1. Creating Competitive Advantages through Resilient
Supply Chain – Case Study: Samsung Electronics
Kurnia Sofia Rosyada
Department of Design, Manufacture and Engineering Management
University of Strathclyde, Glasgow, United Kingdom
Abstract
Purpose – The purpose of this paper is to understand the benefit of SCM practices in Samsung Electronics toward
creating competitive advantages and sustainable business to be resilient toward high-uncertainty market
environment.
Design/methodology/approach – This paper adopts the case study methodology. It uses an in-depth case study of
Samsung Electronics, a global leading electronics industry, in particular investigating how the firms apply organize
its supply chain activities to create resilience toward highly volatile market and generate competitive advantages
against its peers.
Findings – Samsung Electronics applied some of the best practices supply chain such as extended value chain
toward its suppliers, collaborative-customer process toward its product development creating resilience and
competitive advantages. Competitive advantages include strategic positioning in the electronics industry value
chain, product innovation, and product/services differentiation.
Originality/value – This paper provides holistic view of Samsung Electronics supply chain management and
analyze how SCM can create competitiveness and market resilience which critical for business survival. The
findings from this study indicate that the supply chain no longer view as logistics and manufacturing management
but rather as a value-chain.
Keywords – Resilience supply chain, Samsung Electronics, SCM creates competitive advantages
Paper Type – Research paper
1. Introduction
Company survival in the ever-changing business environment is now became an issue of supply chain practices
against another (Fine, 1998). Organization began to realize that improving internal efficiencies is no longer enough,
but their whole supply chain needs to be made competitive (Li et al., 2004). As competition intensified and markets
became global, one of the key challenges in managing the supply chain is the products delivery fulfillment to the
customers (Sridharan and Laforge, 1990; Zhao et al., 2001). Much shorter product’s life cycles as exhibit by
electronics industry, as well as frequent changes in production plan can led to schedule nervousness (Peslak et al,
2007; Krajewski et al, 2005) which without proper management will turn into supply chain disruptions. Supply
chain disruptions and their associated financial and operational risks is surging to become single most pressing
concern for the top executives at Global 1000 firms (Green, 2004). Research related to this issues ranging from
supply chain resilience (Sheffi and Rice, 2005), to supply chain vulnerability and company’s sustainability.
Developing supply chain processes and management that expanded towards organization’s trading partner network
will provide resiliency to deliver predictable results despite market volatility. This ability coupled with embedding
innovation, internalize customer’s needs and proactively build customer feedback into supply chain design is the key
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2. of Samsung’s distinct supply chain practices. Ranked 10th in the recent Gartner’s Top 25 Global Supply Chain
Leaders, Samsung Electronics supply chain management often cited as one of the best-in-class. The study of this
paper will focus on the application of supply chain management in Samsung Electronics which includes the latest
evolution of SCM practices such as extended value chain through supplier partnership, customer relations and
customer service management (Donlon, 1997; Tan et al., 2002; Tan et al., 1998). The objective of this paper is to
understand the benefit of SCM practices in Samsung Electronics towards creating competitive advantages and
sustainable business. Hence, the key research questions that we try to answer are: What are the supply chain
practices in Samsung Electronics and how does it impacted their competitive advantage. Is their current supply chain
management sufficient enough for addressing future challenges and support business sustainability? The answer
should give us a better understanding of creating resilient supply chain management in high-tech industry.
This paper proceeds as follow. In the next section, review of the relevant literature and conceptual framework for
this study will be presented. Then, the paper describes the data collection process and methodology, followed by
case analysis with detailed discussion of the supply chain management practices in Samsung Electronics. Finally,
the paper discusses the findings and present suggestions for future research.
2. Conceptual Background
A supply chain can be defined as an integrated process in which numerous various business entities such as
suppliers, manufacturers, distributors and retailers work together in acquiring raw materials, converting those raw
materials into specific products and deliver it to customers (Beamon, 1998). It is an effective network of firms
performing activities in a particular product/service value chain (Stevenson, 2007). In the high-tech industry, which
can be categorized as innovative product due to its short product life cycle, large variety of products, and high
market uncertainty (Fisher, 1997), supply chain management is a critical area and significant factor for the success
or survival of the electronics industry.
2.1 Trends and Challenges in Supply Chain Operations
We have witnessed several infamous trends of supply chain management in the past decades. In 1980s, just-in-time
production became popular, followed by supply chain collaboration and outsourcing logistic activities concept in
1990. By 2000, internet application changed the supply chain practices according to David Simchi-Levi (Hopkins,
2010). As competition intensified, so did the challenges of getting the product and service at the right time and the
right place (Li et al., 2004). The design of supply chain management became more central to organizational
effectiveness and efficiency in the future than ever before. In particular, there have been some significant challenges
in the highly competitive world market that has made supply chain management (SCM) an essential prerequisite for
staying in the business. These challenges include:
 Globalization that increase supply chain complexity and global sourcing, produces long and geographically
diverse supply chain, exposed to numerous threats of disruptions and risks (Xia and Tang, 2011).
