Summary
Samsung is a global conglomerate with many companies under its umbrella. The South Korea-based company is one of the leading manufacturers and retailers in many domains, including but not limited to electronic devices, appliances and mobile phones. Well, that is as much as people commonly understand it. The company operates in many other disciplines like telecommunications, maritime manufacturing for ships and military and defense products. The electronics section is the company is most famed for globally, a component that Samsung Electronics control. This report reviews the supply chain network for Samsung Electronics, its operations management and how the company leverages technology to control the two functions.
Samsung Electronics Supply Chain
The Company’s Supply Chain Approaches and Tactics
Samsung electronics’ supply chain comprises different components that are managed independently and operated interdependently with others. All components have a relationship with each other; the relationship can either be direct or indirect. The major functions and operations of the company’s supply chain network define its main components. The components discussed in this section are procurement, production, distribution, sales and after-sales services (Waters, 2019).
Procurement of Raw Materials
The success of Samsung Electronics is built on the back of continued business process management and improvement. The company has adopted principles of total quality management in its supply chain. Extensive research and development is the backbone of SE because products are conceived there and conceptualized. The prototyping and improvements are also made in the company’s same facilities, providing a resourceful and consistent supply of new ideas. With all the planning and R&D, the company should have enough raw materials to support electronics production. One of the most important things that Samsung does differently from other electronics companies is creating lasting relations with its suppliers.
Samsung Electronics procures raw materials needed in its production facilities in bulk. It helps reduce expenses and take advantage of economies of scale in production when available raw materials are known. The procurement process of raw materials is done ahead of time thanks to the help of technologies like artificial intelligence (AI) and predictive analytics (Pournader et al., 2021). Machine learning algorithms play an integral role in studying the usage of raw materials in the supply chain. Knowledge from past production data analysis is used to ensure production lines are replenished on time and sufficiently. The relationship between suppliers and SE facilitates a smooth and reliable procurement process.
Production of Electronics
Samsung Electronics is a branch of the larger Samsung conglomerate and has one of the most extensive supply chain networks. The complexity and size of Samsung Electronics’ supply chain call for extensive, robust, and reliable resources to support personnel and technology. Currently, Samsung Electronics employs more than 250,000 employees to work in its supply chain worldwide. The company’s supply chain is also concentrated in Asia. Each entity in the production line is specialized to produce certain parts of the electronics made by the company or the assembly. Major manufacturing of Samsung Electronics’ (SE) is done in Asia, with some production done in Brazil.
The company’s supply chain is extensive and covers all the processes of raw materials, from when they are acquired to when a finished product is sold to a customer. It is worth noting that after-sales services constitute a key part of the supply chain. All supply chain components after a product is sold to a consumer are part of reverse logistics. SE is responsible for addressing its products’ issues as part of the agreement provisions of warranties on products. SE production and manufacturing facilities for electronics are concentrated in or near the regions where raw materials are sourced. Concentrating production facilities near raw materials helps significantly save time and valuable resources on the supply chain.
Production of electronics by Samsung Electronics in China ceased following claims the company had no market in the country. Research has shown that the problems run deeper (Wei and Su, 2019). Most of the loss of market in China was due to locally manufactured devices sold at lower values. Despite introducing cheaper alternatives to the electronics (appliances and smartphones) manufactured in China, Samsung enjoys a significant market share. Customers’ market share and loyalty assure continued sales to its loyal customers worldwide at competitive prices. The resilience of Chinese companies and their penetration into global markets pose a threat to Samsung. Chinese companies like Huawei have grown to become a competitor in the electronics and telecommunications sector, thus threatening Samsung Electronics on many fronts.
Distribution (Logistics and Warehousing)
SE models its operations from the focal point of efficiency and sustainability. It is deeply rooted in Asian cultures and practices of efficiency as well. The logistics model for SE is one of the most complexes, as it is meant to provide feedback on product distribution and demand. The feedback from consumers helps improve the overall model that the company uses to distribute its products to the market. In recent years, the company has overhauled its warehousing and logistics processes to bolster its resilience. Key functions that are addressed by logistics are the distribution of products to the market but that includes a host of other processes. Some related components to product distribution are distribution channels, inventory, distribution networks, transportation and storage capacity.
