Operations management: Samsung Electronics

Introduction:

Operations management enables the production process to produce the desired output as per vision and distribute it to the end users scattered across geography (Slack et al. 2013). It gained importance in the last century when the manufacturers wanted to maximize their rationality of business motives. Song et al. (2011) opined that the profitability factor thus gave an impetus to scientific principles of management leading to input process output tenets. It adopted newer methods and tools to deal with the complexity factor that helped to transform the enterprise with least resources, raw material thereby optimizing in given time for the output. The systems approach to production process enables to view it in different levels, macro and micro which are necessary to understand if the operations is meeting the set goals for the annual fiscal (Plunkett and Dale, 2008). This assignment therefore will look into operations management intricacies of Samsung electronics that manufactures mobile phones “Operations management: Samsung Electronics”. 

Company profile: Samsung Electronics

A Korean conglomerate which was founded way back in 1938, has diverse interests in construction, heavy engg, and has forayed into last decade of the century into semiconductor domain. It started manufacturing consumer durables and thereafter went onto manufacture mobiles. The Samsung electronics now is a brand which is present in 116 subsidiaries spanning over 70 countries. The company has products in the portfolio which is mostly dependent on the manufacturing setup and the production lines. The product lineup increased considerably due to the presence of strong R&D, which helped Samsung expand its portfolio.

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Chang et al. (2008) addressed that the operations strategy of Samsung is defined into ‘three E’s i.e. economy, efficiency, and effectiveness that helps it to triumph over the nearest competitors. It has developed a three level process in operations to manage the production process for the mobile phones. The presence of Samsung NPD (new product development ) was initiated with its capability to manufacture electronics gadgets like television, dvd, music systems. Samsung thus increased its capability to design and manufacture electronic products was done through ‘Samsung engineering membership pass’’ that contains the strong sense of belongingness, the Korean work culture and ethics, professionalism “Operations management: Samsung Electronics”. 

Customer profile: internal and external

The assets of Samsung electronics is the employees, who have a value driven work culture which is helping it to do continuous innovation in mobiles. The employees who are based in Korea led the product design, its foray into new product development and the electronic knowledge base helped to scale down from televisions to mobile phones. Dahlgaard and Kanji (2009) stated that the management of Samsung electronics understood that the opportunity lies in the mobile manufacturing as it is the future telephony. It started with the basic handset manufacturing that led to understanding the criticality of operations and ability to find a place in the market. The evolution of this phone segment led to the introduction of smartphone which led to more complex manufacturing process “Operations management: Samsung Electronics”. 

Goetsch and Davis (2010) opined that external customers for Samsung are the user segment who helped to define their needs in explicit manner which was then, translated into features that went into the next model of the Samsung mobile. Samsung has been able to capture the ‘voice of the customer’ effectively which is in feedback form goes into the next mobile design. The operations management thus is based on the user habits, their willingness to pay, the timing of the Samsung mobile to be launched in the market to stay ahead of competition. The NPD of the smartphones in Samsung is based on the open platform which enables Samsung to put in the hardware and assemble a superior phone meeting the demands of the current market trend. Samsung defines its progress into Samsung Android phones to be able to win the customer attention which forces them to innovate. It aligns its production process and R&D in such a manner so the product availability is there at the right time at right place.

2.1 Samsung Operations process:

Op strategy

Operations strategic objectives

Planning, scheduling, controlling

Continuous improvement

NPD

Operations Strategy

Op. Competitive Roles

Input

Output

Text Box: Customers To stay ahead of competition Samsung lays down the business objectives. These objectives are translated into profits later on, but to achieve these in the goals are segregated into achievable smaller tasks (Taylor & Taylor, 2009). Thus the business objective of Samsung to introduce the latest Samsung Android smartphone in terms of technology, connectivity, user friendliness, design has to be based on customer expectations set. So it aligns its internal business process in order to facilitate the Samsung smartphone vertical to churn out faster the newer models to capture the market. So the NPD development process is defined as shown in Appendix.

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At level I: The Samsung new management principles that were so predominant in their electronics division, while competing that the mobile phone vertical also adopted it. These are operation principles that helped Samsung to do batch production, quality testing, continuous improvement, benchmarking. The production process is preplanned into how many units per lot or batch, the models to be produced and the MRP(materials requirement planning) that is forwarded to the store (Sprague, 2007). It involves the planning, scheduling, controlling all the millions of components that goes into the smartphone manufacturing. The inventory level is checked and is made available in sequence while smartphone manufacturing process begins. At each stage of progression during the assembly of parts, the components are checked using various testing equipment’s. So chips, semiconductors, IC(integrated circuits) are repeatedly tested as more and more components are being assembled into it (Stevenson, 2005). The Samsung aligns the human resources to complement the shifts so that the batch target in a given time is met “Operations management: Samsung Electronics”. 