 Intensified competition and price pressures coupled with high market uncertainty required companies to
built its supply chain resilience towards volatility (Christopher and Peck, 2004).
 Shortened and more complex product life cycle, required firm to redesign its product life cycle
management with emphasize on introducing new products, managing product discontinuation and design
manufacturability;
 Regulations changes requires companies to consider amount of carbon emission produced in the supply
chain, leads to organization focus on green supply chain and long term sustainability (Xia and Tang, 2011)
The response towards the challenges above has led towards the following trends in supply chain amongst leading top
companies.
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3.  Supply Chain Resilience
The needs for supply chain resilience, which defined resilience as the ability of a system to return to its
original state or move to a new, more desirable state after being disturbed. Implication in this definition
include the notion of flexibility (Christopher and Peck, 2004), although speed, agility, efficiency,
responsiveness and embedded innovation along supply chain remains critical. Companies such as Cisco,
Dow Chemical are creating and expanding this resiliency towards their trading partners as well.
 Value-chain network strategy
More companies expanding their value chain, either through becoming more vertically integrated with the
acquisition of their supplier, or through managing an extensively outsourced network of trading partners
which applied by Microsoft and Cisco. Both aim for value chain network strategies that allow better control
of the end-to-end value chain. Example of the extended collaboration have emerged in the Sales and
Operations Planning (S&OP) that include both upstream and downstream value chain partners, in order to
gain better visibility of the whole value chain.
 Organization as a value chain
Supply chain organization is not longer limited to either inbound materials management or logistic.
Organizations redefining their supply chain responsibilities to move from traditional functional silos (plan,
source, make and deliver) towards an “end-to-end value chain” perspective, often start from customer and
moving back up through the suppliers base and new product launch. The role of supply managers is
changing, with increased emphasize on supply market intelligence, collaboration, and operational
integration with suppliers (Handfield et al, 2008).
 Demand-driven excellence
Adoption of demand-driven focus supply chain to influence and manage demand more efficiently.
Companies are shifting from the pursuit of efficiency (cost minimization in production and distribution) to
responsiveness, matching quantity and variety of products supplied to meet required demands (Kopczak
and Johnson, 2003). The application of this principle required the ability to manage demand rather than just
responds, a networked approach to global supply and embedded innovation in its supply chain operation.
 Product life management
Shortening product life cycle required company to adopt product life management (PLM) processes. The
benefit of adopting PLM processes is to help companies design common product development processes
involving collaboration with suppliers and contract manufacturers. Increased parts re-use, declined design
cycle time and reduced time to market are amongst the benefit of applying PLM (Hofman et al., 2011)
2.2 Choosing the Right Supply Chain Strategy to Address Uncertainty
The trends above emerged to address one or combination of the recent challenges. Although there are many new
supply chain concepts and framework designed to address the ever-changing market, successful companies
understand that the right supply chain strategy depends on the two factors. First, the strategy needs to be tailored to
meet specific needs of the customers but also the product should be managed according to its characteristics (Lee,
2002). The “Uncertainty framework”, which Lee expand from Fisher’s framework, can be used to characterize a
product when seeking to devise the right supply chain strategy, looking at both key uncertainties from demand and
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4. supply perspectives (Lee, 2002). Demand uncertainty is linked to the predictability of the demand for the products.
Electronics goods as well as other high-tech products are examples of innovative products due to its short life cycles,
high innovation and unpredictable demand. Other important uncertainties to determine the right supply chain
strategy is the supply side. Lee defined two type of supply process. A “stable” supply process characterized through
mature manufacturing process and technology, coupled with a well-established supply base. Usually, complexity of
manufacture tends to be manageable. An “evolving” supply process is where the manufacturing process still under
development, rapidly evolve, led towards limited supply base in terms of scale and experience. Often, the
manufacturing process requires adjustments, and experiences unscheduled breakdowns (Lee, 2002).
Despite the tendency for functional products to be more mature and stable supply process, it is not always the case.
Example is the food products. Although it may exhibits a stable demand, but the supply of products may vary
according to the weather condition. Similarly, innovative products such as fashion apparel, may has stable supply
process supported with a reliable supply base and mature manufacturing process. Figure 1 provide examples of
product with different demand and supply process. Lee argued that specific supply chain strategies required to be
tailored to each uncertainty characteristics, to provide competitive advantage for the companies. These strategies can
be classified into four types (Lee, 2002): Efficient supply chain, risk-hedging supply chains, responsive supply
chains and agile supply chains. Agile supply chains, suits to semiconductor and high-tech industries, designed not
only to provide responsiveness and flexibility to meet customer needs, but also hedging the risk of supply shortages
and disruptions. It has “agile” characteristics as it capable to respond toward high-uncertainty customer demands
while minimizing the back-end risks of supply glitches (Lee, 2002).
