Supply Chain Management: An International Journal

Supply chain management six sigma: a management innovation methodology at the Samsung Group
Hong Mo Yang Byung Seok Choi Hyung Jin Park Min Soo Suh Bongsug (Kevin) Chae
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To cite this document:
Hong Mo Yang Byung Seok Choi Hyung Jin Park Min Soo Suh Bongsug (Kevin) Chae, (2007),"Supply chain management six
sigma: a management innovation methodology at the Samsung Group", Supply Chain Management: An International Journal,
Vol. 12 Iss 2 pp. 88 - 95
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Seungkwon Jang, Kilpyo Hong, Gee Woo Bock, Ilhwan Kim, (2002),"Knowledge management and process innovation:
the knowledge transformation path in Samsung SDI", Journal of Knowledge Management, Vol. 6 Iss 5 pp. 479-485 http://
dx.doi.org/10.1108/13673270210450582
(2007),"Samsung does six sigma: A case study on supply chain management", Strategic Direction, Vol. 23 Iss 9 pp. 15-17
http://dx.doi.org/10.1108/02580540710779717
Bong Choi, Jongweon Kim, Byung-hak Leem, Chang-Yeol Lee, Han-kuk Hong, (2012),"Empirical analysis of the
relationship between Six Sigma management activities and corporate competitiveness: Focusing on Samsung Group
in Korea", International Journal of Operations & Production Management, Vol. 32 Iss 5 pp. 528-550 http://
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 Insight from industry

Supply chain management six sigma:

a management innovation methodology at the
Samsung Group
Hong Mo Yang, Byung Seok Choi, Hyung Jin Park, Min Soo Suh and Bongsug (Kevin) Chae
Samsung SDS, Sungnam-Si, South Korea

Abstract
Purpose – This paper seeks to introduce a six-sigma based methodology for the SCM domain which was developed and has been used in Samsung.
Design/methodology/approach – The paper provides a detailed description of how and why a six-sigma-based methodology for the SCM domain
was developed in Samsung and presents a real industry case to illustrate the usage of the methodology.
Findings – In Samsung, the effort and investment in synthesizing SCM and six sigma, and developing a unique six-sigma-based methodology to
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improve its SCM operation, have turned out to be fruitful. The Black Belt program has produced highly qualified and talented SCM specialists, who are
currently training the methodology to members in their organizations and leading SCM projects. SCM projects are being prepared and conducted in a
more disciplined way and their outcomes are continuously monitored and shared through the company’s repository.
Research limitations/implications – To generalize its usefulness, the methodology needs to be applied to the SCM projects of those companies
whose organizational and cultural contexts are different from those of Samsung. In addition, the overview of an illustrative SCM project presented in
the paper is brief due to space limitations.
Practical implications – Today, SCM is increasingly recognized as a strategic way to innovate a company’s business operation. This paper shows that
a methodology such as Samsung’s SCM six sigma can be the key to conducting SCM projects in a more disciplined way and for fruitful outcomes.
Originality/value – The paper introduces a unique six-sigma-based methodology for the SCM domain which has been developed and applied in a
leading global manufacturing, financial, and services conglomerate. This methodology could be adapted by other companies for their SCM projects to
increase the likelihood of project success.

