Supply Chain Management - LG Company - Case Study Example

Name Course Tutor Institution Introduction LG Company was originally established in the year 1958 as Goldstar, producing TVs, air conditioners, radios and refrigerators. LG was a merger of two Korean companies, this are; Goldstar and lucky, from which they derived the abbreviation LG (James and Roetteis 16). Before the name changed to LG, household items were sold under the name of Lucky, while electronics were sold under the name of Goldstar. LG has intensified its supply chain management in order to save on the cost thus increase efficiency in its production line. Supply chain management has been a boost to the company coordinating activities (Mentzer 243). Parties to a supply chain The major role of supply chain is to satisfy customers need and wants according to their taste, fashion and preferences. There are four main parties involved in a supply chain in all companies if not all. This includes; the producer or the manufacturer, wholesalers, retailers and finally the consumer. Each one of these parties plays a vital and distinct role from the other. The LG producer’s role is mainly to manufacture items such as phones, TVs radios and so on. They are solely responsible for ensuring that the goods have reached into the market. At this stage, the wholesaler will then be introduced. A wholesaler is a person who buys commodities in large quantity and enjoys benefits thereafter (Shah 268). The wholesaler will then pick the goods from the producer’s warehouse and take then into the market. On the other hand, the retailer will break the bulk into smaller quantities for consumer to be able to buy with regard to their real income. This means that the LG items will be sold as a unit of production but not as wholesale production. The LG retailer is also responsible in ensuring that the goods are all over the country. The consumer is the final user of the LG items. The main aim of this supply chain is to enhance consumer utility. Utility refers to the satisfaction derived from using a commodity (Bidgoli 28). LG Company has chosen on external supply chain. An external supply chain involves other companies. On the other hand, supply chain management engrosses the relationship between the customer and the sales as well as the suppliers through procurement roles. The LG Company chose on this type of supply because (1) it enables its members to reduce the costs with redundancy as well as duplication, (2) it allows the chain to serve the selected customers with the company very well, and last but not least (3) it helps to motivate workers through comparing their activities with those of its competitors. The supply chain fits the overall strategy of the LG Company. It fits the company through consistency between customer’s priorities of competitive strategy and supply chain capabilities specified by the supply chain strategy. This is evident or argued out that competitive and supply chain have the same goal or objective within the LG Company. Most of the companies have failed since they lack strategic fit or as a result of its processes and resources which does not provide enough or adequate capabilities to implement the desired strategy. LG has been able to strategically fit its supply chain in the following steps; through understanding the customers as well as the supply chain uncertainty ( this is through, identifying the customer’s needs and segment being served, quantity of material needed at each stage of production, different variety of product needed and so on), understanding the companies supply chain (this is the company’s ability to respond to wide variety of quantities demanded, handle a wide range of products, serve customers best and meet short deadline), and achieving a strategic fit. The companies supply chain is highly certain or efficient since it allows customers and staff to make suggestion on the supply chain management. Problems of supply chain of LG Company Developing an effective supply chain is not an easy task. LG finds it difficult in establishing the right technology to be used which will out due its competitors, finding a real cost deduction has been an issue in the supply chain of the company and the cost of establishing the supply chain within the organization is so high, leaving managers with a tough decision to make. At time the supply chain fails to show the main causes of cost problems. The company lacks sufficient direction to be used in order to accomplish the cost reduction. Supply chain of the LG Company is currently facing a problem of confusion. The company supply chain is more detailed, thus causing confusion. Confusion is inevitable, especially where there is less training, communication or planning (Shah 32). LG still uses its outdated supply chain as a sole indicator of the success and failure of the company. This strategy that has been recently adopted is said to be a poor tool used to evaluate the company’s performance, since supply chain is not used to determine the profits that the company is making but also to balance the forces of demand and supply among the chain element. The use of profits and revenues as tool used in measuring the success of the company has led to a total destruction of the supply chain because many partners tend to make dramatic changes thus affect the company’s activities. Tactic to solve The LG Company took wholesale item and made readily available to customers. The company understands that if its supply chain dries up, it won’t be easy to satisfy customer’s needs. The company moved from being department to a doing business, this was achieved through allowing all of its customers to become kings. The customer opinion ruled. The company has implemented inventory management software. This software does a lot of work as compared to track units. This tactic was used to compare the sales volume and predict future problems that are likely to occur. Because customers demand result in stock shortage, the company (LG) is able to spot any increases in demand thus allow the company to order for more inventory. Supply chain is managed Strategic alliance LG is making technical development and identifying different opportunity through associative relationship with world’s leading companies. The company is striving hard in becoming the world’s best company in technological fields. Strategic association between different organizations, in which most companies with distinct infrastructure, work together in order to achieve similar objective have increased as a result of the world competition (James and Roetteis 246). Procurement Strategic plan of the LG company are drawn by the supplier in order to support the manufacturing process thus enhance new invention and innovations of products. LG operation are sourced, this is because it carries out its functions globally. The desire of the supply chain is to create a good rapport between different parties and reduce the time needed to design a product. An activity of the company (LG) is related in obtaining different materials outside the supplier’s scope; supply sourcing, order placement or programs. Theories of supply chain management There is no valid proof of the existence of supply chain management; this is to mean that there is currently no theoretical explanation on the existence of a supply chain management. There are different theories related to supply chain through employing organizational theories. The theory that i am going to evaluate is the Just-in-Time (JIT). This is a theory that was developed by Toyota motors Corporation. JIT is an approach queue awaiting process in working in progress. Items are not processed until they are required in the market. JIT is based on three primary facts; minimizing waste in LG company, continuous improvement of process and maintaining respect of all workers (Birgit and Tage 62). Raw material is received in time to go to the production and the manufactured parts of LG are completed in time and thereby supplied to the consumers. JIT assist in inventory control. The principle of JIT theory mostly concerns the management of inventory. It aims in creating zero level of inventory operating system as one worker explain the JIT system” under the JIT system you do not produce anything anywhere for anybody unless they ask for it somewhere downstream, inventory are evil such that they are ought to be avoided”. The results have led to a substantial reduction on ordering and warehousing cost under streaming the operation that has Permitted Company. Conclusion Supply Chain Management (SCM) engages a joint collaboration between suppliers, customers and outsourcing partners. It encompasses the manufacturing of goods from raw materials during to the delivery of the finished goods; it also embraces the management of important information flows. SCM absorb the integration of these activities and aspire to develop relationships between the different parties, while attaining a sustainable competitive lead through high and lower quality cost products. SCM is closely correlated with business resource planning (ERP). The producing industry today is challenged with the task of planning a modified products/solutions in a sensible and cost-effective manner, boosting customer knowledge, quick globalization, are placing pressures on producers to redecorate their product development procedure. The Supply Chain Integration is vital in improving the company’s capability which will help manufacturers, and their partners, to overcome their day-to-day challenges. References Bidgoli, Hossein. The Handbook of Technology Management: Supply Chain Management, Marketing and Advertising, and Global Management. New York : John Wiley and Sons, 2010. Birgit, Dam ,Jespersen and Skjott-Larsen Tage. Supply chain management: in theory and practice. New York: Copenhagen Business School Press DK, 2005. James, Measell and W. C. Roetteis. The L.G. Wright Glass Company. UK: Glass Press, 1997. Mentzer, John T. Supply chain management. UK: SAGE, 2001. Shah, Janat. Supply Chain Management: Text and Cases. India: Pearson Education India, 2009. Read More