Figure 1 Uncertainty Framework and its tailored supply chain strategy (Fisher, 1997; Lee, 2002)
Companies with innovative products and continuously evolving supply processes are now moving towards
implementing the “agile” supply chains. Agility according to Christopher and Towill is defined as “a business-wide
capability that embraces organizational structures, information systems, logistics processes and in particular,
mindset” (Christopher and Towill, 2000). A core characteristic of agile supply chain is flexibility. Naylor et al.,
argues that agility means leveraging market knowledge and virtual corporation in capturing profitable opportunities
in the volatile market (Naylor et al., 1991). An example of the implementation of agility is the adoption of
decoupling point strategy where Xilink Inc., a semiconductor company specialized in IC (integrated circuit), formed
very close partnership with two foundries in Taiwan (United Microelectronics Corporation) and Japan (Seiko).
Fabricated wafers are then stocked, creating a decoupling point as the banks. The final assembly and testing of the
chips are conducted by other supply chain partners in Korea and Philippines as the demand for specific chips is
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5. known once customer orders received. This decoupling strategy enable Xilink to be responsive towards its hard to
predict customer demand but also sharing the risk of wafer fabrication processes (Lee, 2002).
2.3 Creating Resilience Supply Chain
However, in the age where supply chains serving global-spanning operations, in a changing world with numerous
unpredictable events such as natural disaster, fast technology evolution which led to supply disruption, being agile is
not enough. Company need to manage its supply chain vulnerability which defined as “an exposure to serious
disturbance, arising from risks within the supply chain as well as external risks” (Christopher and Peck, 2004).
Resilience supply chain is required as the company need to have notion of flexibility to return toward its original
state or move towards desirable state after being disturbed. Resilience supply chain is created to manage risks
identified with supply chain, including internal risks such as process and control, as well as external risks involving
demand, supply and environment factors (Christopher and Peck, 2004). To create a resilient supply chain, the
following frameworks proposed:
Figure 2 Framework for creating resilient supply chain (Christopher and Peck, 2004; UPS and the Economist Intelligence Unit
(EIU), 2008)
2.3.1 Supply Chain Re-engineering
First, supply chain re-engineering required for considering resiliency into objective function of the optimization
process. The basic pre-requisite for improved supply chain resilience is the understanding of the network,
connecting both downstream customer and upstream (suppliers) to identify the critical path and potential risks.
Critical paths in the supply chain may exhibit one of the following characteristics: long lead times, single source of
supply with no short-term alternatives, poor visibility (e.g. no information-sharing) across supply chain, high level
of risk identified. Choosing the correct supply base strategy is also critical, whether to pursue reduction in the
number of suppliers, or single-sourcing, or few lead-suppliers strategy, depends on the risks assessment as well as
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6. alternate supplier availability. It is also strongly advised to identify whether suppliers also implement risk-
assessment and monitoring. Supply chain design principles for improving resiliency should provide several options
open, able to reduce impact of disruption in the future, although it may not proven to be the most cost-efficient
options in the short term. Re-examine the trade-offs consideration, with the risk-management principle as the base of
the decision-making (Christopher and Peck, 2004).
2.3.2 Agility
Ability of organizations to respond demand changes and supply disruptions in this modern industry no longer tied to
individual companies but much related toward networks. The agility determined by both upstream and downstream
partners of the firm. Two key characteristics of agility are “visibility” and “velocity”. Supply chain visibility enable
organization has a clear view of inventory, demand, and supply along its value chain. Visibility can only be achieved
through collaborative planning with both its customers and suppliers, enabling capture of any alert regarding supply
disruptions. The challenge for building visibility is to create seamless integration view across functions of supply
chain (Christopher and Peck, 2004). Another key component of agility is velocity, which referred to end-to-end
pipeline time. However, for creating agility, the acceleration or rapidness of supply chain react to changes in
demand are also critical. Both velocity and acceleration can be achieved through streamlined processes, lead-time
reduction and eliminating non-value added activities. Enablers are leveraging supplier capability to respond delivery
request quickly, and able to cope with quick changes in volume and portfolio requirements, together with the
information-sharing and inventory management practices (Christopher and Peck, 2004).
