Operational Issues Affecting Samsung - Case Study Example

Operational Issues/Challenges affecting Samsung and its Chain of Supply: A Case Study Student’s Name Institution Tutor’s Name Course Date Executive Summary Operational issues, alongside other factors, are the challenges that organisations face in their business activities. Samsung is one of such companies whose activities are affected by various operational challenges. The major operational challenges in the management of Samsung include: lay out design, inventory and resource management, and risk management. These operational issues influence how materials and other resources are integrated into the production process within the company. Samsung due to its large size has a large and complex chain of supply that defines its production channels and processes. At present, Samsung is the leading manufacturing company in electronic products. This report addresses the major operational issues that affect the management of the Samsung Company. The report outlines the issues in relation to the company’s supply chain. The supply chain of Samsung products defines the route that the production process takes from the suppliers to the consumers of its products. Table of Contents 1. Introduction........................................................................................................................ 4 2. Findings and Discussions................................................................................................... 5 2.1 A Brief Overview of the Samsung Company.................................................................. 5 2.2. Operational Issues at Samsung....................................................................................... 6 2.2.1. Layout Design.............................................................................................................. 6 2.2.2. Inventory and Resource Management......................................................................... 8 2.2.3. Risk Management........................................................................................................ 10 2. 3. Impact of the Operational Issues on Samsung’s Supply Chain..................................... 11 2.3.1. Impact of Layout Design on the Supply Chain............................................................ 11 2.3.2. Impact of Inventory and Resource Management on the Supply Chain....................... 12 2.3.3. Impact of Risk Management on the Supply Chain...................................................... 12 3. Conclusion......................................................................................................................... 13 4. Recommendations.............................................................................................................. 13 Operational Issues Affecting Samsung and Its Chain of Supply 1. Introduction The purpose of this report is to investigate operational issues that affect the management of Samsung Electronics. The report also investigates the effects of these issues on the supply chain of the company. The report by examining a number of recently published books and journal articles that address the operational issues establishes a number of factors that affect the operations of Samsung and its supply chain. The articles reviewed also assist in establishing how the chain works to enhance the overall performance of the company. It also unveils how these factors can be used to develop a more effective supply chain that would enable Samsung to trade well in the electronics’ market. Although there are so many operational issues that affect Samsung’s business operations, the report addresses only three of these factors, which are the major ones. The first factor, which is layout design, influences the operations within the company through material flows, personnel levels, capacity needs, inventory requirements, and technological decisions (Wisner 2011, p. 4). The second factor, which is inventory and resource management, determines the nature of the operations through customer satisfaction, production schedules, suppliers, and human resource planning. Risk management is the third factor and it influences the design of the company’s operations through external factors such as currency fluctuations, fuel price variations, terrorism, political events, technological changes, and natural calamities (Kogan & Tapiero 2007, p. 6). The report is divided into three parts: the first part addresses the three operational issues and how they affect Samsung’s business activities; the second part outlines the effects of these issues on the company’s supply chain; and the last part is a suggestion of the recommendations on how the management can regulate the three operational issues to ensure an effective chain of supply and smooth operations within the company. 2. Findings and Discussions 2.1 A Brief Overview of the Samsung Company The Samsung Company is known as one of the leading companies in the manufacture of electronics. The company began its operations in 1938 and focused most of its operations on shipbuilding, textiles, chemicals and machinery. However, since the late 1980s, the company has been dealing mostly in electronics. Some of the electronics that the company manufactures include televisions, cell-phones, computers, fridges, and other consumer-electronic appliances. Samsung is currently the leading company in the manufacture of electronics and has been recording the best performance for the last five years (Michell 2010). Samsung is an international company with branches in almost every country in the globe. It has a significant number of employees who assist the management in ensuring that the company remains at the top of its