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Supply Chain Planning at LGE (G-SCP)

Supply Chain Planning at LGE (G-SCP). Contents: LGE Global Network SCM Programs at LGE GSCP (Global Supply Chain Planning) GSCP for Monitor Business Channel Collaboration. Korea. 4 Companies. Mobile Communication. CIS. Digital Appliance. Europe. 2 Subsidiaries. N. America.

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Supply Chain Planning at LGE (G-SCP)

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  1. Supply Chain Planning at LGE (G-SCP) • Contents: • LGE Global Network • SCM Programs at LGE • GSCP (Global Supply Chain Planning) • GSCP for Monitor Business • Channel Collaboration 1/14

  2. Korea 4 Companies Mobile Communication CIS Digital Appliance Europe 2 Subsidiaries N. America Digital Display 18 Subsidiaries Sales 1 7 Subsidiaries Digital Media Production 1 Sales 15 Sales 4 Production 2 Production - Logistics 1 Logistics 3 China 13 Subsidiaries Sales - Production - Logistics 13 M. East & Africa 6 Subsidiaries Asia Pacific C.&S. America Sales 4 Production - 13 Subsidiaries 6 Subsidiaries Logistics 2 Sales 7 Sales 4 Production 4 Production 2 Logistics 3 Logistics - 1. LGE Global Network LGE Global Network consists of 4 Companies in Korea (국내 사업본부) and 66 Subsidiaries (해외법인: Sales 35, Production 23, Prod./Sales 7, Logistics 1), and its operational complexity is increasing. – at End of 2004 2/14

  3. Disseminationof SCM • 통합 DM System • TV GSCP Rollout • MC GSCP Rollout • 전사적 Process Set • 통합 ERP • 통합 PDM Change Acceleration via Std/Integration • PSI System • M GSCP Upgrade SCM Infra Building • ERP/FP Systems • GSCP Pilot (M*) • SCM Infra • Master Planning • Global Code • Global Data Hub 1998 1999 2001 2002 2000 2003 2004 2005 M*: Monitor; PSI: Production/Sales/Inventory; DM: Demand Management 2. SCM Programs at LGE Since 1999, SCM infrastructure was built by structuring Global Code and deploying ERP/FP and GSCP Pilot. Acceleration of SCM via standardization & integration. 3/14

  4. Suppliers Customers/Buyers Manufacturing Logistics Sales Distribution • Real-time order promising based on allocated ATP • Extended sell-through plan with customer collaboration • Improved salesman support for effective sales forecasting • Optimized logisticsnetwork design / operation • Global visibility/ planning on material requirements • Tight collaboration with key suppliers • Global supply chain planning - Single plan between Marketing/Sales and Manufacturing with global PSI visibility - Weekly operation with fast planning capability • Production planning with tool support & tight integration with master planning • Optimized logistics planning • Improve factory planning capabilities - Factory planning with minimal manual intervention - Support for advanced production system • Global logistics visibility • integrated SCM KPI monitoring 2. SCM Programs at LGE Now, GSCP (Global Supply Chain Planning) systems are being implemented with enhanced execution modules covering more products. In the future, LGE will focus on enhancing the capability for managing Extended Supply Chain. 4/14

  5. LGEMU Sales Forecast SS LGEFS • CK: Company in Korea (국내사업본부) • PS: Production Subsidiary (생산법인) • SS: Sales Subsidiary (판매법인) LGEMS Allocation Plan Sales Planning Carrier/Customer HUTCHISON Production Planning AMMAN … GSCP Materials Planning Delivery Planning On-Hand/transit Inventory Key MTRL Availability • Global Optimized Planning • Single Plan for entire LGE Key MTRL PO Plan Shipping Plan MPS ATP/CTP … LGEPT LGEQD LGEMX Parts Supplier CK/PS SS/OEM Hub 3. GSCP (Global Supply Chain Planning): Definition GSCP provides a Single Plan covering Sales, Delivery, Production and Materials for the entire LGE, taking into account Sales Forecasts, Inventory and Prod. Capa. 5/14

