INDIANAPOLIS, Ind.—In the first 100 days since Samsung Electronics released its new Galaxy S3 smartphone, the company has sold 20 million units. That’s 200,000 sales each day. In a press release, the Korean company called the milestone a new record, generating sales quicker than any of its predecessors. The volume and the staggering effort it takes to move that much product are impressive, says a Kelley School of Business Indianapolis professor.
“This couldn’t have happened without Samsung working closely with its suppliers to make sure they have technological capabilities, quality and capacity to produce and ship such large volume so quickly,” said Mohan Tatikonda, professor of operations management and Dr. L. Leslie and Mary Louise Waters Faculty Fellow. “The decisions around that are sometimes mind-bogglingly large.”
Tatikonda points out large releases like the Galaxy S3 require multimillion-dollar decisions regarding critical phone parts and equipment, all ordered and synchronized according to the company’s customer demand projections. Without expert supply chain planning in place to bring those products physically closer to the customer, business simply would not happen on this scale and in a timely fashion.
“The timing is so essentially critical,” explained Tatikonda, who is also the director of Kelley’s Global Supply Chain Enterprise. “It is better to get your product to market earlier because margins on these products diminish significantly, literally week by week. Even more pressing, they have to get their product out before the iPhone. If they debut even 24 hours after the iPhone comes out, I doubt we would be talking about the 20 million sold in 100 days.”
The latest Samsung figures came out just a week before the iPhone 5 is expected to debut. Having worked with many major companies and recently toured an LCD factory in Shanghai, Tatikonda says the issue of quickly moving innovative products to customers can be generalized to industries other than smartphones.
“For years Adidas Reebok printed the Super Bowl champion t-shirts at their factory on the east side of Indianapolis. When your team or my team wins, we’re delighted to buy a t-shirt that night or the next day. Three days later, we’re a little less excited about it. So Adidas has to literally be watching the game and be very prepared to get product into the customers’ hands at the right time because customer demand falls so rapidly.
“Likewise, Eli Lilly and Company goes through a long and difficult process to get a drug approved,” he continued. “But once it’s approved, they want to sell the product as quickly and with as much volume as possible. Having one extra month of sales earlier than later is very big in terms of margins and capturing market share. So how does one go about making sure you have capacity for millions of pills or vials? That requires precise coordination between the company and its global suppliers and customers, along with significant financial expenditures to create specialized equipment and factories. The marketing, finance and operations functions of the company need to work as one. Bottom line, it all comes down to superb supply chain management.”