How Samsung drives sustainability across its supply chain
Since Q1 2018, Samsung has consistently ranked as the biggest smartphone manufacturer in the world. For much of the past decade, Samsung’s pricing strategy and general level of quality has seen it steal a march on the smartphone progenitor but, where Apple had done fierce battle with the Korean manufacturer on a quarterly basis – swapping pole position as often as Ayrton Senna and Alain Prost – the margins have widened. Spikes in consumer interest see surges in Apple’s share of the global market, but the sheer consistency of Samsung’s performance, and indeed the impact of Huawei’s meteoric rise, has seen it stay on top while Apple ponders the diminishing returns of insistent quality-based escalation.
Of course, smartphones are not Samsung’s only revenue stream and catering to a global market with quality handsets, televisions, laptops, white goods, smartwatches and more requires a robust and effectively-managed supply chain. Not only that, but the increasingly conscious consumer poses a fresh challenge for any leading company seeking to maintain its position: sustainability and ethics. In a 20 August blog post, Samsung published a blog post on the issue, detailing the methodology behind its supply chain management practices and offering an insight into how the tech giant ensures its products are available in the right place at right time and by the right means. Sustainability herein refers to environmental, ethical, and business sustainability – the umbrella under which each factor comes is, of course, increasingly vital to overall corporate strategy.
With 2,389 first-tier suppliers across 216 global bases (spread between 74 countries), the scope of Samsung’s supply network is certainly vast. The first port of call for Samsung’s strategy is supplier selection. Based on the mentality that supplier competitivity is vital to Samsung’s own success, the company evaluates prospective suppliers on a range of factors: environment, health and safety (EHS), labour and human rights, and Eco-Partner status. Initial screening is followed by on-site assessments, confirmation of regulatory compliance, affirmation of human rights practices, and evaluation of competition relative to the suppliers’ operational territories.
Samsung, with the permission of its suppliers, publishes a list of them to ensure transparency. This in itself is emblematic of the rigour with which Samsung selects its partners: the company would not want to associate itself with any firm engaged in ethically questionable behaviours, and publishing a list of such associations showcases the confidence Samsung has in its suppliers. With suppliers in place, Samsung engages with them on an operational level to boost their training and recruitment capabilities, flexing their corporate and technological might to draw top talent for their partners and enhance retention. Suppliers also benefit from Samsung’s influence on sales, business innovation, procurement across a global network, and leadership. From a sustainability perspective, its first, second and third-tier suppliers each receive EHS consultation, worksite assessment and product stabilisation to ensure best practices are applied across the board.
This symbiotic relationship benefits the suppliers, Samsung and, ultimately, end consumers. Samsung’s supply chain is replete with responsibly sourced, quality products; its suppliers can consistently enhance both their operations and their environmental sustainability; and end consumers can enjoy quality Samsung products in the knowledge that they have been produced to the highest degree of ethical and environmental sustainability.
Samsung closed its blog post with some examples of the CSR (corporate social responsibility) endeavours it has undertaken in its native Korea. In 2015, the company launched its Smart Factory Construction programme to provide its understanding and expertise of smart manufacturing to companies across Korea, fostering the establishment of efficient smart factories. 1,086 SMEs participated between 2015 and 2017, and Samsung credits those firms’ 54% increase in quality and 58% increase in productivity with the efficacy of its programme. 2,500 additional Korean SMEs are on Samsung’s radar for assistance between 2018 and 2022, with a view to facilitating the sustainable expansion of Industry 4.0 across Korea.
Ethically managed workplaces have been a focus for the company in Malaysia, particularly for the benefit of migrant workers at its first-tier suppliers in the country. Samsung’s 2019 Ethical Recruitment and Fair Labour Practice Training Session in Malaysia, in association with the International Organisation for Migration, drew 80 managers from the company’s Malaysian supply chain to ingrain the importance of ethical recruitment, due diligence and how to remedy unethical practices.
Finally, Samsung’s Responsible Sourcing of Minerals policy has been enacted to ensure that sourced minerals from across its supply chain are bought from sustainable origins. As part of the policy, it has banned sourcing from illegal mining operations in African conflict areas, and has launched a Cobalt for Development programme in the Democratic Republic of Congo to upgrade the labour conditions and living standards at cobalt mines across the country.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”