THE NEXT GENERATION OF TRANSPORTATION MANAGEMENT AT LGE

GROUP 1

LG Group is a large South Korean conglomerate, which produces electronics, mobile phones, and petrochemical products. LG Group has many subsidiaries operating under it like LG Electronics, LG Telecom, LG Chemicals, and etc. 

LG Electronics is a South Korean multinational corporation. It is South Korea's second largest electronics maker and the world's third largest appliance maker.

 

 

SUPPLY CHAIN WORK FLOW

The total cost involved in the supply chain is the cost that the company incurs in delivering product from procurement till it reaches the end customers. So, the total cost is the Total Delivery Cost (TDC) is the sum of all the relevant costs of delivering to a customer where outbound freight is only one of the components

The overall cost incurred is accounted under heads like purchase cost, inventory holding cost, manufacturing or assembling cost, packaging cost, outbound freight cost, transporters cost, sales tax paid, warehousing maintenance cost, C&FA agency cost, IBT cost, land loading costs etc. Apart from all these there exist other overheads like administration, maintenance, lightening, support system cost etc.

COSTING OF SCM LG

The LGE logistics network consisted of three central distribution centers (CDC), 18 regional distribution centers (RDC), and more than 3,000 domestic consignees. In this environment, LGE builds more than 700 truck loads every day, 300 of which deliver to the CDCs with the remaining 400 delivered to the RDCs.

The key issues facing management could be categorized on two levels: the quality and accessibility of accurate and timely information, as well as best practice transportation and distribution management.

LGE suffered from high levels of inaccurate shipment planning, inventory, and capacity availability information. Disparate manual processes were adopted as a result of this known weakness.

LG Electronics formally launched its GSCM system with a launch event at its Twin Towers Headquarters in Yoido, Seoul, Korea. The new GSCM (Global Supply Chain Management) system drastically cut down on inventory through integrated control of entire business processes from receiving orders, production to sales with an online link of LGE companies around the world.

IT IN SCM

After building the company-wide ERP system in late 1999, LGE engaged in its GEM (Global Enterprise Management) project to establish an integrated system for overseas subsidiaries. The new GSCM system was part of that project. Another part of the GEM project was the establishment of GFCM (Global Financial and Cost Management) system for financial management, which will also be completed soon.

Both GSCM and GFCM systems improved LGE's corporate competitive edge in the global business environment by giving the company cutting-edge business management tools.

In line with the rising importance for integrated information management, LGE built the new system to respond quickly to the rapidly changing global market demand. The system was built with supply chain management solution and consulting service from i2 Technologies Korea. System development and implementation were done jointly by LGE and LG-EDS.

LGE's new GSCM system is differentiated from simple IT systems by combining design, parts supply, procurement, inventory, production, and cost management into an integrated process to enable strategic flow of information and gathering of standardized production data.

The challenge for LGE was to achieve transparency between market demand variability and distribution planning and execution.

To effectively manage this, LGE set out to establish integrated best practice workflows across the entire transportation and distribution organisation.

The selection criterion was focused on partnering with the best in class transportation management solution provider, followed by the lowest overall total cost of ownership the least rest and a rapid time to value.

The Challenge

LGE Transportation with its annual expense exceeding $40 million, was recognized as one of the critical areas within the companies operations that would deliver significant value to both the top and bottom line.

Transportation Cost account for approximately 51% of total logistic cost and was recognized as a primary target for reduction.

In order to extend the value of Oracle ERP and EXEWMS systems deeper into the distribution network ,LGE needed to integrate a best of breed transportation management into its existing enterprise management systems.

The situations

Designed to meet the demands of the logistics industry and manage as well as cut down the transportation cost largely.

Provides transportation planning and execution capabilities to shippers and 3PL providers.

TMS solution integrates and streamline transportation planning, Freight payment, execution and business process automation on a single application across all modes of transportation, from full truckload to complex ocean. air and rail shipment.

It helps in improving customer service lower transportation cost ,enable better asset utilization and provide flexible and global fulfillment option.

What is TMS?

LG Electronics, one of the world’s largest consumer electronics manufacturers implemented i2 Next Generation best-practice transportation management solutions to synchronize intra-enterprise workflows across distributed operations.

LGE management recognized the need to streamline its business processes and identified multiplies of improvement within its transportation and distribution operations .

i2 next –generation TMS was the only solution that had the ability to delivery best-in-class supply chain management functionality along with the adapt ability to customize workflows and scale across are complex and distributed supply chain network.

With i2 next generation transportation management , LGE was able to quickly accomplish integrated workflows between the existing systems infrastructure, including ERP,OMS,WMS and Logistics management systems. The lead time for the deployment for i2-Next generation TMS was 90% faster than if similar solutions were deployed through traditional development and integrated methods.

The corporate planning, factory operation, branch operation, all three together covers the whole soul of LG Electronics SCM.

Corporate planning accounts for planning part of SCM and so, plans & sets the targets for sales. Factory operations deal with execution aspects of supply chain. Branches deals accounts for network design and deal with distribution.

The expectation is that, through TMS, LG is going to be able to continue to reduce days of inventory.

Approximately 12—18 months ago, LG had about 59—60 days of inventory on a global basis. It is running at about 47 days now, and world-class is probably about 40 days, so LG has about another 6—7 days to go.

LG is now planning on weekly basis rather than monthly. this with the help of i2 software has helped them to reach an accuracy level of around 40% of their forecast.

The protection of the LG supply chain is a critical and strategic issue because security breaches impact our operational effectiveness and our brand,

LGE was able to rapidly deploy and configure i2 Next-Generation Transportation Management, going live with the system in 32 weeks. The initial value target was a 4 percent reduction of transportation cost in RDCs and a 3 percent increase of load fill rate in CDC through optimization of transportation planning.

Inventory turn has been accelerated through dynamic hub selection in transportation planning and higher degrees of collaboration between replenishment planners and distribution.

With i2 Next-Generation Transportation Management, LGE was able to quickly accomplish integrated workflows between our existing systems infrastructure, including ERP, OMS, WMS, and logistics management systems.

The lead time for the deployment of i2 Next-Generation TMS was 90% faster than if similar solutions were deployed through traditional development and integration methods

LG Electronics is engaging CargoNet as part of LG’s supply chain security strategy. The strategy consists of developing and implementing best practices, employing cutting-edge security technologies, and improving cargo theft information sharing with law enforcement.

A vital part of their strategy is to work closely with transportation providers to ensure they are aware of company’s policies and effective resources to combat theft.”

CargoNet would allow LG to quickly share cargo crime data and analysis.

SECURITY OF SUPPLY CHAIN

With Logiworx, LG embarked on an RFID Research Project.

The project is considering all aspects of the supply chain, to identify areas where the application of RFID technology would create efficiencies in both reduced cost and improved service levels — another initiative LG has taken in order to stay ahead in distribution.

8% annual reduction (recurring) in overall transportation and distribution costs

Rapid time to value—project live and delivering value in less than 32 weeks

Significant enhancements in service levels and customer satisfaction

Established highly configurable supply chain management architecture to be positioned for future growth and regional management demands

CONCLUSION

With i2 Next-Generation TMS, CargoNet the security providers and Logiworx for RFID, LGE has been able to realize its supply chain strategy and is positioned to continue to achieve operational efficiency and supply chain innovation.

LG has steadily built its reputation as the number one supplier through its strategy of taking direct control of the warehousing and distribution of its products.

LG is striving to become one of the top 10 supply chain companies in the world. That will enable them to become number one in the industry.

THANK YOU!!!