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Globalization and Operation Excellence through Process Innovation at Samsung Electronics Dr. Sungchil Park Executive Vice President Samsung Electronics
Agenda „
Samsung Electronics Overview
„
SCM Vision & Roap
„
Innovation Journey
„
Next SCM Initiatives
„
Lesson Learned
© 2006 Samsung CONFIDENTIAL
2
Samsung Electronics Overview History
© 2006 Samsung CONFIDENTIAL
3
Samsung Electronics Overview History
© 2006 Samsung CONFIDENTIAL
4
Samsung Electronics Overview Global Network
57 Countries…
Production Subsidiaries Sales Subsidiaries Production & Sales Subsidiaries Branch Offices R&D Center © 2006 Samsung CONFIDENTIAL
19 38 8 31 10 5
Samsung Electronics Overview Brand Equity
2002 Rank Rank
11 22 33 44
Company Company
Value Value Rank Rank
Coca-Cola Coca-Cola 69.6 69.6 Microsoft Microsoft 64.1 64.1 IBM 51.2 IBM 51.2 GE 41.3 GE 41.3
55 66
Intel Intel Nokia Nokia
30.9 30.9 30.0 30.0
21 21
Sony Sony
13.9 13.9
34 34 35 35 ::
DELL DELL
Samsung Samsung Nike Nike ::
11 22 33 44 55 20 20
Company Company
($B) Value Value Rank Rank
Coca-Cola 70.5 Coca-Cola 70.5 Microsoft Microsoft 65.2 65.2 IBM 51.8 IBM 51.8 Nokia 29.4 Nokia 29.4 Intel Intel Sony Sony
31.1 31.1 13.2 13.2
Samsung Samsung
10.8 10.8
::
9.2 9.2
8.3 8.3 7.7 7.7 ::
11 22 33 44 55 20 20
21 21
::
25 25
:: ::
31 31
2003
($B)
2004
($B)
Company Company
Value Value
Coca-Cola 67.3 Coca-Cola 67.3 Microsoft Microsoft 61.3 61.3 IBM 53.7 IBM 53.7 GE 44.1 GE 44.1 Intel Intel Sony Sony
Samsung Samsung
33.4 33.4 12.7 12.7
12.5 12.5
Rank Rank
11 22 33 44 55
20 20
::
::
::
::
::
::
Samsung Samsung
35.6 35.6
15.0 15.0
Yahoo! Yahoo! Motorola Motorola ::
::
::
Pizza PizzaHut Hut Yahoo! Yahoo!
Intel Intel
10.8 10.8 8.0 8.0 5.3 5.3 3.9 3.9
Siemens Siemens
7.4 7.4 5.0 5.0 4.5 4.5
Coca-Cola 67.5 Coca-Cola 67.5 Microsoft Microsoft 59.9 59.9 IBM 53.4 IBM 53.4 GE 47.0 GE 47.0
Sony Sony
28 28 41 41 58 58 73 73
39 39 55 55 61 61
Value Value
13.2 13.2 13.2 13.2
9.2 9.2 8.0 8.0
8.2 8.2 3.1 3.1 2.3 2.3
Company Company
DELL DELL Ford Ford
Nike Nike Canon Canon
Nike Nike Motorola Motorola Starbucks Starbucks
($B)
21 21 22 22
31 31 35 35
33 33 81 81 93 93
2005
Apple Apple
* Source: Business Week © 2006 Samsung CONFIDENTIAL
6
Samsung Electronics Overview Business Areas
24% Digital Media Visual Display, Computer, Digital Video, Printer
6% Digital Appliance Air Conditioner, Refrigerator, Washing Machine, MWO
28% Telecommunications Mobile phone, Communication Network, Optical Fiber
Leading the Digital Convergence Revolution
13% LCD TFT-LCD
29% Semiconductor Memory, System LSI, HDD, OMS © 2006 Samsung CONFIDENTIAL
*Based on 2004 Actual 7
Samsung Electronics Overview Leading Products Worldwide Market Share DRAM 32% SRAM 24%
No.1
Color TV 9.4% Monitor 22%
Flash Memory 34%
TFT-LCD (Large-Area)
20% M 29%
DDI 18%
* Based on 2005 Performance © 2006 Samsung CONFIDENTIAL
8
SCM Vision & Roap Vision Vision
Leading the Digital Convergence Revolution 3P Innovation
Digital
ε
Company
- Product -
- Process -
- Personnel -
Product competitiveness as a fast mover, based on core technology
Supply chain capability
Dynamic organization built on creativity, challenge, and autonomy
© 2006 Samsung CONFIDENTIAL
that ensures best-of-the -industry speed
9
SCM Vision & Roap Process Innovation Vision Digital ε-Company Market Driven Change Product
Process
Personnel
Simple & Speed
Securing inter/intra company connectivity Delivering market needs
R&D Mgmt
Supply Mgmt
Demand Mgmt
Market Driven Process R&D R&D
Proc. Proc.
Mfg. Mfg.
Lgts. Lgts.
Mktg. Mktg.
Sales Sales
Business Management
Svc. Svc.
Sharing product/logistics information Maintain market competitiveness to customer needs Sensing market information
Improve Customer Satisfaction
Strategy
Improve supplier capacity to market needs
Active Collaboration
6 Sigma / IT infrastructure
Key Actions
ƒƒ ƒƒ ƒƒ ƒƒ
Transform Transform individual individual processes processes into into customer/market-driven customer/market-driven Enhance Enhance customer customer and and supplier supplier collaboration collaboration Optimize and upgrade 4 Mega Processes Optimize and upgrade 4 Mega Processes Improve Improve value value creation creation with with enhanced enhanced marketing/sale/development marketing/sale/development
© 2006 Samsung CONFIDENTIAL
10
Innovation Journey 1994~1996 Master planning & Establish infrastructure (1994~96)
3P innovation (Product / Process / Personnel)
& APS pilot (1997~99)
Consolidated operation excellence & APS roll-out (2000~03)
Extended SCM
Basic SCM
Infrastructure
Marketdriven SCM (2004~)
APS Upgrade, Back to Basic SRM, Logistics, Performance to Plan Collaboration Mkt.-Driven SCM
„
Focused on manufactng. manufactng. productivity improvemnt. improvemnt.
„
Implement separate legacy systems
APS Pilot - Display -- Memory
ERP Implemnt. Implemnt. -Major domestic Mfg divisions
ERP Roll-out --All Mfg div. --Major sales sub. ERP Roll-out --FI/CO --other subsidiaries GBM Designed & Structured
PI/SISP mastermasterplan
Plan & Change Mgmt.
