nokia supply chain management

2010

Submitted to :

Lt.Gen. D.V. Kalra

Visiting Faculty

FORE School of Management, New

Submitted by :

Ashutosh Kumar Jha (91011)

Faraz Khan (91033)

Nishant Singh (91039)

Huned Ali (91136)

Florence Darodes (

Global Supply Chain Management Of

NOKIA

NOKIA Supply chain Management

Table of Contents

Introduction ............................................................................................... 3

Nokia Supply Chain Management ........................................................... 4

Nokia distribution structure - GSM .......................................................... 5

Nokia distribution structure - CDMA ...................................................... 7

Sourcing Sustainability: ............................................................................. 8

Nokia Suppliers Requirements ................................................................. 9

Suppliers Performance .............................................................................. 9

Training and Building Capability ........................................................... 10

Sourcing materials ................................................................................... 12

Industry Collaboration ............................................................................ 14

Tie up with Sify Technology ................................................................... 15

Refrences ................................................................................................. 17


Introduction Finland-based Nokia Corporation (Nokia) is the world's leading manufacturer of mobile devices.

Analysts attributed Nokia's success to its supply chain management practices. The company had

an integrated supply chain which inter-linked suppliers, manufacturing plants, contract

manufacturers, sales, logistics service providers, and the consumers. It entered into a long-term

relationship with its suppliers and also supported them in improving their processes, which in

turn helped the company. Nokia was able to keep its costs low because of its efficient

manufacturing systems and processes. The company adopted a hybrid manufacturing system

which was a combination of in-house manufacturing and outsourcing. It also adopted the Smart

manufacturing technique so as to enhance the competitiveness of its manufacturing facilities.

The company had a wide distribution network which helped it to effectively reach the end

customers. The project highlights the unique supply chain management practices of Nokia. The

case examines how the company is making its supply chain efficient to counter the impact of

reduced demand of mobile handsets.

In May 2009, Finland-based Nokia Corporation (Nokia), the world's leading manufacturer of

mobile devices, was placed sixth in the list of top 25 companies in global supply chain

management, announced by AMR Research. According to AMR Research, "Nokia continues to

stay ahead of the curve on everything from regional sourcing and deep supplier collaboration to

an organizational design based on true value chain principles." AMR Research selected the

manufacturing and retail companies from Fortune's Global 500 ranking.

Founded in 1865 as a paper mill, Nokia started producing phones in 1982. The company had

interests in several businesses including telecommunications, consumer electronics, rubber, and

cable. In 1992, Nokia took a strategic decision to focus only on the telecommunications business

and to close down its other businesses. And this decision paid off. Its focus on the

telecommunications business had turned Nokia into a global leader by the year 1998.

According to industry experts, Nokia's supply chain management was the key factor for the

success of the company. The company maintained a long-term relationship with its suppliers and

helped them in improving their processes.


Nokia Supply Chain Management Nokia manufactures its mobile in 15 manufacturing plants located across 9 countries globally-

Brazil, China, Finland, Great Britain, Hungary, India, Mexico, Romania and South Korea.

Then it transfers to nokia‟s mother depot which is located in Gurgaon. They also provide

assistance in selection of channel partners like redistributors, Dealers, Franchisees, etc. Besides

this they provide monetary assistance in Store development for Nokia Priority dealers, help in

promotion of products on mass scale as well as in store and training of the sales force of partners

at every level.

With an extremely complex supply chain that handles 100 billion components, 60 strategic

suppliers, and 10 factories worldwide, Nokia had to be extremely focused in their transformation

efforts. New product introductions and variations are also intense – 1 phone can represent 170

handset variations and 250 sales package variants. To support this complexity, the operations

philosophy has been: think globally, act locally, i.e. balancing localized decision-making with

global planning.

Nokia started their SCM transformation in 1995 with the strategy of replacing inventory with

information and creating a pull-driven supply chain with end-to end integration linking suppliers,

factories, telecom operators, channel partners, contract manufacturers, banks, sales, iHubs, and

logistics service provider tothe consumer. Their approach was to create the most efficient

supplier network to offer the best solutions to meet customer expectations. Fundamentals

for success included creating a value-based partnership with suppliers, based upon factual

information, leadership, flexibility and trust - “Making the impossible possible through

collaboration”. Based on this approach, the supplier network is now considered the central point

for reaching their corporate objectives: Great products, Operational excellence, and Customer

satisfaction.

