Strategic Direction

Samsung does six sigma: A case study on supply chain management

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, (2007),"Samsung does six sigma", Strategic Direction, Vol. 23 Iss 9 pp. 15 - 17
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 Samsung does six sigma
A case study on supply chain management

ince the 1990s businesses have recognized the value of supply chain management

S (SCM) not just to their supply chains, but other parts of their operations where the
same principles can be adapted and applied. This has led to several innovations and
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radical success stories, while at the same time Motorola’s six sigma approach has
revolutionized many businesses in Asia following its success in the US in the late 1980s.
Asian companies have also innovated along six sigma principles, so what would happen
when one of the biggest Asian electronic goods manufacturers got serious about both six
sigma and SCM?

Drawing board
Although it has its origins just before the second world war, Samsung is best known for its
rapid growth in the 1990s to become one of the major players in the manufacture of cell
phones, televisions and other audio-visual equipment. In 2006 it had revenues of almost $64
billion and net profits of $8.6 billion. Part of the success in the 1990s can be attributed to its
adoption of six sigma management principles in the early part of the decade, although the
company was never satisfied that all the defects it could eradicate from its systems had
been.
This dissatisfaction in six sigma areas and in its supply chain led Samsung to look at a
combined approach with the two processes to develop a methodology that would enhance
its now global operations. This idea was based on four elements that the Samsung
management thought were key to growing the business efficiently:
1. Discipline. The six sigma approach would formalize approaches to SCM projects.
2. Results. There would be an accent on sustaining success rather than achieving it once.
3. Framework. Applying six sigma techniques to human resource issues meant that enough
fully trained people in SCM would come through.
4. Data. As six sigma depends on a need for quantitative data analysis, the strength in this
area would be developed and would benefit the company.

Discipline
As with many companies, Samsung hoped the discipline offered by a six sigma program
would benefit them, and in addition they wanted to develop a methodology to take the
company forward. Methodology is often used in business research when what it really meant
is simply method – methodology is defined as the development of a method or methods that

DOI 10.1108/02580540710779717 VOL. 23 NO. 9 2007, pp. 15-17, Q Emerald Group Publishing Limited, ISSN 0258-0543 j STRATEGIC DIRECTION j PAGE 15
 ‘‘ This dissatisfaction in six sigma areas and in its supply chain
led Samsung to look at a combined approach with the two
processes to develop a methodology which would enhance its
now global operations ’’

should be applied within a discipline. This is where Samsung wanted to be with their
combined six sigma and SCM approach.
But first they had to look at what others had done, and so did some background research on
the likes of General Electric and DuPont. GE is famous for its adoption of six sigma through
the inimitable Jack Welch, and Samsung found that GE had developed bespoke
methodologies for the requirements of its individual business units. For example, while some
units used the so-called DMAIC approach (De) others used the DMADV approach (define,
measure, analyze, design and verify).
On the other hand, DuPont has had more recent success with six sigma and its application to
supply chains, as well as the utilization of a quality deployment tool to respond to customers’
needs.
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Design
Following this research, Samsung had three main conclusions. Firstly, the traditional six
sigma methodology was not enough and had to be adapted, which is where the ‘‘enable’’
came into the equation in order to support supply chain initiatives and replace the design
and optimize steps. Secondly, it was concluded that three quarters of Samsung’s needs
were to redesign projects with the rest improving processes, so its approaches had to be
split accordingly. Finally, to support system enablement and implementation activity had to
be built into the process, which aped an approach used by GE Capital.
The final approach was therefore termed DMAEV – define, measure, analyze, enable
(instead of the usual design) and verify. These were measured by two key performance
indicators in the shape of finance and operations. All was set for Samsung to implement their
SCM six sigma strategy, and in order to maximize its effect they set out the four external
business factors that would shape its success:
1. Optimization. All improvements must optimize processes from a global perspective for
Samsung and not a local one.
2. Processes. KPIs used to monitor improvement plans.
3. Systematization. Used to set out implementation processes.
4. Limits. Five design parameters were set out in order to shape organizational changes into
the correct channels.

Development
Although they were ready to go, Samsung then had to think about perhaps the most
important aspect of six sigma change, and also the most difficult to nail down. Education,
adoption and application can often make even the most enthusiastic six sigma advocate
founder in the face of an uncomprehending and unwilling workforce. It hopes that at the end
of the training its employees have a holistic vision of where the company is going and how its
six sigma SCM approach will benefit individuals and the company as a whole.
This attention to the final detail is typical of Samsung’s approach, although perhaps the most
telling aspect of its approach is its restlessness. Samsung has always been a relatively well
run, efficient company, however its determination not to rest on its laurels and to look at every

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PAGE 16 STRATEGIC DIRECTION VOL. 23 NO. 9 2007
 ‘‘ Now well under way, its six sigma SCM approach will be fine
tuned, adapted and innovated further for the foreseeable
future ’’

aspect of its operation means that it has adopted six sigma and innovated traditional supply
chain management practices. Now well under way, its six sigma SCM approach will be fine
tuned, adapted and innovated further for the foreseeable future.

Comment
The article ‘‘Supply chain management six sigma: a management innovation methodology at
the Samsung Group’’ by Hong Mo Yang et al. is a fascinating insight into how a truly global
Keywords: operator has successfully adopted six sigma management principles and combined them
Supply chain management, with SCM approaches. While it has good detail and is well written, it does however lack a
Distribution management, critical aspect and any problems mentioned are potential rather than actual ones, which may
Six sigma have been proved more illuminating.
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Reference
Yang, H.M., Choi, B.S., Park, H.J., Suh, M.S. and Chae, B. (2007), ‘‘Supply chain management six
sigma: a management innovation methodology at the Samsung Group’’, Supply Chain Management:
An International Journal, Vol. 12 No. 2, pp. 88-95.

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