Samsung Electronics, a leading Korean company as well as a symbol of the IT industry, carried out an innovative project to strengthen its global Supply Chain Management (SCM) execution ability, gaining the industry’s interest. Samsung Electronics placed its emphasis on the business management scenario of predicting and preparing for future environmental changes and competitiveness, which is one of the survival strategies of an industry with an unpredictable future. The company is aggressively establishing the foundation for enhancing business management speed and efficiency-oriented business management innovations since early this year. In accordance with this type of scenario, Microsoft’s Business Intelligence (BI) Platform provided life to Samsung Electronics’ SCM system. Samsung Electronics decided to implement an action-oriented BI solution that enables on-demand changes of business management plans and reflects these adjustments. As such, it decided to deploy SQL Server 2008, which can satisfy all three major requirements of BI solution, including ‘performance and reliability’, ‘cube write-back’ and ‘user convenience’, and the company is thoroughly experiencing the benefits of this IT innovation. In the face of enterprise-wide application, it has completed application in only its video display business division, so it is still too early to mention any fixed quantity of benefits. However, with this system implementation, Samsung Electronics expects to increase its forecast accuracy for product demands by more than 20%.
||We judged that we must operate a market-based SCM in order to detect changes in the global market environment and to adapt quickly to the change requirements. So we required a reliable BI solution that can support a large amount of data processing on Samsung Electronics’ promoted BI platform, which consists of hundreds of terabytes of data from ERP and GSBN systems. Ultimately, we chose Microsoft’s BI Platform since it can resolve issues of timely and technical costs felt and demanded by Samsung Electronics while it was facing system implementation.
Deputy Manager, Samsung Electronics
Need for market demand-based global SCM in order to actively respond to changes in the external environment
Samsung Electronics, showing limitless growth in both semiconductor and cell phone industries, is a global corporation with more than 90 offices in 52 countries all over the world. Last year, it achieved US 100 billion dollars in revenues, positioning itself as one of the ‘Top 3 Companies in Global Electronics Industry’ and early this year, it ranked 38th, the highest for a Korean company in a Fortune Magazine announcement of the ‘Top 500 Global Companies for 2008’.
Until it established a noteworthy business management index of US 100 billion dollars in annual revenues, Samsung Electronics was under pressure from high logistics costs and insecure supply and demand of raw materials and, as a manufacturing company, it is always conscious about imminent risks and a need for constant innovation and future visibility to avoid over-purchase/production.
In particular, Samsung Electronics has had strongly backed business innovations with a work environment revolution through IT and it focused on advancing the abilities of its Supply Chain Management (SCM), which is considered a basic for manufacturing companies.
After achieving results of increasing efficiency and decreased costs in overall business through evolved SCM, Samsung Electronics achieved unprecedented revenue for the first quarter of this year. The company also gained strength from a decrease in inventory through SCM, as it was able to double its inventory assets circulation rate compared to ten years before, displaying visual results. However, the competition between companies is becoming fiercer and consumer expectations are rising, contributing greatly to market uncertainty.
Hence, Samsung Electronics needed to establish a differential strategy to position itself as the highest order of electronics company in the forthcoming decade. As a result it entered into a business management system with scenarios that can variously and instantly recognize signs of environmental changes and counteract accordingly. In order to support this new strategic change, Samsung Electronics turned to IT for a solution and implemented an IT project to provide insight into its SCM. The company selected Microsoft’s BI Platform as the instrument for realizing this.
Jo Dong-geun, Deputy Manager, said, “Samsung Electronics’ SCM system has already achieved global top-level but the problem is that its contents, which are all related to Samsung Electronics are limited. In the past, we had a way to systematically integrate competitors’ information inside SCM or foresee global market movements or even forecast worldwide demands for our products.”
He added, “We judged that we must operate a market-based SCM in order to detect changes in the global market environment and to adapt quickly to the change requirements. So we required a reliable BI solution that can support a large amount of data processing on Samsung Electronics’ promoted BI platform, which consists of hundreds of terabytes of data from ERP and GSBN systems. Ultimately, we chose Microsoft’s BI Platform since it can resolve issues of timely and technical costs felt and demanded by Samsung Electronics while it was facing system implementation.”
After considering performance and flexibility, chose a combination of Microsoft SQL Server 2008 and Office System as an enterprise-wide BI platform
Samsung Electronics considered the meaning and weight of this BI system as a strategic weapon acting as the ‘brain’ required for establishing logical business strategy and it conducted a survey about various BI solutions at the end of 2007, entering thorough solution selection process including technology analysis and benchmarking test process to compare performance.
Jo said, “Since the BI system had to process a large amount of data and frequent queries including frequently unexpected queries and accesses, reliability is the most important requirement of mass data processing. In addition, other selection criteria that we check thoroughly include query speed and cube write-back performance. Our basic requirements as well as other conditions include expandability, development productivity and maintenance operating ability, taking into consideration the characteristics of the BI system, which evolves according to the utilization of users.”
After spending several weeks in the investigation process, Samsung Electronics narrowed its search to a total of 3 solutions including Oracle’s AceBase, SAP’s Business Objects and Microsoft’s BI solution. In the initial bid against each other, SAP’s Business Objects was the first solution to be excluded due to limitations in creating simulations while Oracle’s AceBase and Microsoft’s BI solution underwent severe competition.
