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Background of Samsung
Samsung is a multinational company dealing with a variety of products and services. Established in 1938 with its headquarters in South Korea, it has become one of the most innovative companies globally. It is by far the largest company in South Korea contributing to almost a quarter of the country's total exports. The company has grown tremendously from cottage industry to a global leader employing over 300,000 workers across the world.
The company is involved in multiple businesses in the manufacturing and construction, and service sector. These are grouped under four strategic global business units to take full advantage of differentbusiness processopportunities. As a conglomerate, the business includes the Samsung business unit deals with consumer electronics, building and construction, and engineering. The Hansol business unit, the CJ unit and the Shinsegae unit collectively deal with chemical manufacturing, supply chain and logistics, manufacturing of paper, advertisement and insurance among other business interests.
For the purposes of this report, focus will be on Samsung Electronics group which is the most successful of the business units. It deals with manufacture of mobile phones, tablets, personal computers, televisions, display screens, fridges, headphones, microwaves, freezers among other home appliances.
Samsung customers are spread out in across the world. The company has different packages for their different customers. To begin with it supplies other original equipment manufacturers (OEMs) with display screens. Secondly they supply the aviation sector firms with circuits and display equipment. Governments are also part of their customers ordering telecommunication equipment. Other customers include firms in the hospitality industry and individual customers. Samsung has segmented their customers according to their location and social economic aspects. On the smart phones market for instance, the segments include high end customers the midrange customers and the feature phone customers.
Due to the array of products that Samsung sells, the company has different sale approches. It has stores in all major markets in North America, Europe, Asia-Pacific, Africa and South America. In parts where stores are unavailable, it has agents, franchises and subsidiaries to sell their electronics. Lastly, the company has embraced online marketing where customers can order their devices. Damaged or defective devices are replaced if covered by warrants.
Samsung is the biggest Smartphone maker in the world having overtaken Nokia Corporation in 2012. Its sales as of 2017 averaged 175 billion USD. Its net profit was in the same year was in the neighborhood of 20 billion and asset base of a quarter billion US dollars. Its electronics are manufactured mainly in South Korea and shipped to the rest of the world.
Designing a new product using De Bonos Six Hat Thinking Model
Developing a new product
In this illustration, the assumption is that Samsung needs to develop a gaming console since they do not have this offering in their product line-up. Since the gaming console is mostly used by young people. Samsung believes that it can pull up sales by introducing the product in the market.
White Hat (Information)
Green hat (New Idea)
Blue Hat (Processing)
Red Hat (Emotions)
Black Hat (What can go wrong)
Yellow Hat (The benefits)
Design Review checklist consisting
Samsung packaging have done trials with positive results
The materials used by Samsung are recyclable
All information on Samsung products is printed on the package and a manual included
The package is made of safe bio-degradable material
All products are made from high quality raw materials
The product is well tested before leaving the company.
The console bears the ISO 9001 mark of quality.
The product comes with a limited warranty.
Legal /Regulatory Compliance
The console has been checked by government agencies for compliance
The product bears the SAR marking for compliance
However some components such as batteries should be replaced when worn out
The product is tested in all localities to comply with set standards
There are brochures and banners showing the product
The information is written in multiple languages
The company website and affiliate portals have the product information?
The pricing set is standard to all consumers. The company may however offer gifts to heavy purchasers.
Images and information contained appeal to the intended market
The pricing is determined by the product specifications
The pricing is influenced by the government tariffs, distribution costs among other factors
The consoles can be ordered online using the prevailing currency exchange rates
Unless the product damage is outside the scope of the warranty
The product has geo-location tag and a product key to
The product specifies the correct way to be handled
The product contains biometric data that can only be activated by the user
Maintenance information is included in the user manual guide.
Briefsummary of DR outcome
Samsung console is a product that is designed to fill the market gap in the supply of quality and affordable gaming alternatives to the prevailing competition. It is built using high quality andbusiness environmentallyfriendly materials. In terms of packaging, the console provides the specifications, safety measures while using the device warning and the correct disposal mechanism for the packaging. The console has also met all the legal and regulatory requirements to ensure that the user safety is guaranteed always.
The console has been advertised in the news and print media. For any additional information the product specifications can be accessed online at the company's portal and affiliated distributors links. The pricing has been well specified and varies with the products features.
In terms of security and traceability in the event the device is lost or stolen, Samsung has invested in biometric technology to ensure that the device is traceable. In addition, the console is packed with various warning and maintenance directions to ensure maximum utility and comfort.
Value Stream Map for Samsung Gaming Console
Type of waste
Waste from transportation activities
Excessive production of consoles
Production floor plan
JIT Production flow influence by the Kanban pull
JIT production flow influenced by the Kanban Pull
The JIT method of inventory control was introduced by Toyota Motor Company after suffering many instances of resource wastage coupled with poor space management. The system is based on the premise that Reorder levels for inventory are dictated by customer orders. As depicted in the diagram, there is no production of consoles unless customer orders trigger the process.This implies that the company only keeps inventory and finished products commensurate with the orders placed by the customers.