2.3.3 Supply Chain Risk Management Culture
Increasing risks due to high-uncertainty market is expected and required culture of risk-management embedded
within organization. Supply chain risks present major threats toward business continuity and required top-down
leadership to drive the risk-management culture change in the organization (Christopher and Peck, 2004). It is also
argued that supply chain risk assessment should be considered during the decision making process. For example,
supply chain vulnerability such as component scarceness and lead times for manufacturing and distribution need to
be considered when deciding to near-shoring one of the production site. To manage the risk, performance
monitoring is essential. Coupled with both internal and external benchmarking of supply chain breakdowns can
provide key lessons for the organization and help identify potential risks (UPS and EIU, 2008).
2.3.4 Supply Chain Collaborations
Supply chain collaboration enables the participating companies to create competitive advantage, achieved through
cost reductions, increase in revenue as well as flexibility to respond toward market uncertainties (Horvath, 2001;
Spekman et al., 1998; Lee, 1997). Supply chain collaboration requires efforts from all parties to ensure the
attainment of potential benefit (Barrat and Oliveira, 2001). As companies move toward closer arrangements with
their partners, they became involved in the evolving process of collaboration (Mentzer et al., 2000). On his proposed
framework of supply chain optimization consisting of four stages of progress (sourcing and logistics, internal
excellence, network construction, and industry leadership), Poirier (1999) reflect the collaborative efforts between
parties in value chain on its two last stages. Similarly, on Polese’s supply chain maturity model reflecting
organization’s operational capability, collaboration is the critical component to reach stage three (external
integration) and stage four (cross-enterprise collaboration). According to Simatupang and Sridharan (2004) the
collaboration involved three dimensions: information sharing, decision synchronization and incentive alignment
with two additional elements: performance system and streamlined business processes. The collaboration involves
sharing knowledge of business process flow as well as trading partner’s planning and execution system, followed by
the agreed collaboration mechanism and its aims. The execution result then monitored and analyze for identifying
improvements.
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7. Information sharing
Supply chain collaboration begun with information sharing which has objective to capture timely and relevant
information, enabling decision makers to plan and control its supply chain operation (Simatupang and Sridharan,
2004). Data shared includes demand forecast, level of inventory and its related costs, schedule for delivery, and
points of sale (Lee and Whang, 2000) and provide more clear demand view. Moreover, supply chain collaboration
leads to specified market focus, improved corporation for fulfilling sales and demand, as well as minimize risks
related to demand uncertainty, resulted in the better performance of the chain’s participants (Lee et al., 1997;
Whipple et al., 2002).
Decision synchronization
Decision synchronization refer to joint-decision making in both planning and operational contexts. The planning
context includes long-term planning decision and measures such as promotion, customer service level, forecasting
and selecting targeted customer. Meanwhile, operational context relates to order generation and delivery process,
including shipping schedule and product replenishment. Decision synchronization aiming to focus all the chain
members to work toward a common goal of serving end customer, often to reduce delivery time and contributes to
consistent product availability (Ramdas and Spekman, 2000; Bowersox et al., 2000).
Incentive alignment
Incentive alignment refers to the fair sharing of costs, risk, and benefits amongst the supply chain member to
maintain the commitment of each party to the collaborative efforts. Benefits include both financial gains - such as
increased revenue - and performance improvement such as declined inventory costs (Kaplan and Narayanan, 2001;
Corbett et al., 1999). Attractive incentives can motivate the supply chain members to take decision let to the supply
chain profitability (Simatupang and Sridharan, 2002).
Information sharing Decision Synchronization Incentive alignment
•Promotional event •Joint plan of product •Joint frequent shopper
•Demand forecast assortment program
•Price changes •Joint promotional events •Shared savings due to
•Inventory holding costs •Joint development of reduction in inventory
demand forecast costs
•On-hand inventory levels
•Pricing policy consultation •Guaranteed delivery for a
•Inventory policy
•Joint decision on peak demand
•Supply distruptions
inventory •Allowance for product’s
•Order status and tracking defects
requirements, optimal
•Delivery schedules order quantity and •Subsidies for retail price
availability markdowns
•Joint resolution on order •Agreement on order
exceptions changes
Figure 3 Example of Collaborations in Information Sharing, Decision Synchronization, and Incentive Alignment (Simatupang
and Sridharan, 2004)
Strong supply chain collaboration often associated with a mature supply management, characterized by the
following:
 Supply market research and intelligence
 Supplier integration
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8.  Cross-enterprise integration
 Supply management influence
The detail of each capability is summarized below:
•The ability to develop key insights of supply market characteristics: technology, price
Supply market and cost, M&A, capacity requirements, quality and delivery performance and external
intelligence environment scanning (Arend and Wisner, 2005; Carr et al., 2000; Chen et al., 2004;
Handfield, 2006)
•Alignment with internal stakeholder
Supply management
•Formulating strategic sourcing objectives with senior management and enterprise-level
influence strategies (Cousins et al.,2006; Monczka et al.,2000)
•Ability to collaborate with partners, involving them into product development and
Supplier integration design, order management and fulfillment process, all enabled through timely
communication of requirements and continuous improvement (Walter et al., 2006)
•The ability of the sourcing function to actively engage functional decision
Cross-enterprise
making, through carefully tracking stakeholder requirements in both product and
integration process design (Handfield et al.,2009)
Figure 4 Supply Management Practices (Handfield et al., 2009)
2.4 Supply Chain Excellence practices
Apart from creating resilient supply chain, today, companies must be flexible in applying full array of levers at their
disposal, including pricing, sales incentives, promotion and other marketing tools, to stimulate demand for their
most profitable products, as underlined by demand-driven principle. Demand-driven principles is the system of
technologies and processes which responds to the real time demand signals across its supply network of customer,
suppliers and employees. This model has three overlapping areas of responsibility:
 Supply management – manufacturing, logistics, supply planning and sourcing
 Demand management – marketing, sales, demand planning and services
 Product management – R&D, engineering and product development
When these processes work together, the business can respond quickly and efficiently to opportunities arise.