Keywords Six sigma, Supply Chain management, Project management

Paper type Case study

1. Introduction Samsung. The next section describes a detailed overview of

the Samsung SCM six sigma methodology, which has been
In its early years, supply chain management (SCM) was used for the last two years. A summary of a six sigma supply
narrowly conceived as a new approach to inventory chain project is then presented and in the final section we
management or operating cost reduction. In the 1990s draw some conclusions.
organizations and some specific industry segments began to
recognize the much greater roles and impact of SCM on their
business operations. SCM is increasingly recognized as a 2. Background
strategic way to innovate a company’s entire business 2.1 Company overview and the role of SCM and six
operation as well as its planning and execution. This article
sigma
reports Samsung’s journey in developing a systematic SCM The Samsung Group of companies is recognized as a leading
methodology using six sigma and applying it to SCM projects global manufacturing, financial, and services conglomerate. It
and related activities. was founded in 1938 and focused its businesses on areas such
The article first presents the background of introducing a as textiles, shipbuilding, machinery, and chemicals. Since the
six-sigma based methodology for the SCM domain in 1980s, the group has made enormous efforts and investment
in the electronics and semiconductor industry. As a result, the
Samsung Group has experienced a dramatic growth in net
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-8546.htm
The authors thank Mr Banghwan Chung, Nackkyo Choi and Muyeol Seo
for kindly sharing with us their experiences and lessons learned from
applying SCM six sigma methodology in their SCM projects. We would
Supply Chain Management: An International Journal
12/2 (2007) 88– 95 also like to recognize the enormous effort made by many members of the
q Emerald Group Publishing Limited [ISSN 1359-8546] SCM Business Team, including Mr JungGee Yoon and other SCM MBB/
[DOI 10.1108/13598540710737271] BBs, in developing and teaching the methodology.

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 Supply chain management six sigma Supply Chain Management: An International Journal
Hong Mo Yang et al. Volume 12 · Number 2 · 2007 · 88 –95

profits since the 1990s. The flagship unit, Samsung an important issue in SCM in general and manufacturing
Electronics Company (SEC), was one of only two planning and control system in particular (Vollmann et al.,
manufacturing companies worldwide to post profits of more 1997). Six sigma complements this need through the
than $10bn in 2004 (Toyota Motors being the other). “control” stage in a DMAIC methodology or “verify”
Samsung was ranked twentieth in global brand value, stage in a DMADOV methodology. Therefore, six sigma
according to a report by Interbrand (2006). Many regard supplemented by a Samsung’s own centralized system of
these successes as reflecting a continuous and relentless effort capturing and tracking all of its projects beyond their
at Samsung to improve the way it conducts business. For the completion ensures that improvements be sustained.
last few years, SCM and six sigma have been two pillars of 3 Well-established HR framework – At Samsung, a key area
business innovation at Samsung. for the potential improvement of SCM activities centered
The Samsung Group of companies has large, complex, on people. The company continually faces a shortage of
global supply chains in most of the products it manufactures trained, qualified, and talented people to harness the
and makes extensive use of SCM solutions and process maximum potential that its systems and processes offered.
innovations to support and improve its operations. Most Consequently, SCM solutions were not being fully
notably, at SEC, advanced planning and scheduling (APS) utilized and the innovative processes could not be
systems have been adopted since the 1990s and have brought wholeheartedly adopted. The shortage of SCM talent
the company many successes in terms of operational decreased the potential for return on investment that the
excellence. Recently, Samsung Electronics was ranked system and process innovations could bring to the
seventh in a respected analyst’s ranking of the global top 25 company. Six sigma was seen as a proven framework for
companies in supply chain excellence (AMR, 2005). developing people. Its colored belt system clearly
Six sigma has been a key enabler for the group’s success. The
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delineated levels of competency and thus helped manage