Jo said, “In the case of Microsoft’s products, we had SQL Server 2008 in mind but at that time, the product had not been released officially, so we had no choice but to conduct the comparison with SQL Server 2005. We performed benchmarking tests for a week using actual data in systems installed with these two solutions and results showed that there was almost no or meaningless differences in terms of cube write-back function as well as query speed and performance.”
Samsung Electronics began their BI implementation project centering on SQL Server, which satisfies all three of their major challenges including performance, cube write-back, and user convenience, as well as provides mining tools, reporting capabilities, and additional functions not offered in Oracle’s AceBase. This BI system is a key system of enterprise-wide business and Samsung Electronics began the first stage development based on SQL Server 2005 rather than the beta version of SQL Server 2008. Later in 2008, one month before the release of the official version, Samsung Electronics decided to participate in Microsoft’s RDP (Rapid Development Program).
Through this program, Samsung Electronics closely cooperated with Microsoft’s consulting organization to investigate its BI implementation scenario, which is expected to become the business brain of its group of companies and searched for ways to implement optimal performance. In addition to development tasks, it also established detailed checklists for the migration process, setting complete before and after measures so that no issues would arise during the process, including programs created with the 2005 version and procedure components. Having promoted the project following these processes, Samsung Electronics, full of confidence, promoted aggressive upgrade tasks the day after SQL Server 2008 was released.
Since the 1:1 benchmarking test, Samsung Electronics was certain of SQL Server 2008’s performance and decided to deploy it but it emphasized that there were other noteworthy factors involved, such as user familiarity. Jo says, “The BI system we wanted to implement should provide intelligence required for decision making before its potency disappears, since it is used in making decisions with deep financial impact. Since users can easily use and feel familiar with this BI Solution, its implementation benefits can be maximized. Accordingly, we judged that Microsoft’s platform is much more advantageous.”
In August 2008, after 3 months of planning and implementing, simulation and verification processes, Samsung Electronics launched its SCM system with a new look filled with market information. Samsung Electronics built their DW/ODS and OLAP server in SQL Server 2008 and applied Smart Client in a simulation UI/management UI to create employee-familiar UI. Also, it used Microsoft SilverLight to create a BI dashboard, making special efforts to enhance the completeness of the system.
After upgrading to SQL Server 2008, Samsung Electronics’ BI system showed dramatic changes. Jo says, “After upgrading to SQL Server 2008, we executed the system to perform tests and at first, we were almost deluded that the system was not operating. In the past, due to the limitations of system speed on RDBMS, we could not even think of performing queries, but with SQL Server 2008, the system was transformed to provide these queries with responses within one second.”
||Calculating expected ROI before promoting this project showed 1000% more benefits. And we can safely assume the payback period to be one year after the application to enterprise-wide business division has been completed.
Deputy Manager, Samsung Electronics
Achieved 1000% ROI with enhanced demand forecast accuracy
What are the implementation benefits of market demand-based SCM that Samsung Electronics, which was promoting rapid approachability to market changes including scenario business management strategy to step one foot ahead of its competitors, built?
Enhanced reliability of decision making
As a global development and manufacturing company of digital products that have short lifecycles, Samsung Electronics is able to establish smart business management plans, which are the source of its competitiveness. Now that it can establish business management plans reflecting market demands and economic trends, Samsung Electronics is able to establish optimal marketing scenarios or support simulations of revenues, promotions and product placement. It has stacked its Business Intelligence on top of its SCM solution for optimal decision making and rapid agility of business management to adjust to environment changes.
Jo says, “Selecting Microsoft’s BI Platform as a strategic weapon to respond to a rapidly changing environment is a most appropriate choice. The benefits of this system implementation are expected to provide repercussions in future purchases, resources operation and sales planning, enabling Samsung Electronics to cross through the era of uncertainty as a compass supporting its business management strategies.”
Expected to increase demand forecast accuracy by more than 20%
It has not been 4 weeks since it launched this SCM system and Samsung Electronics cannot offer quantitative benefits at this stage but it expects that if it expands this application of SCM to its overall business divisions then its demand forecast accuracy will increase by at least 20%. In the case of manufacturing companies like Samsung Electronics, even 1% increase in demand forecast accuracy can lead to substantial cost reduction in raw materials, logistics and production tasks. If this SCM system is expanded to all revenues division, then the consequence will be even greater. Jo says, “Calculating expected ROI before promoting this project showed 1000% more benefits. And we can safely assume the payback period to be one year after the application to enterprise-wide business division has been completed.”
Decreased business risks with strengthened simulation
More direct benefits are enhanced system speed and cost reduction. Jo says, “In our previous Enterprise Database Management System environment, querying simple information would require at least 7-10 seconds. If the amount of data increases, then the speed would be delayed and employees had to take short-term actions including placing UI with many queries on in-memory and tuning database on-demand. But now they can query and check data immediately, speeding the work processing of employees, further increasing satisfaction about IT. In addition, employees can freely look for valuable information that is useful for their business using preferred data mining tools. As a result, they can perform time-series forecasts or multi-dimensional analysis, which were weaknesses of their previous environment, and systemization of analysis process, enabling them to avoid errors in decision making. Moreover, they can perform simulation tests to reduce analysis costs and decrease the risk of inaccurate strategic decisions.
Microsoft SQL Server
For more information about the Microsoft SQL Server, go to: http://www.microsoft.com/sqlserver/2008/en/us/default.aspx
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Document published March 2009