The Samsung Way ..

Business schools around the world spend a lot of time discussing the Apple model of growth, its focus on innovation, excellence etc. But more often than not, we forget the second number player. This time it is Samsung of South Korea. What makes Samsung a global powerhouse of industrial product design and high quality and performance industrial  and fast-moving-consumer-goods, including white goods and products ?

Samsung from South Korea is the second largest global electronics company (after Apple) and the 15th largest global business entity with an annual turnover of $200 billion, (2 x Tata sons) and annual profits of $20 billion. (click here for Global Fortune 500 link)

It has more profits than the combined profits of the top five Japanese electronics companies which once upon a time dominated global electronics industry. ..

What helped Samsung reach this indomitable position among global corporates ? What is the  Samsung Way ?  

It was very interesting to read an article from Industry week (click here) on Samsung based on the book Samsung Way by J Song and K Lee. 

The notable points in the book as well as the article are the following

1. Focus on developing internal Industrial Product Design expertise, in whuich they succeeded. Presently they have almost 1600 product designers.
2. Focus on credible partnerships that bring value - Initial tie ups with major global companies like IBM, HP etc for technical collaboration and later with design expertise and numerous patents to its credit, ability to negotiate with these industrial giants and carve out markets for quality products around the world

   

   Credit Industry week, August 2014.
   

   
   
3. Focus on high spending on Research and Development.
4. Focus on CHANGE. In fact Chairman Lee, even went to the extent of stressing, change everything in your life except your wife and children.
5. Focus on hybrid management style (combining the good points of Japanese and US management styles) - while Japanese companies focus on improving efficiency and competitiveness and developing in-house talent, American companies are more centralised, focus on outsourcing of production, getting profits and performance, frequently restructuring business and products.
6. Focus on improving product and process competitiveness and product quality
7. Focus on frequent restructuring, performance based compensation, high quality talent recruitment resembling US corporations in managing human resources
8. Focus on cost reduction by deploying Japanese management principles of Lean and waste reduction besides improving output and quality
9. Samsung Human Resource DevElopment Centre (SHRDC) spends a lot of money annually to train all their staff with special emphasis on senior promoted faculty with latest management principles from US examples to develop a high performance culture
10. Focus on effective demand management and supply chain management helping Samsung's massive 37 global production plants supply demand coming from the 63 global marketing offices ultimately helping meet the the market and customer needs.
11. Focus on meeting production targets within the stipulated time thereby improving product acceptability among dealers and customers
12. Focus on adapting production to changing customer demands by deploying Flexible Manufacturing Systems and Cellular Manufacturing, one person cell assembling complex products single-handedly, led to improvement of many skills in-house.

Click here for an HBR article on How Samsung became a global design powerhouse in HBR Sept '15.

Thus we can say it was the attempt by the Samsung management to take the best from both Japanese and AmerIcan management styles, while at the same time, avoiding the poor practices Helped Samsung scale greater heights and conquer new global markets and become the mighty global electronics market leader it is today.

Technology changes over the years ..

As usual I am a skeptic when it comes to accessing and purchasing new technology. I adore old technology and want to fully utilise it before experiencing new technology. Though I can understand new technology and its advantages, I somehow feel the old technology should be fully utilised and exploited before we sidestep it and access better technology. I am afraid of it, but feeling of perfection, whether what it being purchased is the best in the market or are there better alternatives available, if not in this market or country, in other countries, has always bogged me a lot. 

Britannica  defines technology, as the application of scientific knowledge to the practical aims of human life or, as it is sometimes phrased, to the change and manipulation of the human environment.

Bill Gates once famously said - "We are changing the world with technology". The agonising question is are we changing it for the better ?

Refrigerators have played an important role in human society and life. Though the first refrigerator was invented by Britisher Jacob Perkins in 1838 in London, ice making machines were introduced in 1854 The first commercial refrigerator was developed by Albert MNarshall in 1889 and commercial refrigerators were mass produced by Frigidaire in 1923. 

Refrigeration slows bacterial growth. Bacteria exist everywhere in nature. They are in the soil, air, water, and the foods we eat. When they have nutrients (food), moisture, and favorable temperatures, they grow rapidly, increasing in numbers to the point where some types of bacteria can cause illness. www.usda.gov

Introduction of Freon as the refrigerant made refrigerators popular during the 1930s. Unfortunately only later the world came to know of the damage the Ozone hole inflicted on human life and how Freon was majorly responsible for this. Modern refrigerants are now ozone friendly.

It was indeed with some hesitation and scepticism that I gave away my perfectly working old design 27 year old Tata brand Voltas 300 litre refrigerator couple of weeks back to an orphanage in Tumkur. I checked up in Amazon for a replacement. My daughter suggested a 250 L capacity 2 star double door refrigerator from Samsung through Amazon. After some thought and some days dillydallying, we decided to go ahead with the purchase.