Chairman of the Group proclaimed the adoption of a business people in a differentiated way from the HR perspective.
innovation approach called “new management” (pronounced Six sigma was already prevalent in Samsung as a
in Korean as shin kyung young) in 1993. “New management” is management innovation methodology with programs
the pursuit of quality-oriented management in business and structures in place. Leveraging the belt system with
operations as well as in manufacturing. Along with the SCM expertise was a way to keep track of and continue to
“quality movement” in industry, new management evolved develop SCM talent within the Group.
from initial product quality assurance but later shifted its focus 4 Quantitative strength – Six sigma was seen as a
to include the quality of the entire business process, which is methodology which would, by its nature, drive a
the rationale behind six sigma. The outcomes were high- heightened usage of quantitative analysis (Breyfogle,
quality, innovative product developments, and consequently an 1999). Quantitative data about operational activities and
increase in customer satisfaction and profits, and are well performance was abundant, but not used sufficiently for
demonstrated by many of the world’s best technological problem solving or decision-making. Appropriate usage of
resources, including DRAM, SRAM, TFT-LCD, digital TV, numerical data was expected to uncover flaws in SCM
and Flash memory, to name but a few. processes and further enhance the quality of SCM
decisions made at Samsung.
2.2 Why SCM 1 six sigma?
Despite the extensive use of SCM solutions and process Based on the above rationale, the company put together a
innovation to improve global business operation, in 2004 the methodology to formally combine SCM and six sigma, by
company still felt that its supply chain operations had training and developing supply chain staff to be more capable
significant room for improvement. In the early 1990s, the of leading SCM innovations. Over the last two years of
Group’s senior management decided to capitalize on the implementation, SCM six sigma has become a unique and
potential synergy between SCM and six sigma, which they useful component of Samsung’s strategy for systematic and
believed were based on four key areas: continuous improvement of its SCM activities.
1 Project discipline – Six sigma uses a structured process of
defining, measuring, analyzing, improving, and controlling 3. Samsung SCM six sigma
(DMAIC) products or processes, which provides the
discipline to deal with operational vulnerabilities and Samsung SCM six sigma comprises two building blocks. The
variability in business operation (Hammer, 2002). Six first block is a core methodology that was developed by the
sigma would enforce a more disciplined approach to SCM SCM Business Team (subsequently referred to as “SBT”).
projects and ensure that SCM projects were defined This team researched various six sigma approaches of selected
rigorously and executed methodically. Also six sigma’s global companies and then tailored its learning to the SCM
analytical emphasis would steer the improvement projects domain. The second element of SCM six sigma is some key
to investigating and resolving root causes, rather than mere design principles derived from the team’s SCM experience
symptoms of SCM problems at Samsung. base to guide the implementation of the methodology
2 Sustaining results – One of the key challenges of SCM is throughout its different stages.
sustaining the results of a successful project after
completion. Too often, as project groups move on to 3.1 Research and tailoring
future projects, the past process improvement successes SBT researched six sigma approaches at General Electric (GE),
become just that – “past” successes – rather than a since GE is a recognized global leader in six sigma.
sustained base of improvement on which to build further. Additionally, the team researched two other companies –
However, the link between planning and execution DuPont and Honeywell – to get perspectives on how other
through feedback (also known as closed-loop) has been companies have innovatively applied six sigma to similar needs:

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Hong Mo Yang et al. Volume 12 · Number 2 · 2007 · 88 –95

.
General Electric – A key element of GE’s approach to six Group. DMADOV stems from a product design space
sigma is the tailoring of underlying methodologies to while one requirement is to support projects in the supply
specific needs and characteristics of its business units. chain space. The key difference is that after performing
SBT researched GE business that has taken the generic six analyses, the task for the project team would be not to
sigma methodology for process innovation (PI), and has optimize or design as in DMADOV, but to specify how a
tailored them to specific needs of system design and suggested improvement would be realized in practice.
implementation, and product development activities. Therefore, a step, “Enable”, in place of Design and
Particularly, DMADV (define, measure, analyze, design, Optimize, is introduced to address this activity. This is
and verify) by GE Medical System is an attempt to include similar to “Design” in GE Medical’s DMADV.
process management and process redesign in six sigma, .
System development option – SCM six sigma projects, in
while moving beyond DMAIC (often regarded as a most cases, result in system development. Accordingly, a
synonym of six sigma), originally developed for high- new approach is needed to cover a process enablement
quality product developments (Hammer, 2002). GE step to support system building activity. However, many
Capital’s DABTL (define, architect, build, test, launch) SCM innovation projects may call for changes that can be
is a six sigma approach designed for systems development. enabled within existing system capabilities. Therefore, it
.
DuPont – DuPont had just been selected as the 2006 Six was necessary to consider an approach in which system
Sigma Company by the International Society of Six Sigma implementation would be an optional enablement activity.
Professionals (ISSSP) (Forloines, 2005). Additionally, We used DABTL (define, architect, build, test, launch)
DuPont also combined six sigma principles with the approach (used by GE Capital for systems development),
SCOR (Supply Chain Operations Reference) model, incorporating proven software engineering discipline to six
sigma based SCM methodology.
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which is a process reference model for SCM developed