Implementing demand-driven supply chain often required following:
 Enhanced demand forecasting tools based on historical sales data
 Integration of demand management and forecasting tools with existing supply chain and logistics system, to
enable visibility across the whole value chain
 Comprehensive plan created through collaboration between sales, marketing and supply chain operations
 Developed a collaborative sales and operations planning (S&OP), which extends from customer end to the
procurement and logistics, to allow customer insight inform all aspects of the business
 Aim for profitability as the main objective
2.5 Competitive Advantage
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9. Creating supply chain excellence will provide the organization with competitive advantages. Competitive advantage
is the ability of organization to differentiate itself from the competitors (McGinnis and Vallopra, 1999). Price,
quality, delivery and flexibility are amongst the example of important competitive capabilities. Koufteros et al.,
described five dimensions of competitive advantages, including: competitive and premium pricing, dependable
delivery, product innovation, time to market, and customer quality (Li et al., 2006). Other competitive advantages
include cost-leadership and talent.
3. Research Methodology
The paper presents an in-depth case study of Samsung Electronics, the global leading electronics company which
ranked 2nd as the World’s Most Admired Electronics Company (Fortune, 2010). Samsung Electronics often became
a benchmark for key competitors in the industry, given its progressive strategy of extended value chain network
toward both suppliers and customers, as well as its embedded innovation along the value chain, and outstanding
financial and technical performance. The study follows guidelines for case research in operations management
drawn from the literature and company’s public data. The theoretical foundation of resilient supply chain and trends
of supply chain in the top leading companies is established early on and will be contrasted with the supply chain
practices in Samsung. Competitive advantages resulted from the implementation of their supply chain practices will
be identified and analyzed to understand company’s resilience toward highly volatile electronics industry. The data
gathering followed and relied on analysis of secondary data including company records such as annual reports, press
releases, as well as published literature regarding SCM in Samsung.
4. Case Analysis and Key Findings
Samsung Electronics, established in 1969 as a TV company, grew to be one of the most prominent electronics
companies in the world. Ranked second as the world’s most admired electronics company, and 32th as world’s most
admired company by Fortune in FY2010, the firm booked KRW 154.63 trillion of revenue, more than doubled its
record on 2007 at KRW 63.18 trillion. The company recorded a KRW 17.3 trillion operating profit, increased by
58% from 2009 performance, and has 190,500 employees worldwide. According to Interbrand, the company brand
value increased from US$ 5.2 billion in 2000 (ranked 43rd in the world survey), to US$ 19.5 billion (ranked 19th) in
2010. During this time, company has maintained profitability and revenue ahead of its peers – Figure 9(Samsung,
2011).
Figure 5 Samsung Electronics Revenue and EBITDA margin comparison against its peers (Samsung, 2011; Google Finance)
Samsung Electronics transformed its supply chain to be one of the company’s competitive advantages through
implementation of extended-value chain network integration, customer-collaboration process in the product
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10. development stage, all tailored toward creating a resilient supply chain. Overview of the supply chain management
in Samsung exhibits the following characteristics which fit well with the framework proposed (figure 4):
 Continuously improving its agility through increase value-chain visibility and velocity achieved through
implementation of supply chain management support system (e.g. Planning and scheduling system), reduce
delivery time through strategically locate its production site (e.g. in Poland for catering EU market
demand), and streamlined processes and lead time reduction using SCM Six Sigma.
 Progressive supply chain re-engineering through customer-collaboration process in the product
development and supply chain design.