competitors. The management of Samsung is effective and responsible for the good performance that the company has recorded for years. For instance, in 2004, Samsung and Toyota Motors were the only companies that recorded profits of more than $10 billion. The management also ensures that the management personnel and other workers involved in the production and sale of the company’s products are rewarded accordingly to motivate them (Michell 2010). Since Samsung manufactures and distributes a wide variety of electronic products, the supply chain involved in the manufacture and distribution of these products is large and complex; consequently, the company’s supply chain requires a proper management. The operations within the company are also complex due to its size. The operational issues within the company have to be checked to ensure that its management and operations are not negatively affected. The operational issues should also be regulated for an effective chain of supply to exist within the company (Michell 2010). 2.2. Operational Issues at Samsung Although Samsung is and has been for years the leading company in the manufacture of electronics, it faces stiff competition from other companies such as LG Electronics, which also deals in the same line of products. The ever increasing size of Samsung also poses operational challenges to its management personnel. These operational issues need to be addressed in time; if that does not happen, the operational challenges might harm the management and performance of the company (Wisner 2011, p. 14). 2.2.1. Layout Design Layout design is the first operational issue that is evident in the management of Samsung; it is an important factor in the overall operations of Samsung as it helps the management of the company to meet the needs of the employees while maintaining the production rate at its maximum (Heragu 2006, p. 54). The design layout of the company significantly affects the smooth flow of materials, personnel levels, capacity needs, inventory requirements and the technological decisions that are made within the company. The management of Samsung can only achieve an effective layout if it properly integrates the needs of its personnel and customers, materials and the manufacturing process to obtain a well-functioning structure (Tuncel & Alpan 2010, p. 252). A steady flow of materials, which include the raw ones, those in process, and final products, should be maintained to ensure that the production process within Samsung is not halted at any point. However, there are cases in which the production of Samsung’s products has been temporarily stopped because of the lack of enough raw materials or delays in the manufacturing process (Mahadevan 2010, p. 57). The company’s management should ensure that there is adequate equipment for handling materials within and out of the company. For a company to have a smooth production process, it should maintain a proper handling procedure for its raw materials and products; the procedure enables the employees to handle raw materials and the final products in a more efficient and orderly manner (Ha & Krishnan 2008, p. 1305). Personnel level is another factor that influences the design layout within the Samsung Company. Personnel level refers to how a company treats its employees; Samsung ought to have well-established programs in which its employees should be motivated and encouraged to work hard to help achieve its goals. Samsung should have a well formulated design layout that defines how the employees should be rewarded, motivated, promoted, and retained within the company to maximise its overall performance (Tuncel & Alpan 2010, p. 254). The design layout also determines how capacity needs are set within the company. Capacity needs refer to how the space within the company is utilised and how the materials are shipped, received and stored in it (Ha & Krishnan 2008, p. 1307). The operation strategy ensures that there is always an ample space within the company’s warehouse where its products can be stored for as long as it is necessary. The spaces should be well maintained to ensure that the products kept in them remain in good shape for a long time before they are sold (Mahadevan 2010, p. 61). Inventory requirements are also affected by the company’s design layout; the requirements dictate how the company’s facilities are designed to create room for expansion that can accommodate any variations in the production process. Unfortunately, Samsung’s management have not keenly observed the company’s inventory requirements. This is evident in the space problems the company faces as it grows bigger with its operations becoming even more complex. There has not been enough room within the organisation to meet is growing needs (Mahadevan 2010, p. 104). Technological decisions are the last aspect of design layout and they determine how information is passed within the company. Communication is a very important tool that is used to enhance a company’s overall performance. Communication determines how the company interacts with its vendors and customers (Ha & Krishnan 2008, p. 1308). Such interactions and their effectiveness are reflected on the company’s performance in the external environment. Samsung does not have a well established communication system in which information regarding production can be accessed by the people who need it. Samsung is yet to develop proper ways of passing information to its employees and customers (Mahadevan 2010, p. 123). 