1992
’93
’94
© 2006 Samsung CONFIDENTIAL
’95
’96
APS roll-out - 12 GBMs -- 46 Sales Subsidiaries
’97
’98
’99
Organize GOC in GBMs
2000
’01
SCM training -Enterprise wide
’02
’03
’04
’05 11
SCM Vision (1994) „
Deliver the right products (quality and quantity) at the right time (on time and quick delivery) at the lowest cost
„
Anybody in Samsung supply chain can access necessary data at anytime and anywhere through globally integrated information systems
„
Process organization to make quick decisions for customers 7 Major process
To-Be Process vision
Customer Facing
Single Point of , Customer Collaboration
Demand Mgmt Strategic Resource Mgmt Resource Operation Manufacturing Distribution Customer Service
Single Number Forecast, Real-Time AATP Supplier Collaboration, Global Material Planning Global Supply and Demand Balancing Flexible Manufacturing, Cell Manufacturing Optimized Delivery Plan, Postponement, Supply Chain Network Optimization Value Added Customer Services
Over 100 people from all parts of organization worked on this Visioning Work © 2006 Samsung CONFIDENTIAL
12
Achievements Master Planning & Build Infrastructure (1994~1996) „
Build infrastructure first
„
Process innovation at each site
„
„
No end to end integration
„
Integration started with APS implementation in 1998
Automate the transaction process „
Domestic Sales Example:
Order Management Available-to-Promise Headcount Pricing
© 2006 Samsung CONFIDENTIAL
Before Batch
After Real-Time
No ATP
ATP with inventory
-
30% reduction
Post-Pricing
Pre-Pricing
13
Innovation Journey 1997~1999 Master planning & Establish infrastructure (1994~96)
3P innovation (Product / Process / Personnel)
& APS pilot (1997~99)
Consolidated operation excellence & APS roll-out (2000~03)
Extended SCM
Basic SCM
Infrastructure
Marketdriven SCM (2004~)
APS Upgrade, Back to Basic SRM, Logistics, Performance to Plan Collaboration Mkt.-Driven SCM
„
Focused on manufactng. manufactng. productivity improvemnt. improvemnt.
„
Implement separate legacy systems
APS Pilot - Display - Memory ERP RollRoll-out -All Mfg div. ERP Implemnt. Implemnt. -Major sales sub. -Major domestic ERP RollRoll-out Mfg divisions -FI/CO -other subsidiaries GBM Designed & Structured
PI/SISP mastermasterplan
Plan & Change Mgmt.
1992
’93
APS roll-out - 12 GBMs -- 46 Sales Subsidiaries
’94
© 2006 Samsung CONFIDENTIAL
’95
’96
’97
’98
’99
Organize GOC in GBMs
2000
’01
SCM training -Enterprise wide
’02
’03
’04
’05 14
Key Innovation Areas Enabled by SCM Clarify Global Business Ownership As-Was
As-Is
• Dispersed business ownership (multiple profit centers) • Internal competition for profit & inventory responsibility avoidance Biz Biz owner owner
Biz Biz owner owner
Overseas Overseas Sales Sales
Compete with profit & inventory
Biz Biz owner owner
Functional Functional Staffs Staffs
Customer Customer
Domestic Domestic Sales Sales
Biz owner owner Biz of product product of segment segment
Overseas Overseas Plants Plants
Corporate Corporate HQ HQ
Customer Customer
Biz Biz owner owner Manufctring. Manufctring Manufctring.. Division Division
• Single owner of Marketing, R&D, Global resource management • Single owner of end-to-end process throughout the entire supply chain
Global Global Business Business Manager Manager Global Operation Center (GOC)
Cost Centers Domestic Domestic Plants Plants
Overseas Overseas Plants Plants
Overseas Overseas Sales Sales
Domestic Domestic Sales Sales
ƒ Global Business Manager is the only business owner (profit center) of the each product segment ƒ The rest organizations became cost centers ƒ GOC plays important role of managing global supply chain, synchronizing sales & production © 2006 Samsung CONFIDENTIAL
15
Key Innovation Areas Enabled by SCM Organization: GBM & GOC „
„
Process-type organization: GBM* „
GBMs of each product group implement their business strategies with global responsibilities and authorizations for profits and losses across the overall supply chain
„
Sales and production subsidiaries play the role of cost centers ing the GBM
Supply Chain planning/management/synchronization/ optimization: GOC** „
Adjusts and controls sales and manufacturing volumes globally
„
Allocates and adjusts materials to efficiently manage overseas plants.
„
Improves and s the entire supply chain with SCM operation ownership
„
Single point for SCM operations
Customer
Manufacturing Production Sales/ Logistics
Supplier
* GBM : Global Business Management ** GOC : Global Operation Center
GOC ※ Integrating sales and production Operating global supply chain © 2006 Samsung CONFIDENTIAL
16
Key Innovation Areas Enabled by SCM Weekly Global Planning Cycle As-Was
As-Is Weekly Cycle
Monthly Cycle Sales Forecast Manager /Order Sales PSI Subsidiary Sales & Sales Plan Marketing Global Allocation Plan Production Production Management Plan Purchasing
Purchasing Plan
Sales Manager Sales Manager Sales & Marketing Global Production Management
Forecast /Order PSI Sales Plan Allocation Plan Production Plan Purchasing
ConConcurrent current Planning Planning on on aa Single Single Planning Planning Table Table within within aa day day
Purchasing Plan
ƒ Real-time global information sharing (market and supply chain planning information) ƒ Generation of a single plan with simultaneous consideration of global constraints ƒ Reduction in global planning cycle time: monthly cycle → weekly cycle © 2006 Samsung CONFIDENTIAL
17
Key Innovation Areas Enabled by SCM Global Demand Mgmt and Consensus Based Forecasting As-Was Customer Customer
As-Is Local Local Marketing Marketing
Salesman Salesman W14 ISD Total Demand Forecast (all SKUs)
Customer Customer
Salesman Salesman
Local Local Marketing Marketing
7000 6000 5000 4000 3000 2000 1000 0 W14 W15 W16 W17 W18 W19 W20 W21 W22 W23 W24 W25 W26 W27 W28 W29
W14 ISD Total Demand Forecast (all SKUs) 10000 9000 8000
Traditional PSI method amplifying bull whip effect
7000 6000 5000 4000 3000 2000 1000 0 W14 W15 W16 W17 W18 W19 W20 W21 W22 W23 W24 W25 W26 W27 W28 W29
W14 ISD Total Demand Forecast (all SKUs) 12000 10000 8000 6000 4000 2000 0 W14 W15 W16 W17 W18 W19 W20 W21 W22 W23 W24 W25 W26 W27 W28 W29
Global Global
HQ HQ Marketing Marketing
Global Global
Every individual’s sales plan/forecast Kept In “one real-time view” Checked against actual
HQ HQ Marketing Marketing
ƒSequential to concurrent & consensus-based forecasting process on a single table ƒMBO based on forecasting/inventory personalization (by sales subsidiary & salesman) ƒNo Forecast, No Allocation (NFNA) ƒSales plan based on consensus result of RTF (Return to Forecast) from GOC © 2006 Samsung CONFIDENTIAL
18
Key Innovation Areas Enabled by SCM Global Optimization by Concurrent Planning As-Was
As-Is
• Allocation by each plant • Supply plan and Distribution plan by local plants
• Global Allocation by Global Command Center • Concurrent Optimized Plan & Synchronization of Supply-Demand
Korea Korea Plant Plant Global Global Command Command Center Center China China Plant Plant
Europe Europe Plant Plant
N.America N.America Plant Plant Suppliers
Plants
Sales Subs
Suppliers
Plants
Sales Subs
ƒ Global production/distribution planning with consideration of all sales and manufacturing subsidiaries ƒ Strategy driven planning for global resource optimization & profit optimization ƒ Global visibility of all global operations (APS UI, no order visibility) © 2006 Samsung CONFIDENTIAL
19
Key Innovation Areas Enabled by SCM Global Real-Time Order Promising (AATP) As-Was
As-Is Customer Customer
ATP based on local inventory
Inv. Shortage
AATP based on supplying plan HQ HQ
ATP ?
