SCM of Samsung Electronics

MIS Group 1
1. What is SCM?
Definition:
SCM is the management of a network of interconnected businesses involved in
the ultimate provision of product and service packages reuired b! end customers. "t is
related with efficienc! of a compan!#s suppl!$ the goal of SCM is$ to reduce cost
caused b! bullwhip effect$ or other dumm! cost in suppl! chain.
SCM Strategies:
Man! companies use these % strategies for reducing cost. Samsung &lectronics
also innovate S&#s suppl! chain b! this strategies
1' Suppl! Chain (lanning )SC('
SC( is a strateg! to provide stable supplies for an! circumstance of
market. "t#s related to compan! and suppliers. SC( includes:
Suppl! Chain *etwork Design
Demand (lanning + ,orecasting
Suppl! (lanning
Distribution (lanning
Manufacturing (lanning + Scheduling
-' Collaborative (lanning )C('
C( is planning immediate "nformation share with customers and supplier.
"t#s related to compan! and customer. C( includes:
Design Collaboration
Demand Collaboration
(rocurement Collaboration
.etailer Collaboration
%' Supplier Chain &/ecution )SC&'
SC& is to manage timeline for Suppl! Chain S!stem. SC& includes:
Warehouse Management
0ransportation Management
"nventor! Management
1rder Management
%(2$ 3(2 S!stem
SCM &lements:
SCM has % elements$ 1rgani4ation$ (rocess$ and S!stem. 1rgani4ation is the
controller$ means the compan! who manage SCM. (rocess is about suppl! chain$
forecast5based$ dail! production planning in compan!. 6(S)advanced planning +
scheduling'is the s!stem of SCM$ based on &.(. Demand Manager$ Master (lanner$
Demand ,ulfillment$ ,actor! (lanner is included.
-. 7ackground
-.1 Samsung &lectronics
Samsung &lectronics is the world#s largest electronics compan!. 6s of -889$ its
revenue is :18%.3 billion ;SD and its net income is :-1.< billion ;SD$ making it one of the
largest companies in the world.
Samsung &lectronics# business areas are Semiconductors$ 0elecommunication$
and Consumer &lectronics. "t is the market leader in more than =8 markets$ including
mobile phone$ television$ digital displa!s$ home appliances$ D.6M$ flash memor!$ and etc.
-.- Wh! did the! need SCM
"n 1>?8s Samsung &lectronics began to enter the global marketplace as a small
consumer electronics compan!. 6fter that$ information technolog! related markets were
getting bigger and bigger in the late 1>>8s$ and Samsung &lectronics eventuall! grew up
as one of the largest electronics compan! in the world. 6s a rapidl! grown compan!$ it
had to discard previous s!stem$ and build a new s!stem that fits the newer$ bigger
Samsung &lectronics. 1ne of these ke! innovations was implementation of SCM. 0o
describe it in detail$ the background of doing SCM can be e/plained with two
perspectives: 7usiness (rocess (erspective and "nformation S!stems (erspective.
-.-.1 7usiness (rocess (erspective
,irst of all$ there were needs for uick reactions in rapidl! changing markets. 6s
business areas with a lot of innovations$ information technolog! related markets suffer
freuent changes. ,or e/ample$ the price of D.6M and *6*D ,lash memories fell more
than >< percents in < !ears$ from -881 to -88=. 6lso$ the si4e of mobile phone market
has been constantl! growing at a remarkable rate in the last decade. "n these freuent$
rapid$ dramatic changes$ Samsung &lectronics need to be more reactive and proactive$
b! introducing SCM to its suppl! chains.
Secondl!$ as a global corporation with worldwide divisions$ Samsung &lectronics
needed a centrali4ed suppl! control. 7efore doing SCM$ suppl! chains of Samsung
&lectronics were controlled b! regional divisions and these decentrali4ed suppl! control
had numerous disadvantages. ;nreliable demands forecast$ lack of unified standard
information$ no strategic planning for inventor! and low reliabilit! of deliver! due date
were the most important problems of Samsung &lectronics# suppl! control s!stem.
0herefore$ in order to solve these problems$ Samsung &lectronics need to centrali4e its
suppl! management with SCM.
0hirdl!$ Samsung &lectronics# competitors were alread! implementing SCM$ and
it was necessar! for Samsung &lectronics to follow them in order to compete with them.
"n the late 1>>8s$ Samsung &lectronics# competitors such as Son!$ @&$ and A( were
researching about SCM$ and some of them alread! started to do SCM. 6s a result of
doing SCM$ the! got shorter lead times$ cheaper logistics costs$ and more price
competitiveness. 0herefore$ in pursuit of getting continuous competitive advantage
against them$ Samsung &lectronics decided to follow its competitors$ and started to
implement SCM to its suppl! chains.
