Samsung 2006 Annual Report Download - page 64

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Efforts to bolster supplier competitiveness
Samsung Electronics earmarked KRW43.7 billion in 2006 for new facilities at
a total of 34 suppliers. This includes KRW26.4 billion for expanding production
lines or improving quality assurance and productivity at 22 suppliers. Another
12 suppliers received a total of KRW17.3 billion in funds for developing new
technologies or production line equipment for semiconductors or LCDs.
In 2006, we completed a three-year Enterprise Resource Planning (ERP)
installation project to improve suppliers’ information management systems
and abilities to control finances internally. Our support included funds for the
hardware and software as well as consultants for the installation work.
The ERP Project has greatly enhanced suppliers’ operational efficiency,
reducing inventory days by 30% and halving the time for bookkeeping.
We also have provided various kinds of support to improve how work
is performed on the factory floor. We have hired outside consultants to help
suppliers to improve production, cut costs and upgrade work processes. At the
same time, our own experts have been mobilized to help supplier employees
internalize Six Sigma activities and objectives.
Cultivating professionals at suppliers
Samsung trains the senior management of supplier companies in management
techniques related to manufacturing, personnel and other key areas. We also
offer training in Six Sigma methodology and cost cutting techniques as well as
3D design techniques using CAD systems.
In 2004, a new program was launched to groom the children of
employees at supplier companies for top management positions. They are
invited to work at Samsung as interns in production, procurement, R&D or
marketing for a year. We will also send them to overseas to learn the Toyota
Production System or attend other special programs.
Meanwhile, we are providing a new cooperative education model
linking schools and industry, and our expanded OJT programs for suppliers
are providing young people greater job opportunities. We continue to expand
our rotational human resources development (HRD) programs. For example,
we have formed a consortium with 19 of our suppliers as well as 8 major
universities around Korea to offer a special HRD program that is tailored to
supplier requirements.
Economic benefits from the supplier support program
Our supplier support program has reaped various tangible results since its
launch in 2004. Production innovation has been established at suppliers.
The process defect ratios have dropped while output per worker has risen by
30%. As a result, the suppliers have improved their collective bottom line by
some KRW50 billion a year.
In addition, we have transferred parts architectures and materials using
group value engineering (GVE) and have shown suppliers how to alter processes
to lower costs. Such methodologies have improved the cost structure at
suppliers by around 20%.
Technology innovation is unquestionably an important factor for
improving supplier competitiveness. Therefore, we are partnering with our
suppliers to develop new technologies for localizing semiconductor and LCD
production equipment and for making key parts for strategic product lines
such as mobile phones. We provide the capital that suppliers need to secure
their production equipment in Korea instead of relying on expensive imports.
Samsung Electronics and Korean Medium and Small Business Administration
are promoting the development of new products with procurement conditions
attached. The resulting technology innovation at suppliers is estimated to be
worth more than KRW100 billion a year.
Samsung Partners’ Day
The annual Samsung Suppliers’ Day was held in February 2006
with more than 400 executives from Samsung and its supplier
companies in attendance. The event encompasses various
activities, including an awards presentation to recognize exceptional
innovation performance in one of four categories—technology,
quality assurance, production cost and manufacturing. In the
future, we will remain a true “partner for mutual prosperity,” sharing
a global strategy with suppliers while advancing toward global
leadership. Starting in 2007, the name “Samsung Suppliers’ Day”
will be changed to “Samsung Partners’ Day” to underscore the
commitment to excellence through mutual benefit.