`

ASSIGNMENT FOLDER

Grade
(Office Use Only)

SUBJECT CODE: INS3021

LECTURE: Ph.D. Tran Cong Thanh

GROUP NUMBER: 12 Date received

INTAKE: II 2020-2021

Subject Name: GLOBAL SUPPLY CHAIN MANAGEMENT

Assignment type: Final Assignment

Due date of assignment: 08/06/2021

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DECLARATION: I declare that

● No part of this assignment has been copied from any other person’s work except
where due acknowledgment is made in the text, and
● No part of this assignment has been written for me by any other person except
where such collaboration has been authorized by the lecturer concerned
● Signature………………………………………….Date……08/06/2021………………

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SAMSUNG’S GLOBAL SUPPLY
CHAIN MANAGEMENT

Prepare by

Kim YuJeong 18071553

Ly Thi Huong 18071114
Nguyen Thu Uyen 17071210
La Hai Anh 17071027

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 Group Member Student ID Task Contribute to overall
content (including
operation
description,
management
objectives,
recommendation,
reading) 
Kim YuJeong 18071553 Analysis and evaluation, summarizing and 30%
( Team Leader) combining the report.

Lý Thị Hương 18071114 Supplier+Distribution 30%

( Team member) Create PPT, editing report

Nguyễn Thu Uyên 17071210 Logistics managemt 20%

( Team member)

Lã Hải Ánh 17071027 Issues and resolution 20%

(Team member)

Group member participation evaluation

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 TABLE OF CONTENT

I. INTRODUCTION

II.ANALYSIS AND EVALUATION

III. ISSUES AND RECOMENDATIONS

IV.CONCLUSION

V.REFERENCE

VI.APPENDIX(PRESENTATION SLIDES)

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I. Introduction
1. Company targeted
Samsung is a South Korean multinational conglomerate founded by Lee Byung-
Chul in 1938 .It comprise numerous affiliated business, most of them united
under Samsung brand, and the largest South Korea and top 5 best brands in the
world in 2020. Samsung specializes in the production of a wide variety of
consumer and industry electronics, including appliances, digital media devices,
semiconductors, memory chips, and integrated systems. Samsung’s supplier
network has 2,500 suppliers (mainly first-tier suppliers) from around the world.
The number of first-tier suppliers of Samsung in 2018 was 2,389. These are the
suppliers who provide: raw materials, product components as well as
equipment. A large part of Samsung's supplier network is located in countries
including: the US, China, Japan, Korea, Taiwan, Hong Kong, and Vietnam as
well as the UK. While most electronics choose to outsource their products,
Samsung has kept most of its production in house and operate global production
site in 37 countries.

2. Report objective
The economy crisis caused by the corona virus, the importance of supply chain
management is arising. Due to the pandemic, movement restrictions between
countries and simultaneous manufacturing paralysis occurred in the world.
Companies with well organized SCM system in preparation for a crisis enjoyed
an advantage in the midst of the corona crisis, but those that did not had to deal
with losses. SCM refers to a system that identifies and supports the logistics flow
from the parts supplier to the producer, distributor, and finally to the customer in
supply chain. It is a strategy to optimize the entire process by considering the
flow between supply chain components beyond individual unit optimization.
SCM is essential for businesses to deliver products and services to customers on
time. And there is an opinion that it is necessary to build a new SCM system that

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 combines technologies suitable for the current era. The purpose of the paper is to
find issues and solutions on the Samsung’ SCM operation with the analysis and
evaluation of that based on the several criteria. The standards for analysis are
procurement, manufacturing, buyer-supplier relationship, SCM strategy, SCM
system, distribution and logistics. To sum up, recommendations for the
improvement of the Samsung related to the issues will be provided

II. Analysis and evaluation

1. Procurement
1.1 Analysis
In order to analyze the purchasing process of Samsung, first thing to
understand is the characteristics on electronic device maker: they are not
purchasing components by themselves because of the intra-firm nature of
many of the components. Therefore, the relationship between supplier and
buyer is critical. As an actual example, all suppliers for Samsung are always
building their plant next to the Samsung main plant to provide component.
The Samsung has a reasonable and realistic purchasing strategy. Here are the
Samsung electronics procurement objectives. Firstly, the Samsung is trying to
creating opportunity for local, South Korea procurement, and global
procurement. The purpose on that is to reduce the cost and is to prevent from
generating the supply problem. Secondly, they have believe that opportunity
for global procurement will give competitive advantage for the company to
secure good suppliers. Thirdly, establishing well managed functions to
maintain relationships with suppliers and partners is one of the key
objectives; establishing Samsung Technology sourcing collaboration
partnerships, supporting IT infrastructure to improve the capabilities of
partner companies and creating cost saving project innovation processes;
pertinent departments of Samsung electronics and partner companies can
develop cost saving initiatives.