The distribution of products begins right after products leave the production line. Value addition begins on the production line and continues into the next function which is sales. The primary goal of the company’s distribution model is to deliver products to consumers in the best possible way. It is paramount that the products are not compromised while in transport. SE uses maritime transportation to transport products from its production facilities to regional distributors responsible for managing regional distribution. Samsung has its distribution centers and several trusted partners who serve as distributors (Yang et al., 2018). Partners and distribution mechanisms of SE’s regional centers oversee the movement of products to retailers and dealers. Both operate in liaison with SE’s clearing and forwarding agents.
Sales and After-Sales Services
Samsung Electronics has been utilizing its reputation and loyalty of customers as a basis for quantifying its success. That, coupled with the timely release of new products across the demand spectrum, has allowed Samsung to continue competing as one of the major manufacturers and retailers of electronics. The timely release of products is an effective and reliable supply chain built by the company. The sales part is relatively easy as the company enjoys a significant market share and has extensive marketing techniques.
CRM (Customer relationship management) at the end of the sale is responsible for handling after-sales services. Most after-sales services associated with SE’s products are product-specific. CRM managers and personnel work closely with technicians to support customers and handle complaints (if any). Return of products is also handled by the CRM team and the company employs reverse logistics for devices to trace the channels the products moved through. This is an integrated approach that helps identify trends and patterns in customer feedback and helps identify whether the channels have contributed to issues raised in after-sales complaints. SE has worked extensively to ensure that customer journeys are as smooth as possible.
Lean and Agile Practices for Competitive Advantage
Since its founding on the first day of March 1938, the company has been growing. The growth over time has resulted in SE’s extensive resources and facilities that it currently uses to support its supply chain. Having resources is one thing and using them is another. Over time, information extracted from production lines has helped study the company’s supply chain and develop optimal measures to improve it. The company has a corporate social responsibility covering environmental protection and conservation as key objectives. Implementing social responsibility requires the company to adjust its business processes to align with CSR and corporate objectives.
Samsung’s supply chain is set up to facilitate the company to reach its goals. Various key elements are addressed in the way the supply chain is modeled. The company has its production facilities close to its suppliers. While everyone sees the primary issue as saving money on the movement of raw materials, Samsung Electronics is effectively reducing the time used to deliver the raw materials to its warehouses in readiness for use in production. This has indirect impacts as it is also a green and environmentally-friendly tact that ensures environmental pollution by the supply chain in transportation is also limited. The overall gain is that the company has continued to advance its adoption of environmentally sensitive sustainable practices.
The rate at which technology has been growing in recent years is astronomical. Even so, SE has been able to stay up to date with its electronics and the technologies it produces. This has been facilitated by Samsung Electronics’ reliable research and development department. It has one of the best R&D departments in the world, working on various advancements concurrently to assure consistent outcomes in the form of new products and technologies. While carriers around the world were developing 5G technologies, Samsung took the first stage to advance the development of devices compatible with the technology (Lee et al., 2018). This gave SE a significant competitive edge when rolling out the technology because the reliable R&D had already developed products for the new technology.
The procurement practices and production of electronic devices in bulk are the perfect way of improving the company’s overall productivity. Well-rounded practices in the usage of raw materials to reduce waste have been developed and implemented by Samsung. The company has continued to manufacture a range of products, from premium to affordable ones, but never compromises quality. Producing quality products will maintain the competitive prices that Samsung commands on the market. Savings made in procurement and bonuses from sustainable practices help drive down production costs. Mass production will exploit economies of scale to increase profitability because of the lean and agile practices adopted on the supply chain.
Logistics and Reverse Logistics
Supply Chain Model and Technology Application
A detailed description of Samsung Electronics’ logistics component is provided in the description of supply chain approaches. There are many entities in the logistics for SE, and each plays an important role in the whole supply chain. Samsung Electronics is one of the top companies designing and implementing a resilient and efficient supply chain network. It has the capacity of tracing products from the time it leaves the production line and packaged for sale to the time a device reaches a customer. The managers of distribution channels store the data about paths taken by devices in the supply chain.
The company has a top-of-the-line information systems backbone to monitor and manage the supply chain. A lot of valuable data is stored and processed in the architecture. The company has implemented its information technology in microservices architecture to bolster its resilience to risks. The supply chain setup is also done well to facilitate the management approaches used by Samsung Electronics in operations and the supply chain. The efficiency objective of the company is not a one-off but an ongoing practice that helps improve the supply chain and its productivity continuously.