 Mutual-growth supply chain collaboration with its suppliers to enhance their trading partner resilience
and core competency for responding toward volatile market.
 Embedded risk-management culture in the supply chain as one of the key strategy for 2012 as mentioned
by Choi Gee-Sung, Samsung CEO as quoted by Korean Times, 2011. Sense of urgency will continue
coloring the Samsung’s operations to react quickly and identify any potential disruptions on its operation.
Samsung Electronics Details Benefit
Supply Chain Focus
Trading partner  Value-chain network integration (vertically  Strategically placed Samsung as both
networks (Extended integrated with suppliers) OEM and major component suppliers in
value chain to the electronic industry value chain
upstream end)  Secure supply access
 Win-win partnership programs  Mutual growth with key partners create
o CSR supports, HR development better resilience and agility towards
o Innovation and technology sharing changes in the market
o Financial and infrastructure
assistance
 Suppliers Management System  Achieve economy of scale, cost-savings,
o Secure outstanding suppliers and secure profits
o Conduct fair evaluations
o Concentrate volume to suppliers
with a competitive edge
o Provide predictable information
Customer-  Customer-satisfaction (CS) certification  Customer collaboration process led
collaboration process program – embedded customer’s input in the towards holistic design product
(Extended value-chain early product development stage  Improve and speed up product
to downstream end)  Involve customer in the products preview and development process – less time to market,
development through “Prosumer” communities more products offering
o Example: AnyCall Dreamers for  Connecting new product development with
mobile phone communities – viral supply chain strategy – better product
products review, user test, marketing offering and supply chain execution
ideas, pool of improvement and
product recommendation ideas
 “Quick Delivery 119 Team” – smart and fast  Retain customer loyalty
delivery of purchased products
 Customer after-sales service innovation  Provide in-depth and accurate information
on customer’s needs
o Service center outlet expansion –  Product innovation ideas gathering
available in 3100 cities by 2008  Retain and attract customer base and
o Progress control system – track loyalty
customer’s service from reception
for repair
o Service Component Demand
Forecast system (2009)
o Repair Ceiling Schemes – innovative
repair fee ceiling based on product’s
age
 Customer Relationship Management system
Demand-Driven  SCM Sales Forecast System  Reduce inventory level
Maturity  Sales and Operations Planning (S&OP)  Provide greater visibility of value-chain
 Demand-Modeling  Improve product life-cycle management
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11. through better understanding of customer
demand
 Improve promotional planning and meet
customer expectations
Organization as a  In 2010-2011, Samsung undergoes  Improve operational efficiency
value chain organizational restructuring for its end-user  Accommodate emerging market’s growth
products and global operations potential
o Recent M&A of Samsung LED  Technology core-sharing and seamless
o Merging of digital air solution to vertical integration
digital appliances and
telecommunication system into
visual display business
o Consolidation of raw material
procurements, development of key
components and overseas business
unit
o Central and Eastern European
structure established
 Partner Collaboration Center placed directly  Top-down driven implementation of
under CEO with VP as the head of the center – supply chain
implying the importance of extended network  Optimize partnership collaboration
value chain strategy towards Samsung’s
business
 Organization culture with sense of urgency,  Change-management culture
quality-focus, low bureaucracy and allowing  Continuous improvements
innovations driven bottom-up
Supply Chain  Adexa’s Enterprise Global Planning System  Provide realistic planning and improve
Management Systems (2004): Supply Chain Planning, Factory order fulfillment
Software Planning and Scheduling, Collaborative  Demand forecast tools help reduce excess
Demand Planning inventory, generate cost-savings and
 Advanced Planning and Scheduling System provide better quality data for decision-
 Integrated Sales Document Management making
System (Adobe)  Enable intelligent collaboration
 Product Data Management  Maximize asset utilizations
 Global Real Time Management Information  Greater plan visibility and flexible view of
System products
Green Movement –  Supply Chain Environmental Management  Creating sustainability supply chain to
Sustainability supply program meet tighter government and environment
chain o Eco-partner Certification regulation
o Eco-design assessment –
incorporated in eco-friendly product
development
o Eco-label for marketing
Product Lifecycle  Standardize parts in different products model  Slashed out time to roll out products
Management globally
 Alternative supply available from other
region in cases of shortages
SCM Six Sigma  Implement six sigma to improve Samsung  Provide talent required for SCM
Electronics SCM  Provide more systematic and discipline
o Identify supply chain process SCM application
improvements – most notably in the  Demand stabilization
inventory visibility, demand  Improve inventory visibility led toward
stabilization and better use of cost-reduction
information network
o Six Sigma Academy
Figure 6 Samsung Electronic Supply Chain Practices (Samsung, 2011; Yang et al., 2007; Gartner Top 25 Supply Chain
Companies, 2011)
In this section, we will discuss the key supply chain practices in Samsung Electronics and how it drives the
competitive advantage for the company.