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 1.2 Evaluation

For example, Samsung has managed a global supply chain but most of it is in
the Asian region. However, the company has managed strong relationships
with its suppliers to ensure a continuous supply of raw material. Apart from
the main International Procurement Center of Samsung, its IPCs are also
present globally in various strategic locations.They monitor the latest
technology trends and also identify potential suppliers from these locations.
So these kinds of procurement system works well for Samsung SCM because
procuremnt is pretty much first step for supply chain management.

2. Manufacturing
2.1 analysis
Samsung has 37 production lines and 52 sales bases in 74 countries
around the world. throughout Eastern Europe and Asia, including design
centers, research and development centers, and factories around the world.
The company manufactures 90 percent of the products sold under its
name. Televisions sets are made in Europe, in the Czech Republic,
Hungary, Romania, Slovakia and Slovenia. The Slovakian factory also
produces home theatre systems and Blu-ray players. Samsung produces
refrigerators and washing machines in Poland. All of the remaining
Samsung products are produced in the company's Asian factories. Phones
are produced in South Korea, Vietnam, China and India. Camcorders are
manufactured in Indonesia and China. Samsung microwaves come from
Malaysia. Refrigerators are made in South Korea and China. Washing
machines are produced in China. Computers are manufactured in China,
as are some of the Samsung LCD screens and printers, but computer
peripherals are also made in Malaysia, Philippines and South Korea.

2.2 Evaluation

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 Most of all, Samsung is doing very well regarding the manufacturing.
While some experts predict the Covid-19 epidemic crisis is causing global
supply chains to restructure, Samsung is still able to continue serving
customers because of diversified production lines as mentioned above
paragraph. As a result, effect on COVID-19 is less than other global big
company such as Apple. Concentration of production line in China to cut
costs caused major crises for Apple. As the Foxconn plant in China
stopped, iPhone production was also halted. The factory restarted, but this
time, the procurement of key parts was blocked. Production of the new
iPhone to be released at the end of this year is also expected to be delayed
about a month. Apple is urgently considering moving its production base
to countries other than China, such as Vietnam. Unlike Apple, Samsung
Electronics has a regional distribution strategy and the proportion of
production in China is just about 10-15%.
Since Samsung successfully building a strong supply chain all over the
word and the strategy is still sustainable.
3. Buyer-supplier relationship
3.1 Analysis
Essentially, Samsung has a unique buyer-supplier relationship policy so
as to maintain good product quality and to have the cost leadership. How?
Samsung is pursuit of designing a family of accredited suppliers and often
advertises opportunities only to this family. Once inside the family, new
horizons are offered. Outside the family, supplying to Samsung is
difficult. The recruitment of external partners of Samsung has three steps:
application, review and feedback and partnership. Actually, Samsung uses
a core competency proposal system for those who wish to become a
supplier, open to any company. And the other important thing is the
cooperation policy. Samsung Electronics promotes a win-win policy
based on cooperation for mutual benefit with cooperating companies.
Some of the programs provide cooperation by providing equipment
funding for plant modernization and localization, promoting productivity

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 enhancement through site improvement, dispatching expert manpower to
strengthen efficiency and providing ERP. In fact, once the relationship
created, that is strong and is sustainable.
3.2 Evaluation
According to the sustainability report in 2020, Samsung electronics is
making an effort to share the value with suppliers continuously. Firstly,
the supplier training program is one of them. Supplier Training
(Samsung): Samsung has a special program called “Smart Factory” which
helped 570 companies in 2019 improve their manufacturing capacity.
Samsung has established the International Procurement Centre (IPC)
which serves as a training, as well as, a common data center for all
suppliers of Samsung( Samsung ,2020)

4. Distribution
4.1 Analysis
Samsung Electronics distributes electronic products mainly through two main
channels: indirect (through wholesale or retail) and direct (customers order
through Internet or direct sales sites). Firstly, Samsung uses direct
distribution.
Samsung always tries to reduce polluting emissions by minimizing
transportation distance thanks to the very advanced distribution system.
Specifically, time
delivery is greatly reduced by the introduction of electronic maps and
shipping route optimization software such as DTPS (Newspaper Delivery
System)
before). Therefore, customers can know and order at the nearest dealers or
Conversely, the company can determine the shortest distance to deliver the
products for customers. The distribution system can be seen more clearly in
the following figure.