Samsung Electronics committed a lot of time (work hours) and resources to develop the current practices in supply chain management. That does not mean that the improvements have come to an end because the process is done iteratively to facilitate its adaptation to changes in the operating environment. Even so, the core principles largely remain the same unless the change is necessary and has benefits. The main reason for building a traceable supply chain network is to predict probable causes of problems to shipments and address them on time. In some cases, recall of products may be necessitated by underlying conditions. In such cases and complaints, reverse logistics are employed.
Reverse Logistics
Reverse logistics refers to the movement of products beyond their traditional destination (Santana et al., 2021). In Samsung’s supply chain, the movement of products after being sold to consumers constitutes reverse logistics. The company has set up its supply chain to have facilities to support reverse logistics because it is essential in ensuring customer satisfaction. It is also a tool used for quality management of the products and the supply chain because it is a prerequisite for business process improvement. The DMAIC process for business process management and improvement requires reverse logistics for the supply chain. DMAIC is a Six Sigma model used to manage the quality of products and the supply chain as a whole. It is an abbreviation of the steps followed in quality management: Define, Measure, Analyze, Improve, and Control. The five steps are drawn from total quality management to design a definitive and cyclic model.
Reverse logistics proved useful in the 2017 case of Samsung phones recalled after a line of new product models exhibited technical problems. The Samsung Galaxy Note 7, S7 Edge and Note S7 were the models recalled to evaluate why some of their batteries exploded (Shamsi, Ali and Kazmi, 2017). It was a swift process that used the model to recall products. Reverse logistics does not just work when products have to be recalled but extends to the other processes that contribute to the cyclic process. The movement of products from disposal by customers to raw materials step in the supply chain constitute reverse logistics. It includes processes like Reuse, Repair, Remanufacture, Part Fabrication and disposal of final remnants as raw materials back at the start of the production line.
Contractual Agreements
Samsung assumes control of some form throughout its supply chain. According to SE, an efficient model assures that it will reach the desired outcome more often. Even so, the company cannot manufacture and produce all components used in its devices which calls for the involvement of external parties. Most of these limitations are not associated with capital as the company has the financial muscle and infrastructure to ensure that resources are available. Intellectual property limitations are a bottleneck to the company but must be overcome to ensure production is not affected. Samsung contracts specialty companies to build components and chips that the company does not produce.
The distribution networks used by Samsung Electronics to transport products from the company warehouses at production facilities to consumers have many entities. Distribution is the only component that the company heavily relies on third-party entities to assist. Samsung has come up with a brilliant idea of adding resellers to their supply chain network as they play a crucial role in reverse logistics. Overall, this section of the supply chain network needs the most attention from information systems to effectively model its operations. Samsung Electronics and third-party warehousing providers also make third-party agreements to help with storage. Independent transportation companies with the right equipment and information systems also have contracts with Samsung Electronics to help deliver products to the market.
Outsourcing
Samsung has contracts with suppliers of components they need for their products. The suppliers, in this case, are considered contractors who play critical roles in the supply chain. In some special cases, the company has agreements to develop some of its products by external parties entirely. Most of the development of the Galaxy M series phones was outsourced by Samsung. The company sees it as an opportunity to help smaller companies grow while developing products for emerging markets where prices are a concern. The Galaxy M series phones retail at less than $200 and were specifically designed for the Indian market. Outsourcing entire product lines help the company keep its focus on what matters the most. It also frees resources for use in other business processes on the supply chain.
Outsourcing and contractual agreements reduce operations for the company while facilitating growth in the industry because the contracts empower the smaller competitors. They reduce direct operations and processes, but indirect involvement is necessary to keep good relationships and product expectations. Outsourced product development also presents opportunities to extend reverse logistics. Reusing phones and other contracts with third-party entities to take care of after-sales services benefits every involved party. It keeps the customer satisfied and happy, thus retaining their loyalty.
Emerging Technologies in Supply Chain Management
Technology has been a crucial part of humanity and aided in many developments in the past four decades. Supply chain management (SCM) is one of the domains that have benefited from the advancements in technology. Different technological innovations and advancements have been explored to help improve various aspects and functions of SCM. Technology played an assistive role in the past but recent advancements have indicated enough innovations to support autonomy. Consequent advancements in complementary technology like blockchain, artificial intelligence, robotics and superior information systems have catapulted autonomy to being a reality (Calatayud, Mangan and Christopher, 2019).