by the Supply Chain Council and enables effective
3.2 DMAEV
communication among SCM partners. SCOR scopes
The resulting approach is termed DMAEV (define, measure,
five core management processes, including plan, source, analyze, enable, and verify) (Figure 1). Additionally, we
make, deliver, and return (See SCOR Model 7.0 for incorporated the concept of five design parameters (process,
details). The use of SCOR for analyzing supply chains has operation rule & policy, organization role & responsibility,
been of interest (Burgess and Singh, 2006). DuPont’s Six performance measure, and system), process modeling and
Sigma approach utilizes a quality function deployment value chain map techniques, and SCM related investment
(QFD) tool, a method or technique for converting value analysis methods.
customers’ requirements to products, processes or The goal of the Define phase is to define the overall project,
services. including the problem(s) to be tackled, project goal(s) and
. Honeywell – Honeywell was selected because of its scope, expected outcomes, and project schedule. The first
extensive application of lean methodologies, which has step identifies key issues and problems through the voice of
become a major tool in the implementation of six sigma, the customer (VOC) and the voice of the business (VOB) as
as evidenced by the Proceedings of the ISSSP (2005). well as the analysis of SCM related processes. This step elicits
Honeywell developed a proprietary Six Sigma approach customer’s critical to quality (CTQ) criteria or characteristics.
called Six Sigma Plus (DMAIC) which links lean The next step finds the CTQ-dependent variable (Y). The
manufacturing concepts and tools (e.g. value stream outcomes from the Define phase become essential for the next
map, thought process map) into a general six sigma. phases.
Each of the above approaches was analyzed and the following The Measure phase identifies the current level of CTQ-Y,
conclusions drawn, which fed into the subsequent sets up a new target level, and finds the key explanatory
development of the Samsung SCM six sigma methodology: variables (Xs). The first step verifies CTQ-Y and then, if
. Nature of SCM projects may involve either design or necessary, further identifies several specific indicators that can
improvement – Six sigma projects usually focus on either substitute CTQ-Y. The next step measures the current level of
redesigning processes and systems or improving CTQ-Y and sets up an improved target level of CTQ-Y. The
performance levels of existing systems. In six sigma following step elicits potential Xs (or causes of the problem)
parlance, the former is addressed most commonly through with respect to five design parameters:
DMADOV (define, measure, analyze, design, optimize, 1 process;
verify), while the latter is addressed using DMAIC 2 operation rule and policy;
(define, measure, analyze, improve, control). SBT 3 organizational role and responsibilities;
estimated that among the SCM projects at Samsung, 4 performance measure; and
5 system.
about 75 percent would involve re-designing processes,
while the remaining 25 percent would focus on process The Analyze phase generates and evaluates “hypotheses” as to
improvement. Accordingly, extant six sigma approaches the potential Xs. This phase cycles between hypotheses and
were adapted in order to accommodate both redesigning fact-based analysis to prove or reject the hypotheses. This
and improving processes. Consistent with the expected process involves both quantitative and qualitative analyses for
mix of projects stated above, this new approach was closer evaluating hypotheses. The quantitative analysis includes
to supporting process redesign, but still incorporated all various statistical tools such as ANOVA, Pareto analysis and
relevant elements for process improvement. correlation, while the qualitative analysis uses process
.
DMADOV is not enough – The DMADOV methodology, mapping, cause and effect diagrams and value stream maps.
while useful, could not provide the necessary support to In the end, the goal is to select the vital few Xs, representing a
execute the entire range of SCM projects at the Samsung few key explanatory variables.