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 (Source Samsung Electronics
website)

As shown in Figure in this distribution channel, customers will place

orders online to the company or directly to Samsung's global
management system. This information is then transferred to distribution
centers and finally delivered. Here, Samsung has been very flexible and
efficient in using the system inventory management at all distribution
centers and the entire process is controlled by the global system, not just
on a local scale. This ensures distribution centers always have stock for
delivery as well as timely updates with production plans.

Second, Indirect distribution through intermediaries (wholesalers and

retailers) is the main distribution form of Samsung Electronics with
more than 60%. According to the Samsung Electronics Global Financial
Report for the first 3 quarters of 2014, the wholesale channel accounts
for 36% and the retail channel is 25%. Distribution intermediaries such

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 as electronic stores, commercial centers, shopping centers, electronics
supermarkets and telecommunications service provider. These
intermediaries will source the product directly from the manufacturer or
through a network of retailers’ local Samsung Electronics office and
sales agent for sale to customers.

4.2 Evaluation
Due to CORONA-19, most of offline shops are closed at this point. Direct
distribution has enormously increased compared to indirect distribution. It
also lead Samsung to forecast demand easily because on the direct
websites, there’s an advanced reservation events so that it is much more
easier to predict the demand on specific models of electronics especially
cell phones.

5. SCM systems and Logistics

5.1 Analysis
The system that Samsung is using as is the SAP. Actually, what Samsung
is doing is to customize on SAP for their business: not using the original
version of SAP. That is, the point in connection with the system is to
change, or transform, the system for the Samsung’s business.

Logistics is handled in a unique way in Samsung so that it covers many

administrative processes. Core building blocks for components plus
combined internally and externally sourced components are shipped to the
assembly factories, either from Korea or directly to the overseas plant by
Samsung Electronics Logitech which handles both inbound and outbound
logistics and goes further in handling payments and processes with
outsourced companies working seamlessly with the global ERP system
maintained by Samsung SDS. Samsung has 2 types of logistics.

First, Inbound logistic, Materials and components from Korea or from

suppliers in other countries are shipped directly to assembly plants

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 through Samsung Electronics Logitech. All operations related to internal
transportation are carried out in a very streamlined manner because
Samsung has synchronized schedules and inventory status, which can
speed up the production process and create more value.

Second,Outbound logistics is often understood as product delivery,

because the function is distribution of finished products from the factory
to dealers and consumers. Outbound transport will be analyzed in terms of
3 distribution environments: Domestic, International environment and
B2B cooperation Domestic transportation in charge of delivery,
installation, return, collection, storage, loading and unloading and
processing related information from the distribution center to dealers or
consumers. To improve customer service, Samsung Electronics Logitech
has provided sales and installation of products at home for customers.
This is what helped reduce transport steps from 4 steps to only 3 steps.

5.2 Evaluation
In order to get the efficiency of logistics, Samsung has three regional logistics
companies: Europe, North America and Middle East. The other countries
have their warehouse. That is, the ways to deliver products are two: one is
handled by the central warehouse and the other is handled by the warehouse
each country. And the standard to divide the two ways is the volume of
delivery from the plant: big size market or small size market. Samsung is
using the selection and focusing strategy in connection with the logistics.
Actually, due to the system and the logistics organized well, Samsung ranked
in the top level on the SCM evaluation from Gartner.

6. SCM strategy
6.1 Analysis
Samsung uses vertical integration which is SCM strategy that equipment,
raw materials, and parts necessary for product production are supplied

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 from subsidiaries in the form of groupcompanies through
vertical integration of companiesvertical. For example, Samsung phones
are composed with camera module(Samsung electricity),
semiconductor(Samsung electronics), substrate(Samsung electricity),
display(Samsung display), battery(Samsung SDI), assembling(Samsung
electronics). This strategy stabilize supply and demand sources, and it is
easy to secure market share at each stage when competitiveness is
secured. However, In the event of sudden economics recession, there is
a possibility of a recession with affiliates. 

