External supply chain analysis and management

LG Supply Chain & Sustainability

LG, a South Korean technology conglomerate that is known mostly for its presence of behemoth proportions in the LED and OLED television market along with its direct competitor Samsung, is world-renowned for its slick products, enhanced market presence and global reputation for its supply chain and sustainability initiatives and processes. There are a number of ways in television manufacturers can streamline its manufacturing and supply chain operations in the name of both cost saving and fiscal efficiency and LG sets the benchmark for all of the above. LG's financials have not been completely rosy as of late given that its mobile section is struggling a bit but its television sector is extremely strong (CNet, 2012).

Product Description & Updates

Televisions have evolved significantly since their invention in the middle of the twentieth century. For the longest time, televisions were all cathode rayon tubes (CRT's for short) and these sets and monitors were very power-hungry and inefficient. Television technology has innovated and progressed extremely quickly in the last two decades with the advent of plasma, LCD and then LED technology. LED-backlit televisions represent a massive improvement in product lifecycle length and energy efficiency. The products last long and take up less energy as they are used as compared to CRT's or even plasma and traditional LCD televisions.

The quality of LG's televisions is demonstrated both by the quality of the product as well as its daily business practices. It is important that LG remain at the forefront of the technology curve and for a couple of reasons. First, it must do so to keep up with companies like Samsung that give it a run for their money. Many companies in the television sphere have fallen away and have abandoned manufacturing of televisions. Examples do are projected to further include companies like Philips, Sony and Hitachi. Gone are the days where Panasonic, Sharp and Sony were the industry heavyweights in the television market, now replaced with Samsung and LG with everyone else trailing behind (NDTV, 2012). One company that most certainly threw in the towel was Philips which gave up on the television market in 2012. It is worthy of note that Philips imported a lot of its sets from LG and the Philip name was simply affixed onto the LG equipment (Nic, 2012) Philips also licensed a significant amount of manufacturing items with Funai (Gray, 2011).

Another reason that LG must keep its supply chain and sustainability activities up-to-date is that they are deemed by others, if not themselves, to be responsible for having as little impact as possible to the environment through their daily business practices. This includes carbon emissions, waste products, the amount of fuel spent delivering raw materials as well as finished products and other concerns. At least on appearances and based on the recognition of third party companies and organizations, LG is at the forefront of both effective supply chain management and sustainability concerns. LG actually has dedicated environmental and sustainability web links for each of the countries that it operates and sells in including Canada, Ireland, the United States and South Korea, the latter being its home country.

Supplies Necessary

A lot of parts and supplies go into the making and selling of television sets and it is by no means limited to the television parts themselves, as far as the television parts go, there are plastics, glass, circuit boards, metallic materials and the like. There is also the speaker materials that can include metals, paper and so forth. The inherent sustainability concern with the making of televisions is that a lot of the materials that go into making a television have either been unrecyclable or they often end up in landfills and thus pollute the environment and/or take a long time to breakdown. Circuit boards are one item that can be toxic and plastic materials do not break down quickly when compacted in landfills.

There are obviously other materials that are involved in the manufacturing process that are not actually parts of the televisions and one of the major ones is fuel. A large amount of fuel is spent transporting raw supplies to LG's factories as well as moving the televisions out of the factories once they are done.

Another set of supplies in the mix are the cardboard boxes and Styrofoam inserts that are used to package and cushion televisions so that they are transported to their destination with minimal to no damage. LG obviously have little control over what happens to these materials once the consumer opens the box and many countries have laughable infrastructures for recycling and reuse of products and materials than can and should absolutely be reused and repurposed.

Organizations Working Together

There is a massive infrastructure of corporate and advocacy interests that all contribute in their own ways to the concepts of sustainability and efficient global supply chain management. These organizations range include academics and other intellectuals who make it their main purpose to advance the concepts and knowledge dissemination relating to sustainability. People in this sphere range from college professors to industry experts to members of industry-oriented organizations that exclusively or at least majorly focus on improving the industry with everything they do.