2.2.2. Inventory and Resource management An effective management of inventories and resources is a better way of reducing the costs and investments used in the managerial issues. To focus on reducing the costs spent on inventories, Samsung’s management has to ensure that it oversees and reviews the inventory management and operations on a regular basis. This might enable Samsung’s management personnel to maintain proper controls and implement effective processes. An effective management of inventories and resources entails taking into consideration customer satisfaction, suppliers’ needs, human resource planning and production schedules (Vachon & Klassen 2008, p. 300). Customer satisfaction affects how Samsung conducts its operations in many ways: it determines the company’s overall market opportunity, its revenues, its market share, and the expenses that it incurs in trying to ensure that the customers get maximum satisfaction from its products. In Samsung, inventory and resource management is directly dependent on customer satisfaction. The company designs its products according to the customers’ needs since the factor is the most important push factor during the production process. Sometimes the company fails to take into consideration the needs of the customers; in such cases, the end result is quite disastrous to its operations and overall performance (Mansouri, Gallear & Askariazad 2012, p. 26). The suppliers’ behaviour and performance in relation to the company’s products are important factors in inventory and resource management. The behaviour of the suppliers is greatly influenced by managers, employees and senior subordinate staff. The behaviour is also determined by other operational aspects such as direct products, customer response, management of complaints, and maintenance services. However, Samsung’s management at times overlooks the importance of working together with the suppliers to ensure that the materials supplied are of the required standards (Branch 2009, p. 17). Suppliers have repeatedly caused serious challenges to Samsung’s operations. This is evident given the frequent misunderstandings that sometimes occur in the company’s production process. There are some cases where customers have been irritated by the quality of the products, which result from the lack of a regular maintenance of the required standards for raw materials (Tuncel & Alpan 2010, p. 26). This has at times made customers go for products of other companies, resulting in serious financial losses for the company and suppliers. The lack of proper management of the suppliers has sometimes led to speculations that Samsung’s products will drop in value making the customers lose interest in them (Harrington 2006, p. 21). Strategic human resource planning is also another factor that assists the company to meet the needs of its employees to achieve its set objectives and goals. Samsung’s management through human resource planning is able to address all the aspects within its control that it feels may deter employees from achieving their best. Human resource planning encompasses hiring, training, rewarding, and firing the employees. The management of Samsung at times overlooks the aspect of the human resource planning. The consequences of such assumptions are evident considering the small number of employees who chose to continue working for the company (Harrington 2006, p. 22). Lastly, a company can use a good production schedule to reduce inventory, lower cost and enhance the services it offers to its customers. While developing a production schedule, a company does not need to consider the aspect of time so much; however, it should ensure that the schedule developed gives a clear program that gives details on when work is supposed to be started and completed (Tuncel & Alpan 2010, p. 29). For that reason, an appropriate production schedule requires a finite capacity scheduling, which takes into account other constraints such as labour, machines, materials, and capital. The lack of a proper production schedule has at times been witnessed in Samsung when the resources available fail to match the desired output (Branch 2009, p. 23). 2.2.3. Risk Management Most risk factors are external and Samsung lacks a strong control over them; however, these factors have a direct impact on its business operations. Some of the risk factors include: currency fluctuations, petrol price changes, natural disasters, terrorism, unfavourable government regulations, negative political influence and unforeseen changes in technology. Risk management entails identifying, analysing, and implementing strategies that can assist the company to minimise the effect of such factors once they occur (Narasimhan & Talluri 2008, p. 115). Like any other company, Samsung is prone to risks, some of which may be predictable. Risks such as fuel price fluctuations are predictable and under the management’s control. There are tools that companies can use to manage risks, especially those that are external and unpredictable in nature, such as natural disasters. The most effective tool that is used by most companies is insurance; the tool if well used can be of great help to Samsung (Sodhi & Tang 2012, p. 16). Samsung is yet to establish a proper risk management scheme in all its branches; operations in some of its branches are still adversely affected even by simple risks such as fire and theft. These risks have in several occasions caused havoc in some of the branches leaving them unable to continue with their operations unless they are boosted by the company’s headquarters. Although Samsung has a number of risk managers who are supposed to identify and manage the risks, they seem overwhelmed by the work (Olson 2012, p. 25). 2. 