The Supply Chain and Logistics System of LG in Korea

LG Electronics is one of the world-leading companies in electronic products that are in operation globally. However, this report is going to focus on the supply chain and logistics system of LGE in Korea. Some of the issues facing LGE are the increases in logistic costs, contrary to expectations that there ought to be a reduction in costs and improvements in logistics systems. Based on the findings of supply chain analysis, there is proof that LGE is adaptive and agile in gaining the required competitive advantage. The company uses both in-house logistics providers, as well as outsources the logistics from another company to accomplish procurement and transportation procedures. It helps the company to improve its logistics system especially in supporting demands such as enhancing on-time deliveries to its customers and supplying components to its manufacturing departments throughout the world. As a result, LGE becomes more flexible in terms of order fulfillment and acts in accordance with the customers’ demands. The company follows a weekly program that boosts collaboration of planning, forecasting and replenishing activities, to get accurate sales forecasts and therefore improve on its inventory management.

In addition, the report analyzes the distribution systems of LGE to IBM, which are the company’s global major customers. From the analysis of IBM’s existing distribution system, the main hindrance noted by this report includes the inefficiency of the distribution network, because they store products at the factories.

The details from the findings of the analysis and evaluation, therefore, include some vital recommendations. The report recommends that LGE should improve its inventory management system by applying the A-B-C approach, to ensure products are not out of stock. The application also enables the company to know the products that need keen focus and consequently assist in the elimination of waste, since the electronic goods undergo rapid changes due to market diversification. On the other hand, to solve the IBM problem, the company needs to redesign its distribution system by locating two or more distribution systems in different geographical settings. Eventually, the report suggested the use of last-mile delivery for both customers and suppliers. By locating distribution centers near customers, LGE will improve customer service, in view of the fact that speed delivery and closeness of the suppliers can cut down the transportation costs.

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