Secondly, Samsung evaluate (decision making) SCM every 3 days (in

2016) with four items: Allocation Party 1(AP1), Allocation Party 2(AP2),
Return and Order earliness. The API is the order lists from the customer.
The AP2 is the target quantity to sell based on the AP1; actually, this is
given by Samsung head office in South Korea. The Order earliness is the
KPI to evaluate the order from customer in advance. In fact, this is from
the demand side, not supply. The standard for evaluation is the
achievement in comparison with the target; the target is given by business
unit in the HQ.
6.2 Evaluation
When it comes to the performance evaluation and decision making,
Samsung has a good administration, or controlling, process on the SCM;
from demand side. According to the Gartner world supply chain top 25,
Samsung has outstanding SCM performance: Samsung Electronics ranked
17th in 2018 and 21th in 2019. As a matter of fact, the SCM KPI in
Samsung is demand response time. According to Korea News
“HANGYURAE”, Samsung Electronics wireless department has
shortened the demand response period from 3 days to one day, so that if
telecommunication companies and distributors around the world reduce or
increase smartphone demand, they can be immediately reflected in
production the next day. Multinational companies such as Samsung

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 Electronics targets to sale world widely. As such, smooth logistics flow is
important, and cost reduction in this process is essential to increase
product price competitiveness. Samsung's logistics innovation this time
can be seen as the storage and management of production parts, which
account for a large portion of the logistics cost. Forecasting demand
accurately from consumers in various countries and producing products
accordingly can greatly reduce the cost of storing production parts and
products. Based on its outstanding management and management
capabilities, Samsung Electronics reflected these demands every three
days, however now reduced to ‘one day’ for the first time in the world.
Smartphones, the flagship product of Samsung Electronics, are
intensifying competition with many companies in China and other
countries. In this situation, securing price competitiveness through
reduction of logistics costs rather than technological innovation of
products will play a major role in increasing Samsung Electronics' net
profit.

III. In order to improve Samsung’ SCM, the recommendations are as follows;

1. The design of the supply chain
The supply chain design has something to do with the SCM strategy
and logistics. As far as the SCM strategy is concerned, Samsung is in
the right place in terms of the making and buying decision making.
The SCM performance evaluation process is in the right place as
well. But, the AP2 operation has some issue to improve. Actually, the
AP2 is not actual customer demand but the target given by HQ in
South Korea in order to maintain the inventory balance among
relevant parties. The current process can make several problems.
Firstly, it can hurt the fair market price due to the surplus supply in
order to reduce the inventory in Samsung. Secondly, the costs
regarding the warehouse are going to increase due to the inventory;
customers don’t want to get the AP2 inventories. Lastly, there is

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 possibility to make a bad selling habit: sales are driven into at the end
of each month. Because sales office has a management target
regarding the inventory aged. Therefore, Samsung has to rethink the
AP2 operation. When it comes to the logistics in Samsung
Electronics, there is no special issue.
2. Supplier relationship
The supplier relationship has something to do with the purchasing
and the buyer-supplier relationship. As reviewed already, Samsung is
focusing on not only South Korea but also foreign countries in terms
of purchasing so as to reduce the raw material and labor costs. And,
as far as the buyer-supplier relationship is concerned, they are making
an effort to have a good relationship with suppliers with the diverse
policies: Training services for supplier employees as well as Open
innovation applications. Even if the status regarding supplier
relationship is like this, Samsung has to spend more energy and time
to have strategic business relationship with the suppliers because of
conservative culture in South Korea: top down structure. For this, the
example above with respect to the SVC supplier is a proper evidence.
In summary, Samsung should overcome the conservative
organizational culture.

3. Digital(advanced SCM system) is required

Despite of adopting 1 day decision making in 2018, Samsung
Electronics was excluded from Gartner's annual Supply Chain Top 25
for the first time in 16 years. “According to the industry on the 18th,
Samsung Electronics was not listed in the Global Supply Chain
Management (SCM) rankings recently announced by Gartner, a
global market research company.” This means that the stability of the
process from raw material procurement to product production and
sales has deteriorated. Since Gartner's SCM evaluation began in
2005, Samsung Electronics has maintained a stable ranking in the top

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20 for 10 years. In 2017, the ranking fell sharply to 25th, but it
recovered its ranking by rising to 17th in 2018 and 21st last year.

I was questioned that despite of adopting 1 day decision, why the

ranking has fallen sharply in 2020. The key is digital SCM system.
Global companies such as Nike, Google, and Starbucks are
accelerating the digital transformation of SCM, centering on Europe
and the Americas. According to Executive Vice President Song, they
have mobile based processes which is superior than computing
function based on computer, automatically detect defects through
artificial intelligence (AI) and machine learning (ML) technology,
and provide qualitative information and information through NoSQL
technology. Simple manual tasks are being automated through RPA
(Robotic Process Automation) technology.
On the other hand, there are opinions that Samsung SCM is stagnant.
Samsung SCM still relies on old technologies such as RDB
(relational database), PL/SQL, and Java programming. These cause
problems in being unable to meet the rapidly changing society and
users' expectations,"

So the solutions to this stagnant systems of SCM is as below

Firstly, to ‘enhance scenario-based decision-making’, that is, to have

the ability to cope with uncertainty. It should have realistic data-
based, actionable scenario planning and decision-making system, not
just verbal scenario management. A smarter SCM system that
considers various scenarios in preparation for uncertainty, quickly
establishes a plan for each scenario, and enables managers to make
optimal decisions through real-time comparative analysis from the
perspective of corporate management indicators is needed.

