle, named after W. E. Deming. Another variation
of PCDA is PDSA (Plan - Do - Study - Act) (Sokovic, M., & Pavletic, D., 2007, 369-378).
Act
Plan
Managing Nonconformity
Improvement
ISO 9001 Certification
Cultural and Organizational Aspects
Total Quality Management
Environmental Management Systems
Management System Integration
The Quality Concept and Objectives
Statutory Considerations
Product Liability and Product Safety
Training for Quality
The Control of Design
Check
Do
An Introduction to Statistics
Control Charts
Inspection
Functional Testing
Inspection and Measurement Equipment
Metropoly
Procurement
Just-in-time Supplies
Process Capability
Product Reliability
Materials Handling
Servicing
Quality Audits and Reviews
Quality-Safety-Related Cost
Benchmarking
Service Quality
Documentations and Records
Controlling Changes
Standards, Standardization, Conformity and Com-
patibility
Figure 1: PDCA Cycle
Source: Gower Handbook of Quality Management, M. Seaver (2003)
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2.2. Methodology
In this study, the authors make use of qualitative research techniques based on analysis of
key factors (5Ms: man, machine, method, material, environment) in production and the role of
such factors in the application of USDA organic regulations for the company. According to the
TQC Center for Testing and Quality Certification, these factors are the main ones for all systems.
Similarly, in 1998, Allan Miller et al. recommended to use 4M1E factors to identify the primary,
or “root cause”, of a problem and enhance the product quality (Positioning the farm business,
1998). Also, in 2011, it was proved that these factors play an important role in technical quality
(Yihua, M., & Tuo, X., 2011). The five factors were analyzed on how it encourages or discourages
the progress to company’s achievement of the certificate.
Another information collection method used in this study is on-site observation. To be ob-
jective researchers take product samples, measure product quality directly over a period of time.
In addition, the cause and effect diagram (Ishikawa diagram) are used to identify the root
causes of problems. The best technique to find the causes of the problem is to form a quality team
(people who often work together) and then brainstorm to detect the main causes. In this study,
the quality team consists of two executive officers and 2 leaders of production groups. Since
there were some limitations in gathering the quality group for brainstorming, the authors collected
opinions of these participants one by one and re-systemed their opinions into the chart. After fin-
ishing the chart, each cause was voted to find out the main.
3. The results of factor analysis on the implementation of USDA organic regulations at Hoa
Lac Poteco
Hoa Lac Potential Ecological Company Limited
Hoa Lac Potential Ecological Company Limited was established in September 2010. After
nearly 10 years of operation, this company has become one of the largest organic producers in
the agricultural industry in Vietnam. The company has obtained many certifications from The
International Federation of Organic Agriculture Movements (IFOAM - Organics International),
the USDA and ISO 9001: 2015. The average annual turnover of the company fluctuates at 50
billion VND, providing jobs for more than 100 employees. Currently, the company is focusing
on growing and supplying organic vegetables and fruits which are labelled as Dai Ngan. The
main goals of the business in the next 5 years are to expand the domestic market, to enter the in-
ternational market and increase the revenue by 30% from the 2018 figure of 49,382 million VND.
The results of 5Ms (4M1E) analysis
Man: The company’s employees have long-term experience in agriculture. Through the
survey, it was found that 50/50 of surveyed employees (out of a total of 125 employees) have
grasped the main rules of organic practice. This is a testament to the effective internal training
activities of the company. In fact, although there are no human criteria in the USDA organic reg-
ulations, people have a substantial impact on the entire production process. Therefore, the long-
term experience of the employees and the effective training activities of the business are the main
reasons for the successful application of organic standards.
Machine: Since the characteristic of the majority of the organic farming model is labor in-
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tensive, the participation of the modern machinery in this model is far less than that of the inten-
sive farming model on a large scale. Besides, it is the production facility located in an uneven
and valley-like area that limits the use of large-capacity machines. However, the company is very
active in applying tools such as cold chambers, packaging machines, agricultural films, etc. to
improve production efficiency. Also, the organic rules do not refer to the productivity and quality
aspects of the equipment, but only focus on the equipment hygiene to avoid product mixing and
ensuring the organicity of the product.