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Hong Mo Yang et al. Volume 12 · Number 2 · 2007 · 88 –95

Figure 1 An overview of SCM six sigma

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The Enable phase identifies ways to improve the “as-is” and .

global optimum;
develops a plan for the “to-be”. The quality function .
process KPI mapping;
deployment (QFD) is used to select the subjects for .
systematization; and
improvement regarding the vital few Xs and to elicit .
five design parameters (Figure 2).
detailed action items for improvement. Several alternative
The overall approach was designed to be easy to learn, apply
solutions are elicited, then the optimal solution is identified
and maintain. Further, the approach had to be applicable
through the use of AHP (analytic hierarchy process) methods
within the regular flow of work of supply chain personnel
for improvement or the final to-be plan, which is further
working on their projects, to avoid them being involved in
detailed in terms of the five design parameters. If system is
additional project work:
required as part of the optimal solution, DABTL (design, .
Global optimum – SCM aix sigma improvements are
architecture, build, test, launch) is utilized for systems
positioned not as narrowly focused functional
development and implementation.
improvements but as improvements of the end-to-end
The Verify phase establishes a pilot test plan and then
SCM process. All improvement ideas must be aligned
validates and verifies the solution chosen in the Enable phase.
with global rather than local goals. That is, when
Next, control and change management plans are developed
improving a process through SCM six sigma, it will be
and then the optimal solution is put into operation. The
necessary to measure, monitor, and, if possible, improve
methodology encourages a comprehensive change
key performance indicators (KPIs) of related upstream
management plan that supports the execution of the optimal
and downstream processes. Thus, two mechanisms for
solution with respect to those five design parameters. The
ensuring global optimization were utilized. First, before an
results are continuously collected, monitored, and shared
improvement is attempted, a flow-down tree of the
through the Group’s repository for projects
critical-to-quality KPIs (called CTQ-Y), in a hierarchical
Two kinds of measures or KPIs are used:
structure using mega-processes and sub-processes, is
1 financial; and
used. Later, after the improvement is piloted, a bottom-
2 operational.
up check is used to ensure that global KPIs have not been
In general, the increases in sales, and the decreases in adversely affected.
material, inventory and transportation expenses that result .
Process KPI mapping – Process KPIs follow the SCOR
from the improvement and redesign of SCM are examples of Model, and are used to define objectives and monitor the
financial KPIs. Operational KPIs include cycle time, process towards managing improvement plan goals.
utilization rate, lead time, forecast accuracy, etc. Compared to generic six sigma, SCM six sigma
increases the credibility of CTQ-Y selection using KPIs
3.3 Design principles decomposed by detailed supply chain processes of the
SBT realized that the success of the DMAEV methodology in SCOR model.
driving SCM innovation would depend on not only the .
Systematization – Systematization is viewed as a key
strength of the methodology itself, but also on relevant component of an SCM initiative at Samsung. Samsung
business and organizational factors. Based on the SBT team’s uses systems (e.g. advanced planning systems) extensively
experience and expertise in business and organizational to effect behavioral and process changes. Therefore, to the
aspects of SCM, the following design principles that would extent that SCM changes need to be reflected in processes
guide SCM six sigma projects through all of the DMAEV and systems, systematization is a critical component of
stages were drawn: SCM six sigma. This is achieved utilizing the DABTL

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Hong Mo Yang et al. Volume 12 · Number 2 · 2007 · 88 –95

