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SCM Six Sigma in Samsung
Transcript of SCM Six Sigma in Samsung
Six Sigma was added to upgrade these existing innovations and improve SEC’s competitive position in world markets. 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). For the last few years, SCM and six sigma have been two pillars of business innovation at Samsung. 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. "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. Project discipline Sustaining results Well-established HR framework Quantitative strength Six sigma would enforce a more disciplined approach to SCM projects and ensure that SCM projects were defined rigorously and executed methodically. Six sigma supplemented by a Samsung’s own centralized system of capturing and tracking all of its projects beyond their completion ensures that improvements be sustained. At Samsung, a key area for the potential improvement of SCM activities centered on people. The company continually faces a shortage of trained, qualified, and talented people to harness the maximum potential that its systems and processes offered. Quantitative data about operational activities and performance was abundant, but not used sufficiently for problem solving or decision-making. Samsung’s SCM Business Team (SBT)
researched six sigma approaches at General Electric (GE), DuPont and Honeywell to get perspectives on how other companies have innovatively applied six sigma to similar needs: A key element of GE's approach to six sigma is
the tailoring of underlying methodologies
to specific needs and characteristics of its business units. DuPont combined six sigma principles with the SCOR (Supply Chain Operations Reference) model, which scopes five core management processes, including plan, source, make, deliver, and return.
DuPont's Six Sigma approach utilizes a quality function deployment (QFD) tool Honeywell developed a proprietary Six Sigma approach called
Six Sigma Plus (DMAIC). Each of the above approaches was analyzed and the following conclusions drawn, which fed into the subsequent development of the Samsung SCM six sigma methodology: Nature of SCM projects may involve either design or improvement Six sigma projects usually focus on either
redesigning processes and systems
or improving performance levels of existing systems. SBT estimated that among the SCM projects at Samsung, about 75% would involve redesigning processes, while the remaining 25% would focus on process improvement. DMADOV is not enough The DMADOV methodology,
while useful, could not provide the necessary support to execute the entire range of SCM projects at the Samsung Group. The key difference is that after performing analyses, the task for the project team would be not to optimize or design as in DMADOV, but
to specify how a suggested improvement would be realized in practice. Therefore, a step, “Enable”, in place of Design and Optimize, was introduced to address this activity. System development option SCM six sigma projects, in most cases, result in system development. The DABTL (define, architect, build, test, launch) approach was used, incorporating proven software engineering discipline to six sigma based SCM methodology. By: Kelly, Brenda, Tifanny, Fransisca, and Marissa SBT realized that the success of the DMAEV methodology in driving SCM innovation would depend not only on the strength of the methodology itself, but also on relevant business and organizational factors.
Based on the SBT team's experience and expertise in business and organizational aspects of SCM, the following design principles that would guide SCM six sigma projects through all of the DMAEV stages were drawn: Global optimum All improvement ideas must be aligned with global rather than local goals. Two mechanisms for ensuring global optimization were utilized:
A flow-down tree of the critical-to-quality KPIs (CTQ-Y).
A bottom-up check to ensure that global KPIs have not been adversely affected. Process KPI mapping Process KPIs follow the SCOR Model,
and are used to define objectives and monitor the process towards managing improvement plan goals. Systematization Systematization is viewed as a key component of an SCM initiative at Samsung. To the extent that SCM changes need to be reflected in processes and systems, systematization is a critical component of SCM six sigma.
This is achieved utilizing the DABTL
(design, analyze, build, test, launch) Five design parameters DMAEV uses the five design parameters to characterize the changes that need to be managed throughout the DMAEV process stages. process changes
operation rule & policy change
role & responsibility changes
performance measures / KPI changes
system and master data changes A summary view of Samsung SCM six sigma At Samsung,
SCM and six sigma have been two important enablers for the group's management innovation and growth.
Samsung realize that there is significant room for improvement in its SCM operation.
The effort has been synthesizing SCM and six sigma and developing a unique six-sigma based methodology to improve its SCM operation. Samsung's effort and investment has turned out to be fruitful.
Their SCM six sigma program has produced highly qualified and talented SCM specialists, who are currently training the methodology to other members in their organizations and leading SCM projects. Result SEC’s Six Sigma projects have also contributed to an average of 50% reduction in defects between 1999 and 2001. There is no thought of improvement in quality and productivity without Six Sigma. By 2001, SEC had earned net income of $2.2 billion on total revenues of $24.4 billion. Market capitalization stood at $43.6 billion.
According to SEC’s 2001 annual report, SEC now is one of the top 10 electronic and electrical equipment manufacturing companies in the world, with the best operating profit ratios and superior fiscal soundness.
The report also says debt to equity ratio is lower than that of any top ranking company, and the shareholders equity to net assets ratio surpasses the average.
SEC says its technological strengths, Six Sigma quality initiatives and product marketability helped Six Sigma increase its share of the memory chip market in 2001 to 29%, monitors to 21% and microwave ovens to 25% of those sold worldwide.
Despite a downturn in the world economy and a reduction in exports to the United States, credit for SEC’s current operating profit margin of 8.5% is due mostly to quality improvements and Six Sigma deployment.
SEC’s quality and innovative strategy helped it reach the number one position in the BusinessWeek 2002 information technology guide.