OnHand
“If you don’t have products in your warehouse and you can’t supply them, I will buy them from another vendor.”
Allocation
OnHand
Manager Manager
InTransit
Salesman Salesman
In Prod.
Prod plan
Customer Customer Mat. Plan
Salesman Salesman
ƒ Pre-allocation down to salesman level based on forecast and production constraints ƒ AATP based on global inventory & production plan ƒ AATP policy based on customer priority and business policies © 2006 Samsung CONFIDENTIAL
20
Achievements Case: Visual Display Division
P
Before SCM
S
Large inventory level caused by out of sync between S and P
I
P S I
After SCM
P S
I
I
P
(1998)
S
© 2006 Samsung CONFIDENTIAL
(2002)
21
Achievements Case: Visual Display Division Sales Qty (100K)
6,000
Sales Amt ( M$ )
Profit ( 100K$ )
5,000 4,000 3,500
TV Biz Merge
3,000 2,500
SCM Roll-Out
2,000 1,500 1,000 500 ’94
’95
’96
’97
’98
’99
’00
’01
’02
( Monitor Business ) © 2006 Samsung CONFIDENTIAL
22
Achievements 3P Innovation & APS Pilot (1997~1999) „
3P Innovation „
Product: Restructuring
„
Process: Quick Response, D+α Delivery
„
Personnel: Process oriented organization
„
Successful internal APS showcase implementation (Display APS Pilot)
„
Global Operation Process (GOP) implementation „
GOP ownership: GBM (Global Business Management)
„
GOP control tower: GOC (Global Operation Center)
© 2006 Samsung CONFIDENTIAL
23
Achievements 3P Innovation & APS Pilot (1997~1999) „
Restructuring „
Spin-off non-core business functions „
„
Dispose of non-profitable business units „
„
Domestic After-Market Service, Logitech (Domestic Transportation) 19 including Medical Equipment & Defense
Outsourced non-core cost centers „
Security, automobile asset management
1997
1999
Employees #(Korea)
59,000
39,000
Debt Ratio
300%
85%
Debt (USD)
$ 13 Billion
$ 5.7 Billion
© 2006 Samsung CONFIDENTIAL
24
Innovation Journey 2000~2003 Master planning & Establish infrastructure (1994~96)
3P innovation (Product / Process / Personnel)
& APS pilot (1997~99)
Consolidated operation excellence & APS roll-out (2000~03)
Extended SCM
Basic SCM
Infrastructure
Marketdriven SCM (2004~)
Back to Basic APS Upgrade, SRM, Logistics,Performance to Plan Mkt.-Driven SCM Collaboration
„
Focused on manufactng. manufactng. productivity improvemnt. improvemnt.
„
Implement separate legacy systems
APS Pilot - Display - Memory ERP RollRoll-out -All Mfg div. ERP Implemnt. Implemnt. -Major sales sub. -Major domestic ERP RollRoll-out Mfg divisions -FI/CO -other subsidiaries GBM Designed & Structured
PI/SISP mastermasterplan
Plan & Change Mgmt.
1992
’93
APS rollroll-out - 12 GBMs - 46 Sales Subsidiaries
’94
© 2006 Samsung CONFIDENTIAL
’95
’96
’97
’98
’99
SCM training -Enterprise wide
Organize GOC in GBMs
2000
’01
’02
’03
’04
’05 25
Key innovation areas enabled by SCM SRM – Strategic Sourcing As-Was
As-Is
• No leverage of global buying power during negotiation at local site Corporate Corporate Procurement Procurement
Business Business unit unit
Business Business unit unit
Business Business unit unit
Business Business unit unit
Global aggregation at any time & level
Local Local Plant Plant Procurement Procurement
Local Local Plant Plant Procurement Procurement
Spend analysis by suppliers & parts at site level only
Corporate Corporate Procurement Procurement
Manual & subjective supplier evaluation once or twice a year only Local Local Plant Plant Procurement Procurement
• Frequent negotiation at the global and/or local level with global visibility
Local Local Plant Plant Procurement Procurement
Local Local Plant Plant Procurement Procurement
Local Local Plant Plant Procurement Procurement
Spend analysis by suppliers & parts at both global and site levels
ƒ Corporate spend aggregation, spend visibility by region, by business unit ƒ Baseline price and variance management ƒ Strategic procurement decision by providing rapid & accurate information © 2006 Samsung CONFIDENTIAL
26
Key Innovation Areas Enabled by SCM Synchronize R&D, Purchasing, Suppliers - Product Sourcing As-Was
As-Is ƒ ƒ ƒ
ƒ ƒ ƒ
Sourcing Workflow
Suppliers Parts Price
ƒ ƒ
Strategic Sourcing
Part/Manufacturer/Supplier # Item Spec Data. ƒ Cost (Standard, Target, Tooling, Bid) Supplier Pref. ƒ Obsolescence Data AML/AVL ƒ Schedule Data Supply Status ƒ Calculated Preference
MRP
CSM PDM “Engineering BOM”
MCAD #1 PPDB MCAD #2
PDM 1
C
ƒ ƒ
eCAD #1
PDM 2
ƒ ƒ ƒ
CAD File Part # Description Quantity Revision
ƒ ƒ ƒ ƒ ƒ
Design Workflow
ƒ
CAD File Part # Description Quantity Revision Configuration
SRM “Sourcing BOM”
Concurrent Workflow Target Target Cost Cost !! Preferred Preferred Parts/Suppliers Parts/Suppliers !! Part Part Reuse Reuse !! Design Design for for Supply Supply !! Faster Faster time time to to Market Market !!
ƒ Optimize designs for sourcing and supply chain constraints before they reach manufacturing for best total margin and cost for this product ƒ Establish Component & Supplier Master (CSM) to bridge design & procurement ƒ Continuous monitor & analysis of part reuse, target cost, BOM grading, & obsolescence © 2006 Samsung CONFIDENTIAL
27
Key Innovation Areas Enabled by SCM 1C1B: One , One Bill As-Was • Transportation plan and execution were done by different dedicated regional 3PLs
As-Is • Centralized & integrated transportation management (managing all operations, plan to execution) Centralized Logistics
MFG MFG
Region Dedicated 3PL
X-Docking
DC
Customer
Direct Ship
Regional DC
Customer
Route Optimization
ƒ ƒ ƒ ƒ ƒ
Outsourcing to 3PL Network Optimization People Consolidation Minimizing transportation cost by route optimization, X-Dock, direct shipment etc. Real-time proactive monitoring and multi-dimensional KPI management © 2006 Samsung CONFIDENTIAL
28
Achievements APS Roll-Out: SCM Performance Index (2000~2003) SCM Performance Index
3Q 2001
4Q 2003
Forecast Accuracy
22%
41%
On-Time Delivery
32%
81%
Days of Inventory
20 Days
14 Day
2001
2002
2003
Q1/2004
Stagnation in Performance Improvement
© 2006 Samsung CONFIDENTIAL
29
Innovation Journey 2004~ Master planning & Establish infrastructure (1994~96)
3P innovation (Product / Process / Personnel)
& APS pilot (1997~99)
Consolidated operation excellence & APS roll-out (2000~03)
Back to Basic/ APS Upgrade, Performance SRM, Logistics, to Plan/ Collaboration Mkt.Mkt.-Driven SCM
Extended SCM
Basic SCM
Infrastructure
Marketdriven SCM (2004~)
„
Focused on manufactng. manufactng. productivity improvemnt. improvemnt.