For this reason, there is never an instance where there are excessive or shortage of raw materials in the storage. On the same breathe, a there is never a case of overproduction of finished products waiting in the warehouse for distribution.
In the case of Samsung manufacturing Consoles, once a customer places an order, the company system picks the order immediately and produces finished consoles from the optimal raw materials kept in the storage. This in turn minimizes material wastage, space wastage and in the long run helps to keep the cost of production low. Other companies such as Amazon and Ebay have borrowed a leaf from toyota's JIT system and are reporting innumerable success.
Manage the operations
Development of a supply chain consisting of five elements
In order for Samsung to manage their operations, there are concerted efforts at ensuring optimal management of customer orders while at the same time ensuring smooth flow of raw materials from their suppliers. This is made possible through managing supply chain functions such as supply chain integration, planning of operations, managing their purchasing, demand and supply planning and lastly through ensuring effective distribution networks.
Supply chain integration
In the production of gaming consoles, Samsung has to ensure that the communication lines between the suppliers, the production team are well managed. The integration of all the parties involved from demand forecasting, inventory control, the production team and the budgeting team has to be in sync.
To ensure that gaming consoles are produced on the time specified and that the products are of high quality, Samsung has adopted demand forecasting as one avenue to be able to predict future needs of the customers. In addition the company has a very robust research and development department that keeps adding value to its products which in turn keeps customers interested in their products. This helps the company to maintain a sustainable competitive advantage.
Planning of operations
Samsung has to effectively manage their processes to ensure that there is minimal wastage hence leading to low cost of production of their gaming consoles. Moreover, the company conducts regular market forecasting to be able to predict utur demands hence maintaining optimal inventory. Lastly, Samsung has leveraged their broad marketing networks to ensure that new demands in the market are pursued by having handy supplies of raw materials when needed.
The market is always demanding consoles of high quality without compromising on pricing. To maintain this balance the Samsung purchasing department are well trained in managing cost effective supplies while at the same time making sure that the materials supplied adhere to the quality standards set by the company.
always look out for companies that keep their word in delivering ordered products. To this end, Samsung has established many networks including partnerships with other businesses, maintaining an online market for their products and establishing franchises to make sure their console products and other electronics reach as many customers as possible within the delivery timelines specified.
Samsung has enrolled its staff on intensive training on quality management programs such as lean sigma. This ensures that the staff are able to maintain demand from the customers by providing high quality devices.
Reorderly point safety stock and EOQ
This part of the report analysis specific inventory management controls to ensure smooth operations of a company by computing a desirable outcome given a set of constraints like is the case in the real business environment. The calculations desired include Inventory reordering point which is basically the stock a company should have at the very least to order inventory given certainmarket managementdemand. The computation will also cover safety stock and Economic order quantity.Inventory
Reorder point, safety stock and economic order quantity
The parameters given are:
1. Demand (D) per week = (500,000 to 1,000,000 per week)
2. Lead Time during replenishment (L/T) = a number between 1 and 2 weeks
3. Standard Deviation of demand during replenishment (SD) = 15%.
4. Carrying cost (H) per week = a number between $1and $5
5. Fixed cost of order (S) = a number between $100 and $200
6. Service Level = a number between 80% and 95%
1. Inventory Reorder Point
Chose service level = 90%
Z score = 1.30 for 90% service level
Request Variation σ = D*SD = 500,000*1.5= 75,000
Demand variation during replenishment = σ L/T= σ* LT =75,000*= 106,066 for a lead time of 2 weeks
Then ROP= 500,000*2 + 1.3*106,066
ROP= 1000, 000+ 137885 =1,137,885 Items
Calculating Safety stock
Safety Stock = Z σ L/T
Hence Safety stock = 1.3*106,066
Safety Stock= 137, 885 Items
Economic order quantity
Annual Demand= 500,000 *52.1429 = 26,071,450
Annual Carrying cost H= 5*52.1429 = 260.71
Since the Fixed cost S per order= a number between $100 and $200
200 is chosen as the fixed cost
EOQ = √2D*S/H
Therefore EOQ = √2 *500,000* 260.71/200= 1141.73 units
Interpretation of the inventory calculations
From the calculations it is evident that the demand that must be met by Samsung at any given week is at the very least 500,000 units. However since the EOQ has been found to be 1141 units it shows that Samsung is running on a shortfall supply to be able to meet the market demands. For this reason it is advised that the company should make better purchasing decisions to ensure that market demand is met to keep customers satisfied.
From the computed safety stock of 137, 885 items, it is evident that Samsung can run well on the current inventory of 500,000 per week up until the inventory reaches 362,115 items. At this point, Samsung can replenish their stock to keep the operations optimal.
C) Determining reliability given a fictitious MTBF
The reliability of a given machine is the ability to continue working up to a point in time when the manufacturer predicts, base on tests, that without servicing the machine will continue working. Reliability of the console gaming equipment produced by Samsung to fail may also be computed from the average time that the machine will continue working after it has been serviced after failing.
If for instance Samsung stated that their console units will work for 5 years without any failure for 12 hours every day, then the calculations based on this assumption would be as follows.
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