Samsung’s Galaxy Note 7 Supply Chain on Fire

In its rush to beat rival products to market, notably Apple's new iPhone, which launches tomorrow, Samsung Electronics has accelerated new phone launch cycles, but its haste is raising concerns that it fell short on quality testing.


On Sunday, Patently Apple posted a detailed report titled "Korean Press Reports the Exploding Note 7 is a Severe Blow to Samsung that could help the iPhone 7."

Today several more reports have surfaced in Korea today discussing the depth of the problem that is now in play.

One report notes that "As Samsung Electronics has decided to recall 2.5 million units of the Galaxy Note 7 due to a flaw in its battery - its performance will have an adverse effect."

"Also, its distribution and sales will be somewhat affected by Hanjin Shipping's issue. This, in turn, will create the contagion effect to component companies, leading to a vicious circle in terms of price competitiveness and profit."

Yesterday industry sources told Business Korea that "Samsung Electronics is likely to see a 1.5 trillion won (US$1.34 billion) loss on account of the recalls. The figure is calculated based on 1 million won (US$895) per unit and subtracting Samsung Electronics' profits.

The biggest problem is sales suspension of the new handset. When a company has low sales, it makes more losses. A senior official from the industry said, 'The more smartphones a company produces, the lower fixed costs it will achieve. So, operating profits can rapidly reduce when production stops and there are no new sales due to the incident. The amount can even reach trillions of won.'

Marketing is another problem. The company has to delay or cancel new marketing campaigns which are scheduled this month. An official from the industry said, 'There are limits to increase production so the company can boost the production by 10 to 20 percent. However, it is impossible to double it. The company may have an extensive marketing plans after the release and it will make an additional loss when the plan doesn't go well as scheduled.'

Read: China's Online Chatter Muted Ahead of Apple iPhone 7 Launch

This is why some market watchers say that the company will see a vicious cycle that new sales suspension and contracted marketing plans can lead to the decrease in operation profits and then to lower sales of new products.

In particular, many expect that it is the structure that hit both semiconductor and display sectors at the same time. It means that the low sales of the Galaxy Note 7 will adversely effect on the performance of the semiconductor and display divisions of Samsung Electronics, reducing the total profits. Moreover, how to bear losses with component firms will have a considerable effect on the performance.

In this situation, some say that Hanjin Shipping's troubles can also have an adverse effect on sales of its home appliances products. Hanjin has handled about 10 percent of Samsung Electronics' shipments. U.S. retail businesses, such as Walmart and Target, are complaining as they are not being supplied with the products on time before the busy season at the end of the year. 

Source: Patently Apple

Related: 7 Best Practices that Transform Samsung Electronics Supply Chain

7 Best Practices that Transform Samsung Electronics Supply Chain


Article Topics


SupplyChainOpz News & Resources

Is Apple Working on a Trump Contingency Plan?
A Case Study of Apple Computer’s Supplier Hubs: A Tale of Two Cities
The 7 Principles of Supply Chain Management
Samsung’s Galaxy Note 7 Supply Chain on Fire
Google Overtakes Apple as Most Valuable Company
Apple Suppliers Hope to Tap Into New ‘3-D Touch’
Apple iPhone Sales Slack Says Supply Chain Leak
More SupplyChainOpz

Latest in Supply Chain

How Businesses Can Strengthen Their Supply Chains & Build Future-Ready Supply Networks
The Elusive AI Based Supply Chain Control Tower Platform
Global Trade Trends Overview with S&P Global Market Intelligence Head
When It Comes to Digital Transformation You May Not Be Doing What You Think
Discover How Procurement is Driving Sustainability
Online Sellers Find Excellent Opportunities to Win More Customers this Easter
How Chief Operating Officers are Achieving Results with Supply Chain Software
More Supply Chain

The inspiration to create this blog is that I found a lot of good academic articles about logistics and supply chain management when I did the consulting project (master’s degree thesis) about implementation of Supply Chain Operations Reference Model (SCOR Model) in SMEs. I believe sharing my findings to supply chain communities might be a good idea.



View SupplyChainOpz company profile

 

Featured Downloads

How Roaming Shuttles Improve Order Fulfillment Operations
How Roaming Shuttles Improve Order Fulfillment Operations
Implementing this goods-to-person automated storage and retrieval technology improves customer experience, optimizes operations, and maximizes profitability.
Warehouse Contingency Planning Template
Warehouse Contingency Planning Template
We’ve taken the guesswork out of warehouse contingency planning with this downloadable editable template; from performing a risk assessment to testing...

AlixPartners 2023 Disruption Index A Bias for Action Sets Growth Leaders Apart
AlixPartners 2023 Disruption Index A Bias for Action Sets Growth Leaders Apart
In their 4th annual AlixPartners Disruption Index, business leaders cite this as the central dilemma, with 85% of CEOs telling us that it...
2023 Digital Transformation Report
2023 Digital Transformation Report
In this 2023 Digital Transformation Report, we share insights gained from our annual research on technology trends and digital transformation and explore the...
The State of Digital Transformation
The State of Digital Transformation
This White Paper Report combines our research findings with insights into what transformation truly entails – plus, guidance from our data and digital...