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Executive
Summary

Supply chain management six sigma at
Samsung
In its early years, supply chain management (SCM) was narrowly conceived as a new approach to inventory management or
operating cost reduction. However, in the 1990s organizations and some specific industry segments began to recognize the much
greater roles and impact of SCM on their business operations. In its early years, supply chain management (SCM) was narrowly conceived as a new approach to inventory management or operating cost reduction. However, in the 1990s organizations and some specific industry segments began to recognize the much greater roles and impact of SCM on their business operations.

The Samsung Group of companies is recognized
as a leading global manufacturing, financial, and
services conglomerate. It was founded in 1938
and focused its businesses on areas such as
textiles, shipbuilding, machinery, and chemicals.
Since the 1980s, the group has made enormous
efforts and investment in the electronics and
semiconductor industry. As a result, the Samsung
Group has experienced a dramatic growth in net
profits since the 1990s. The flagship unit,
Samsung Electronics Company (SEC), was one of
only two manufacturing companies worldwide to
post profits of more than $10bn in 2004 (Toyota
Motors being the other). Many regard these
successes as reflecting a continuous and
relentless effort at Samsung to improve the way it
conducts business. For the last few years, SCM
and six sigma have been two pillars of business
innovation at Samsung.
The Samsung Group of companies has large,
complex, global supply chains in most of the
products it manufactures and makes extensive
use of SCM solutions and process innovations to
support and improve its operations. Most
notably, at SEC, advanced planning and
scheduling (APS) systems have been adopted
since the 1990s and have brought the company
many successes in terms of operational
excellence. Recently, Samsung Electronics was
ranked seventh in a respected analyst's ranking
of the global top 25 companies in supply chain
excellence.
Six sigma has been a key enabler for the group's
success. The Chairman of the Group proclaimed
the adoption of a business innovation approach

called “new management” in 1993. “New
management” is the pursuit of quality-oriented
management in business operations as well as in
manufacturing. Along with the “quality
movement” in industry, new management
evolved from initial product quality assurance but
later shifted its focus to include the quality of the
entire business process, which is the rationale
behind six sigma. The outcomes were highquality, innovative product developments, and consequently an increase in customer
satisfaction and profits, and are well
demonstrated by many of the world's best
technological resources.
Why SCM and six sigma?
Despite the extensive use of SCM solutions and
process innovation to improve global business
operation, in 2004 the company still felt that its
supply chain operations had significant room for
improvement. In the early 1990s, the Group's
senior management decided to capitalize on the
potential synergy between SCM and six sigma,
which they believed were based on four key
areas:
1. Project discipline
2. Sustaining results
3. Well-established HR framework
4. Quantitative strength

Emerald Management First | © Emerald Group Publishing Limited

design, optimize, verify), while the latter is
addressed using DMAIC (define, measure,
analyze, improve, control). SBT estimated
that among the SCM projects at Samsung,
about 75 per cent would involve redesigning processes, while the remaining 25 per cent would focus on process
improvement.

The company put together a methodology to
formally combine SCM and six sigma, by training
and developing supply chain staff to be more
capable of leading SCM innovations. Over the
last two years of implementation, SCM six sigma
has become...
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