Describe about the Logistics Management for Pertaining to Samsung.
Report outline and purpose:
The current report focuses towards analysing the logistical management pertaining to Samsung. The core functional area of Samsung has been thoroughly evaluated using logistical theories followed by gathering insights into it. The primary purpose of the report is to review the core functional and operational areas of the company. Moreover, analysis of the efficiency of prevailing order processing mechanism in Samsung has been undertaken in conjugation with prevalent theories regarding logistics management. This is to be followed by dissemination of inventory management policies concerning the company and evaluating the degree of affirmation that such processes have with academic models and theories regarding inventory management.
Samsung Electronics is engaged in manufacturing and providing mobile devices and electronic appliances on a worldwide basis with consumer base in nearly every economy of the world. The company is headquartered in Suwon, South Korea and is considered the second most valuable technology company in the world in terms of revenue and market capitalization (Samsung Electronics, 2016). The logistics pertaining to the company is of the largest in the world with manufacturing and assembly plants located over 82 countries. The company has accelerated its degree of diversification in the consumer electronics market. Thereby, despite being the market leader in the mobile and smart phone market, it has considerable market shares in electronic gadgets and appliances.
The company is renowned for its innovativeness and the quantum of emphasis it puts upon providing consumers with cutting edge technology at affordable price. The company primarily targets young professionals through product innovativeness and attractive product designs (Samsung Electronics, 2016). The positioning of the company has been made in the consumer electronics market in a manner that the marketing strategy and taglines of the marketing and promotional campaigns varies on a product-to-product basis. Moreover, the company does not target specific market segments but to primarily cater to the technologically well-informed high-income group along with upper-middle income groups.
Christopher, Magrill & Wills (2013) stated that the correlation and co-ordination between the production process and that of its logistics management results in driving the revenue generation capability. The inbound logistics pertaining to Samsung tends to have a direct effect upon the production of the company. Moreover, in terms of value chain analysis, it can be construed that production process is of utmost relevance as the largest contributor in creating value pertaining to the product. The logistics management process pertaining to large-scale manufacturing firms undertake a context based approach for resolving issues pertaining to logistics.
Moreover, Bowersox, Carter & Monczka (2013) stated that for mitigating the degree of complexity pertaining to the production processes, it is pertinent that the supply chain management (SCM) process is merged or aligned to that of the product process. In case of Samsung, the mobile division is subjected to numerous set of allotments pertaining to the different models. Each set of production is customized to take into account the prospective demand for the product and the degree of complexity that relates to the production of that product. The production run is short owing to the dynamism of the electronic industry and the overall production costs are kept low through minimising of overhead costs.
In case of accounting, logistics management is complemented by the different set of accounting frameworks that synthesises the data pertaining to supply chain. For instance, in case of inventory management, use of Last in First out (LIFO) and First in First out (FIFO) facilitates in determination of the inventory turnovers. Moreover, in case of deriving upon the number of batches that are to be ordered in case of inbound logistics, Economic Order Quantity (EOQ) is relevant (Rushton, Croucher & Baker, 2014). In the case of Samsung, the sales forecasts pertaining to the sales of its different products are utilised for determination of the EOQ and the inventory turnovers in each of its inbound and outbound logistics are evaluated using accounting methods.
The assimilation of the marketing plan with that of the logistical management results towards facilitating in framing and implementation of tactical plan, which is consumer centric. The marketing plan pertaining to Samsung is intertwined with that of its logistics management (Samsung Electronics, 2016). This is done so that when the marketing of a certain product is made the logistics concerning the product is fine-tuned for the prospective increase in the demand of the product. The promotion pertaining to Samsung’s products is comprised of pull strategy. Thereby, the logistics requires ensuring that the demands of the retailers are met appropriately. Moreover, it is pertinent to note that the logistics shall comprise of providing products to retailers.
Price- The price drivers needs to be recognized in the marketing logistics. The logistical cost structure and the discount for volume impacts the price that the customers will pay for the services and goods. The other factors driving cost is the carrier pricing that is the shipping cost which is based on the weight, size and distance where the items would be shipped.
Product- The goal regarding the product aspect of marketing of logistics is about the on time delivery, filing the order and zero damage and precise invoicing. The packaging should be such that there is no damage. The product proliferation is attributable to the mass customization which helps in providing the product with personalized designs at affordable price. The display and promotional packs contribute to the product proliferation which increases costs.
Promotion- The logistics follows the pull and push promotional strategies in order to get the product to its target market. The products are placed in front of the consumers using the push strategy and pull strategy is intended to stimulate the demand and motivate the customers to seek the specific product. The logistics of Samsung make use of pull strategy.
Place- The logistics must be executed in a way that the customers and the location of the warehouse and factory impacts the logistics operation by reducing or increasing the costs. The operation of the logistics either through the retail or wholesale determines the price.
Vlad & Pavel (2016) mentions that for company with large set of clients the initial processing system shall be required to facilitate the ordering of all types of product that the company is offering. Thereby, in the context of Samsung, the ordering mechanism is kept simple for arriving at the figures pertaining to inbound logistics. The quantum of inbound logistics are computed after taking into account the forecasted demand for a particular product that is arrived at through the data analytics by Samsung. The company places a buy now button at its website for facilitating ease of transactions.