-.-.- "nformation S!stems (erspective
Samsung &lectronics decided to implement SCM because it was an efficient wa!
to integrate decentrali4ed suppl! controls. 7ecause the decentrali4ed suppl! control
s!stem had man! problems$ Samsung &lectronics chose to integrate the suppl! s!stems
and there were two wa!s to do it. 1ne of the possible wa!s was to integrate all the
regional &.( s!stems around the world b! networks. Aowever$ it need more than one
!ear of time with <88 developers$ which would be too e/pensive. 6lso$ managing and
monitoring centrali4ed sales B manufacturing B logistics plans were too difficult in that
&.( network s!stem. 0herefore Samsung &lectronics chose to make a stand5alone SCM
s!stem that centrali4es and streamlines suppl! chain management.
6lso$ another reason for doing SCM was that SCM was a step toward future
e5business. @rowth in the development and application of e5business technologies in the
1>>8s made e5business a promising future trend. Since e57usiness and SCM are closel!
related$ man! companies started to do SCM as a step ahead to future e5business$ and
Samsung &lectronics was one of them.
%. SCM Case Samsung &lectronics
"t is summari4ed that Samsung &lectronics introduced SCM with three plans. 7!
three plans$ Samsung &lectronics could accomplish SCM and reduce a lot of costs. 0hese
three plans are presented below.
(26*1. .apid planning for fast reaction to market changes
(26*-. (redicting demands with information integration
(26*%. .eal50ime deliver! to customers
%.1 .apid planning for fast reaction to market changes
Demands prediction b! salesperson and order information can be distorted or
lost b! unsuitable support of the middle organi4ation. 7ecause a compan!#s future
proCects are based on this distorted market information$ these wrong information can
directl! lead to wrong$ inefficient proCect plans. 7! integrating all the planning steps into
one concurrent planning$ Samsung &lectronics could get real5time business information
and make right proCect plans uickl!.
D,igure %.1E .apid planning for fast reaction to market changes
%.- (redicting demands with information integration
"nformation for sales and predicting demands are made b! local marketing group
who contact with customers$ and this information is controlled b! strateg! marketing
group in the headuarter. "nformation management s!stem in this kind of s!stem is ver!
likel! to cause incorrect demands prediction$ without the help of concurring collection of
demands data. 7! integrating dispersed local information managements into one centric
management process$ it was possible to perform simultaneous management on
information$ and eliminate all the inefficiencies originated from inaccurate forecasts.
D,igure %.-E (redicting demands with information integration
%.% .eal50ime deliver! to customers
Fualit!$ time limit for deliver!$ and price of products are euall! applied to
high5tech products. "n order to deliver the products that sustain high5ualit! within the
contract term$ it was important for Samsung &lectronics to acuire the credible date
that a compan! can guarantee. 0hus$ allocation of resources in advance based on
current situation was essential for on time deliver! through reliable information sources$
and it was possible with SCM.
D,igure %.%E .eal50ime deliver! to customers
3. 6(S 5 @lobal (roduction (lanning
6s a specific solution that enables SCM$ Samsung &lectronics introduced G@lobal
(roduction (lanningH. @lobal (roduction (lanning is a similar concept to 6(S. With this
@lobal (roduction (lanning$ Samsung &lectronics could make plans simultaneousl!$ reduce
time needed for planning$ and shorten the planning c!cle weekl! or even dail! planning.
6lso$ it enabled Samsung &lectronics to make precise production plans$ enhance its on5
time deliver!$ response uickl! to circumstances$ and enhance its customer service.
<. SCM 0imeline ,rom 1>>9 to -889
,igure < is 0ime line of S&#s SCM from 1>>9 to -889. (ink arrow shows design
for SCM. 7lue section is SCM process. 1range area is shown about 6(S. 6nd gra! thing
is about @1C)@lobal 1peration Center'. @reen arrow is about organi4ation. ,inall! in
-88> Samsun &lectronics become SCM World .anking 0op ?.
D,igure <.1E 0imeline of S&#s SCM 1>>9I-889
D,igure <.-E SCM World 0op ? S&
=. .esult of SCM 5 "mprovements on process management
Samsung &lectronics improve on process management. ,igure = show us following
things:
5 Shortened process management c!cle: monthl! 5J weekl! 5J dail!
5 Simultaneous planningBe/ecution of worldwide manufacturingBsales plans as
a single s!stem
5 .eduction of lead time for planning: previousl! % weeks$ reduced to less
than 1 week
D,igure =E .esult of SCM