3. Impact of the Operational Issues on Samsung’s Supply Chain A supply chain at Samsung refers to the system of personnel, technology, resources, information, and activities that are involved in transferring the ownership of the products from the company’s suppliers all the way to the consumers. The activities in the chain assist in converting raw materials to finished products to be delivered to the final users, who are the customers of Samsung’s electronic products. The chain of supply of the company’s products is affected by the three operational issues: layout design, inventory and resource management and risk management (Tang & Musa 2011, p. 25). 2.3.1. Impact of Layout Design on the Supply Chain Layout design affects the supply chain of the company through a number of ways. It determines the distance over which materials are moved from one point to the other. A well-developed layout design should ensure that the total distance over which the products are moved is as short as possible to avoid unnecessary damages. If the distance between the suppliers and the consumers is made unnecessarily long, then delays and damages that could have been avoided are likely to happen (Vachon & Klassen 2008, p. 307). The layout design that is commonly applied in Samsung’s commodities is product layout. In this kind of layout design, the transformation of resources is arranged in such a way that the convenience of the product flow process is the main propelling factor. The location of machines and other facilities is entirely determined by the processing details of a given product. This is the main reason Samsung has put up outlets in many countries (Mahadevan 2010, p. 282). 2.3.2. Impact of Inventory and Resource Management on the Supply Chain Inventory and resource management helps the management of Samsung to determine the amount of financial resources it needs to invest in the supply chain. A proper inventory and resource management leads to an improved financial performance as the amount of inventory is reduced by a big percentage. However, the management of Samsung at times fails to minimise inventories making the supply chain so expensive and less efficient (Branch 2009, p. 31). Resource management, which entails ensuring that resources are located in strategic places, makes a supply chain more efficient by reducing the amount of money that is spent on expenses such as transportation. A good resource management ensures that the company’s employees live close to the factory, and the plant is situated close to the target market. In the case of Samsung, the distance between where the workers live and the factory, and that between it and its target market are too wide (Harrington 2006, p. 28). 2.3.3. Impact of Risk Management on the Supply Chain Risk factors make the supply chain more expensive and less efficient; natural calamities such as floods and earthquakes affect the location of resources and make the transportation of the resources more expensive. There are cases in which earthquakes have affected the production of Samsung Electronics and led to a serious disruption of the supply chain. Samsung’s supply chain is very fragile due to its complexity and length. Although the management of Samsung has been working towards establishing a balance between costs and risks within the supply chain, it is yet to realise this goal (Olson 2012, p. 63). 3. Conclusion Samsung is one of the international companies in which business operations are well defined and all the factors affecting its operations are well understood. There are so many operational issues that determine how Samsung operates businesswise and the ways in which it handles its resources. The main operational challenges facing the management of Samsung include layout design, inventory and resource management, and risk management. The major production factors that are affected by the challenges include: materials, personnel, technological decisions, and inventory requirements among others. These organisational challenges are the same factors that influence Samsung’s supply chain. Understanding the operational issues could help the company’s management to make the supply chain as efficient as possible while minimising the costs involved. 4. Recommendations Although Samsung’s management system is competent enough to solve the operational challenges that the company faces, there are a number of adjustments that the company needs to make to ensure that its business operations are not adversely affected. This report recommends the following: 1. Samsung’s management should ensure that there is an effective layout design with a steady flow of materials and human resources. This is important in ensuring that the production process is not halted at any point. 2. The company’s management team should ensure that customer satisfaction, suppliers, human resource planning, and production schedules are well taken care of for effective inventory and resource management. 3. Samsung should also employ other managers who can assist the company to evaluate and manage the risks that impact on the operations and supply chain of the company. The risk managers should be responsible for putting in place risk preventive measures. This will ensure that all the risk factors that surface in the company are managed before they cause serious damages to the production process. References Branch, AE 2009, Global supply chain management and international logistics, Routledge, New York, NY. Ha, SH & Krishnan, R 2008, ‘A hybrid approach to supplier selection for the maintenance of a competitive supply chain’, Expert Systems with Applications, vol. 34, no. 2, pp. 1303-1311. Harrington, HJ 2006, Resource management excellence: the art of excelling in resource management, Paton Press, Chico, CA. Heragu, SS 2006, Facilities design, iUniverse, New York, NY. Kogan, K & Tapiero, CS 2007, Supply chain games: operations management and risk evaluation, Springer, New York, NY. 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