Method: The company has a typical organic model with nearly ten years of experience in
this field. The farming techniques used are 100% organic. Particularly, some typical methods of
the company are treating organic waste with earthworms, using cover crops to improve soil and
water quality, and using sprinkler and drip irrigation systems. Nevertheless, the method of using
organic fertilizer applied to the company needs to be changed to meet the criteria of prioritizing
prevention over treatment and protect the ecological balance of the cultivating area.
Material: Seed is self-controlled by the company (110/112 plant varieties and vermicom-
post are produced by the company itself). Self-control of raw materials makes it easy for the com-
pany to demonstrate the organic origin, ensuring that products are not mixed with genetically
modified, non-organic varieties. Also, autonomous seed systems help to reduce production costs
when the seeds proven organic usually are at a high price.
Environment: The company is a huge farm with substantial acreage (180 ha, of which
10% is used). The virgin land meets the requirement regarding ecological isolation and balance
of the USDA organic regulations. The three natural factors that are important in agricultural pro-
duction are soil, water and air. Among them, the arable land of the farm located on Ba Mountain
is virgin land with many native trees, such as Imperata cylindrica , Cyperus alternifolius, Mua
flower, etc., which have grown naturally without the intervention of humans and the pollution.
The water source is the underground water from Vua Ba Mountain, which has been tested and
acknowledged as the high purity water. Water is taken to tanks with a total capacity of 2000m3,
using advanced sprinkler and drip irrigation systems on 100% of the cultivated land. The virgin
area is far away from residential areas and industrial zones, ensuring air quality.
Table 1: Points to be improved in the operation of Hoa Lac Poteco
Main criteria
Soil
Code
Evaluation
Modified
§205.202
Need modifications - Emphasize primitive characteristics
which have been never infected with
banned substances
- Add criteria for ecological balance
and ensure soil sustainability accord-
ing to §205.202, §205.203
Soil fertility and
nutrient manage-
ment
§205.203
§205.205
Need modifications - Emphasize the criteria of crop rota-
tion and ecological protection ac-
cording to §205.203
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Seeds and plants
§205.204
§ 205.206
Qualified
The management
of weeds, pests
and diseases
Need modifications - Emphasize the criteria of crop rota-
tion according to §205.205
- Eliminate natural pest control meth-
ods, emphasize the principle of 3 lev-
els of prevention over cure according
to §205.206
Post-harvest treat- §205.270 –
Qualified
ment
205.272
Recordkeeping
§205.103
Need modifications - Add records of planting
- Add criteria of keeping records
- Add criteria of prevention via fore-
cast
Source: Authors
Before being certified, there were 4 out of 6 categories that the company needed further
improvement to meet the USDA organic regulations. The fundamental changes lied in the tech-
niques as the company has practiced the organic model for a long time. Therefore, there were no
changes that required a lot of time and resources like a 3-year transition period without using any
banned substances. Besides, criteria such as the protection of regional ecosystems or the buffer
zone were those that had been done before and had not been recorded yet. In conclusion, those
were small changes that could be achieved easily in the short term.
Through the 5Ms analysis of the production for the success of Hoa Lac Poteco in applying
USDA organic regulations, we draw the following conclusions:
The advantage of the company is the natural factor (Environment) as this company is cul-
tivating on virgin land which is unexploited and isolated from other areas. This is conducive to
organic farming thanks to the low converting and isolating cost compared to other companies.
Besides, methods and experience play a vitally important role as the company has applied organic
standards for nearly 10 years. As a result, by having the right resources, the company has been
certified organic by the U.S. Department of Agriculture (USDA).
In addition to the purely technical elements in the USDA organic regulations, under onsite
observation and through the sampling process aiming to evaluate effectiveness of the company
in applying organic rules, the results are as follows:
First, the production model is labor intensive due to the characteristics of the organic pro-
duction, coupled with the fact that the use of personnel has not been optimal yet. In addition, labor
market structural changes make the company unable to access cheap labor in the future. Second,
through the sampling process from February, 1st 2020 to February, 21st 2020, it was found that
there has been still a rate of defective products, returned products, and down-standard products
from class 1 to class 2. Third, the output and quality are not equal across production regions.