  6. Monthly Operation: Lagged Response to Market • Monthly Forecasting, SP*, and PP* • ‘End-of-month’ phenomena (surge) • Manual & ‘After-the-fact’ Planning • SP & PP are separated • Unconstrained (infeasible) plan • Reactive planning for occurred problems • Decision-making for Local Optimum • Each SS** determines PS/Volume without knowing Global Inventory & Prod. Capa 3. GSCP: Backgrounds and Goals GSCP aims for Weekly Planning, Globally Synchronized Demand/Supply, and Optimal Use of Global resources. Establish Weekly Planning System • Reduce Planning Cycle (MW) • Increase Decision-making Speed Global Sync. of Demand/Supply • Consensus-based Forecast • Sync planning of Sales/Shipping /Production • Finite Capacity (Feasible) Plan Global Optimization of Resources • Optimized Global Inventory • Selection of Optimal PS • Global Resource Optimization * SP: Sales Planning; PP: Production Planning **SS: Sales Subsidiary; PS: Production Subsidiary 6/14

  7. 4. GSCP Example (Monitor): Progress Summary A version of GSCP for Monitor was developed in 2000, and after re-building basic infrastructures and improving functionalities, a ‘To-Be-Model’ suitable for LGE was established in 2004. 2004 2003 2000 2001 2002 Develop GSCP System Basic INFRA Stabilization Integration Upgrade • Infra for GSCP • Code systems for Monitor models • Correction of Data Integration Errors • Planning Accuracy & Organization • Formal Operation Team • : Global Logistics Op. Gr ’02.12 설치 • Enhanced Change Mgt • Planning/Execution • Stable Shipping Plan • : Frozen period setting • Plan/Exec. linking • : Auto PO system • Upgraded GSCP • Weekly planning process • Shortage handling process 7/14

  8. Key Information • PS(생산법인): 7개 • SS(판매법인): 35개 • Buyer(거래선): 30개 • 05년 물량: 2,138만대 - LCD:1,237만대 - CDT:900만대 • Model 수: 400개 EU China CIS North America LGEWA GUMI LGENT Asia 중미 Africa LGEIL S. America LGEDI Australia LGESP C/SKD SET 4. GSCP Example (Monitor): Supply Network G-SCP System was implemented for the 35 Sales Subsidiaries (SS), 7 PSs and 30 Buyers handling Monitor Products of 21 million/yr consisting of 400 models. 8/14

  9. GSCP Operation Cycle (Weekly) Major Operation Rules • FCST Control Point Change - Factory → LG-out • Consensus-based FCST Operation - PM: Input Sell-out FCST - Marketing: Reflect Marketing Strategy (Product Strategy, Allocation, etc.) Sales FCST Sales FCST • Finite Capacity Optimal Supply Planning - Capacity, C/SKD, Materials • Firm Production-order Period - 3 week Fixed, 4th week Targeting MasterPlanning ClosedLoop PO Release Master Planning(1st/2nd) Logistics Planning • Weekly Logistics Planning - Weekly Review of Target/Result/Plan - Shortage Handling/make-up Plan → Support Data for Top Management’s Decision Logistics Plan PO Release • Auto PO Release for the 3rd Week Production → Integration of Plan and Execution 4. GSCP Example (Monitor): Operational Rules Major Operational Rules for Weekly Global SC Planning were established. 9/14

  10. 금 / 토 / 일 월 화 수 목 금 판매법인 이동판매계획 Retargeting DP Web UI FCST 수정 FCST 입력 M Plan 결과검토 Auto PO 확인 ▼C/OFF화 13:00 ▼C/OFF월 13:00 마케팅 DP 이동선적/판매계획 Retargeting FCST 수정 FCST입력 Eagle Auto PO Sys 가격입력PO 발행 S/O 확인 및 Booking ▼(수)13:00 Web UI Plan 결과검토(1차) Plan 결과검토(2차) 전략물동회의 선적계획수정/확정 사업부 ▼계획 Rel.목 13:00 SCP ▼(토)24:00 ▼(화)16:00 ▼(월)16:00 FP FP 이동생산계획 Retargeting/집행생산/자재계획 수립 1차 Master Planning 2차 Master Planning PSIReloading 집행생산계획 판매법인 ▼(토)24:00 M S/O 확인 및 Booking M Web UI 집행생산계획 ▼(월)13:00 Plan 결과검토 Capa. 조정 이동생산계획 Retargeting/집행생산/자재계획 수립 Web UI 구매 입고계획 입력 4. GSCP Example (Monitor): 주 단위 프로세스 주단위로 Out of LG기준의 FCST를 Input으로 1차/2차에 걸친 Master Planning과 전략물동회의를 수행하며, 사업목표달성을 위한 주 단위의 Retargeting을 수행함 10/14

