The History Of The Samsungs Supply Chain Business Essay

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May 7, 2013

EXECUTIVE SUMMARY

The basic aim of the paper is to describe the supply chain of the Samsung Company. It is a Korean based corporation; holding the major share of the market. Moreover, its supply chain is comprised of the five layers and the negotiation with the suppliers is dependent upon the layer to which they belong. The first section of the report provides a brief introduction to the company as well as the concept of the Supply Chain. Moreover, it also discusses the background of the Samsung Group of Companies. Moreover, the section discusses the Supply Chain of the Samsung Company as well as the description of the composition of each layer. Additionally, it also encompasses the deliberation of the various issues encountered by the company in their supply chain.

Contents

INTRODUCTION

Samsung Group is a South Korean based international corporation situated in Seoul. It encompasses several divisions and conglomerated businesses, most of them amalgamated under the brand of Samsung, and are the chief South Korean chaebol. The basic purpose of the paper is to elaborate the supply chain of the Samsung as well as to deliberate the encountered issues.

The SCM (Supply chain management) is the vigorous administration of supply chain actions to maximize patron value and attain a sustainable competitive advantage. Additionally, it signifies a meaningful effort by the supply chain corporations to run and develop supply chains in the most efficient and effective ways probable. Moreover, supply chain activities shelter everything including the sourcing, production, product development, and logistics, as well as the information systems (IS) required to synchronize these activities. The corporations that make up the supply chain are connected together through information flows and physical flows. The Physical flows encompass the conversion, movement, and storage of materials and goods. They are the most discernible component of the supply chain. Moreover, the Information flows permit the numerous supply chain associates to harmonize their enduring plans, and to control the everyday flow of material and goods down and up the supply chain. (Anderson & Katz, 1998)

BACKGROUND

The Samsung Group of companies is renowned as a primary international manufacturing, monetary, and facilities conglomerate. It was established in 1938 and concentrated its commerce on zones like shipbuilding, textiles, chemicals and machinery. During the past few decades, the group has made massive investment and efforts in the semiconductor and electronics industry. As a consequence, the Samsung Group has undertaken a vivid development in net proceeds since the 1990s.

Furthermore, the Samsung is considered as a company delivering augmented value to their patrons. Many deliberate these accomplishments as reflecting a relentless and continuous effort at Samsung to advance the manner it conducts commerce. During the past few years, Supply Chain Management and Six Sigma have been two props of corporate innovation at Samsung. The Samsung Group of companies has great, multifaceted, international supply chains in most of the merchandises it produces and makes widespread usage of SCM elucidations and process innovations to improve and support its processes. Most particularly, at Samsung electronics, APS (advanced planning and scheduling systems) have been espoused since the 1990s and have carried the corporation many achievements in relations of operational distinction. At present, Samsung Electronics is ranked at seventh number in a respected expert’s position of the international top 25 corporations in supply chain superiority.(Kim, 1998)

SUPPLY CHAIN MANAGEMENT

The efficacious SCM necessitates an alteration from managing discrete functions to assimilating activities into main supply chain procedures. Conventionally, both downstream and upstream shares of the supply chain have interrelated as disengaged entities getting intermittent flows of data over time. The purchasing department put orders as necessities turned out to be essential and marketing, retorting to patron demand, interfaced with numerous retailers and distributors endeavored to content this demand. Orders were occasionally given to dealers and their suppliers had no discernibility at the point of use or sale. Contending the patron often deciphered into demands for accelerated processes throughout the supply chain as member companies responded to unanticipated alterations in demand.( Ellram, 1991).

Therefore, operating an assimilated supply chain necessitates incessant information flows, which in turn support to make the best merchandise flows. The client remains the primary concentration of the procedure. Attaining a virtuous customer-focused system necessitates processing data both precisely and in a timely way for quick response schemes that necessitate recurrent alterations in retort to variations in purchaser demand. Controlling ambiguity in buyer demand, manufacturing procedures, and supplier performance are perilous to operative SCM. (Hammer, (2002).

SAMSUNG’S SUPPLY CHAIN

Samsung Electronics’ proceeds equals approximately twenty percent of the worth of GDP of South Korea. It has been deliberated that nearly thirty percent of all electronics corporations in South Korea are autonomous of SEC (Samsung Electronics Company). The common of these are the subcontractors of LG Electronics’. Moreover, the system of constituent manufacture and supply for Samsung Company is composed of five layers.

FIRST LAYER

The first layer is made up of subsidiaries of Samsung Group and accounts for approximately eleven percent of the worth of constituents bought by Samsung Electronics.