The results of their transformation have been impressive with increased sales and reduced

component inventories not only within Nokia, but also reduced inventories throughout the

pipeline, including supplier and customer inventories. Sourcing excellence is a key ingredient for

Nokia‟s business model transformation. Benefits include time-to-market, risk management,

agility and financial model flexibility. Nokia believes two critical factors were instrumental to

their transformation success: leadership and the communication of the vision. The


Nokia factory

Nokia Warehouse

Distributor

Re-distribution Stockist Supplier

Retailers

leadership philosophy relies on four equally important elements: head, heart, hands, and guts.

These leadership attributes are exemplified through energy and passion, trust as the base for

business, focus and drive, active communication and finally, flawless execution.

Nokia distribution structure - GSM Nokia rarely does divulge any kind of internal data in public domain. It makes it hard to get

much detail about the exact details of the distribution structure of Nokia mobile phones.

Nokia has been market leader in mobile phones market not just in terms of sales by volume and

value, but also in terms of setting best practices and examples in supplier selection. Nokia

manages one of the largest distribution network among mobile companies globally. It ranges

from small village on island of some remote south-east Asia like Tahiti to advanced market like

US and western European countries. Its mobiles are available at stores measuring barely 15sq. ft.

in remote villages to super-sized Nokia Concept stores on high streets.

When it comes to distribution, Nokia's lead is clear. Today, India has some 1,10,000 outlets that

sell mobile phones. Out of these, according to companies own conservative estimates, 50,000

stores have only one brand available – Nokia.

In India, Nokia started distributing its phones through a partnership

with HCLI (formerly Hindustan Computers Ltd.), which had already

built an extensive network for its own products. Recently, Nokia has

decided to supplement that with its own distribution efforts. Nokia

believed that there was a tremendous growth opportunity and it was

best exploited when the resources utilization of both companies was

optimized.

In recent years, Nokia has started an initiative to allow customers to

drop their used old mobiles in Nokia drop boxes for safe disposal. This

has necessitated a reverse flow of handsets also.

Distributor


HCLI Info has been handling distribution of Nokia phones in India for 10 years. Nokia follows

similar pattern in different global markets of having tie-ups with companies with established

network for the distribution of their mobile phones. In September this year Brightstar Europe

today announced a distribution agreement with Nokia. The agreement will focus mainly on the

IT reseller market, Value-Added Resellers (VARs) and the B2B sector in France.

These distributors perform multiple roles within the supply chain. They act as resellers for the

GSM phones.

Retailers/ Dealers

Nokia Priority dealers, Multi brand and individual dealers in any specified region are all served

by designated RDSS. Dealers are explained the features of every new launch mobiles, different

schemes and offers by Nokia‟s representatives. Re-supplies are always just a phone call away

and the delivery is made within a few hours. Besides, Nokia assists most dealers in the region in

the store set-up and design. The price points sometimes dictate the type of outlet.

Stock norms define that for how many days worth of stock does any level in the supply chain

should have. These norms are defined by Nokia only. Given below are the stock norms:

The expected target to be fulfilled by the particular level is determined by the following formula:

Expected target = (30 / No. of working days) * Stock Norm for that level

Distribution Channel

Sales ForcePenetrate

market deeper

Explore new markets

Assist in new product

Receivable collection

Share & gain market insight

Nokia Care Centres


Nokia distribution structure - CDMA The distribution system for CDMA phones of Nokia globally is little different from that for the

GSM phones. In CDMA mobiles the mobile network operators need to have the mobiles

supplied to them before they are sent out in the market so that they can fuse the SIM cards inside

the phones. The CDMA handsets are manufactured and send to Nokia‟s mother warehouse, same

as in the case of GSM mobiles. From there they are directly delivered to the local mobile

network operators in the region. The mobile network operators assemble their respective mobiles

with the network‟s SIM card. They then send it to its own associate outlets and large distributors.

The large distributors further transfer the handsets to agents, chain of stores, etc. for retail

selling.

