electronics SCM

electronics SCM - Global Supply-Chain Risks in the Consumer...

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1 Global Supply-Chain Risks in the Consumer Electronics Industry ManMohan S. Sodhi Cass Business School Seongha Lee General Manager, Samsung Europe 15 th October 2004 ABSTRACT : The consumer electronics industry is a $ 240 billion global industry with a small number of highly competitive global players. We describe many of the risks associated with any global supply chain in this industry. We also list steps that Samsung Electronics and its subsidiary, Samsung Electronics UK, have taken to mitigate these risks. INTRODUCTION In supply chain management, there is much discussion on risks related to such aspects of supply chains as short product lifecycles, keen competition combined with cooperation, and globalization. The consumer electronics industry is the very embodiment of these aspects of supply chain management and related risks. While some of the supply- and demand-related risks are similar to such industries as the toy industry (Johnson 2001), the consumer electronics industry faces additional risks due to its vertically integrated supply chains. This article seeks to provide a starting point for understanding supply chain risk in this industry through examples from this industry and related ones like computers and mobile phones. To make the mitigation of these risks tangible, we list steps that Samsung Electronics and its subsidiary, Samsung Electronics UK, have taken to manage these risks. The consumer electronics industry is worth US $ 240 billion annually worldwide comprising visual equipment, audio equipment, and games consoles (Data Monitor 2004) and is a quarter of the broader electronics sector (Market Watch 2004). It is truly global with Asia Pacific having 35 percent market share,
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2 Europe having 31.5 percent, the US having 23 percent, and the rest of the world having the rest (Data Monitor 2004). Many of the players in this industry are household names like Sony, Samsung, Philips, Sanyo, and Sharp (Figure 1). ------------------------------------------- Insert Figure 1 somewhere here -------------------------------------- The industry faces consumers with unpredictable tastes on the demand side, supplier-related delays or disruptions on the supply side, and production challenges in the middle. The high rate of technology evolution or revolution requires large investments without the guarantee of proportional returns. As a result, the big players are global companies that require global markets to achieve economies of scale. Even these companies have to sometimes cooperate on standards to reduce the risk to their investments. Samsung Electronics is part of the Samsung Group. In 2003, consolidated revenues for Samsung Electronics were $55 billion. Samsung Electronics UK is a subsidiary of Samsung Electronics contributing $1.2 billion in revenues. Samsung Electronics has one of the highest R&D expenditure as a proportion of revenues in the industry and spent about $2.9 billion in 2003. Like its competitors, Samsung Electronics is global and employs 88,000 people in 89 offices in 46 countries. Not including facilities in Korea, it has 24 manufacturing complexes, 40 distribution bases and 15 branches spread over all continents except Antarctica. Countries with
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This note was uploaded on 06/16/2010 for the course MS&E 369 taught by Professor Blakejohnson during the Spring '08 term at Stanford.

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electronics SCM - Global Supply-Chain Risks in the Consumer...

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