„
Implement separate legacy systems
APS Pilot - Display - Memory ERP RollRoll-out -All Mfg div. ERP Implemnt. Implemnt. -Major sales sub. -Major domestic ERP RollRoll-out Mfg divisions -FI/CO -other subsidiaries GBM Designed & Structured
PI/SISP mastermasterplan
Plan & Change Mgmt.
1992
’93
APS rollroll-out - 12 GBMs - 46 Sales Subsidiaries
’94
© 2006 Samsung CONFIDENTIAL
’95
’96
’97
’98
’99
Organize GOC in GBMs
2000
’01
SCM training -Enterprise wide
’02
’03
’04
’05 30
Recent SCM Initiatives Recent Activities Based on the visibility improve delivery and demand management capability (Performance to Plan) ’04 : Back to Basic and improve visibility ƒClean up mater data ƒImprove data accuracy ƒImprove system functionalities and usability
’05 ~’06 : Improve SCM capability Delivery capability
Demand Management capability
ƒMake Good Production Plan ƒOn time manufacturing on hourly basis ƒDaily production and shipping ƒSupplier delivery capability
ƒMake Good Sales Plan ƒSell to Plan ƒOn Time Delivery
’06
ƒTraining all employees
’05 [ Focus on Sales Management ]
’04 [ Focus on S&OP ] [ Focus on SCM Basic Infrastructure ] © 2006 Samsung CONFIDENTIAL
Improve Distribution Capability Improve APS Usability 31
Key Innovation Areas Enabled by SCM 3-Day Committed Operation (3COR) for Back to Basic As-Was
As-Is Performance to Plan
Fix Set Aggressive Goal
Line
Optimization (Do Your Best)
Material Material or or Capa Capa Issue Issue
Shop Floor
Rescheduling ASAP
No Trust among Supply Chain Entities
Set Achievable Goal
Line
Material Material or or Capa Capa Issue Issue
Shop Floor
Achieve It!!!
Stop, Understand the Problem & Fix it
Trust among Supply Chain Entities
ƒ Focused on Market-Driven SCM, but difficult to realize (thus Back-to-Basic with 3COR) ƒ Trust based “Performance-to-Plan” with 3 Principles: 1) Maintain 100% accurate master data, 2) clear rule define and follow the rule, and 3) system-driven operation © 2006 Samsung CONFIDENTIAL
32
Key Innovation Areas Enabled by SCM Daily Execution Enhancement for Quick Response As-Was •c
As-Is
Weekly Supply Request
• SiPlan Capacity Weekly, Execute Daily with Customer Order Fixed
Supply Request = 1200
W1
W2
Replenishment Request = 200
Daily replenishment request
Weekly supplying request within the week’s given RTF**
Post management of possible highinventory level by GR* control
Level/uniform load production is not encouraged Line
Level/uniform load production is encouraged to synchronize with daily changing market demand Daily GR Plan for 2 weeks
Secure 20% JIT material inventory buffer Line
ƒ Sales, transportation, and manufacturing synchronizes with daily demand fluctuation ƒ Plan weekly with daily plan adjustment: Plan weekly capacity, but if there is no customer order then no production/execution) ƒ Daily level production is encouraged at manufacturing © 2006 Samsung CONFIDENTIAL
33
Achievements Market-Driven SCM: SCM Performance Index (2004~2005) SCM Performance Index
3Q 2001
4Q 2003
4Q 2005
Forecast Accuracy
22%
41%
45%
On-Time Delivery
32%
81%
91%
Days of Inventory
20 Days
14 Day
14 Day
2001
2002
© 2006 Samsung CONFIDENTIAL
2003
2004
2005
34
Overall Achievements Financial Benefits of SCM
© 2006 Samsung CONFIDENTIAL
35
Overall Achievements AMR Research 2005 Supply Chain Top 25
© 2006 Samsung CONFIDENTIAL
36
Next SCM Initiatives Adaptiveness - Strengthen partnership with customers and business partners ㆍP/O process collaboration and integration of sales channel inventory → Toward Merchandise Planning
- Fast response to market change ㆍ Nokia: Response to a market change within 1 hour over entire supply chain ㆍToyota: Delivery within 5 days from order receipt (D+5 delivery)
- Fast response to supply chain exceptions ㆍMonitoring, analysis and quick response to supply chain events
Differentiation - Set-up personalized response process for individual customer needs → Mass Customization
- Provide total solution for customer needs ㆍDELL Plus : Customized system design ~ after-sales management
Market Driving - Enhance market sensing capability ㆍForesee market change → Pre-occupy opportunities → Drive the market
* Merchandise Planning : It s Field Marketing Strategy by detecting and analyzing product exposures, display states, store info (competitors, prices, inventory, sales status), etc., (Time To Market realization) * Mass Customization
: Phrase that comes from a combination of 'Mass‘ in Mass Production and 'Customization’
* Dell Plus Service
: Total Solution of Software, Hardware, Asset Management, Part Replacement, etc.,
© 2006 Samsung CONFIDENTIAL
37
Lessons Learned Characteristics of Samsung SCM Top Down: Top’s mind and commitment
„
Change Management „
Education
„
PI, PS
May 2006 Monthly Executive Speech
First, must further internalize the “D+3 „ Internal Benchmarking Day Production „ SCM experts Commitment Mr. Jong-Yong Yun, CEO Framework” initiative Synchronization of Process, Systems and Organization in supply-related areas „ End to End (customer to supplier) process Second, must further enhance our „ Enterprise Architecture: SAP R/3, i2 SCM competency in demand-side areas such as sales and marketing „ GBM, GOC,
…
„
May 2006, Monthly Executive Speech
…
„
…
„
Third, need to further strengthen our innovation activities for raising cost competitiveness © 2006 Samsung CONFIDENTIAL
38
Variability in today’s market the primary force behind inefficiency Global Global Operation Operation
Rapid Rapid Market Market Change Change
10km/h
300km/h
ƒ High forward visibility ƒ Intelligent and fast decision making & execution (Process Capability)
ƒ Optimization across business functions
Endless Endless pressure pressure To To Reduce Reduce Cost Cost
Velocity
(Reduce Complexity) © 2006 Samsung CONFIDENTIAL
39
Lessons Learned „
Change organization, Process and then System
„
‘Trust’ across supply chain is the key „
Visibility first, then Capability
„
Performance to Plan
„
S&OP „ Good Plan → Performance to Plan → Fast Replanning with PDCA
© 2006 Samsung CONFIDENTIAL
40
당부의 말씀 „
Be an expert (professional) and understand overall business, especially finance and control.
„
MOT is a process of managing technology. Innovate process, system and people.
„
Technology for customer satisfaction and money, not for engineering excellency.
© 2006 Samsung CONFIDENTIAL
41
SCM at Samsung in the Past „
What did SCM stand for in the beginning of SCM journey at Samsung? „
Supply Chain Management?
„
Solution Consultant Manager?
„
Software Configuration Management?
„
Source Code Management?
„
Sweet Chin Music (wrestling finishing move)?
„
…..
