Seoul Solution for Cutting Costs

LG Electronics looks to slash inventories with launch of global supply chain management system

Seoul, Korea  September 6, 2001  Korean manufacturer LG Electronics formally launched is global supply chain management system (GSCM) today, hoping that it will cut inventory and save the company tens of millions of dollars over the next few years.

In announcing the launch, LGE said it expects the new system to drastically cut down on inventory through integrated control of entire business processes from receiving orders, production to sales with an online link among LGE divisions around the world.

Headquartered in the Yoido area of Seoul, 43-year-old LGE, formerly known as Goldstar, manufactures a variety of electronic appliances and equipment.

The new supply chain system covers design, parts supply, procurement, inventory, production and cost management into an integrated process. In implementing the system, LGE says it is moving from department-level IT systems for operation automation to an integrated system that will cover all company processes from outsourcing partners to customers, creating a "strategic flow of information" and a proactive, forward-looking information system that can read future changes in the business environment before determining the company's operational direction.

The new system will also allow customers to track their order status from production, shipment to goods receipt into inventory in real-time, the company said.

LGE said it expects savings to reach to about $54 million (about 70 billion won) per business location for the next 3 years.

After building a companywide enterprise resource planning (ERP) system in late 1999, LGE began a global enterprise management (GEM) project to establish an integrated system for overseas subsidiaries. The new GSCM system is a part of that project.

LGE also plans as part of the GEM project to establish a Global Financial and Cost Management (GFCM) system for financial management. The company said it will complete this system soon.

"To ensure survival in the era of e-business, companies need process innovation rather than continuous improvement of its operations," said Young-min Yoo, a senior vice-president with LGE's Business Innovation Team. "With the introduction of the GSCM system, LGE will be able to minimize the adjustment period to change."

The GSCM is based on software from i2 Technologies Korea, which also provided consulting services to LGE during the implementation. System development and implementation were done jointly by LGE and LG-EDS.

LGE said it selected i2 Technologies as its partner for the GSCM implementation because of the solution provider's experience building supply chain systems for such technology companies as Texas Instrument, Dell and IBM.

LGE reported 2000 sales of $11.7 billion and net income of $396.4 for the same year.