Figure 2 A summary view of Samsung SCM six sigma

(design, analyze, build, test, launch) roadmap for system techniques in that methodology in particular. To illustrate the
implementation, which incorporates proven software application of the SCM six sigma methodology in practice, this
engineering discipline into our methodology. section presents a brief overview of a SCM project conducted
.
Five design parameters – The underlying belief is that any in a manufacturing firm (its name and detailed information are
organizational change requires a comprehensive, multi- not revealed). This project, completed in the early 2006, had
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faceted approach. Thus, DMAEV uses the five design applied the methodology from its beginning in 2005.
parameters to characterize the changes that need to be
managed throughout the DMAEV process stages – 4.2.1 Define
process changes; operation rule & policy changes; role & The VOC/VOB analysis began with investigating internal and
responsibility changes; performance measures/KPI external business environments and identifying clients of the
changes; and system and master data changes. A project project. Increases in crude oil price and the devaluation of the
will need to identify latency cause factors and Korean won represented a challenging external business
improvement plans for each of the parameters to ensure environment while an increasing cost associated with surplus
comprehensive treatment of root causes. inventory was a critical pain point. Top management and
various business units including sales, planning &
administration, production, purchasing, global operation
4. Adoption of SCM six sigma at Samsung center (GOC), and transportation in the company were
There are two courses in implementing SCM six sigma identified as the project’s clients. Then, the VOC/VOB was
methodology at Samsung: education (“SCM Six Sigma Black elicited from interviewing those business units (Figure 3).
Belt”) and application of the methodology in practice. The next step was to identify problems and inefficiencies in
SCM-related business processes, typically encompassing
4.1 SCM Six Sigma Black Belt production (e.g. material purchasing, manufacturing), global
The first course is the institutionalization of the methodology operation management (e.g. order fulfillment, weekly
at the Group through a four-month training program. The production plan, inventory management) and sales (e.g.
training program, known as SCM Six Sigma Black Belt forecasting, order management, sales, transportation). Eight
training and mentoring, consists of one week per month of issues were identified, including a lack of visibility in inventory
full-time training for four months, supplemented by and demand forecasting, in the process of replenishment,
mentoring of SCM Black Belts on their selected projects. weekly production planning and packing & shipping. Drawn
The prospective SCM BBs have to complete three such from the VOC/VOB and process analysis, two potential CTQs
projects to get full certification as a SCM Black Belt. were elicited:
By leveraging the established HR belt system of six sigma, 1 demand stabilization; and
Samsung aims to alleviate the shortage of SCM talent that has 2 inventory visibility.
been the primary obstacle in improving SCM performance. The priority of these two was evaluated with respect to the
Samsung expects that SCM six sigma will elevate the findings of the VOC/VOB and process analysis. As a result,
effectiveness of its SCM function as people will now the latter (development of inventory management process)
understand the overall supply chain process and ways of was chosen as the CTQ and surplus (or unpegged) inventory
enabling it. Samsung also expects that greater effectiveness of rate, defined through the formula:
its people in managing its supply chains will improve the
X 
X
company’s ROI. The current training program is within the Unpegged inventory= Inventory £ 100;
Group’s Six Sigma Academy, the goal of which is to develop
talent and future leaders at Samsung. As of today, over 100 was selected as CTQ-Y (or the key performance indicator of
SCM Black Belts have been trained. the CTQ).
4.2 An illustrative case 4.2.2 Measure
As of 2005/6, SCM projects at Samsung are being conducted The baseline level of surplus inventory rate was measured to be
by following the SCM six sigma methodology in general and over 10 percent. A new target was set at 6 percent. This required
utilizing DMAEV and various data and process analysis a 42 percent reduction in surplus inventory. Next, potential root

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 Supply chain management six sigma Supply Chain Management: An International Journal
Hong Mo Yang et al. Volume 12 · Number 2 · 2007 · 88 –95

Figure 3 Summary of the VOC and VOB

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causes or Xs were identified in terms of the five design After considering the importance by the project owners,
parameters, (process, operation rule & policy, organizational including representatives of the client groups, finally, seven
roles and responsibilities, performance measure, and system) causes associated with three parameters – process, role &
and further prioritized using an X-Y matrix (Table I). policy, and system – were selected as the final Xs (Table II).

