10/12/16, 10:51 AMSamsung Recall Puts Supply-Chain Oversight in Spotlight - WSJPage 1 of 4http://www.wsj.com/articles/samsung-recall-puts-supply-chain-oversight-in-spotlight-1476224149?tesla=y&mod=djemlogisticsSamsung Electronic Co.’s botched recall of its Galaxy Note 7smartphone is putting a spotlight on supply-chain oversight andraising questions about the ability of today’s technology andmanagement tools to help companies maintain quality control ingiant complex networks of suppliers—as when products are beingbuilt and upgraded more swiftly.Samsung on Tuesday said it would permanently halt production of thesmartphone, just one month after issuing a recall of the device overcomplaints that batteries were prone to overheat and cause fires. Itlaunched the phone on Aug. 19, aiming to bring it to market ahead ofThis copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visithttp://www.djreprints.com.http://www.wsj.com/articles/samsung-recall-puts-supply-chain-oversight-in-spotlight-1476224149BUSINESSSamsung Recall Puts Supply-ChainOversight in SpotlightMaintaining quality control is put to the test as companies use a giant network of suppliersSamsung on Tuesday said it would permanently halt production of the Galaxy Note 7 smartphone,which hit the market on Aug. 19. PHOTO: EUROPEAN PRESSPHOTO AGENCYOct. 11, 2016 6:15 p.m. ETBy ANGUS LOTEN, SARA CASTELLANOS andSTEVEN NORTON10/12/16, 10:51 AMSamsung Recall Puts Supply-Chain Oversight in Spotlight - WSJPage 2 of 4http://www.wsj.com/articles/samsung-recall-puts-supply-chain-oversight-in-spotlight-1476224149?tesla=y&mod=djemlogisticsApple’s iPhone 7.The company initially blamed the fires on one bad battery supplier,which it cut out of its production process. But similar complaintsabout supposedly safe Galaxy Note 7 replacements have led someindustry analysts to suspect the company’s problems run deeper. Just updated Just updated$409,900541 Glen Abbey, Knoxville, TN4 Bd4 Bd 3 Ba3 BaSearch Now“A design flaw should have been caught during review and testing,”said Frank Gillett, a vice president and principal analyst at ForresterResearch, “and this is much harder to do at global scale with multiplesuppliers and factories for the same part.”It isn’t clear why Samsung was unable to detect the problems earlier.Samsung declined to comment.But experts say that problems in the supply chain can be exacerbatedwhen different departments within a corporation, and their suppliers,fail to communicate or coordinate effectively, said Fangruo Chen, aprofessor at the Columbia Business School whose area of expertise issupply chain management.Marketers, executives, designers and suppliers within a company mayhave different ideas about when a product should be launched, headded.Likewise, companies looking to reduce costs by outsourcing much oftheir supply chain to countries with cheaper labor markets also runthe risk of sacrificing quality, said Timothy Brown, managing directorat Georgia Institute of Technology’s Supply Chain & LogisticsInstitute.“There’s a dispersion of all components around the whole continentthat might make it more difficult to monitor,” he said.RELATEDPersonal Tech: What Samsung Must Do to Win Back Our TrustSamsung’s Woes Could Bode Well for Apple and Other RivalsWhat to Do if You Still Have a Galaxy Note 7Samsung Tells Consumers to Stop Using Galaxy Note 7Heard on the Street: Google Can Feast on Samsung’s MisfortuneHeard on the Street: Why Samsung’s Dud Phones Will Cause Lasting DamageSamsung’s Reputation Takes a Hit as Incidents Mount10/12/16, 10:51 AMSamsung Recall Puts Supply-Chain Oversight in Spotlight - WSJPage 3 of 4http://www.wsj.com/articles/samsung-recall-puts-supply-chain-oversight-in-spotlight-1476224149?tesla=y&mod=djemlogisticsSamsung is based in South Korea.Simon Jacobson, vice president of supply chain research at GartnerInc., said most companies can trace where a product has been alongthe supply chain, but it is still difficult to get a full view of the entireproduct life cycle. Improving supply-chain visibility and traceabilitymight help, he added.It is possible that today’s supply chains are so big and complex thatthey push current management tools and techniques to the limit. Buta new generation of technology may help address the problems.International Business Machines Corp. in July launched a blockchain-enabled cloud platform designed to help companies track itemsthrough complex supply chains. Blockchain, the technology thatunderpins the virtual currency bitcoin, creates an unerasable digitalrecord of transactions along a chain of users.For manufacturers with third-party suppliers, blockchain offers theability to trace any problems down the production line back to theoriginal source, said Mr. Jacobson.Other organizations like the Massachusetts Institute of Technology’sCenter for Transportation and Logistics are also working ondeveloping technologies that could help reduce the risk of supplychain management failures. One technology being developed at MITwould allow companies to see aspects of their supply chain, withoutphysically being present, through virtual reality.R Ray Wang, founder and principal analyst of Constellation ResearchInc., said Samsung would have benefited from using a “digital me”—or“digital twin”—to better test its products and components beforeshipping them to market, including batteries and other parts fromthird-party suppliers. These “twins” are digital models of physicalproducts or entities, which can be used to further analysis andunderstanding of the way they operate.GE Digital, for instance, used a “digital twin” to develop a moreefficient wind turbine based on testing from an exact softwareduplicate.Increasingly complex supply chains, which can include resellers,retailers and telecoms to name a few, may exacerbate the challengescompanies face as they try to execute a product recall, said RichardSoley, chairman and CEO of technology standards consortium ObjectManagement Group.“This is an example of where Internet of Things will make a10/12/16, 10:51 AMSamsung Recall Puts Supply-Chain Oversight in Spotlight - WSJPage 4 of 4http://www.wsj.com/articles/samsung-recall-puts-supply-chain-oversight-in-spotlight-1476224149?tesla=y&mod=djemlogisticsdifference,” Mr. Soley said. “When you maintain a connection to allthe devices, you know where
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