Question

CASE STUDY - LG Electronics

From its origins as the progenitor of South Korea’s electronics industry and then its first global exporter, LG Electronics has evolved to a respected global brand with manufacturing facilities in China, India, Mexico, Brazil, Poland, and Russia and a presence in 49 countries. Headquartered in Seoul, South Korea, the company has 84,000 employees in 112 locations around the world, including 81 subsidiaries. Perhaps best known today for its quality mobile phones, LG Electronics is also one of the world’s top manufacturers of flat-screen televisions, air conditioners, washing machines, and refrigerators. Led primarily by exploding demand for flat-screen televisions and mobile phones in the past 15 years, LG Electronics’ European operations grew exponentially. By 2015, its logistics network was inadequate and severely overtaxed. Most of its transportation needs were outsourced to third-party logistics (3PL) providers. Internal knowledge and expertise were nonexistent. LG Electronics Europe wanted to change this equation. By creating a collaborative effort with its partners, LG believed that it could better control coordination of its transportation networks and realize aggregate cost savings. Management was clamoring for increased logistics visibility so that it could preempt bottlenecks rather than fashioning reflexive, and often imprudent, remedies. Dependent on their 3PL providers, managers had little to no control over transportation planning. Fixed routing in outsourced systems hamstrung management’s ability to optimize carriers, loads, and overall capacity. In order to control performance and costs, LG Electronics Europe knew it had to take control of its logistics system and adopt robust performance evaluation tools so that it could continually adapt and revise transportation decisions. LG Electronics already had a relationship with JDA Software, a leading vendor of supply chain management systems, employing many of its products in localities across the globe. Impressed with JDA’s global presence and armed with positive reports about its partnerships with other divisions, LG Electronics Europe chose JDA Software’s Intelligent Fulfillment solutions— Transportation Modeler, Transportation Manager, and Transportation Planner. The ease of use and exceptional data-sharing capabilities of this unified supply chain planning, optimization, and business analytics platform immediately drew favorable reviews.Once all managers could log in to a single source where all logistics data were shared, they could collaborate to find the most efficient and cost-effective transportation options. Transportation strategies could now be flexible and easily adapted to respond to fluctuations in product demand, shipping rates, fuel costs, and other factors. LG used JDA Transportation Modeler to model an ideal logistics system that consolidated orders, established transportation hubs, and selected carriers in a flexible manner based on costs and service levels. With Transportation Modeler, LG Electronics Europe can assess the abilities of alternative transportation hubs and associated carriers to optimize order consolidation. What-if scenarios examine various requirements and objectives to design possible networks and outline the best way to run them. Once a logistics system model has been settled upon, it is run through Transportation Manager to generate a new network. Transportation orders can then be dynamically managed. What’s more, cross-company workflows now connect LG Electronics Europe to its supplier network. Rather than ceding control to its 3PL providers, LG works in partnership with them. Freight audits reveal comprehensive statistical insight into logistics spending. Truck-loading efficiency ratios are used to optimize the vehicle-miles needed to transport like tonnages of freight. Consolidation ratios show how to combine two or more shipments to yield maximum cost savings. Transportation Planner then weighs product availability, customer delivery commitments, and facility, inventory, and transportation network constraints to create benchmarks. By focusing managerial attention only on activities that fall outside of these accepted norms, labor productivity is maximized. This built-in exception-based management functionality minimizes the need for human intervention and review. Three-dimensional load building automatically uses order line data to optimally configure pallets, taking into account weights, dimensions, stacking protocols, and other factors. A web-enabled interface displays this customizable 3-D view, and a Gantt bar chart illustrates the project schedule for dock and vehicle utilization. All transportation plans are archived so that they can be used in historical analysis and future what-if scenario construction, and previous asset allocations and carrier assignments are considered as new transportation plans are created. Multiple users can access and edit any active plan. As LG Electronics Europe’s users became comfortable with the system, they progressed beyond basic tasks such as loading trucks and scheduling deliveries to more complex issues including managing tariffs and checking for invoice duplication. Workload efficiency was bolstered by the ability to access realtime information, the exception-based management tools, and the ability to tailor logistics to local environments. Managers quickly gained confidence in their logistics decision making. Investing in JDA Services—Consulting, Education, Performance Engineering, and Support Services— provided valuable support with system implementation. Although change was introduced systematically with a comprehensive training regimen, LG Electronics Europe’s transportation manager, Menno Cleton, was thankful to have JDA consultants during the final three steps of the seven-step JDA Enterprise Methodology (JEM): Deploy, Transition, and Evolve. These experts walked users through equipment use, interface details, tool usage minutiae, and other miscellaneous issues. In addition, LG participated in a JDA Special Interest Group (SIG), which organized and supervised group meetings with other JDA customers to share experiences and offer peer-to-peer support. A true supply chain transportation knowledge base and increased visibility into LG’s transportation 3. How did implementing JDA Software solutions change the way LG ran its business? 4. How did LG’s new logistics and transportation management system improve management decision making? Describe two decisions that the new system solution improved. 5. Build the Organization, Management and Technology diagram, fill it in correctly and report it in details in written form. network quickly produced significant cost savings, yielding a generous profit. Dedicated performance analysis using the built-in business intelligence (BI) tools resulted in improvements in all transportation metrics. Managers can now see a load plan’s optimized cost compared with its implemented cost or how shipment costs are calculated from loads along with 60 other key metrics by selecting a report or dashboard directly within their current transportation workflow. Improved service (in-stock) levels, faster order cycle times, reduced time to implementation, and improvements in the freight audit process have all been achieved. LG Electronics Europe can now also assess the performance of its carriers and allocate loads accordingly. Improved service levels have yielded increased customer satisfaction. Consolidation ratios in all implementations saw a 10 percent improvement, and optimized load configurations improved truck-loading efficiency ratios. In partnership with its 3PL providers, LG Electronics Europe is poised for continuing improvement in its service levels and adoption of additional JDA solutions.

Questions

What management, organization, and technology factors contributed to LG’s supply chain problems?

Answer 1

The main management requirement is to obtain the same logistics lead data as the third transport network and the exported logistics. This is the root of the problem in the supply chain. To control something you really can not control after leaving your company has caused the impact on many businesses, creating an uncontrollable. This is the only factor I have seen in management. This prevented LG's management system from controlling its products. Organizations suffer from the fact that high taxes are the reason for their logistics supply. Because they could not afford supply due to high taxes, they were forced to use these third parties, which used different supply chain management systems. In an article in the International Journal of Research, Engineering and Technology, it explains why many companies, not just LG, are looking for new leadership roles for third parties.