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12. Trading Partner Networks
Samsung Electronics weathering ups its value chain to include their partners and suppliers on their mutual growth-
program, improving their core competency through providing CSR support, HR development, cost and product
innovation as well as financial and infrastructure assistance (e.g. ERP). Samsung realized that in the globalized
market, competition field no longer exist between individual firm, but rather, among the network. Therefore,
developing its partners became an important strategy on their supply chain management, as the seamless
collaboration will led towards better visibility across its value chain and resilience toward highly unpredictable
market. Moreover, recently Samsung provide opportunity to SMEs that hold core technology to pursue joint-
development projects, generating innovation ideas and aligned product development. Wynstra argued that integrate
suppliers in the new product development process can be a competitive advantage (Wynstra et al., 2001). It will
provide a much holistic designed products and advance innovation process, supporting Samsung maintained its
leadership in technology.
While other electronics manufacturers such as Apple, Vizio, Sony and Panasonic are moving towards outsources
most components, Samsung is notable for its vertical integration with suppliers. Most recent, is their acquisition of
Samsung LED (Bloomberg, 2011). The vertical manufacturing sourcing strategy to keep all in-house is the key for
Samsung to establish itself as both OEM and major component suppliers. Apart from being the main supplier of
digital TV market, Samsung also a dominant supplier in flash memory devices and chips for smart-phone, with
Apple as one of their biggest customer. In the long term, as more Japanese electronics giant (i.e. Hitachi) decides to
join forces of vendor-managed sourcing strategy, this can bring Samsung Electronics to a more strategic presence.
Their major strategy of vertical integration brings not only core-sharing of technology and expertise, but also better
control of supply uncertainty. It also provides economies of scale as they produced not only for within Samsung
Electronics, but also for the whole industry players. However, one disadvantage could be the decreased flexibility.
Customer-collaboration process
Samsung measure its supply chain as the way customer experience it. It developed capability to incorporate
customer needs into the product design stage and proactively build customer’s recommendation into their supply
chain operations. This can be seen through the current customer-service innovation program that Samsung
Electronics launched, such as quick delivery system, progress control system, and even Service Component Demand
Forecast. Those initiatives provide competitive advantages such as holistic and appealing design products as well
as product differentiation through its after-sales services. Moreover, by embedded customer’s perspectives early on,
Samsung able to create attractive product offering, speed up product development process – hence less time to
market, and improve its supply chain execution. On the longer term, the tailored supply chain will result in the
customer loyalty. Due to its progressive customer-collaboration process, it should not come to our surprise that
Samsung is one of the electronics giant who able to launch many products simultaneously and according to Yoon
Boo Keun (executive VP in-charge of TV and Display business), they can launch products twice more often than its
peers (Bloomberg, 2011).
Demand-driven maturity
Samsung Electronics has often been cited as the best-in-class in applying Sales and Operations Planning (S&OP).
S&OP in Samsung is a critical operation component, providing visibility of the supply chain for its top management,
supported with massive amount of data allowing decision maker choose quickly and efficiently after analyzing the
complex tradeoffs it has (Gartner report, 2011). Similar to P&G and Kimberley-clark, Samsung focus its S&OP for
creating strategic trade-offs decision. Inventory is seen as the buffer for demand-volatility rather than target for cost-
savings. The system provide Samsung Electronics with better stock-inventory control and enable quick management
decision, something that is critical in this ever-changing market.
Organization as a Value Chain
Samsung Electronics leverages its organizational structure to drive the supply chain implementation, such as
partnership collaboration by putting it directly report to CEO. In addition, the merger and acquisition of its major
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13. supplier aims to accommodate operational efficiency and enabling core-technology sharing as well as seamless
vertical integration. In addition, its sense of urgency and risk-managing culture enabled the company to always
aware of the market changes, responds to it quickly and at the same time, nurtures the innovation-led culture on their
employees. Organization no longer acts as a hurdle but rather, as a value chain, creating resilience and
responsiveness on adapting toward market uncertainties. This is contrast with the Sony Corporation, of which their
consensus-style decision making is criticized slowing the urgent decision-making, led towards lagging performance
in the industry.
Near Shoring Strategy
Aligned with its goal to be a market leader in the EU market, Samsung Electronics implement near-shoring strategy
to Eastern Europe, moved away from sourcing its production in China and SEA, often perceived as low-cost
manufacturing regions. Similar strategy applied for its LCD production, being produced in Mexico to cater its
customers in North America. The savings are noted up to four-week reduction in order lead times, beside reduction
in distribution costs, bringing competitive advantages of time-to-market and cost-efficiency.