SCM: Set for Crash Mode © 2006 Samsung CONFIDENTIAL
42
SCM at Samsung Today
MCS: Money Collecting System © 2006 Samsung CONFIDENTIAL
43
© 2006 Samsung CONFIDENTIAL
44
Agenda „
Samsung Electronics Overview
„
SCM Vision & Roap
„
Innovation Journey
„
Next SCM Initiatives
„
Lesson Learned
© 2006 Samsung CONFIDENTIAL
2
Samsung Electronics Overview History
© 2006 Samsung CONFIDENTIAL
3
Samsung Electronics Overview History
© 2006 Samsung CONFIDENTIAL
4
Samsung Electronics Overview Global Network
57 Countries…
Production Subsidiaries Sales Subsidiaries Production & Sales Subsidiaries Branch Offices R&D Center © 2006 Samsung CONFIDENTIAL
19 38 8 31 10 5
Samsung Electronics Overview Brand Equity
2002 Rank Rank
11 22 33 44
Company Company
Value Value Rank Rank
Coca-Cola Coca-Cola 69.6 69.6 Microsoft Microsoft 64.1 64.1 IBM 51.2 IBM 51.2 GE 41.3 GE 41.3
55 66
Intel Intel Nokia Nokia
30.9 30.9 30.0 30.0
21 21
Sony Sony
13.9 13.9
34 34 35 35 ::
DELL DELL
Samsung Samsung Nike Nike ::
11 22 33 44 55 20 20
Company Company
($B) Value Value Rank Rank
Coca-Cola 70.5 Coca-Cola 70.5 Microsoft Microsoft 65.2 65.2 IBM 51.8 IBM 51.8 Nokia 29.4 Nokia 29.4 Intel Intel Sony Sony
31.1 31.1 13.2 13.2
Samsung Samsung
10.8 10.8
::
9.2 9.2
8.3 8.3 7.7 7.7 ::
11 22 33 44 55 20 20
21 21
::
25 25
:: ::
31 31
2003
($B)
2004
($B)
Company Company
Value Value
Coca-Cola 67.3 Coca-Cola 67.3 Microsoft Microsoft 61.3 61.3 IBM 53.7 IBM 53.7 GE 44.1 GE 44.1 Intel Intel Sony Sony
Samsung Samsung
33.4 33.4 12.7 12.7
12.5 12.5
Rank Rank
11 22 33 44 55
20 20
::
::
::
::
::
::
Samsung Samsung
35.6 35.6
15.0 15.0
Yahoo! Yahoo! Motorola Motorola ::
::
::
Pizza PizzaHut Hut Yahoo! Yahoo!
Intel Intel
10.8 10.8 8.0 8.0 5.3 5.3 3.9 3.9
Siemens Siemens
7.4 7.4 5.0 5.0 4.5 4.5
Coca-Cola 67.5 Coca-Cola 67.5 Microsoft Microsoft 59.9 59.9 IBM 53.4 IBM 53.4 GE 47.0 GE 47.0
Sony Sony
28 28 41 41 58 58 73 73
39 39 55 55 61 61
Value Value
13.2 13.2 13.2 13.2
9.2 9.2 8.0 8.0
8.2 8.2 3.1 3.1 2.3 2.3
Company Company
DELL DELL Ford Ford
Nike Nike Canon Canon
Nike Nike Motorola Motorola Starbucks Starbucks
($B)
21 21 22 22
31 31 35 35
33 33 81 81 93 93
2005
Apple Apple
* Source: Business Week © 2006 Samsung CONFIDENTIAL
6
Samsung Electronics Overview Business Areas
24% Digital Media Visual Display, Computer, Digital Video, Printer
6% Digital Appliance Air Conditioner, Refrigerator, Washing Machine, MWO
28% Telecommunications Mobile phone, Communication Network, Optical Fiber
Leading the Digital Convergence Revolution
13% LCD TFT-LCD
29% Semiconductor Memory, System LSI, HDD, OMS © 2006 Samsung CONFIDENTIAL
*Based on 2004 Actual 7
Samsung Electronics Overview Leading Products Worldwide Market Share DRAM 32% SRAM 24%
No.1
Color TV 9.4% Monitor 22%
Flash Memory 34%
TFT-LCD (Large-Area)
20% M 29%
DDI 18%
* Based on 2005 Performance © 2006 Samsung CONFIDENTIAL
8
SCM Vision & Roap Vision Vision
Leading the Digital Convergence Revolution 3P Innovation
Digital
ε
Company
- Product -
- Process -
- Personnel -
Product competitiveness as a fast mover, based on core technology
Supply chain capability
Dynamic organization built on creativity, challenge, and autonomy
© 2006 Samsung CONFIDENTIAL
that ensures best-of-the -industry speed
9
SCM Vision & Roap Process Innovation Vision Digital ε-Company Market Driven Change Product
Process
Personnel
Simple & Speed
Securing inter/intra company connectivity Delivering market needs
R&D Mgmt
Supply Mgmt
Demand Mgmt
Market Driven Process R&D R&D
Proc. Proc.
Mfg. Mfg.
Lgts. Lgts.
Mktg. Mktg.
Sales Sales
Business Management
Svc. Svc.
Sharing product/logistics information Maintain market competitiveness to customer needs Sensing market information
Improve Customer Satisfaction
Strategy
Improve supplier capacity to market needs
Active Collaboration
6 Sigma / IT infrastructure
Key Actions
ƒƒ ƒƒ ƒƒ ƒƒ
Transform Transform individual individual processes processes into into customer/market-driven customer/market-driven Enhance Enhance customer customer and and supplier supplier collaboration collaboration Optimize and upgrade 4 Mega Processes Optimize and upgrade 4 Mega Processes Improve Improve value value creation creation with with enhanced enhanced marketing/sale/development marketing/sale/development
© 2006 Samsung CONFIDENTIAL
10
Innovation Journey 1994~1996 Master planning & Establish infrastructure (1994~96)
3P innovation (Product / Process / Personnel)
& APS pilot (1997~99)
Consolidated operation excellence & APS roll-out (2000~03)
Extended SCM
Basic SCM
Infrastructure
Marketdriven SCM (2004~)
APS Upgrade, Back to Basic SRM, Logistics, Performance to Plan Collaboration Mkt.-Driven SCM
„
Focused on manufactng. manufactng. productivity improvemnt. improvemnt.
„
Implement separate legacy systems
APS Pilot - Display -- Memory
ERP Implemnt. Implemnt. -Major domestic Mfg divisions
ERP Roll-out --All Mfg div. --Major sales sub. ERP Roll-out --FI/CO --other subsidiaries GBM Designed & Structured
PI/SISP mastermasterplan
Plan & Change Mgmt.
