Scm Of Lg 1v223

1

Logistics Management LG Electronics India Limited

By: Shilpa Garg (03) Medha Grover (13) Saman Naqvi (22) Mansi Mullick (39)

2

Task • To visit a corporate and understand their logistics system. • To find out how the logistics manager takes various decisions involved in international logistics.  Resource Person: Mr. S. M. Srivastava, Deputy General Manager (Supply Chain), LG Electronics India Limited, New Delhi.

3

LG Electronics A South-Korean multinational corporation which produces electronics, mobile phones and petrochemical products.

LG is the world’s third largest appliance maker.

It is also the world’s second largest manufacturer of television sets and third largest producer of mobile phones.

LG manufactures a wide variety of products such as washing machines and microwave ovens, besides employing third-party manufacturing services.

4

The Supply Chain Process LG’s total logistics cost (including export freight cost) is 3.01% on net sales, minus excise duty. Follows the “Global Supply Chain Planning (GS)” model, first implemented in 2008. GS integrates LG operations worldwide using Oracle ERP systems. It also provides previous weeks’ performance results.

5

The Supply Chain Process • GS combines designs, parts supply, procurement, production, supply chain, cost management into an integrated process that allows the company to know how much to produce. • Obstacles in good transportation (theft, piracy, misrepresentation of inventory, counterfeiting) have been reduced by implementing Global Digital Logistics System.

6

Forecasting

Forecasting

• Company adopts a short-term forecasting of up to 6 weeks and a mid-term forecasting for 4 months. • The company maintains a forecasting model of 16 weeks, since it needs to place an order for some components at least 3 months in advance.

• The short-term forecasting is 95% accurate. • It imports 35-40% of components which total about 60% in of volume.

7

Forecasting • “Global Demand Management Innovation (GDMI)” is used to arrive at the expected demand by using previous years’ seasonality demands and trends in previous quarter across each product. • The sales department sends across its forecasting data to a centralized server at the end of the month for the following month, while keeping figures tentative for the next three months. • The production department picks up the plan and based on the closing stock and demand forecasting decides on the numbers to be manufactured.

8

Inventory Control

• Days of inventory outstanding (DIO) for finished goods is 27 days. • Monthly warehouse shelf inventory turn is 4 days.

• Company is focusing on reducing DIO because of shortened PLC. • End-of-Life (EOL) products are sold though special schemes in smaller towns and rural areas.

• GS keeps track of EOL products and also tells where they can be sold. • Transportation and warehousing have been outsourced at LG Electronics.

9

Transportation logistics • Global bidding conducted every year to choose 5 shipping lines for its imports. • LG is first consumer durables company to use sea route to ship goods.

• Sends out shipments through rail route using Private Container Train Operators (PCTOs). • Mobile phones are shipped by air.

• Started using Closed Body Trucks for transportation in 1997. • Primarily use road as a means of transportation.

10

Outbound Logistics • Process related to storage and movement of final product. • Inflow of trucks from North India to other parts of the country during festive seasons, creating problem of long hauls. • Sends 7500 vehicles every month from various manufacturing locations to branch distribution centers. • The constraint of availability of quality vehicles led the company to explore multi-modal transportation.

11

Regional Distribution • Instead of going to national distributors, the company goes to regional distributors directly. • Offers higher margins than other companies. • The expertise of the regional distributors helps LG to send out the right products and manage the reverse logistics too.