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 The second is 'strengthening responsiveness to changes and reducing
lead time'. By reducing the planning lead time from hours to tens of
minutes and from tens of minutes to minutes, it is necessary to build a
system that can quickly re-establish a plan in line with the rapidly
changing pace. Especially recently, too much 'data' has become a
challenge for us. In the past, insufficient information was a problem,
but now it is a problem of information overload. Turning the
overflow of information into insights is a challenge that SCM will
face in the future.

The third is ‘strengthening insight and improving work efficiency’. It

should be a flexible SCM that can accommodate even sudden
changes. Of course, it is still impossible to plan for the future with
100% accuracy. This is difficult even with the latest artificial
intelligence and machine learning technologies. All forecasts are
subject to variance and fluctuations. But that doesn't mean not
planning. It is important to plan as well as possible and to have the
ability to resynchronize the supply chain to react quickly and react
when a mismatch occurs.

IV. Conclusion
In order to build the next-generation SCM, Samsung has to break away from the
existing technology base.” Samsung should move on to the establishment of a
platform-based SCM equipped with in-memory technology, self-service BI
technology, natural language processing technology, and AI technology.
Samsung should provide ‘best of breed’ solution on such a platform to provide
customized solutions to customers.

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 V. REFERENCES

(1) Supply Chain – SAMSUNG(I) By Prof. K. RadhaKrishnan

https://rksupplychainmanagement.wordpress.com/supply-chain-samsung/?fbclid=IwAR0uu-
3yp7bnDbEQc1NA2qzyJCehiHbWlRSGdTW5lsDJgjCii4IhvCCAfeg

(2) “Why We Stay at SCM 20 Years Ago” (Reporter Um Ji-Yong (byline.network)

12/09/2020)
https://byline.network/2020/09/12-93/?
fbclid=IwAR2iI4Uj2XgX3yBbRqpKTu10gjWnbRgpdJSpsvyloxdY4pCoLDChVcxq53U

(3) Samsung Electronics excluded from 'Supply Chain Management Top 25' for the
first time in 16 years (by m.mk.co.kr 18/06/2020)
https://m.mk.co.kr/news/business/view/2020/06/623685/?
fbclid=IwAR0EaakGs8F0HWevEPcPjXN__YjlOZsGM6XL0GNkFuAbMOI3bAa7b0Lh2ZQ

(4) What is Samsung SDS' Digital SCM? (Reporter Um Ji-Yong

(byline.network)11/05/2019)
https://byline.network/2019/05/11-58/?fbclid=IwAR3UDf-
hCuhpdUzDxWxQ4ne8ibwyXn7o9FKDUygpaIf1HKPGlTdaiGRiUvQ

(5) Value Chain Analysis of Samsung (by Abhijeet Pratap (notesmatic.com)

21/09/2020)
https://notesmatic.com/value-chain-analysis-of-samsung/?
fbclid=IwAR0W5ymPsQjIjHW06Y7THNhPUEY3sD3mxSGQKwvNx1tWtuW6tqd0_7BxWuA

(6) Samsung operations strategies online comparative study (follow

operationsstrategies.weebly.com 25/03/2020)
https://operationsstrategies.weebly.com/samsung-case-study.html?
fbclid=IwAR3_pI9BVvclH3KVQfvc1C3G0U3w0eIcy4xN8ST7saC2RzWZAb_X_m202UA

(7) Supplier Partnership Strategy and Global Competitiveness: A Case of Samsung

Electronics (November2015EurasianJournalofBusinessandManagement):
https://www.researchgate.net/publication/284196829_Supplier_Partnership_Strategy_and_
Global_
(8) Channels of Distribution Crucial to Success? SAMSUNG ELECTRONICS
MAY 16, 2016  / TREVZSAAGA (
HTTPS://MPK732T12016CLUSTERA.WORDPRESS.COM/2016/05/16/CHANNELS-OF-
DISTRIBUTION-CRUCIAL-TO-SUCCESS-SAMSUNG-ELECTRONICS/

VI. APPENDICES(PRESENTATION SLIDES)

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