Level II: At the level II process the need to understand the market based forces and demand is aligned into Samsung electronics production process. Therefore the assembly line of production method requires to switch the models as the production is demand centric (what customers aggregate demand is) (Voss et al. 2002). Therefore in the batch production, Samsung is able to switch into other smartphone model manufacturing by stopping the current one. This flexibility in the production process happens through the identifying the volume of production already taken place, and use of IT. The use of IT enabled visibility to map the production assembly process helps to Samsung to track the progress of operations on the whole. The decision to switch the models when assembly is going on involves the inventory management, production scheduling is done through IT (Bendoly et al. 2006). The variation in the output is critical aspect for Samsung to meet, and it achieves this by deploying the 4Vs methodology.

4Vs: The key to bringing in flexibility in the production process is done by the Samsung employees. The mass production is thus enabled through 4Vs. Volume is the derived from the given aggregate demand from the market which Samsung divides into batch wise production scheduling process (Greasley, 2010). The Variety is the key to above operations challenge, which Samsung managed to bring into its existing production process. It is important from business perspective, and the agility in the assembly line manufacturing is achieved through shifting models that uses similar components. Variation is seasonal and is more market driven and the trends to meet the demand are thus met with the flexible manufacturing process (Größler et al. 2008) . Visibility factor of the production process is done with IT ERP supporting it, that enables the production supervisor to track and monitor the finished, work in progress, semi finished Samsung handsets. So the agility in output variety is facilitated by IT, which is handled by production supervisor. To meet the ‘Variation’ factor in the aggregate demand in the supply chain, Samsung uses shorter production batches. This helps to do variation in the Samsung models easily on a given day, though much of it depends on the MRP, production scheduling. “Operations management: Samsung Electronics”. 

Operations strategies:

The operations strategies are formed at the managerial level, where line supervisors, plant head, inventory and production managers, are usually present (Kerzner, 2009). Each day the production agenda is briefed and agreed upon by all, while IT mapping of the whole process is mapped accordingly. The employees in Samsung are empowered to stop operations if they find NC(non conformance) to the test reports in any of the phases of the Samsung mobile assembly process. So each employee is a process owner, and is the decision maker that is tactical in nature. End of the week, in Samsung is a consolidation of figures, in the IT system where finished lots, rejected, WIP(word in progress) are being reviewed by the group, and forward plans for the next week is done (Khanna, 2007).

The above operations management can be summed up in the following diagram shown below.

The key elements in the Samsung electronics is market driven pull factor, and the challenge is to maintain the cost effectiveness, which is aided through IT, where visibility enables to make the production process agile. Samsung tries to sustain the system, through its experience and technological knowhow.

Successful experience and know how

Implementation

Consulting

Operations

The key element however in smartphones is innovation that is driving the operations process and the demand supply figures. Samsung’s knowledge in the production process in consumer electronics division helped a lot to replicate in its smartphone, which has helped to produce consistently excellent product quality over the years. The flexibility and agility is brought in when old smartphones go out of demand and newer models introduced are in greater demand. The key to quality however, depends on the supplier components though Samsung tries to do over 90% indigenization.
The explicit operations metrics which are used in the Samsung operations management are standard elements of quality, flexibility, reliability, cost and speed (Taylor & Taylor, 2009). The need to maintain uninterrupted quality is directly linked to the user acceptance of the brand while reliability of the smartphone is done by SPC, and reducing the defects. The issue of flexibility in the production process and the speed with which Samsung can churn out a NPD phone is dependent on resources, R&D capability.

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LEVEL III: The operations management of finished goods does not end here as the requirement of the product to be shipped at Samsung distributors around the world at right time is an extended part of the process. This is essentially a consolidated order where the plant in Korea needs to ship and bill it for specific country. It involves a range of legalities, through ports, shipping info, and operationalize logistic solutions on global scale (Bendoly et al. 2006). At each warehouse, distribution centre, retail store does keep buffer so that it keeps a steady supply of Samsung smartphones for the customers. The alternate channel which has sprung up in recent years is the e-commerce distribution which it supplies directly such as Amazon.com, ebay.com to increase its channel presence.

