November 01, 2016
Samsung’s recent recall of the Galaxy Note 7 calls to mind a few critical supply chain lessons.
There’s a big push in the technology industry to roll out upgrades and launch new products as quickly as possible, but this rush in production and innovation can’t come at the expense of quality control.
In Samsung’s case, the company was aiming to bring the Galaxy Note 7 to market ahead of Apple’s iPhone 7.
But rather than leveraging their supply chain as a competitive advantage, Samsung’s speed-to-market ended up costing them customer loyalty, brand reputation and sales - and that’s not counting the $5.3 billion in lost profits and costs of halting production and physically recalling the product.
Read: Samsung Asks Its Employees to Question Their Work
Maintaining quality control is a difficult task for any company, but it gets even more complicated for companies that have a wide web of geographically diverse suppliers to manage.
The Samsung situation provides a few takeaways for procurement and supply chain teams:
1. Supplier relationships should be at the center of procurement. While cost reduction is important and often at the top of most organizations’ priority lists, we need to reframe the conversation from “how much more can we squeeze from our suppliers” to “how can we get more value from our suppliers?”
Oftentimes when we choose suppliers based solely on cost, product quality suffers. When we work with suppliers in a collaborative, strategic framework to cultivate more value for both parties, we find that less risk, continuous improvement and lower costs follow.
2. Balancing stakeholders is an art we must master. Marketers, executives, designers and suppliers all have different ideas of what a product should look like, what it should be made of, and when it should be launched. These different opinions are driven by different needs.
Quality matters most to product development while speed-to-market is a major concern for the marketing team. When departments fail to communicate and coordinately effectively, the results can get ugly.
With Samsung, the problems are thought to stem from a design flaw, which likely could have been caught if the organization was better aligned. It’s up to procurement to understand the overarching company objectives, each department’s goals, the trade-offs for each stakeholder interest and make the modifications and decisions needed to arrive at the best possible outcome for the business.
3. Procurement plays a leading role. Procurement is the only part of the business that works with every other team to help them achieve their goals. This puts procurement in a unique position to drive the success of not just their function, but for the entire organization.
This should empower us, and we need to remember this as we interact with other departments and make both tactical and strategic business decisions.
Samsung’s recall reminds us of the importance of quality control and effective supplier relationship management.