Product Lifecycle Management (PLM)
Designing products which share common operation, or materials not only reduce risks of write-offs but also speed
up time-to-market for launching products globally. For instance, Samsung used same circuit boards for both LCD
TV 32-inch (sold in EU) and 60-inch plasma TV. This effort reduced the minimum roll-out time from sixteen weeks
in 2005 to just four weeks in one-year time.
Supply Chain Management Systems Support
Prior to using Adexa’s Enterprise Global Planning System, Samsung Network Division faced challenges in reducing
its COGS, and pressure to increase both asset utilization and market share. The issues arose include lengthy
forecasting cycles, supply shortages, bottlenecks and rush order delivery. For electrical industry, characterized with
increasingly stringent product life cycles, most manufacturers need accurate and timely information on assisting
their design, planning and production process, while also reducing excess capacities and non-value added cost (Lynn
et al.,1996; Blanchard, 2008). Therefore, synchronizing the scheduling and planning tasks of supply chain is critical
to achieve high performance (Kadipasaoglu and Sridharan, 1997; Pujawan and Kingsman, 2000). Software system
support used in supply chain enabled Samsung Electronics to enable intelligent collaboration, provide better
visibility, realistic planning, improve order fulfillment as well as enabling reduction in inventory. Especially in the
electronics industry where price falls on breakneck pace, often electronics channel giant such as Best Buy and
Circuit City charged manufacturers for gap compensation due to old and new price differences in their store
inventory.
Supply Chain Management-Six Sigma
Samsung Electronics implement combined approach of six-sigma principles towards its supply chain management,
developing methodology that enhanced its current global operations. The six-sigma applications is expected to
create a systematic and methodical supply-chain management, while at the same time developing the necessary HR
talent to applied it on Samsung’s operations and providing better quantitative data which will be useful for decision-
making process. The final approach is DMAEV – Define, Measure, Analyze, Enable and Verify. The six-sigma
application on its SCM able to identify three key issues: inventory visibility, demand stabilization and web-user
interface design for inventory management (Yang et al., 2007). This approach is built to overcome challenges of
sustaining results of successful project after completion, which often called as “Closed-loop”, one of the important
issue in SCM and particularly for manufacturing planning and control system (Vollmann et al.,1997; Yang et al.,
2007). Six-sigma fulfill this needs through its “control” stage, or in this case “verify” stage.
Conclusions and Future Research
13

14. Analyzing supply chain management in Samsung Electronics, author concluded that their SCM implementation
contributes to the following competitive advantages:
 Reduce time-to-market – Customer collaborative approach coupled with engaging supplier earlier on the
product development stage enable Samsung launch its product in a timely manner, addressing challenge of
short product life cycle in electronics industry
 Cost leadership – Inventory cost reduction and elimination of non-value added activities through
Samsung’s combined approach of SCM Six-sigma, coupled with strong software supports to manage the
entire value chain
 Product and services differentiation – The collaborative customer approach on the design stage as well as
the company’s innovative services enabled Samsung distinct its brand as a premium brand, creating
customer loyalty
 Innovation – Innovation creation in the company leverages both suppliers and customers, through
extending their value-chain to both downstream and upstream
 Strategic market positioning - as both OEM and major supplier in the electronics industry value chain
 Talent – Six-sigma black-belt certified employees are the critical enablers of continuously evolving supply
chain management in Samsung. They led the top-down approach for resilient and sustainable supply chain
One question remained. Is current supply chain practice in Samsung sufficient to address future challenges and
highly volatile market changes? Author recommends the following:
 Continue application of collaborative approach SCM Six Sigma as it helps company identify potential
improvements and address critical issues
 Explore state-of-the-art supply chain practices in the industry to improve Samsung Electronics supply
chain such as:
o “Customer Value Chain Management” organization in Cisco which brought together sourcing,
production, logistics, customer service, quality and new product launch under hard-line reporting
function
o Apple’s strategic sourcing, vendor negotiation and distribution networks
o Dell’s segmentation of value chain
 Improve its risk management capabilities and resilience through creating stronger risk-awareness
culture, strengthening their preemptive response system and improving their risk management system
 Continue embedded innovation along its supply chain and create distinct positioning against its peers
This paper studies the impact of resilient supply chain practices in Samsung Electronics towards creating
competitive advantages against its peers. Further study across industries using the same methodology may help
identify whether supply chain practices drive different competitive advantages. Contrasting Samsung Electronics
with its peers also can provide insights of key success factors of supply chain excellence and how it helps company
create outstanding financial and operational performance. Other interesting future study is to explore the concept of
supply chain quality management and comparison of vendor-managed supply chain which now adopted by most
electronic giants against vertical-integration concept implemented by Samsung Electronics.
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