The processing of an order at Samsung entails selecting of the type of devices that the consumers require ordering. Further, apart from a separate portal for facilitating placing of an order, Samsung provides a toll free number so that consumer can directly have a telephonic conversation with the executive of Samsung (Samsung Electronics, 2016). Moreover, such executives have trained at assisting clients for making up their decisions pertaining to which product and at what quantity are to be provided. The consumers pertaining to the product are provided an online cart in which they can gather all the products that they are seeking and a final checkout button have been placed at the side of the order button. Through the checkout button, the payment gateway can be accessed that facilitates in making online payment.
Figure 1: Order Processing System
(Source: Bowersox, Carter & Monczka, 2013)
In terms of orders that are primarily tax exempt, the proceedings of such orders cannot be made online and the customer care service executives at Samsung Electronics always validate such transactions. The payments of the order are made through utilising Visa, MasterCard and American Express amongst others online fund transfer mechanisms. The company has a policy of not charging its consumers prior to shipping of the logistics. The client’s location plays a significant role in terms of order processing. The placed orders are the placed onto assembly factories. The inventories from inbound logistics are deployed for assembling for the order and the production process takes into account the order quantity and runs its processes accordingly. The finished batch of products are then shifted to warehouse wherefrom outbound logistics are prepared.
In terms of facilities regarding tracking of an order, the clients are able to track their shipments through the different stages and distribution hubs that their ordered product goes through. Moreover, such tracking facilitates in real time evaluation of the logistical processes that each order is going through. The initial processing of order is done within a 48 hours period and thereby Samsung does not delay in face-lifting streamlined order processing. The company further provides clients towards opening an account at Samsung.com. The account acts as a vantage point through which the clients are notified regarding the status of their shipments (Samsung Electronics, 2016). Moreover, the summary of their billings, online receipts of bill payment as well as displays of notification are also made through the individual accounts. In case of damaged product or delivery of wrong product, the company provides cash back or replacement offers and has a separate logistics functions that takes into account the inbound logistics.
The probable recommendation pertaining to Samsung’s logistical mechanism is to note the fact that company requires opening up a web-chat service for its clients. Moreover, the clarity as regards to Samsung’s order requires to be enhanced through using data analytics. The toll free number that the company provides remains inadequate for communication and Samsung needs to come up better set of communication mediums for handling the client grievances.
Ellram, La Londe & Weber (2013) stated that inventory management tend to play a significant role in facilitating production processes and minimising obsolescence. Moreover, Myerson, P. (2012) stated that inventory management pertaining to a manufacturing firm displays the company’s ability to organise its supplies along with sorting out its outbound products. In case of Samsung, it can be construed that the company’s inventory management is highly complex in nature owing to the number of product that the company deals with. Moreover, the variations pertaining to each product such the different models of smartphones offered by Samsung, LCDs will different sizes and resolution makes it even complex for the company for tracking and maintaining of inventories. The demand for Samsung’s products is significant as compared to other electronic brands sans Apple Corporation. The high demand is reciprocated through large inventory turnover and thereby Samsung maintains over 80 manufacturing hubs around the globe for meeting the demand for their products (Samsung Electronics, 2016).
The reorder point is determined through the forecasts pertaining to a certain device based upon its promotional campaign and initial response to the product by its consumer. Thereby, economic order quantity (EOQ) is derived through using the forecasted demand. A safety stock of over 5% is to be kept for meeting the demand for the product in case the production is disrupted or demand for the product has grown exponentially. The inventory levels pertaining to each manufacturing hub are under constant monitoring in order to mitigate any issues arising out of shortage, production issues or assemblage disruptions.
The organization has the inventory policy system of fixed order quantity and this helps in keeping the stock level at fairly stable level. In order to achieve the desired level of inventory, the orders are placed for the quantities that can vary with the number of order received. This makes the management of the inventory and helps in monitoring and replenishing the stock.
Rushton, Croucher & Baker (2014) mentioned in the context of inventory management, the relevance of aligning the stock levels with that of the demand for the product is essential so as to prevent any forms of consumer grievances. Since the re-order quantity is not the optimum forecast mechanism, thereby the EOQ is revised periodically for adjusting the reorder quantity in accordance with the present scenario of demand. Moreover, on occasions, the inventory levels may go down below the safety stock levels, this is owing to the thriving demand that the product displays and when such demand is unanticipated. In such occasions, the reorder quantity varies to take into consideration the replenishment of safety stock along with the inventory assimilated through sales forecasts. The reviewing of inventory are done each day from real time tracking since the inventory turnover of Samsung is unmatched by many consumer electronics manufacturer.
Conclusion:
Logistics management plays a significant role towards enhancement of growth prospects for each manufacturing firm. This is owing to the fact that inventory management policies that takes into account prospective demand for the product and thereby maintains inventory based upon it mitigates over or under stocking. The amalgamation of marketing policy and logistics management is relevant owing to the fact that such assimilation may result in development of tactical plans pertaining to the product. Moreover, accounting plays a significant role towards ensuring that the databases pertaining to inventory management are assimilated and maintained. Moreover, the primary framework for inventory management has arisen out of accounting and thereby the role of accounting remains intertwined with inventory management. Samsung essentially processes an order within 48 hours. The customers are provided with an official account and through which they can facilitate the tracking of orders. Samsung keeps a detailed tracking of each order that has been placed from the initial order processing to the outbound logistics from the manufacturing hub for ensuring that each order is processed in due time. The safety stock is kept at around 5% margin as can be gauged by the electronic industry standards coupled with the fact that Samsung inventory turnover is high. The computations pertaining to reorder quantity or EOQ are revised on a periodical basis in order to ensure that the stock levels reflect the current demand for Samsung’s product.
References and Bibliography:
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