Why does Samsung focus on supplier and supply chain management?
Why do companies like Samsung focus exclusively on managing large, connected and smart supply chains? All the large smartphone and consumer electronics brands depend on efficient and strong supply chains for the uninterrupted supply of raw materials. It is crucial to establish a strong supplier network and manage its output and efficiency through the right supply chain strategy and technology. With a stronger supplier network, your position is better in terms of production and sales. Leading global businesses like Samsung are managing supplier networks from a modern and long term perspective and developing closer connections with their suppliers. They are developing supply chain management strategies that strengthen the mutually beneficial relationship between the firm and its suppliers, but more than everything large firms are working on their suppliers to manage their performance, efficiency and output across all areas from operations to labor and social responsibility. The manufacturer-supplier relationships are no more limited to give and take but have taken the form of a partnership. Supplier relationships are a critical area of focus for businesses and managing supplier relationships has some great benefits apart from higher security in terms of raw material supply.
What does Samsung achieve by managing supplier relationships?
Samsung does this for several reasons like ensuring an uninterrupted supply of raw materials and lower operating expenses. Samsung is a leading global brand of smartphones, consumer electronics, and semiconductors. Its supply chain is the backbone of its business and the success of the firm can be attributed partly to its efficient supply chain management. Supply chain issues rank near the top for most big brands and not just Samsung. When you are dealing with competitors that are the top brands in the world like Apple, you need to be extra cautious. Supply chain management is a demanding area but since the fortune of the brand rests on it to a large extent, companies like Samsung leave no stone unturned to make their supply chains as agile, connected, and perfect as possible. Investing in the supply chain brings superior results. Samsung has established a healthy and strong supplier network that does not bailout during difficult times because of its higher resilience. Large brands do not ignore their supply chain risks and instead focus on creating highly resilient supply chains. Apart from the efficiency of its supply chain, Samsung also focuses on sustainability and minimizing the environmental impact of its supplier operations.
Samsung Supply Chain Management Strategy
Samsung strives to achieve cost competitiveness as well as operational efficiency through strategic supply chain management while maintaining its focus on sustainability as well. The supply chain management strategy of the company is based on five important criteria. They are cost competitiveness, human resources capacity, on-time delivery, response to risk and supplier competitiveness. Samsung focuses on the economic, social as well as environmental aspects of its supply chain operations to manage its impact in all the three areas.
The focus of Samsung’s supply chain management strategy is to ensure an all-encompassing competitive edge in terms of cost, delivery, quality, technology, and human resources in order to maximize synergy, speed, and efficiency with its suppliers and create a corporate ecosystem that enables sustainable growth. Cost efficiency, product quality as well as technology are some important focus areas in terms of supply chain management for Samsung.
Samsung also ensures that the suppliers abide by international standards and regulations in the areas of human rights management, work environment, ethics, and conflict mineral issues with the aim to build an open and transparent management accountability system that engages all stakeholders along the supply chain. Social responsibility and business accountability among suppliers is also an important focal point of Samsung’s supply chain management strategy.
To manage an environmentally sustainable supply chain, Samsung works only with Eco-Partner certified suppliers. This way it ensures that it can assess and manage the environmental impact of components, raw materials, and manufacturing processes. Samsung had adopted sustainability best practices in manufacturing long back in 2004 and its production process focuses on making products sustainable right from the planning stage through an eco-friendly design.
Who are Samsung’s suppliers? Where are they located?
Samsung’s supplier network has 2,500 suppliers (mainly first-tier suppliers) from around the world. These are the suppliers who provide raw materials, product components as well as equipment. The number of first-tier suppliers of Samsung in 2018 was 2,389.
A large part of Samsung’s supplier network is located in countries including the US, China, Japan, Korea, Taiwan, Hongkong, and Vietnam as well as the UK. The US, China, Korea, Japan, and Taiwan, as well as Vietnam, are among the leading countries where Samsung’s suppliers are located. China is the leading supplying country for a large number of big brands including the leading rivals of Samsung like Apple and Huawei and several more technology businesses.
Here is a list of 26 Samsung suppliers whose names the company has revealed in the supplier section of its website.
|AAC Technologies Holdings Inc||China & Vietnam|
|Advantest Corp.||China, Korea, and Japan.|
|Air Products and Chemicals Inc.||USA and Korea.|
|Alps Electric Co. ltd.||Japan & Korea.|
|Applied Materials Inc||Singapore, USA and Korea|
|ASM International N.V.||USA & Korea|
|ASM Lithography Inc||Hongkong, USA & Korea.|
|AU Optronics Corp.||Taiwan|
|Avago Technologies ltd.||Singapore|
|Biel Crystal Manufactory ltd.||Hongkong|
|BOE Technology Group company ltd.||China|
|Bujeon Electronics Co. ltd.||Vietnam|
|BYD Co. ltd.||China|
|Canon Inc||Japan, Korea & USA|
|Cirrus Logic Inc.||USA|
|Daeduck Electronics Co. ltd.||Korea|
|Daeyoung Electronics Co. ltd||Vietnam|
|Daifuku Co. ltd.||Japan, Korea & USA.|
|DongjinSemichem Co. ltd.||Korea|
|Dongwoo Finechem Co. ltd.||Korea|
As you can see China and Korea have the highest concentration of suppliers followed by the USA. However, Samsung does not reveal the name of all suppliers but only the ones who have consented.
How does Samsung add new suppliers?
Samsung has built a procurement portal for the registration of new suppliers.
It also carries out annual assessments to help the existing suppliers strengthen their competitive edge. The Korean smartphone brand has established the International Procurement Center (IPC) and Global Supplier Relationship Management System (G-SRM) to accept submissions from new supplier organizations. It has its IPCs located strategically all over the world in key locations so that they can monitor regional technology trends and identify potential suppliers. These methods have allowed Samsung to ensure that its supply chain is competitive and strong.
New suppliers that want to register with Samsung supplier program need to pass certain criteria before they can become a part of the supplier network. These criteria are divided into three main areas. The first area is environment and safety where the registering company is required to satisfy the requirements related to occupational safety, fire prevention equipment, occupational health, hazardous substances, and environmental facility that Samsung has laid out in the form of 22 articles. There are eight items where compliance is mandatory for any new supplier wanting to register for Samsung’s supplier program. The second area is labor rights where the company performs onsite audits of interested suppliers on 20 articles including voluntary work, compliance with work hour regulations, and a ban on discrimination.
In the second category too there are three compulsory areas including a ban on child labor, guaranteed minimum wage, and ban on inhumane treatment. The third category is related to the environment where Samsung reviews its suppliers’ business operations and performance in terms of product environmental policy, education & training and the use of hazardous substances. The suppliers that pass all the criteria are EcoPartner certified suppliers that the company has business relationships with. Samsung has also established a code of conduct for its suppliers that they are required to follow to remain Samsung suppliers. The code of conduct apart from ensuring adherence to the local laws and regulations also ensures that the suppliers manage their business operations and work environment responsibly.