1992
’93
’94
© 2006 Samsung CONFIDENTIAL
’95
’96
APS roll-out - 12 GBMs -- 46 Sales Subsidiaries
’97
’98
’99
Organize GOC in GBMs
2000
’01
SCM training -Enterprise wide
’02
’03
’04
’05 11
SCM Vision (1994) „
Deliver the right products (quality and quantity) at the right time (on time and quick delivery) at the lowest cost
„
Anybody in Samsung supply chain can access necessary data at anytime and anywhere through globally integrated information systems
„
Process organization to make quick decisions for customers 7 Major process
To-Be Process vision
Customer Facing
Single Point of , Customer Collaboration
Demand Mgmt Strategic Resource Mgmt Resource Operation Manufacturing Distribution Customer Service
Single Number Forecast, Real-Time AATP Supplier Collaboration, Global Material Planning Global Supply and Demand Balancing Flexible Manufacturing, Cell Manufacturing Optimized Delivery Plan, Postponement, Supply Chain Network Optimization Value Added Customer Services
Over 100 people from all parts of organization worked on this Visioning Work © 2006 Samsung CONFIDENTIAL
12
Achievements Master Planning & Build Infrastructure (1994~1996) „
Build infrastructure first
„
Process innovation at each site
„
„
No end to end integration
„
Integration started with APS implementation in 1998
Automate the transaction process „
Domestic Sales Example:
Order Management Available-to-Promise Headcount Pricing
© 2006 Samsung CONFIDENTIAL
Before Batch
After Real-Time
No ATP
ATP with inventory
-
30% reduction
Post-Pricing
Pre-Pricing
13
Innovation Journey 1997~1999 Master planning & Establish infrastructure (1994~96)
3P innovation (Product / Process / Personnel)
& APS pilot (1997~99)
Consolidated operation excellence & APS roll-out (2000~03)
Extended SCM
Basic SCM
Infrastructure
Marketdriven SCM (2004~)
APS Upgrade, Back to Basic SRM, Logistics, Performance to Plan Collaboration Mkt.-Driven SCM
„
Focused on manufactng. manufactng. productivity improvemnt. improvemnt.
„
Implement separate legacy systems
APS Pilot - Display - Memory ERP RollRoll-out -All Mfg div. ERP Implemnt. Implemnt. -Major sales sub. -Major domestic ERP RollRoll-out Mfg divisions -FI/CO -other subsidiaries GBM Designed & Structured
PI/SISP mastermasterplan
Plan & Change Mgmt.
1992
’93
APS roll-out - 12 GBMs -- 46 Sales Subsidiaries
’94
© 2006 Samsung CONFIDENTIAL
’95
’96
’97
’98
’99
Organize GOC in GBMs
2000
’01
SCM training -Enterprise wide
’02
’03
’04
’05 14
Key Innovation Areas Enabled by SCM Clarify Global Business Ownership As-Was
As-Is
• Dispersed business ownership (multiple profit centers) • Internal competition for profit & inventory responsibility avoidance Biz Biz owner owner
Biz Biz owner owner
Overseas Overseas Sales Sales
Compete with profit & inventory
Biz Biz owner owner
Functional Functional Staffs Staffs
Customer Customer
Domestic Domestic Sales Sales
Biz owner owner Biz of product product of segment segment
Overseas Overseas Plants Plants
Corporate Corporate HQ HQ
Customer Customer
Biz Biz owner owner Manufctring. Manufctring Manufctring.. Division Division
• Single owner of Marketing, R&D, Global resource management • Single owner of end-to-end process throughout the entire supply chain
Global Global Business Business Manager Manager Global Operation Center (GOC)
Cost Centers Domestic Domestic Plants Plants
Overseas Overseas Plants Plants
Overseas Overseas Sales Sales
Domestic Domestic Sales Sales
ƒ Global Business Manager is the only business owner (profit center) of the each product segment ƒ The rest organizations became cost centers ƒ GOC plays important role of managing global supply chain, synchronizing sales & production © 2006 Samsung CONFIDENTIAL
15
Key Innovation Areas Enabled by SCM Organization: GBM & GOC „
„
Process-type organization: GBM* „
GBMs of each product group implement their business strategies with global responsibilities and authorizations for profits and losses across the overall supply chain
„
Sales and production subsidiaries play the role of cost centers ing the GBM
Supply Chain planning/management/synchronization/ optimization: GOC** „
Adjusts and controls sales and manufacturing volumes globally
„
Allocates and adjusts materials to efficiently manage overseas plants.
„
Improves and s the entire supply chain with SCM operation ownership
„
Single point for SCM operations
Customer
Manufacturing Production Sales/ Logistics
Supplier
* GBM : Global Business Management ** GOC : Global Operation Center
GOC ※ Integrating sales and production Operating global supply chain © 2006 Samsung CONFIDENTIAL
16
Key Innovation Areas Enabled by SCM Weekly Global Planning Cycle As-Was
As-Is Weekly Cycle
Monthly Cycle Sales Forecast Manager /Order Sales PSI Subsidiary Sales & Sales Plan Marketing Global Allocation Plan Production Production Management Plan Purchasing
Purchasing Plan
Sales Manager Sales Manager Sales & Marketing Global Production Management
Forecast /Order PSI Sales Plan Allocation Plan Production Plan Purchasing
ConConcurrent current Planning Planning on on aa Single Single Planning Planning Table Table within within aa day day
Purchasing Plan
ƒ Real-time global information sharing (market and supply chain planning information) ƒ Generation of a single plan with simultaneous consideration of global constraints ƒ Reduction in global planning cycle time: monthly cycle → weekly cycle © 2006 Samsung CONFIDENTIAL
17
Key Innovation Areas Enabled by SCM Global Demand Mgmt and Consensus Based Forecasting As-Was Customer Customer
As-Is Local Local Marketing Marketing
Salesman Salesman W14 ISD Total Demand Forecast (all SKUs)
Customer Customer
Salesman Salesman
Local Local Marketing Marketing
7000 6000 5000 4000 3000 2000 1000 0 W14 W15 W16 W17 W18 W19 W20 W21 W22 W23 W24 W25 W26 W27 W28 W29
W14 ISD Total Demand Forecast (all SKUs) 10000 9000 8000
Traditional PSI method amplifying bull whip effect
7000 6000 5000 4000 3000 2000 1000 0 W14 W15 W16 W17 W18 W19 W20 W21 W22 W23 W24 W25 W26 W27 W28 W29
W14 ISD Total Demand Forecast (all SKUs) 12000 10000 8000 6000 4000 2000 0 W14 W15 W16 W17 W18 W19 W20 W21 W22 W23 W24 W25 W26 W27 W28 W29
Global Global
HQ HQ Marketing Marketing
Global Global
Every individual’s sales plan/forecast Kept In “one real-time view” Checked against actual
HQ HQ Marketing Marketing
ƒSequential to concurrent & consensus-based forecasting process on a single table ƒMBO based on forecasting/inventory personalization (by sales subsidiary & salesman) ƒNo Forecast, No Allocation (NFNA) ƒSales plan based on consensus result of RTF (Return to Forecast) from GOC © 2006 Samsung CONFIDENTIAL
18
Key Innovation Areas Enabled by SCM Global Optimization by Concurrent Planning As-Was
As-Is
• Allocation by each plant • Supply plan and Distribution plan by local plants
• Global Allocation by Global Command Center • Concurrent Optimized Plan & Synchronization of Supply-Demand
Korea Korea Plant Plant Global Global Command Command Center Center China China Plant Plant
Europe Europe Plant Plant
N.America N.America Plant Plant Suppliers
Plants
Sales Subs
Suppliers
Plants
Sales Subs
ƒ Global production/distribution planning with consideration of all sales and manufacturing subsidiaries ƒ Strategy driven planning for global resource optimization & profit optimization ƒ Global visibility of all global operations (APS UI, no order visibility) © 2006 Samsung CONFIDENTIAL
19
Key Innovation Areas Enabled by SCM Global Real-Time Order Promising (AATP) As-Was
As-Is Customer Customer
ATP based on local inventory
Inv. Shortage
AATP based on supplying plan HQ HQ
ATP ?