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The results of the Ishikawa Fishbone Diagram analysis to find the root causes of the above
problems
The root causes of the problems at Hoa Lac Poteco drawn by the quality team of 4 man-
agement committee members are showed in three following models:
Fig 2: Fishbone diagram analysing the causes of poor and uneven quality of products
Source: Authors
Fig 3: Fishbone diagram analysing the causes of poor product quality
Source: Authors
Fig 4: Fishbone diagram analysing causes of labor intensive
Source: Authors
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Causes of poor and uneven quality of products:
iThere has not been any unique framework and quality scale for products in the list yet.
iThere have not been any records or experience shared between production groups to
minimize the impact of the natural factors in using large areas of cultivation and crop rotation as
required by USDA.
iProducts have been processed together; therefore, it is hard to evaluate and compare the
production efficiency among separate regions.
Causes of labor intensive:
iThe production characteristic is one of the reasons.
iTasks are assigned according to situations; mid-level leaders lack management skills;
and there are no plans regarding the use of labor, causing waste of labor.
4. Recommendations and Solutions
“USDA organic regulations” describes the practices and materials that are allowed or pro-
hibited for organic production. Therefore, factors that help to improve production efficiency and
product quality are not included. However, the purpose of following such rigorous rules is to cre-
ate quality products for communities and improve the efficiency and profitability for companies.
In other words, although problems in the production process are not directly mentioned in the
regulations, they have a direct impact on the practices for organic production. For instance, pro-
duction planning that puts profit as the top priority leads to intensive farming negatively affecting
soil sustainability, which is one of the main terms in the “USDA organic regulations”. As a result,
it is clear that standards assurance activities have an inextricable relationship with quality and
performance improvement ones in organic farming.
For HOALAC POTECO, although the company has been certified by the USDA, the prob-
lems that are not included in the USDA organic regulations but directly affect the product quality
and production efficiency should be addressed adequately. In fact, the company has not completed
the scales for the product and the labor efficiency, which causes the uneven quality of products
and the difficulty in evaluating the efficiency of each production area. As a result, it is necessary
for the company to establish a complete set of criteria to evaluate product quality and labor effi-
ciency. In order to do that, the USDA organic regulations can be referenced for product quality
scales. In addition to the identified problems, the authors propose the PDCA cycle, a model of
continuous improvement, in applying USDA organic regulations to achieve two goals of meeting
technical standards and production efficiency. Specifically, the PDCA cycle aims to detect prob-
lems and improve production efficiency. This cycle is particularly suitable for the company as
all organic farms must be inspected and re-certified each year. Also, this cycle helps the company
to map out a clear roadmap for application of standards. Below are some general steps when a
business adopts USDA organic regulations following the steps in the PDCA cycle.
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Figure 4: Four main steps in PCDA Cycle applying in agricultural companies
Source: Authors
Evaluating the organic system and planning the necessary changes are the prerequisites in
pursuing an organic certification. This step helps the company find “gaps” between their existing
operation system and requirements for accreditation. Finding these gaps is really important as it
helps producers make informed decisions of whether they should pursue various certifications.
This is simply because when the gap is too large, it means that producers have to invest a huge
amount of money in technologies, infrastructure, etc. To illustrate, if a producer is going to im-
plement organic practices on a normal farming area, she or he should take into account the enor-
mous cost of creating the buffer zone and the isolation distance needed to prevent organic crop
contamination with genetically modified (GM) pollen or prohibited substances. Therefore, the
question for him or her should be whether he or she should cultivate that area or not. This is even
more important for conventional farmers who are considering organic certification for their crops.
As a result, once the producers decide to follow the rules, a clear roadmap should be put in place
to implement necessary changes.
After planning and identifying points that need to be changed, a business needs to broadly
implement the plan. Since the typical characteristic of the organic sector is labor intensive, a large
number of employees (most of them take on constantly changing tasks) is required. Therefore, it
is necessary to make sure that all employees grasp the plan and the organic standards. This means
the company has to have effective propaganda.
Throughout the implementation, it is necessary to observe and find out ineffective points
to change. In reality, controlling activities and adjustments are made right in the second stage to
standardize the process. In the third stage, checking operation and continuous self-assessment
are significant because this will help producers reduce the costs incurred when fixing the error
(according to the correlation between the cost of the error and the fault location) and avoid un-
necessary waste of resources.
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The final stage is testing and accrediting. For HOALAC POTECO, the detected problems
are outside the USDA organic regulations, so the company needs to focus on the third stage
“checking operation and continuous self-assessment” to address aforementioned problems. Since
PDCA cycle is a cyclic process, companies could repeat the PCDA steps as many times as needed
until being certain that the PDCA cycle is as efficient as it can be.
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