Nokia doesn‟t sell its cell phones directly to individuals, they sell them through operators such

(Bouygues, SFR, Maroc Telecom) and to distributors (Cora, Auchan, Carrefour…) also to

traders who are intermediate who are responsible for the marketing of Nokia products with the

small distributors. In India Nokia has a tie-up with TATA Indicom and Reliance network for its

CDMA handsets. Structure of Nokia CDMA mobile distribution is as following :


Sourcing Sustainability: Nokia sources components, materials and services from suppliers all over the world. Our

sourcing activities can be divided into two categories:

Direct sourcing - taking care of the material supply for Nokia products, such as

components, parts, packaging, software development and research and development.

Indirect sourcing - covering equipment such as office furniture and computers. It also

includes services like catering, IT consultancy, and marketing which purchase for our own

use.

As a global company Nokia has suppliers located all around the world. The main countries and

regions for our supplier locations are: Austria, Belgium, Brazil, Canada, China, Czech Republic,

Denmark, Finland, France, Germany, Hungary, India, Ireland, Israel, Italy, Japan, Malaysia,

Mexico, Morocco, Netherlands, Philippines, Poland, Portugal, Singapore, Slovakia, S Korea,

Spain, Sweden, Switzerland, Taiwan, Thailand, Ukraine, UK, USA and Vietnam.

Source : Nokia Supplier Guidelines document, 2007


Supplier diversity

Supplier diversity is highest on the corporate responsibility agenda in the US. Nokia recognize

that their spending with suppliers there can have a significant impact on economic development.

We have developed a comprehensive set of global Nokia Supplier Requirements (NSR), which

include specified environmental and social requirements. These requirements are based on

international standards ISO 14001, SA 8000, OHSAS18001, PCMM and ILO, and UN

conventions.

Nokia Suppliers Requirements Nokia has developed environmental requirements for the products, components and parts that it

source. New suppliers (like our existing suppliers) must commit to meeting their requirements

(e.g. NSR and environmental product requirements) as part of the contractual agreement.

Suppliers Performance Supplier assessments are used to understand a supplier‟s performance level and compliance to

Nokia‟s requirements. Trained Nokia assessors conduct the majority of its supplier assessments

so that Nokia is involved first hand. Nokia believe it is important for Nokia assessors to see the

factories for them, to understand the problems and to work directly with suppliers to drive

improvements. This hands-on approach means that both Nokia and its suppliers take their

performance very seriously. Occasionally, Nokia work with third parties for specific expertise or

investigations, or as part of joint industry assessments. Nokia do, however, invite its suppliers to

use NGOs or similar parties to assure the effectiveness of its own labor standards and

environmental practices.

To drive sustainable change Nokia often need to combine assessments with other tools and

approaches including face-to-face meetings, performance metrics and targets, development

programs, trainings and supplier-focused events.


Training and Building Capability Nokia help suppliers improve their management of corporate responsibility (CR) issues by

meeting with them and providing training, sharing examples of best practice from Nokia‟s own

operations or from other case studies. Nokia help suppliers develop their own internal CR

organization and embed CR within their business starting with a commitment from the top.

Nokia also work with Tier One suppliers to help them manage their own supply chains.

It is becoming increasingly apparent that training and capacity building amongst companies in

the supply chain are important for driving sustainable improvements to support monitoring

programs. Therefore, as part of the Global e-Sustainability Initiative (GeSI) Supply Chain

Working Group (SCWG), Nokia actively participate in the Learning & Capability Building sub

work group.

Internal training

Before Nokia‟s suppliers can be expected to meet our requirements, it is first important that own

sourcing personnel are familiar with the requirements and commitments so that they can support

implementation and ensure consistent messaging.

Internal training is provided to new sourcing personnel and existing personnel receive training

and information sessions on new requirements.

Supplier training

Supplier training helps:

New suppliers to understand our expectations (e.g. NSR, Environmental Requirements for

Nokia products)

Existing suppliers to understand and implement new requirements (e.g. new material

restrictions, updates to NSR), and

Existing suppliers to build competences to meet existing requirements (e.g. address non-

conformances from on-site assessments).

Nokia‟s trainings focus on the Nokia Supplier Requirements, labor conditions, health and safety

in the work place, design for the environment, and substance management.