OnHand
“If you don’t have products in your warehouse and you can’t supply them, I will buy them from another vendor.”
Allocation
OnHand
Manager Manager
InTransit
Salesman Salesman
In Prod.
Prod plan
Customer Customer Mat. Plan
Salesman Salesman
ƒ Pre-allocation down to salesman level based on forecast and production constraints ƒ AATP based on global inventory & production plan ƒ AATP policy based on customer priority and business policies © 2006 Samsung CONFIDENTIAL
20
Achievements Case: Visual Display Division
P
Before SCM
S
Large inventory level caused by out of sync between S and P
I
P S I
After SCM
P S
I
I
P
(1998)
S
© 2006 Samsung CONFIDENTIAL
(2002)
21
Achievements Case: Visual Display Division Sales Qty (100K)
6,000
Sales Amt ( M$ )
Profit ( 100K$ )
5,000 4,000 3,500
TV Biz Merge
3,000 2,500
SCM Roll-Out
2,000 1,500 1,000 500 ’94
’95
’96
’97
’98
’99
’00
’01
’02
( Monitor Business ) © 2006 Samsung CONFIDENTIAL
22
Achievements 3P Innovation & APS Pilot (1997~1999) „
3P Innovation „
Product: Restructuring
„
Process: Quick Response, D+α Delivery
„
Personnel: Process oriented organization
„
Successful internal APS showcase implementation (Display APS Pilot)
„
Global Operation Process (GOP) implementation „
GOP ownership: GBM (Global Business Management)
„
GOP control tower: GOC (Global Operation Center)
© 2006 Samsung CONFIDENTIAL
23
Achievements 3P Innovation & APS Pilot (1997~1999) „
Restructuring „
Spin-off non-core business functions „
„
Dispose of non-profitable business units „
„
Domestic After-Market Service, Logitech (Domestic Transportation) 19 including Medical Equipment & Defense
Outsourced non-core cost centers „
Security, automobile asset management
1997
1999
Employees #(Korea)
59,000
39,000
Debt Ratio
300%
85%
Debt (USD)
$ 13 Billion
$ 5.7 Billion
© 2006 Samsung CONFIDENTIAL
24
Innovation Journey 2000~2003 Master planning & Establish infrastructure (1994~96)
3P innovation (Product / Process / Personnel)
& APS pilot (1997~99)
Consolidated operation excellence & APS roll-out (2000~03)
Extended SCM
Basic SCM
Infrastructure
Marketdriven SCM (2004~)
Back to Basic APS Upgrade, SRM, Logistics,Performance to Plan Mkt.-Driven SCM Collaboration
„
Focused on manufactng. manufactng. productivity improvemnt. improvemnt.
„
Implement separate legacy systems
APS Pilot - Display - Memory ERP RollRoll-out -All Mfg div. ERP Implemnt. Implemnt. -Major sales sub. -Major domestic ERP RollRoll-out Mfg divisions -FI/CO -other subsidiaries GBM Designed & Structured
PI/SISP mastermasterplan
Plan & Change Mgmt.
1992
’93
APS rollroll-out - 12 GBMs - 46 Sales Subsidiaries
’94
© 2006 Samsung CONFIDENTIAL
’95
’96
’97
’98
’99
SCM training -Enterprise wide
Organize GOC in GBMs
2000
’01
’02
’03
’04
’05 25
Key innovation areas enabled by SCM SRM – Strategic Sourcing As-Was
As-Is
• No leverage of global buying power during negotiation at local site Corporate Corporate Procurement Procurement
Business Business unit unit
Business Business unit unit
Business Business unit unit
Business Business unit unit
Global aggregation at any time & level
Local Local Plant Plant Procurement Procurement
Local Local Plant Plant Procurement Procurement
Spend analysis by suppliers & parts at site level only
Corporate Corporate Procurement Procurement
Manual & subjective supplier evaluation once or twice a year only Local Local Plant Plant Procurement Procurement
• Frequent negotiation at the global and/or local level with global visibility
Local Local Plant Plant Procurement Procurement
Local Local Plant Plant Procurement Procurement
Local Local Plant Plant Procurement Procurement
Spend analysis by suppliers & parts at both global and site levels
ƒ Corporate spend aggregation, spend visibility by region, by business unit ƒ Baseline price and variance management ƒ Strategic procurement decision by providing rapid & accurate information © 2006 Samsung CONFIDENTIAL
26
Key Innovation Areas Enabled by SCM Synchronize R&D, Purchasing, Suppliers - Product Sourcing As-Was
As-Is ƒ ƒ ƒ
ƒ ƒ ƒ
Sourcing Workflow
Suppliers Parts Price
ƒ ƒ
Strategic Sourcing
Part/Manufacturer/Supplier # Item Spec Data. ƒ Cost (Standard, Target, Tooling, Bid) Supplier Pref. ƒ Obsolescence Data AML/AVL ƒ Schedule Data Supply Status ƒ Calculated Preference
MRP
CSM PDM “Engineering BOM”
MCAD #1 PPDB MCAD #2
PDM 1
C
ƒ ƒ
eCAD #1
PDM 2
ƒ ƒ ƒ
CAD File Part # Description Quantity Revision
ƒ ƒ ƒ ƒ ƒ
Design Workflow
ƒ
CAD File Part # Description Quantity Revision Configuration
SRM “Sourcing BOM”
Concurrent Workflow Target Target Cost Cost !! Preferred Preferred Parts/Suppliers Parts/Suppliers !! Part Part Reuse Reuse !! Design Design for for Supply Supply !! Faster Faster time time to to Market Market !!
ƒ Optimize designs for sourcing and supply chain constraints before they reach manufacturing for best total margin and cost for this product ƒ Establish Component & Supplier Master (CSM) to bridge design & procurement ƒ Continuous monitor & analysis of part reuse, target cost, BOM grading, & obsolescence © 2006 Samsung CONFIDENTIAL
27
Key Innovation Areas Enabled by SCM 1C1B: One , One Bill As-Was • Transportation plan and execution were done by different dedicated regional 3PLs
As-Is • Centralized & integrated transportation management (managing all operations, plan to execution) Centralized Logistics
MFG MFG
Region Dedicated 3PL
X-Docking
DC
Customer
Direct Ship
Regional DC
Customer
Route Optimization
ƒ ƒ ƒ ƒ ƒ
Outsourcing to 3PL Network Optimization People Consolidation Minimizing transportation cost by route optimization, X-Dock, direct shipment etc. Real-time proactive monitoring and multi-dimensional KPI management © 2006 Samsung CONFIDENTIAL
28
Achievements APS Roll-Out: SCM Performance Index (2000~2003) SCM Performance Index
3Q 2001
4Q 2003
Forecast Accuracy
22%
41%
On-Time Delivery
32%
81%
Days of Inventory
20 Days
14 Day
2001
2002
2003
Q1/2004
Stagnation in Performance Improvement
© 2006 Samsung CONFIDENTIAL
29
Innovation Journey 2004~ Master planning & Establish infrastructure (1994~96)
3P innovation (Product / Process / Personnel)
& APS pilot (1997~99)
Consolidated operation excellence & APS roll-out (2000~03)
Back to Basic/ APS Upgrade, Performance SRM, Logistics, to Plan/ Collaboration Mkt.Mkt.-Driven SCM
Extended SCM
Basic SCM
Infrastructure
Marketdriven SCM (2004~)
„
Focused on manufactng. manufactng. productivity improvemnt. improvemnt.