The real people who have to make these innovations work in real life are the companies that actually sell the products. Fortunately, companies do not have to capitulate simply because of public or academic pressures for they do so out of competitive interest. Companies must evolve in many ways to remain on-going and competitive and sustainability and enhancements to supply chain management are no exceptions.

To that end, LG announced in 2009 that it saved $350 million USD from January to September of 2009 alone through increased efficiency in its supply chain process. The further projected that overall savings would reach $400 million by year end and that cash flow would improve by more than $800 overall. Didier Chenneveau was quoted as saying that efficient supply chain operations was a major concern for LG and that reduction of carbon emissions was one of the major aims of the supply chain improvements (Anderson, 2009)

Implementing Sustainability

Because there are multiple dimensions to the materials and resources consumed in making televisions, LG can or already does use several different tacks when enforcing its practice of sustainability and effectively global supply chain management. Many of the vehicles that are used to transport LG goods and its raw materials can be made to use renewable or at least very efficient fuels such as natural gas and hydrogen. These sort of fuels are far more effective and beneficial than fossil fuels. As far as the televisions themselves, many countries have implemented alongside assistance from companies like LG the process whereby people are able to recycle discarded televisions and other electronics so that they can be properly disposed of or even recycled if possible.

Sustainability Challenges

There have been concerns regarding sustainability in the television manufacturing industry. An article in 2010 noted that there was at least a possible shortage of LED's in the industry. This was stated as a concern because the overall manufacturing capacity of 2010 was slated to barely exceed that of 2009 thus illustrating that perhaps demand was outstripping supply and that a shortage would ensue (Dirjish, 2010).

One major innovation that has come to the forefront is the use of organic LED's (OLED's) rather than traditional LED's. These LED's use more renewable and reusable technology this improving sustainability and limiting the use of materials on the planet that are exhaustible or hard to reuse (International Business Times, 2012). There has been sputtering in the industry with some struggles presenting themselves, but LG aimed to sell 50,000 OLED televisions in 2012 (Yoo-Chul, 2012).

Rather than being hands off in the television disposal and recycling sphere, LG has actively participated in the creation and maintaining of the infrastructure to recycle used up televisions (Greenbiz Staff, 2009). LG openly advertises this on their numerous websites and they are quick to note that they strive to comply with or exceed all relevant regulations and the concerns of environmentalists (LG UK, 2012). LG has signed on with international shipping heavyweight DHL to assist in the logistics of collecting and recycling televisions (Avenell, 2012).

LG has also had a wide involvement in industry-standard organizations that focus on sustainability and recycling. One such organization is the LCD TV Association and it boasts about a dozen members including Applied Materials, LG and Supertex. Taos Inc. has focused on the use of ambient energy technology. MSilica Inc. has focused on reduced system costs, power efficiency and efficient use of company real estate (Atmega, 2012).

LG has actually created its own sustainability scoring system whereby companies must score an aggregate of 80 points to qualify as a "green" and sustainable company (LG Eco, 2012). LG has also trumpeted in 2011 that it was able to earn its first certification for carbon-free manufacturing for both its televisions and its fridges (Bardeline, 2011). Obviously, the excessive use of and pollution with carbon into the atmosphere and in other parts of the environment has been an overarching concern of environmentalist entities and public figures.

On one of its website, LG has a process map showing its certification process. The mapping starts with a request for examination for the certification process. The plan to examine the technology performance is assessed, the plant and the relevant vendors are looked at, and then the certification is approved or denied based on the empirical results (LG Sustainability, 2012). LG also has a blog that contains a set of frequently asked questions that educates blog readers on the different technologies in the television market, which ones are better and why, and how TV buyers can be energy efficient yet entertained at the same time (LG UK Blog, 2012).

LG has also implemented solutions at its factories and offices so that the manufacturing process can be accomplished both with an attention to quality but also a commitment to sustainability and efficient operations, even if the latter is not always the cheapest solution (LG Vietnam, 2012). LG has also openly shared that they are going to invest almost $7 billion on the use of solar power, EV batteries, LED's and water treatment technology both in its products and for the processes and infrastructure that goes into making these products (Redell, 2011). LG has also made light of its "Eco-Design" product features prevalent in many of their products including their televisions (LG Global, 2012).