4-page Case Study - Posted 11/25/2003

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SAMSUNG

Samsung Gains U.S.$2.9 Million Annually with Portal Solution

With extensive production, distribution, and sales facilities worldwide, Samsung Electronics Corporation had a mission-critical need to enable full, real-time information sharing and collaboration among its employees, business partners, and key customers. To create this Global Samsung Business Network, the company adopted a comprehensive portal solution based on Microsoft technology. Total benefit to Samsung is U.S.$2.9 million annually, with annual return on investment of 235 percent. Samsung says it was impressed by the extraordinary speed with which data moves through the interface from SAP R3. Samsung's customers can identify exact production planning and supply schedules in real time, reducing management cost and maximizing business efficiency. As a result, Samsung expects to increase its competitiveness in international markets.

Situation

As one of the world's largest corporations, Samsung Electronics Corporation maintains facilities across the globe, including 24 production subsidiaries, 26 sales subsidiaries, and 20 branch offices. It produces, markets, and sells electronic parts and components such as next-generation memory chips, computer and telecommunications equipment, color TV picture tubes, and glass bulbs. It also develops computer systems and produces general electronics and precision machines. The global operations are managed by seven regional headquarters located throughout the Western Hemisphere, Europe, Asia, and elsewhere. In the 1980s, Samsung outsourced manufacturing and distribution to local business partners.

Around 2000, the company deployed an integrated enterprise resource planning (ERP) system covering all of these affiliates. As part of this solution, the company's international sales subsidiaries relied on a point-to-point technology system to process information for the purchase of products from the headquarters and regional production subsidiaries. They also used this system to obtain information concerning product distribution among the sales agencies and business partners of local sales subsidiaries. Samsung used a parallel system for information exchange with its key customers. But the systems didn't fully meet Samsung's needs. A patchwork series of e-mail messages, phone calls, faxes, and other methods also were used but presented time lags and other problems.

The Microsoft-based portal, one of the most powerful means we have to boost decision making and customer collaboration, is also one of the most productive investments we could make in our future. Jong Hwan Sa General Manager, Samsung Electronics

What made the enhancement of the IT infrastructure such an important strategic goal was Samsung's competitive environment. Companies including Sony, Panasonic, and Philips already had automated business processes for inventory management, demand forecasting, and information exchange with key customers and were expanding those offerings to include more customers and innovative services such as demand chain management of up to 40,000 retail channels.

Samsung originally considered adopting a demand chain management (DCM) system from i2 Technologies. Although most DCM products have predefined business processes that are fairly simple to apply, Samsung learned that deploying one of these products would create new problems for the company. "If we had introduced a DCM package with some customization, we would be dependent on the developer for every correction and for upgrades," says Jong Hwan Sa, General Manager, Samsung Electronics. "We decided not to opt for the DCM since it wasn't the right choice, especially in view of the capabilities that were made possible by XML Web services."

In addition to the i2 DCM solution, Samsung—which already used SAP R/3 ERP software in its infrastructure—evaluated the SAP Customer Relationship Management module, a HAHT Commerce package, and webMethods B2Bi. All proved to be relatively inflexible, requiring Samsung to purchase components that it didn't need and limiting the solution's ability to scale to meet the company's anticipated growth.

One option that was discounted early was Linux. "We had to complete the project on time and with limited resources," says Chang Hoon Chae, Senior Manager, Samsung Electronics. "Linux and open source software lacked in the ability to operate the enterprise system; therefore, we didn't consider this as an option from the early stage."

With our subsidiaries and distribution channels spread through more than 60 countries around the world . . . the portal has become the virtual center of our company. Jong Hwan Sa General Manager, Samsung Electronics

Solution

Samsung turned to Microsoft® Consulting Services for help. Together, the two organizations conceived and built the Global Samsung Business Network (GSBN), a worldwide collaborative portal system. GSBN enables Samsung and its overseas subsidiaries, partners, and customers to have a clear and real-time view of the status of purchase orders, sales, shipping, and inventory.

Using the Microsoft-based GSBN portal, Samsung, its partners, and its customers can share information and process transactions in real time. The portal includes two separate areas, one for each key audience: a customer collaboration area and a business area for internal audiences such as subsidiaries. Each area is connected to back-end business processes and includes variations on the same four "megaprocesses" needed by Samsung and its audiences, with distinct content and transactions available for customers and for internal users.

These four processes are:

• Distribution of information about product offerings, including new product information and marketing event information for customers, and retail price change and competitive information for internal users.
• Inventory planning, including product availability for customers; content to improve forecast accuracy; and weekly purchase, sales, and inventory information for internal users.
• Order fulfillment and payment, including purchase order tracking, shipping status, and accounts receivable information for customers, as well as automatic transactions and order, product, and shipment-tracking information for internal users.
• Service and support, including training and incentive information for customers, and continuous business improvement information for internal users.

The comprehensive portal solution is based on Microsoft Windows Server System™ integrated server software, including Microsoft BizTalk® Server, Commerce Server, and Content Management Server running on the Microsoft Windows Server™ 2003 operating system. The portal's operations data is maintained on the back end by SAP R/3 ERP software. Microsoft BizTalk Server serves as the intermediary between the SAP and portal systems, and coordinates pricing information unique to each customer and region.

Content Management Server manages content information—such as product catalog and showroom areas—while Commerce Server and Web services are the forward-facing elements that allow business partners and customers to access the portal and its information. The use of web services, coupled with the solution's integration with Microsoft Excel, provides accessibility and support to smaller business partners that do not have sophisticated systems to interact with GSBN.

