(BATCH 2018-2020)

TERM – III

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 On March 17, 2000, there was a power surge caused a fire at the Royal
Philips Electronics (Philips) plant in Albuquerque, New Mexico and
this plant was a key supplier of semiconductor chips used in cell
phones for both Ericsson and Nokia Corporation and this fire lasted
for about ten minutes it destroyed many chips but the smoke of fire
destroyed most of the chips kept in that plant. At this time, both
companies were about to release new cell phone designs that required
these chips.
This news was conveyed both to Nokia as well as Ericsson but both
the companies acted differently. Nokia on one hand reacted very
quickly and tried to find out new suppliers whereas Ericsson waited
and didn’t pass the information to its superiors and this led to a huge
loss to Ericson as Nokia was able to find new suppliers and launched
its new phone on time but Ericsson was not able to do so. Ericson at
that time was trying to launch the first phone with Bluetooth, despite
this this new model when launched was not a success as expected as
it was not launched on time.
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  NOKIA:- POST FIRE
Supply managers at Nokia flagged the fire a few days after the fire, and
the event was properly escalated to Tapio Markki, the component
purchase manager.
When Philips sent detail report about the fire and weeks delay, Markki
escalated it further to Pertti Korhenen, Senior Vice President of
operations, logistics and sourcing.
Korhenen implemented a series of tracking and daily updates from Nokia
about their components and when it was determined that Philips would
need weeks to restart production, they calculated that it would also
hamper their handset production.
With 4million handsets or 5% of their annual production at stake,
Korhenen and then CEO Jorma Ollila fast implemented several drastic
steps:
1. Chip redesign to allow Nokia access to alternate suppliers, two new
suppliers from USA and one from Japan were developed and asked
to supply with 5 day notice period.
2. Applying pressure on Philips to mitigate their loss which resulted
in Philips securing more inventories from Netherlands and
Shanghai.
3. Nokia Engineers even devised a process to boast production of
Philips plant which would supply 2 million more chips that year.
This all around effort helped Nokia avoid any production loss due to
supply chain disruptions saving the organization millions in lost revenue.
CEO Jorma Ollila passed more authority to executives to act fast on such
supply chain disruptions by creating dedicated teams and institutions
inside the organization dedicated to this purpose.

 ERICSSON:- POST FIRE

In contrast to Nokia, the low level technician received the first hand
information at the Ericsson about the fire but he didn’t flow this
information until April to his supervisors. Due to this, the production

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 got late and hence proved to be a harm to the Ericsson production of
mobile phones.
On the other hand, Ericsson due to his poor supply chain management
and poor risk management skills have to jump into high financial
losses and also the late back for the image of the company which will
hamper them in upcoming future.

 RECOMMENDATION
After analysing the full case on how supply chain of Nokia works, it is
observed that Nokia had a edge over Ericsson in terms of supplier
from where they occupying chips used in phone. As Nokia had other
supplier and took a required step when they got to know about the fire
tragedy in Philips that shows the management efficiency as well.
On the contrary side Ericsson was depending on the sole supplier
which leads to the failure of supply chain and also they had a un-
efficient management as well because of which the higher authority
was not able to take a corrective measure.
It is recommended that Ericsson should had an other suppliers too so
that in case of any failure of delivering material by one supplier will
not affect Ericsson supply chain. Also it is recommended that Ericsson
should train their management so that they can take corrective
measure within time frame and prevent company from losses, as
happened in case Ericsson was not able to launch their new phone
because of not having required chip and had to face huge market share
loss.

THANK YOU

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