Table I X-Y matrix

CTQ
Development
Evaluation of inventory Prioritization
Type of Type of X Quick criteria management Percentage
parameter Potential cause (Xs) X C N SOP win Importance process Total rank
Process Reflecting quick demand U 3 3 3
Inputting weekly demand data U 3 3 3
Recording past surplus inventory U 9 9 10
Planning surplus inventory consumption U 9 9 10
Early detection and advanced managing of
surplus inventory U 9 9 10
Rule & policy Standard for demand inputting U 3 3 3
Standard for reflecting quick demand U 3 3 3
Standard for managing excess inventory U 9 9 10
Standard for managing surplus inventory U 9 9 10
Standard for managing safety stock U 9 9 10
System Web user interface design U 9 9 10
Inventory name management U 3 3 3
Amount search capability U 1 1 1
Roles and New job position for stock management U 1 1 1
responsibility Sales and demand control and management U 3 3 3
Rearrangement of stock management tasks U 1 1 1
Performance Reduction of demand change rate
measure U 3 3 3
Notes: Types of Xs include C (constant variable), N (noise), X (controllable variable), SOP (standard procedure), and Quick-Fix (variables that can be fixed
quickly). Importance: 1 (low impact on Y), 3 (medium impact), 9 (high impact)

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Table II Selected Xs (Figure 4). Then, using benchmarking, the to-be image for
each of the three possible solutions was developed. Then,
Type Selected Xs “Web-based user interface design for inventory management”
Process Recording past surplus inventory was found to be highly relevant to the overall improvement
Planning surplus inventory
subjects identified in the QFD. To design and implement the
selected optimal solution (named “Web-based early warning
Early detection and advanced managing of surplus
system for surplus inventory”), necessary changes were
inventory
identified with respect to the five parameters. For example,
Rule & policy Standard for managing excess inventory as to the “process” parameter, a list of processes which
Standard for managing surplus inventory needed to be improved was identified.
Standard for managing safety stock As for the “system” parameter, DABTL was employed to
define system requirements and to architect, build, test, and
System Web user interface design put the web-based system into operation.
4.2.5 Verify
4.2.3 Analyze Two stages of pilot test were conducted with a business unit in
For those selected Xs, data collection was planned and the company. The first stage, which took place in October
executed (Table III). For each question posed in Table III, a 2005, aimed to prove the applicability of newly proposed or
detailed data analysis was conducted, including both improved processes, rules and policies, roles and
quantitative (e.g. graph, statistics) and qualitative (e.g. responsibilities, and performance measure. The pilot test of
benchmarking, Delphi method, on site visit, document the system was excluded during this stage. The second stage
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review) tools. piloted all improvement subjects associated with the five
Based on the results of the data analysis, three Xs – parameters between 9 January and 28 January 2006. The pilot
recording past surplus inventory, standard for managing test resulted in a 37 percent reduction in surplus inventory
excess inventory, and web user interface design for inventory (CTQ-Y), from 10.4 percent to 6.5 percent. Although slightly
management – were determined to be the vital few Xs. These short of target, the cost associated with surplus inventory
were the factors considered to significantly affect the CTQ-Y. decreased from over $2.7 million to $1.9 million.
Next, in order to proceed and accelerate the adoption of the
4.2.4 Enable optimal solution, “control” plan and change management
The three vital few Xs led to three possible solutions or plan were developed. The control plan included factors or
actions to improve the current SCM. For each solution or performance indicators (e.g. inventory consumption rate) to
action, detailed improvement subjects were elicited with be controlled, methods to control, business unit responsible
respect to the five parameters. This overall information was for each factor, and actions to be taken for unexpected events.
constructed through a quality function deployment (QFD) The change management considered such elements as critical