SECOND LAYER

The second layer is composed of international electronics constituent suppliers who have autonomous technical competence. The ACQ (American companies Qualcomm), having a CDMA patent, as well as the 3Com, having a wireless patent, are instances of corporations in this layer. (Han, Liem & Lee, 2013).

THIRD LAYER

The third layer encompasses the dealers to which Samsung Company subcontracts parts production that it could manufacture itself, but selects not to for production capability or cost motives. These corporations mainly provide small-scale LCD boards. Samsung Company gets these LCD panels at a low price from corporations like the CPT (Chunghwa Picture Tubes Ltd) as well as the (AUO) Taiwan-owned AU Optronics Corporation. (Gattorna & Chorn, 1991).

FOURTH LAYER

The fourth layer is comprised of local subcontractors that provide parts that Samsung Company could not manufacture itself. The key corporations in this layer encompasses the Intops LED Company Ltd, which manages both the manufacturing of cell phone cases and the assembly of cell phones, and Interflex Corporation Ltd, which manufactures PCBs (Printed Circuit Boards).

FIFTH LAYER

The final and the fifth layer in the supply chain of the Samsung Company is made up of small and medium-size fragments suppliers situated in engineering parks. As these corporations supply parts at the low cost, Samsung Electronics recurrently switches among them, aggravating price rivalry. In addition, it also imports certain parts from China. These are the corporations most subjugated by Samsung Company.

SAMSUNG AND SUPPLIERS

Suppliers’ associations and power of negotiation with Samsung Company differ dramatically contingent on to the supply layer to which the supplier belongs. Moreover, the subsidiaries of Samsung Company that provide the key constituents and make up the initial and primary layer, for example, get the fortification of the Group. Lawfully, they are discrete corporations, but in fact they function as if they were part of the same corporation founded on Samsung Groups’ corporate plan. International corporations that own patents have strategic associations with Samsung Company owing to the importance and scale of their impact to the production procedure. (Burt & Soukup, 1985).

Furthermore, dissimilar to the companies in the first two layers, which are inimitable from Samsung Company’s point of view, national third and fourth layer dealers or foreign parts suppliers may drop their agreements with Samsung Company at any time if there is a delinquent with merchandise supply or excellence. The Samsung Company particularly the Samsung Electronics would at times upkeeps domestic dealers, but it will also simply cut those that it believes to have mislaid value from a corporate viewpoint. Additionally, in the instance of small and medium-size dealers situated in industrial parks, the association can barely even be perceived as contractual. These corporations’ pacts with Samsung Company may be on a scheduled basis, and they ought to supply at the prices Samsung Company limits. (See Appendix 1)

SUPPLY CHAIN ISSUES

It has been deliberated that in the modern realm the rivalry is no longer between single businesses however between SCs (Supply Chains). The trial for the Samsung Company is specifically not just to take up a SCM (Supply Chain Management) edge but to execute it effectively. An informatics viewpoint is vigorous as information flow is an essential fragment of Supply Chain Management and material flow is diligently reliant on information flow. But Supply Chain Management procedure can be a fiasco unless the company is aware of the matters that may ascend during its execution or the planning phase. Moreover, the jeopardy of disturbances instigated by both factors within Supply Chain and outside ecological forces of the Samsung Company is a subject of increased standing. It is imperative for the firm to implement certain effective strategies in order to overcome the confronted issues. (Vollmann, Berry & Whybark, 1997)

The sources of jeopardies can be from customers, suppliers or internal setting. In addition, it is founded on the proposition that diverse suppliers function in different environments and markets; consequently their commotion and the forces swaying a supplier also vary. Another important matter is the understanding of the fact that a certain dealer strategy may be suitable in a non-turbulent setting, it may be damaging in a more tempestuous one for instance; in the incidence of quick technical developments like microprocessors or great product price fluctuations. Seeing all of this, the same dealer strategy, attributes, and structure may stance significantly different dangers of distraction. Consequently, a wide-ranging approach to Supply Chain Risk Management has to embrace supplier-associated commotion as well as numerous sources of improbability owing to dealer attributes including the structure, strategy, and performance.( Carter & Narasimhan, 1994)

CONCLUSION

It has been comprehended that the Samsung Company needs to add value at each step of their supply chain in order to be effective. Though the adoption of the Six Sigma process is a step towards enhancing the quality of their merchandises, more needs to be done. Moreover, managing better relationships or the associations with the suppliers involved in all the five layers of their Supply Chain form the basis of their success and accomplishment. In addition, the understanding of the supplier relationship is vital for managing the supply chain in an efficient manner. (Ellram, 1994).