Samsung is one of the largest white goods manufacturer of the world, at #15, it is the second largest electronics manufacturer of the world after Apple. The looks of the modern refrigerator that works on digital inventor technology is killer type. At least 5 ft tall, it is very convenient to handle, open, place items and retrieve from the refrigerator.

The good thing about it was the dashing looks, compact frame. There are no exposed refrigerant tubes behind. A 2 star energy rating indicated it uses a max of about 243 electricity units (Kwh) annually, ie running expense of about INR 2000 annually. At cost of Rs 8 per unit of electrical energy, Kwh, it costs just Rs.6 a day to run this refrigerator.

The ergonomically designed handles fused into the body, the product overall design and final finish is simple superb. Being a value addict and a tough value master, unless I find great value in the purchases, I do not go ahead with them. Regarding this purchase, I am extremely satisfied. Having worked in the industry and having worked with 200 Ton industrial scale chilling plants in the tyre industry, I know this purchase of a 0.25 Ton refrigerator is chicken feed. In addition there is a 10 year warranty on the compressor and no need of an analogous voltage stabiliser.

Unlike the standard single-speed compressor, which is either off or operating at full speed (typically about 3,600rpm), the digital inverter compressor is almost always on, but can operate at different speeds – from 1,100 to 4,300rpm. This ensures high efficiency and consistent temperature inside the refrigerator. It also results in significant cost savings, a reduced carbon footprint, less noise and a longer lifespan for the compressor. The digital inverter compressor is one of the most important innovations in the history of refrigerators and food preservation and Samsung has led the way. www.samsung.com

But the extent to which Samsung has made the product extremely customer attractive and given fantastic finishes, I can only say they are doing a good job. South Koreans are no doubt, doing a satisfying job in India and they are bound to grow even further, be it mobile phones, white goods like refrigerators, washing machines or even automobiles from Hyundai. Tata recently trounced Hyundai to be the second most popular and largest automobile brand in the country.

The customer obsession in this product is extremely gratifying. The looks are extremely stunning. My friend has the same 7 year old model in his home, working perfectly fine. A big thanks to Amazon for having given a 12 % discount on the price and delivered the product without any damage in the best condition in two days. And Amazon charged me just INR 22,300/=. When I did check up with another store in my vicinity on what could competitor's refrigerators offer, I was surprised to find LG and Voltas come with equally stunning and energy saving models. 

While the variable speed rotary compressor inside the fridge is the new technology, using the ambient solar energy inside the room to power the refrigerator would be the new technology that would disrupt household refrigeration in the near future. 

Samsung from South Korea is the second large technology company of the world, standing at rank 15 in the global 500 list from Fortune mag, with revenue surpassing $200 billion and profits $22 billion.

An interesting discussion on E-commerce Product Returns ..

E-commerce product returns is a big pain for all e-commerce players. We know it has a negative impact on product margins. If not handled properly it can result in heavy bleeding for the companies. While assuring that products shipped to customers are of good quality, packed and delivered on time, due to reasons beyond the control of the organisation, products get returned by customers. Why do companies give liberal product return policies ? We know it is to attract more customers. But more often than not product returns are a big drain. 

To analyse this returns process, we had an interesting discussion in the classroom and found that more often than not, returns are not such frightening figures made out in the media. It is the poor ethics of the customers which we found surfaced many a time in the classroom. 

Click here for a caselet on the product returns process.

We did an Ishikawa analysis (cause and effect analysis) to find why customers generally return items. (click here)

Delay in delivery, poor fit, poor packaging and hence product damage were the most pressing reasons for product returns. 

While the e-commerce world in general had returns rate of about 30%, it was found from literature that Amazon had product returns of between 5 and 15 %. The returns rate for brick and mortar products were about 9% globally.

Unless the e-commerce players offered easy and fast item returns policy, customers were not ready to return to the website for more purchases. It lowered the customer risk of being bogged down with a wrong and useless product. 

Th discussions were of good quality and enabled the students get a good idea, understand the loopholes used by frequent defaulters to circumvent returns policies and how to increase customer satisfaction and customer returns to the website.

An organisation that can ensure free and fast product returns while at the same time ensuring low rates of forgery and cheating by customers through innovative ways can become a market leader in the long run.

The role played by the reviews and feedback section in prompting the customers for purchase was also discussed.

An interesting Kaizen exercise in the class ..

 Kaizen is about continuous improvement. As usual in the Lean Operations management class for sem 4 MBA in Alliance School of Business, Bangalore, I was talking about Kaizens and had distributed a small self prepared note to the students. About 5 students attended the session in a class strength of 19, as the classes were resuming after the closure due to Covid and hijab row in Karnataka.

Click here for my caselet on kaizen.