Technological advancements have presented more opportunities for Samsung to improve its supply chain. While Samsung Electronics has a reliable supply chain in its traditional sense, it still lags behind its use. There are gaps that SE needs to address concerning how it exploits its supply chain. The rush to catch up with technology, incorporate it into new devices, and launch them to markets before competitors do has consequences. Chances of releasing new products prematurely to beat the competition are high, thus presenting limitations on the rigorous testing of products before mass production.
Samsung has developed the necessary infrastructure and IT architecture to support its operations. Even so, it has focused on management innovation to help govern the new resources deployed to support operations. SE’s lean and agile practices align with sustainability with many of them being systemic. Materials planning and resource utilization are innovative techniques that the company uses to ensure sustainability and grounds it to its corporate objectives and corporate social responsibility.
Advancements in Information Technology
Samsung Electronics supply chain is implemented on a robust information technology backbone. Samsung Electronics supply chain flaws were exposed in the wake of the 2020 coronavirus pandemic when inefficiencies began to show. The supply chain resilience that SE had before the pandemic faded away due to inactivity when lockdowns and movement ceased across borders. It became clear in the end that the company had to integrate business continuity planning into business processes. A company of its size should have had measures to keep its supply chain network active for when SE needed it.
The current supply chain model and approaches used by Samsung are compatible with the technology. Robots will improve how Samsung Electronics manages warehouses and inventory by increasing efficiencies. RFID technology has been around for a while and has proven to be crucial in supply chain management (Papadopoulos et al., 2017). The technology will improve how products are traced from the point they exit the production line to reach customers. After purchase, tracing products in the supply chain, including reverse logistics, will rely on customer relationship management (CRM) practices.
Materials Planning
Planning is crucial for any success in the supply chain. It should provide the foundation for all operations the company is involved in. Managers on Samsung Electronics’ supply chain need to effectively understand the business processes involved in supplying resources and raw materials for improved productivity. Past supply chain data is a crucial requirement in studying trends and the resulting outputs are valuable insights generated from data analytics. Managers use these insights to help in accurately predict the dynamics of the supply chain. SE’s supply chain managers and suppliers liaise to discuss procurement and timely delivery of raw materials in the planning process.
A balance between productivity, capacity and inventory levels must be struck for an efficient supply chain to be implemented. Replenishment should be timed accurately on the production line and that is often optimized in most supply chains. A replenishing challenge that most managers face is associated with raw materials. The procurement process has to be planned to ensure that the inventory of raw materials never runs out. By doing this, managers effectively get the prerequisites to tune production lines with higher efficiencies and accuracy, eliminating disruptions due to a shortage of raw materials. The production schedules of SE rely on the availability of raw materials and it has done well to assure continuity. Assuring business continuity is backed by the company establishing and maintaining lasting and productive relations with its suppliers.
Systems Development
Samsung Electronics was touted to be planning to implement a blockchain network to manage its supply chain. While this is an interesting trend to adopt, the technology is still in its early stages of conception in the supply chain. The technology gained traction due to its use in cryptocurrency but it has been around for much longer (Dutta et al., 2020). Bitcoin is the most common coin in the cryptocurrency domain but even its ardent users have a limited understanding of blockchain technology. In comparison, the company’s supply chain network has enough users to create blockchain nodes. A lack of understanding of how the technology works remains a big issue in its adoption.
Samsung Electronics’ supply chain network is complex and intricate, impacting how the entire system is perceived. Entities operate on different levels on the network and their roles vary, as does their access control on the network. The level of connectivity needed on the supply chain for efficient operations call practically yields an Internet of Things (IoT). It is a basic requirement that the information systems used by the entities interact with each other. There are many different kinds of information systems used by the entities on the supply chain. In the end, the connections increase the complexity.
The ideal option for Samsung is to adopt more mainstream alternatives to increase the computing power of the information systems. The company should explore options like bringing your own device (BYOD) and remote access to bolster the productivity of the distribution channels and the information systems on them. Even so, changes should be planned carefully to ensure that the system’s information security is not compromised in the process. Samsung Electronics should adopt standard InfoSec frameworks like NIST-CSF throughout the system to improve overall system security by using best information security practices.
References
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