LG outsources more as it globalizes its supply chain
LG has been making dramatic supply chain strides with the goal of becoming a top three company in each of its markets
By David Hannon -- Purchasing, 10/15/2009 2:00:00 AM
LG Electronics is outsourcing more manufacturing as it moves from a mostly Asian manufacturer to a global consumer electronics giant.
LG's Chief Supply Chain Officer Didier Chenneveau outlined the Korean firm's supply chain strategy at the Council of Supply Chain Management Professionals conference last month. He says LG has been making dramatic supply chain strides with the goal of becoming a top three company in each of its markets. Among the broader supply chain steps that LG has taken are:
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An increase in outsourced manufacturing (LG prided itself on its manufacturing ability and the concept of outsourced manufacturing was completely foreign, so the cultural shift here was a big challenge)
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Improved cost visibility across the organization
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Globalization of its supply chain (while LG had sites around the world, it wasn't thinking like a global company and its internal organizations didn't reflect the markets it was doing business in)
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A move to a more demand-driven supply model with more accurate forecasting.
Some of the specific strategies LG's supply chain team took to move along this curve include:
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Creation of 10 metrics across various areas (financial, demand, order and supply) to track progress and report to the CEO on them twice a year
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Standardize on one ERP system (Oracle)
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Standardize on one financial system
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Consolidate the various WMS/TMS instances
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Standardize RFPs and contract terms and conditions across the company
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Improve sales forecast accuracy from 30% in 2008 to its current level of 40% with the goal of 60%
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Make English the standard language across the company's supply chain to facilitate better communication
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Standardize job titles in the supply chain
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Rationalize the more than 41,000 SKUs LG carried in 2008.
Strategic Supply Chain Management- TOC
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