  11. GSCPPortal BOM 개발 자재 입출고 SS(판매법인) 생산 • Stored Inventory • In-transit Inventory • Plan Evaluation (Sales/Prod PSI, etc) • Master Data Mgt • Results Mgt • Management Report 주문 검사 DM • Sales Forecast Overseas Marketing SCP Sales (M) Production(iERP) Sales/Ship/Prod.Moving Plan ShippingPlan PO 사업부/생산법인 해외마케팅/판매법인 한국마케팅/해외지사 • Executed Prod. Plan • Key MTRL Plan Domestic Marketing Ship/Prod.Moving Plan SCS Auto-PO Key MTRL Requirements Firm PO Release • MTRL Input • MTRL Plan Supplier 사업부/생산법인 WO release MTRL PO GSCP Related S/W 4. GSCP Example (Monitor): S/W System Structure GSCP consists of DM (demand mgt), SCP (logistics mgt), Portal (visibility mgt) and Auto-PO, together with related systems 11/14

  12. Global Operational Excellency • Inventory Reduction (reduced holding days, reduced bad inventory • On-time Delivery (improved on-time production, shipping, delivery) • Processing Speed Improvement (Weekly Planning/Control) Achievements Future Action Items Globalized Material-Move Operations - Factory Basis → Global Basis Faster Mgt Decision-Making Process - Monthly Control → Weekly Control - Weekly Strategic Meeting on Material-Moves Single Planning (법인/마케팅/사업부) - Consensus-based FSCT Mgt - Consensus-based Planning Rule Based P/S/I Control - Demand-oriented Control - Firm Periods Concepts Integration of Plan and Execution - Auto PO for the 3rd Week Firm Order • Weekly Mgt KPI Improved • - FCST Accuracy : 20% → 60% (’05-end Target) • - Shipping : 53% → 80% (’05-end Target) • GBU System Strengthened • - Global Price-agreement Process etc. • SCM Coverage Enlarged • - ATP • - Customer Collaboration • - Supplier Collaboration 4. GSCP Example (Monitor): Achievements and KPI Monitor Business is managed based on a Globalized Single Planning System • KPI-based Management • FCST Accuracy (20%60% in 0565% in 06): Weekly Sales v.s. FCST (2, 4, 8, 12 weeks before) by Model • Auto PO Ratio (85% in 05  95% in 06): Weekly Auto-PO releases v.s. total PO releases • Shipping Meet Ratio (53%80% in 05 85% in 06): Weekly Shipping v.s. Firm Shipping Plan (3 weeks before) 12/14

  13. Plant W/H Factories Suppliers Sales Co. DC Retail DC Retail Store consumer 5. Channel Collaboration: Needs Excessive Channel Inventory due to Sell-in based Management by Customer leads to 1) Price Protection, 2) High Inventory Cost, 3) Slow Response to Market Demands 13/14

  14. 5. Channel Collaboration: Action Plans Channel collaboration aims to 1) establish a Weekly Customer-Response system, 2) reduce Supply Lead Time and Inventory Level, 3) increase Processing Speeds, 4) improve Customer Service Real-time Forecasting System connected to Sell-out Information FCST/Due-DateMgt System • Accuracy of Forecasting • - 12W FSCT accuracy: less than 40% • Sharing of Sell-out Information • - MS ~ PS ~ Company(판매법인, 생산법인, 사업부) • Accumulation of Historical Data • - Among customers, subsidiaries • Forecasting reflecting Sell-out Inf. • Install a FCST Mgt System Optimal Inventory Control System reducing Price Protection Exposure while meeting Buyer’s Requirements • Increased P/P due Excessive Inventory • - Increased Price Protection Exposure • - Uncontrollable excessive distribution inventory • - Increased Space and Carrying Cost • Difficult to Meet Customer’s Due Dates • - Increased Request for Faster Delivery • - Difficult to maintain good Customer-Relationship • Need for ‘Sell-out Promotion’ Marketing • - Currently focusing on Sell-in • - Lack of Fund & Skill CPFR System • Improved Communication with Buyers • Strengthen Sell-out Promotion Marketing 14/14

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