Especially important for its international user base, GSBN exploits the Microsoft technology's multilingual support, which enables users to easily conduct transactions and access information and product brochures coded in their own language.

"The Microsoft-based portal is tremendously important because it supports business partners who may not have a sophisticated technology infrastructure of their own," says Sa. "Web services make it easy for all of our partners and subsidiaries to connect with GSBN, and we feel it greatly increases the use of the system over what we might have seen with another platform."

Benefits

The new portal solution is giving Samsung, its subsidiaries, and its partners faster and fuller access to real-time data for decision making that boosts revenues and profits while cutting costs. It increases customer communication and collaboration for better customer satisfaction. And because the portal was developed quickly and cost-effectively, and now runs with relatively minor operational support costs, it contributes to reduced total cost of ownership (TCO) on an ongoing basis.

Faster, More Accurate Information Access and Streamlined Collaboration for More Informed Decision Making

"One of the most significant benefits to us of the Microsoft-based portal is the greater efficiency we experience because of our ability to share information with greater speed throughout the company," says Sa. "With our subsidiaries and distribution channels spread through more than 60 countries around the world, the portal has become the virtual center of our company."

Thanks to the portal, inventory and sales data and projections are more available and more accurate, enabling more accurate production plans and delivery schedules. Meanwhile, Samsung's strategic partners, vendors, and distributors also benefit from the greater and deeper information access because it boosts their productivity and competitiveness through, for example, more accurate sales plans and better forecasts of product availability.

One powerful function of the Global Samsung Business Network is its ability to keep customers informed about how product availability compares to a customer's weekly demand forecast. The system also is convenient for Samsung's customers, as it provides a one-stop source of information such as product arrival date, marketing cost analysis, customs service, and banking service.

"Through this system, our customers can identify exact production planning and supply schedules in real time, thus reducing management cost and maximizing business efficiency," says Chae. "Samsung Electronics can expect to increase its competitiveness in international markets."

Annual Benefit of $2.9 Million and Payback in Four Months

Samsung expects direct benefits of the Microsoft-based portal—from additional profits, reduced cost of sales, and reduced site development costs—of U.S.$1.3 million per year. Indirect benefits—from enhanced demand forecasting, reduced inventory costs, and enhanced delivery forecasting—total $1.6 million per year, for a combined annual benefit of $2.9 million. With an annual return on investment of 235 percent, Samsung expects the payback on the investment to take about four months.

"The Microsoft-based portal, one of the most powerful means we have to boost decision making and customer collaboration, is also one of the most productive investments we could make in our future," says Sa.

Faster Development, Lower Maintenance Costs for Lower TCO

Samsung rejected other portal options because of their cost and projected length of deployment. In contrast, the Microsoft portal solution delivered rapid time-to-benefit and reduced maintenance costs, for lower TCO both at the start of the project and projected over its useful life.

"What impressed us the most was the extraordinary speed in bringing the data through the interface from SAP R/3," says Sa. "Using the advanced tools and drag-and-drop visual environment of Microsoft Visual Studio® .NET 2003, we could implement the Web development and Microsoft Windows®-based application development with a single tool."

"Commerce Server is a component-based development system, which increases development productivity, enabling us to save on the time and cost of development and deployment," says Chun Kyu Kim, Assistant Manager, Samsung Electronics. "In addition, thanks to the Commerce Server pipeline technology, we also strengthened our workflow. The BizTalk Server orchestration function was a powerful aid in linking communications among different types of machines, thereby making the code mapping a lot easier. All these factors combined to bring about the successful launch of GSBN."

And because Visual Studio .NET development system helped Samsung to reduce the amount of code needed for the portal solution, that solution not only was faster to create but also will require less maintenance over time. Samsung also will save in ongoing maintenance in other ways—for example, by using Web services to extend the solution to new partners without having to write additional code—resulting in additional TCO savings over the life of the solution.

Microsoft Windows Server System is a comprehensive, integrated, and interoperable server infrastructure that helps reduce the complexity and costs of building, deploying, connecting, and operating agile business solutions. Windows Server System helps customers create new value for their business through the strategic use of their IT assets. With the Windows Server operating system as its foundation, Windows Server System delivers dependable infrastructure for data management and analysis; enterprise integration; customer, partner, and employee portals; business process automation; communications and collaboration; and core IT operations including security, deployment, and systems management.

For more information about Windows Server System, go to:
http://www.microsoft.com/windowsserversystem/

For More Information

For more information about Microsoft products and services, call the Microsoft Sales Information Center at (800) 426-9400. In Canada, call the Microsoft Canada Information Centre at (877) 568-2495. Customers who are deaf or hard-of-hearing can reach Microsoft text telephone (TTY/TDD) services at (800) 892-5234 in the United States or (905) 568-9641 in Canada. Outside the 50 United States and Canada, please contact your local Microsoft subsidiary. To access information using the World Wide Web, go to:
http://www.microsoft.com/

For more information about Samsung Electronics Corporation products and services, visit the Web site at:
http://www.samsung.com/

© 2003 Microsoft Corporation. All rights reserved.

This case study is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.

Microsoft, BizTalk, Visual Studio, Windows, the Windows logo, Windows Server, and Windows Server System are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries. The names of actual companies and products mentioned herein may be the trademarks of their respective owners.