„
Implement separate legacy systems
APS Pilot - Display - Memory ERP RollRoll-out -All Mfg div. ERP Implemnt. Implemnt. -Major sales sub. -Major domestic ERP RollRoll-out Mfg divisions -FI/CO -other subsidiaries GBM Designed & Structured
PI/SISP mastermasterplan
Plan & Change Mgmt.
1992
’93
APS rollroll-out - 12 GBMs - 46 Sales Subsidiaries
’94
© 2006 Samsung CONFIDENTIAL
’95
’96
’97
’98
’99
Organize GOC in GBMs
2000
’01
SCM training -Enterprise wide
’02
’03
’04
’05 30
Recent SCM Initiatives Recent Activities Based on the visibility improve delivery and demand management capability (Performance to Plan) ’04 : Back to Basic and improve visibility ƒClean up mater data ƒImprove data accuracy ƒImprove system functionalities and usability
’05 ~’06 : Improve SCM capability Delivery capability
Demand Management capability
ƒMake Good Production Plan ƒOn time manufacturing on hourly basis ƒDaily production and shipping ƒSupplier delivery capability
ƒMake Good Sales Plan ƒSell to Plan ƒOn Time Delivery
’06
ƒTraining all employees
’05 [ Focus on Sales Management ]
’04 [ Focus on S&OP ] [ Focus on SCM Basic Infrastructure ] © 2006 Samsung CONFIDENTIAL
Improve Distribution Capability Improve APS Usability 31
Key Innovation Areas Enabled by SCM 3-Day Committed Operation (3COR) for Back to Basic As-Was
As-Is Performance to Plan
Fix Set Aggressive Goal
Line
Optimization (Do Your Best)
Material Material or or Capa Capa Issue Issue
Shop Floor
Rescheduling ASAP
No Trust among Supply Chain Entities
Set Achievable Goal
Line
Material Material or or Capa Capa Issue Issue
Shop Floor
Achieve It!!!
Stop, Understand the Problem & Fix it
Trust among Supply Chain Entities
ƒ Focused on Market-Driven SCM, but difficult to realize (thus Back-to-Basic with 3COR) ƒ Trust based “Performance-to-Plan” with 3 Principles: 1) Maintain 100% accurate master data, 2) clear rule define and follow the rule, and 3) system-driven operation © 2006 Samsung CONFIDENTIAL
32
Key Innovation Areas Enabled by SCM Daily Execution Enhancement for Quick Response As-Was •c
As-Is
Weekly Supply Request
• SiPlan Capacity Weekly, Execute Daily with Customer Order Fixed
Supply Request = 1200
W1
W2
Replenishment Request = 200
Daily replenishment request
Weekly supplying request within the week’s given RTF**
Post management of possible highinventory level by GR* control
Level/uniform load production is not encouraged Line
Level/uniform load production is encouraged to synchronize with daily changing market demand Daily GR Plan for 2 weeks
Secure 20% JIT material inventory buffer Line
ƒ Sales, transportation, and manufacturing synchronizes with daily demand fluctuation ƒ Plan weekly with daily plan adjustment: Plan weekly capacity, but if there is no customer order then no production/execution) ƒ Daily level production is encouraged at manufacturing © 2006 Samsung CONFIDENTIAL
33
Achievements Market-Driven SCM: SCM Performance Index (2004~2005) SCM Performance Index
3Q 2001
4Q 2003
4Q 2005
Forecast Accuracy
22%
41%
45%
On-Time Delivery
32%
81%
91%
Days of Inventory
20 Days
14 Day
14 Day
2001
2002
© 2006 Samsung CONFIDENTIAL
2003
2004
2005
34
Overall Achievements Financial Benefits of SCM
© 2006 Samsung CONFIDENTIAL
35
Overall Achievements AMR Research 2005 Supply Chain Top 25
© 2006 Samsung CONFIDENTIAL
36
Next SCM Initiatives Adaptiveness - Strengthen partnership with customers and business partners ㆍP/O process collaboration and integration of sales channel inventory → Toward Merchandise Planning
- Fast response to market change ㆍ Nokia: Response to a market change within 1 hour over entire supply chain ㆍToyota: Delivery within 5 days from order receipt (D+5 delivery)
- Fast response to supply chain exceptions ㆍMonitoring, analysis and quick response to supply chain events
Differentiation - Set-up personalized response process for individual customer needs → Mass Customization
- Provide total solution for customer needs ㆍDELL Plus : Customized system design ~ after-sales management
Market Driving - Enhance market sensing capability ㆍForesee market change → Pre-occupy opportunities → Drive the market
* Merchandise Planning : It s Field Marketing Strategy by detecting and analyzing product exposures, display states, store info (competitors, prices, inventory, sales status), etc., (Time To Market realization) * Mass Customization
: Phrase that comes from a combination of 'Mass‘ in Mass Production and 'Customization’
* Dell Plus Service
: Total Solution of Software, Hardware, Asset Management, Part Replacement, etc.,
© 2006 Samsung CONFIDENTIAL
37
Lessons Learned Characteristics of Samsung SCM Top Down: Top’s mind and commitment
„
Change Management „
Education
„
PI, PS
May 2006 Monthly Executive Speech
First, must further internalize the “D+3 „ Internal Benchmarking Day Production „ SCM experts Commitment Mr. Jong-Yong Yun, CEO Framework” initiative Synchronization of Process, Systems and Organization in supply-related areas „ End to End (customer to supplier) process Second, must further enhance our „ Enterprise Architecture: SAP R/3, i2 SCM competency in demand-side areas such as sales and marketing „ GBM, GOC,
…
„
May 2006, Monthly Executive Speech
…
„
…
„
Third, need to further strengthen our innovation activities for raising cost competitiveness © 2006 Samsung CONFIDENTIAL
38
Variability in today’s market the primary force behind inefficiency Global Global Operation Operation
Rapid Rapid Market Market Change Change
10km/h
300km/h
ƒ High forward visibility ƒ Intelligent and fast decision making & execution (Process Capability)
ƒ Optimization across business functions
Endless Endless pressure pressure To To Reduce Reduce Cost Cost
Velocity
(Reduce Complexity) © 2006 Samsung CONFIDENTIAL
39
Lessons Learned „
Change organization, Process and then System
„
‘Trust’ across supply chain is the key „
Visibility first, then Capability
„
Performance to Plan
„
S&OP „ Good Plan → Performance to Plan → Fast Replanning with PDCA
© 2006 Samsung CONFIDENTIAL
40
당부의 말씀 „
Be an expert (professional) and understand overall business, especially finance and control.
„
MOT is a process of managing technology. Innovate process, system and people.
„
Technology for customer satisfaction and money, not for engineering excellency.
© 2006 Samsung CONFIDENTIAL
41
SCM at Samsung in the Past „
What did SCM stand for in the beginning of SCM journey at Samsung? „
Supply Chain Management?
„
Solution Consultant Manager?
„
Software Configuration Management?
„
Source Code Management?
„
Sweet Chin Music (wrestling finishing move)?
„
…..
SCM: Set for Crash Mode © 2006 Samsung CONFIDENTIAL
42
SCM at Samsung Today
MCS: Money Collecting System © 2006 Samsung CONFIDENTIAL
43
© 2006 Samsung CONFIDENTIAL
44
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