By Kim Yoo-chul
Staff Reporter
Vulnerability to supply-chain fraud risks is on the rise as supply lines of South Korean companies become more extended and complex.
As a result, experts say companies have become the target of an array of frauds ranging from simple theft, and misrepresentation of inventory, to gray market diversion, counterfeiting and even piracy.
Fraud thrives on complexity and companies are faced with fraud from the very beginning because of global growth and increased outsourcing, according to a recent Global Fraud Report released by Kroll a New York-based risk consulting firm.
South Korean IT giants, which have already acknowledged the significance of such issues in managing their businesses on overseas markets, are planning to inject fresh capital to strengthen their supply-chain management systems.
LG Electronics is one of the players who wants to save costs and increase efficiency in its product inventories by placing more emphasis on intensified supply chain management.
"3Ps ― Best Process, Best People and Best Partners are LG’s distinguished features which are different from other companies," Didier Chenneveau, LG Electronics chief supply chain officer said in an interview with The Korea Times.
"Supply-chain management emerges as a top concern for our company as we need to intensify such a system to face off increasing financial damage triggered by poor supply chain management in our overseas markets," he said.
LG, the world’s No. 3 flat-screen TV and No. 4 handset maker, reaped some 85 percent of its sales overseas in 2007.
According to the officer, tasked with supply-chain management of U.S.-based Hewlett-Packard for more than 15 years, LG could increase productivity by 10 percent as the recently finished system dubbed "Global Supply-Chain Management System" makes it possible to cut inventory levels and lead times, and to check the current status of product shipments in real-time.
"We will maintain 'flexibility' and 'adaptability' to match supply and demand of our products. LG is still processing to fill up definitions of the system."
On a question to possibly form a joint venture with other companies to set up a "supply-chain management belt," he hinted of such a possibility, though no official decision has yet to be made.
"We will continue and proceed to find the best possible partners. But for the time being, I couldn’t comment on that," he said.
Analysts say LG is on the right track for a better supply system. But they urge the company to present more detailed strategies as LG’s supply-chain management is in its initial stage.
Samsung officials say they don't have a set cutoff in terms of pricing thanks to experienced know-how over the past few years and its top official told the paper some portions of the company’s performances are due to its advantage in supply-chain management.
"We are monitoring our rivals not just for Samsung but other global companies. I can say the better way to reduce inventory is to access the system with information."