Table III Plan and execution of data collection

Data collection plan
Selected Xs Questions Analysis tool Data source Data collected
Early detection and Is managing surplus inventory done weekly? Graph SAP R/3 January 2004-August 2005
advanced managing of Unpegged inventory, dumped
surplus inventory inventory
Recording past surplus If recording past data of excess, surplus, Research on site Relevant documents Relevant Excel worksheets
inventory dumped inventory is done weekly, not
monthly, does this have a positive effect on
the overall inventory management?
Planning surplus inventory If managing excess, surplus, dumped Research on site Relevant documents Relevant Excel worksheets
consumption inventory is done weekly, not monthly, does
this have a positive effect on the overall
inventory management?
Standard for managing Is there any standard for managing excess Benchmarking Other companies Rules and policies of other
excess inventory inventory and is it currently used? companies
Standard for managing Is there any standard for managing surplus Benchmarking Other companies Rules and policies of other
surplus inventory inventory and is it currently used? companies
Standard for managing Is there any standard for managing safety Research on site Inventory monitoring Rules and policies for
safety stock stock and is it currently used? system monitoring inventory level of
top ten products
Web user interface design Is web UI used for inventory management? Benchmarking Other companies Other companies’ web
systems

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 Supply chain management six sigma Supply Chain Management: An International Journal
Hong Mo Yang et al. Volume 12 · Number 2 · 2007 · 88 –95

Figure 4 Quality function deployment

success factors for system success, communication among References

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various groups, training, ways to resolve potential conflict,

and incentive systems. Enterprise-wide deployment is AMR (2005), “The AMR Research supply chain top 25 for
expected by the end of 2006. The plan is to further develop 2005”, AMR Research Report, November.
the current web-based warning system to a full-scale supply Breyfogle, F. (1999), Implementing Six Sigma: Smarter
chain event management (SCEM) system. Solutions Using Statistical Methods, Wiley-Interscience,
New York, NY.
5. Conclusion and future direction Burgess, K. and Singh, P. (2006), “A proposed integrated
framework for analyzing supply chains”, Supply Chain
Today, there are various approaches and systems available for Management: An International Journal, Vol. 11 No. 4,
process innovation. Six sigma and supply chain management pp. 337-44.
(SCM) are among those techniques aiming for process and Forloines, R. (2005), “Supply chain transformation in
quality improvement, and synchronization of company’s value DuPont utilizing lean six sigma”, paper presented at the
chain, from inbound logistics to sales and customer services. 6th Annual Six Sigma Leadership Conference, Scottsdale,
At Samsung, SCM and six sigma have been two important AZ.
enablers for the group’s management innovation and growth. Hammer, M. (2002), “Process management and the future of
However, Samsung realize that there is significant room for six sigma”, MIT Sloan Management Review, Vol. 43 No. 2,
improvement in its SCM operation. Thus, the effort has been pp. 26-32.
synthesizing SCM and six sigma and developing a unique six- Interbrand (2006), Best Global Brands 2006, Interbrand, New
sigma based methodology to improve its SCM operation. York, NY.
The purpose of this article has been to introduce the Vollmann, T.E., Berry, W.L. and Whybark, D.C. (1997),
company’s journey in this course. The methodology has been Manufacturing Planning and Control Systems, 4th ed.,
adopted in two waves since 2005: SCM six sigma Black Belt McGraw-Hill, New York, NY.
program and SCM projects. Samsung’s effort and investment
has turned out to be fruitful. The SCM six sigma Black Belt
program has produced highly qualified and talented SCM
Further reading
specialists, who are currently training the methodology to Pande, P., Neuman, R. and Cavanagh, R. (2000), The Six
other members in their organizations and leading SCM Sigma Way, McGraw-Hill, New York, NY.
projects. SCM projects are being prepared and conducted in a
more disciplined way and their outcomes are continuously
Corresponding author
monitored and shared through Samsung’s repository for six
sigma. Samsung’s endeavor for global optimum is continuing Bongsug (Kevin) Chae can be contacted at: kevinbs.
and SCM six sigma is expected to play an enabling role. chae@samsung.com

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