Supplier cooperation & development programs

In order for any company to systematically drive social and environmental improvements, it is

necessary to have both management support and an effective management system in place. One

of the ways in which Nokia help to build suppliers‟ Social and Environmental Responsibility

(SER) capabilities is to work with them to develop their own internal Corporate Responsibility

(CR) organization and embed CR within their business starting with a commitment from the top.

Nokia do this by meeting on a regular basis, helping to get management support and sharing

examples of best practice from Nokia‟s own operations or from other case studies.

In 2007 Nokia initiated a cross-commodity development program with Foxconn , a global

contract manufacturer and component supplier based in Taiwan. They helped the company set up

a corporate CR structure connected to business units, and to define a corporate CR commitment.

Nokia has been working with Foxconn for a number of years, meeting regularly to share best

practice.

Since 2007 Nokia have expanded this work and for the latest information please refer to Progress

and targets. Although the suppliers are at different levels in their CR journey and organized in

different ways, the objectives have been similar; to ensure they commit to and implement

effective CR programs, targets, monitoring practices and reporting.

A Supplier's view

"In 2007, Foxconn was advised by Nokia‟s customer to adopt industry best practice and set up an

internal Global Social and Environmental Committee. That advice has helped them plan and

manage social and environmental issues in a systematic, responsive and effective manner similar

to the business value propositions it deliver to customers with our products and services.

The Committee holds regular meetings to bring in new improvement agendas. For example, new

initiatives in 2007 included energy efficiency, air quality control and power saving. Through the

guidance of our customer and Nokia‟s internal organizational change, Foxconn has made

progress in social and environmental responsibility, developing a Code of Conduct in 2007,

improving employee benefits, and ensuring cleaner, safer and more enjoyable working

conditions.


Foxconn embarked on its journey of corporate social and environmental responsibility (SER) in

2004, but without Nokia‟s help this „quantum leap‟ and significant progress wouldn‟t have been

possible. This is genuinely a realization of supply chain collaboration and partnered actions."

Sourcing materials Nokia is an industry leader in substance management. Their main objective is that they know all

the materials in our products, not just those that raise concerns, and that they are safe for people

and the environment when used in the proper way. Their sourcing organization and suppliers

play a key role in ensuring our components and parts are safe and compliant with the Nokia

Substance List (NSL).

The NSL identifies substances that Nokia has banned, restricted, or targeted for reduction with

the aim of phasing out their use in Nokia products. Nokia also require suppliers to have a record

of the raw material content of products supplied to them and, if needed, to provide end-of-life

treatment recommendations.


Source : http://www.nokia.com

EU REACH Regulation

In June 2007, the EU regulations on the Registration, Evaluation, Authorization and Restriction

of Chemicals (REACH) came into force. According to this regulation, companies have

obligations to ensure that the chemical substances they manufacture, import or found in articles

considered as “substances of very high concern”, are registered, authorized or notified according

to legal requirements.

To support Nokia‟s suppliers they provided information to them and have ongoing discussions to

ensure they are aware of the REACH regulations, understand the requirements and are taking

responsibility for compliance to ensure uninterrupted supply.

How far does Nokia’s responsibility go down the supply chain?

Nokia‟s primary focus is on those suppliers with who company contract and work with directly.

Their suppliers are required to meet Nokia Supplier Requirements and product environmental

requirements that define expectations for their suppliers, the components, parts and services they

supply. Nokia Supplier Requirements request that their suppliers in turn set environmental, labor

and health & safety requirements, and monitor the performance of their suppliers. Nokia believe

each tier of the supply chain must take responsibility for managing its own suppliers to achieve

positive, sustainable improvements throughout the entire supply chain.

If concerns arise regarding the performance of 2nd/3rd tier suppliers, Nokia works deeper down

the supply chain to investigate and address any concerns.

For certain materials of concern or alternative new materials, Nokia works with suppliers to

evaluate and promote environmental and social improvements further down the supply chain.

This work involves increasing the transparency of the supply chains of these materials,

understanding the commitments of each tier, working at an industry level and with stakeholders.

Nokia efforts with Tantalum are one example of work to tackle materials of concern, and

biomaterials are an example of alternative new material.


Industry Collaboration

Global e-Sustainability Initiative (GeSI)

Nokia became a full member of the Global e-Sustainability Initiative (GeSI ) in 2007. They have

been a member of the GeSI Supply Chain Working Group (SCWG) since 2004. This Group

works closely with the Electronics Industry Citizenship Coalition (EICC). The main aims of this

collaborative effort are to promote good conduct and to develop and deploy a consistent set of

tools and processes to measure, monitor and improve CR performance across the ICT sector

supply chain.