Cost:
The cost of manufacturing is a concern as the electronics components that go into the assembly of the Samsung smartphone is directly outsourced from the third party companies. They are tested before dispatched while the Samsung accepts the materials with random testing of the lot accepted. There is high rate of waste in the components as they are fragile and likely to loose the properties for which they are meant for (Größler et al. 2008). Thus reducing waste of electronics components needed to be brought down as it was increasing the operating cost. Samsung wants the core competency to assemble and software testing that is built into the cost, while setting up dedicated plants for ICs, PCB, resistor, transistors at present requires huge investment. So it outsource these key components but is trying to stabilize the output quality index through SPC (statistical process control). They are using process control tools like Poke Yoke to find out the root cause of problems, and is measuring the capability of the production in terms of DPMO (defects per million output) (Song et al. 2011). “Operations management: Samsung Electronics”. 

Lean management has already been implemented in Samsung that follows the eight form of wastes that can happen, while employees work hard to avoid that.
The employee performance objectives are defined in the form of KPI(key performance indicators) and the results to be achieved as KRA(key result areas). Cost is not a revenue factor, so the rework for the failed tests for the smartphone set in a production assembly is a cost for Samsung as the employees fixing it up is engaged with respect to time.

Process Challenges:
The aim of Samsung electronics producing handsets is to reduce the NPD TAT time which affects the revenues and the cost of production. The faster innovation to lead the market is directly linked to the requirements of the mass marketing agenda and the ability to produce the particular smartphone model on demand. In order to meet this fluctuations of demand of different models at a given point of time, Samsung uses ‘SLIM’ technique to manage the scheduling and TAT time. The TAT time is the new launch into the market and how fast the production in Samsung can response to the customer demands. This is similar to the agile technology that is used in software coupled with the high learning curve Samsung has acquired over the years (Khanna, 2007). The defects which occur during the testing phase needs to be resolved so that it can reduce the error percentage. The production rescheduling takes time when the agile mode is one, so it is one of biggest challenges, though Samsung has done concurrent production. But the assurance of which smartphone model and its components are needed are not ascertained a day before on production floor. This hinders the whole process which slows down the operations management ‘agile process’ at Samsung.

Recommendations:
The recommendations for Samsung include the need to run shorter and tighter batch of Samsung mobile phones in the assembly line operations. This will help to achieve the targets but is will increase its ability to be flexible as the shorter TAT of input-process-output can be modified as per the aggregate agents. The challenge to reduce design to conceptualize the definition and now increasing ‘benchmarking’ threshold as operations for a given point is pointing towards a design enriched production. The inputs of the design and features for the Samsung smart phone is therefore new that has to be incorporated into the NPD. This cannot be done if existing project has almost nearing completion, as the defect finding mission in each item becomes tougher.

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Feasibility of changes:
Breaking down the agile concept and applying it in the product design and output is not different when we compare it with the software coding process which spawned it. The SLIM method is similar to the agile process except that the Samsung needs the inventory level full to meet the exigencies of the urgent order batch production. Chang et al. (2008) addressed that the production manager along with the whole team needs to do a mathematical modelling to understand how fast the switching to different models can be done in the assembly line. Though the employees are authorized to do ‘Kanban’ stopping of the assembly line production when the product is found faulty, over here the testing of each individual component separately and the aggregate semi assembled state of the smartphone presents a bigger challenge than the agile method used in software. It thus needs to reengineer a process that will enable to do quick switches where the options of selecting dedicated line of production can be done.
This can be analyzed from revenues and cost issues which will help us to understand the cost of delay. Samsung can standardize its production procedures, while improve Sigma level for defective components testing incrementally (Dahlgaard and Kanji, 2009). So changes in the scheduled production planning that will be changes can also be simulated on computer to understand Samsung’s best options “Operations management: Samsung Electronics”. 

This can be ascertained by the following diagram where the capacity of the operations process is dependent on the design capacity, effective capacity and the final output. As there are a host of factors acting on it, therefore it is important that Samsung identifies the ways to optimise resources, inventory and scheduling. Stevenson (2005) argued that unlike in software agile is change in the services by aligning right coding which Samsung does in building the GUI Android phone user interface, the manufacturing challenge is therefore more about inventory, flexibility, production process and employees chasing it altogether.

Conclusion: Operations management: Samsung Electronics 

The operations management in a complex product like a smartphone increases the level of difficulty when the components are either not matching or meeting operational QC standards. Thus the need to switch over to a newer smartphone model and the interlinked chain of activities that takes place inside the Samsung plant is worth pondering. The challenge to meet the demands of particular model is only feasible when existing production line is halted. Agile production method works fine but in product assembly the availability of components should be ready. Investing in modelling technique and perfecting it is necessary to make the production through switching models a feasible one. Thus adjusting the back end drivers, the actors involved, maintenance of capability index is necessary. Multiple level quality checks at each stage of assembling can be standardized which will help to minimize defects, while operations manager needs to benchmark quality metrics, production process redesign in case of sudden demand spikes for particular models.

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