After discussing about the different aspects of the Lean process, given here namely, identifying value, plotting the value stream map, creating the pull, establishing the pull system, the final step was continuous improvement or kaizen.

Since I already have an experience of carrying out Kaizens in the industry, I thought this would be a good opportunity to let the students get real hands on experience on administering Kaizens and benefiting from it. All other actions like value identification, plotting value stream map, waste removal, establishing flow and pull in the system have got to do with  contining the status quo, but what makes the Lean system (Toyota Production System) really unique is the concept of continuous improvement or Kaizens. 

Setting aside complacency, the lean system firmly believes that always there is a chance to do things better. Even when we visit the Toyota plant in Bidadi or Jigani, we are always able to observe the immediate urgency in employees minds of the need to bring positive changes in the work environment, procurement, assembly line, product design etc.. 

Accordingly I asked the students to come up with two Kaizens each on how to improve the quality of classroom interaction inside the classroom. The students were on their own. They came out with good suggestions. After collecting the Kaizens, I asked them to be be seated together around a table and evaluate each of the ten Kaizens and classify them into Class A, B or C.

Two Kaizens were class C, impossible to implement, while one Kaizen was class B, ie. possible to implement but needs time, investment in infrastructure and more talent. The third group class A, had the rest seven Kaizens. I asked the students to analyse each of these seven kaizens and identify the top one with greatest impact and benefit. 

Two Kaizens came on top. 

• One relating to bringing more of case discussions, not just caselets in the class. 
• The other Kaizen related to bringing more of visual system of teaching and active learning, activity based learning in the classroom. 

I have asked the students to do an A3 analysis - the PDCA mapping of the improvements (click here) of the 7 Kaizens and tell me how it can be implemented. 

In an earlier occasion while discussing about Kaizens and implementation with the EPGDM students, one of the students told me how the Kaizen system failed in his organisation. The person who proposed the Kaizen had the responsibility of getting it implemented too. In other words, it was only the people having problems who reported the problems and had the responsibility of fixing the problem. Kaizen was looked at from a negative angle - only those who had problems would report them. This saw the Kanban practice failing because no one wanted to admit that his area had problems. 

The A3 discussion is going to add more colour to our class discussion and I am sure the learning would remain in the minds of the students so that they would start practicing Kaizens in full earnest, knowing the intention and spirit behind Kaizens, when they get to industry. 

George.

Warehousing and Automation

This is the age of e-commerce and we see more and more ecommerce companies entering the fray, making use of technology and modern warehousing and transportation modes and supply management theories to serve customers around the world.

The Fortune 500 list (US companies click here) and global 500 (global companies click here) have Walmart, the physical retailer at the top and Amazon, the e-commerce giant at #2 and #3 respectively.

The physical retailer and electronic retailer, all need warehouses to stock their products. The physical retailer is hard pressed for warehouses at geographically distributed sites across the world, while the ecommerce giant can afford to have centralised warehouses at major cities and effective distribution systems.

I happened to go through a research published in HBR Feb 2022 of how Automation is causing many a heartburn in the warehousing industry. Click here ..

Though automation in warehousing can increase efficiency and productivity it can also result in lot of joblosses and resulting heartburn among employees.

How can this be overcome ?

Fear of job loss, inadequate training and unreliable technology are the main concerns from the employees while the positive points are greater safety, increased productivity, speed and higher quality work.

If the companies keep investing in safety, training for workers and ensure their growth prospects within the company, automation will cease to be a major concern in organisations. Employees who are displaced with the arrival of robots can be gainfully employes elsewhere in avenues where robots cannot play a serious role, like the front end or front office of organisation and solving customer issues.

Visit to Nandini dairy plant, Dairy circle, Bangalore

 

Daily all of us have our share of milk, be it fresh or in tea or coffee. We cannot do away with this milk. But have you ever considered how all this happens ?  Tyhe Dairy supply chain is one of the most difficult and cumbersome supply chain in that it involves many people, particularly if the daily is in the cooperative sector. How complex the dairy supply chain is to collect milk from the farmers, homogenise it and bring it to the collection centre and then to the Dairy circle plant for further pasteurisation, packing and distribution to the outlet points around Bangalore.

 

Along with Major Druv and Prof. Sajan Mathew, we made a visit to Nandini Dairy plant in Dairy ciecle this afternoon. Dhruv is doing his EPGDM project over there. 

 

The entire supply chain was explained to us well by the Asst manager (production) Kavitha. We were also taken to the control room from where we could control all operations in the plant, right from receiving milk to pasteurisation, packing, shipping etc.   

 

The plant is maintained at high levels of cleanliness and hygiene. The butter pant, the chiller, the screw conveyor through which the butter reaches the packing area, all were a treat to the eyes and mind.

This is the second most advanced dairy processing plabnt in the country after the Amul plant in Anand, Gujarat.

George.