As part of their membership of the GeSI SCWG, they actively participate in the Learning and

Capability Building, Shared Auditing and Extractives sub-groups working together with EICC.

Shared Audits

Industry shares many of the same suppliers and Nokia‟s networked supply chain means that

many of them are customers and suppliers of each other. As a result, one focus of the GeSI

SCWG has been to develop a shared auditing process together with the EICC, which means a

single audit of a supplier facility can be shared across customers. In doing so, the work group

aims to reduce the burden of duplicate audits on suppliers and allow them to focus resources on

addressing issues and improving conditions

During 2008 Nokia participated within the shared audit work group, helping to develop the

shared auditing process and in the actual audit pilots.

Learning & Capability Building

Recognizing that simply assessing suppliers for compliance does not create sustainable change,

GeSI SCWG and EICC formed the Learning & Capability building work group, to which Nokia

is an active member. During 2008, this work group hosted a supplier forum in China, concluded

the pilot studies that emerged from the multi-stakeholder capability-building project for the ICT

sector in China (in collaboration with BSR and the Foreign Investment Advisory Service (FIAS))

and, began developing a series of web-based e-learning modules.

Extractives

GeSI and EICC formed the Extractives Workgroup to enhance members‟ understanding of social

and environmental conditions at the mine level and to determine if and how Nokia could act


collectively or individually to improve these conditions. With this aim, the Workgroup

commissioned an industry research project to understand:

How six key metals (aluminum, cobalt, copper, gold, palladium, and tin) are mined,

recycled, purchased and used within the electronics industry,

How members of the GeSI and EICC can effectively influence social and environmental

issues associated with the mining of metals used in electronics products. The research,

published in June 2008, helped raise awareness of the key facts and challenges surrounding

the supply of metals, the ability to trace the sources of metal used in electronic products and

the industry‟s ability to include conditions. After this research the work group coordinated

stakeholder forums to gather feedback and define the groups priorities moving forward..

RosettaNet

RosettaNet is a voluntary initiative of over 500 major information technology and electronics

manufacturers that is committed to developing solutions for the standardized exchange of

information.

As part of its supplier cooperation development, Nokia is using the web-based RosettaNet

information exchange solution in its product information exchange with suppliers, including

information on material content.

Tie up with Sify Technology Nokia India on Monday announced its tie up with Sify Technologies to deploy Nokia Tej, the

firm‟s supply chain management solution on mobile. Sify will integrate the product with its

existing suite of solutions such as Forum and will customise it for individual customers.

Nokia Tej launched in April is a pay-per-use service available on Nokia handsets targeted at

enterprises and small and medium customers. It takes care of order, distribution and sales

management processes. The service comes at Rs 1,250 and an additional Rs 550 per user per

month. Sify will charge a professional fee for customization. The service can be integrated to any

existing IT applications used at the customer end.

Since its commercial launch, over 50 customers across verticals including consumer durables,

FMCG and pharma have signed up for the service to e-enable their sales force and distribution


channels.

Given the cutthroat competition in the telecom segment, service providers are focusing on

services such as business applications beyond voice offerings. “Our association with Sify will

help us leverage their widespread distribution network. Sify also has a strong presence in the

verticals relevant to us,” said Chand Malu, business head of Nokia Tej.


Refrences

www.Nokia.co.in

www.hclinfosystems.in

http://toostep.com/debate/nokia-to-have-its-own-retail-distribution-model-will-this-he

http://davidhowse.wordpress.com/2010/08/10/converting-a-wholesale-or-distribution-

business-model-to-a-retail-model-an-alberta-marketing-perspective/

http://press.nokia.com/PR/199601/775828_5.html

http://www.hclinfosystems.com/news45.htm

http://dqchannels.ciol.com/content/reselleralert/106022101.asp

http://www.businessweek.com/globalbiz/content/aug2007/gb20070831_914354.htm

http://www.businessweek.com/magazine/content/09_32/b4142056700653.htm

http://www.thehindubusinessline.com/2008/06/27/stories/2008062751790400.htm

nokia supply chain management

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