Name: Anand Kumar Chaudhari

19PGDM-BHU009
Case study: Nokia supply chain management
This case study is an analysis of two very similar companies, Ericsson and Nokia, in
the same situation and how they react. The case shows the repercussions of the
reaction or lack thereof and how each company was ultimately affected by their
decisions. There are several major issues that need to discussed. This analysis will
look at each company individually and what they did right and what they did wrong,
in hindsight, realizing that it is very easy to look back at an event but usually not so
easy when the event is unfolding.
The first company is Nokia. According to the case, Nokia was the world’s leader in
cell phone sales and the largest corporation in Europe by market capitalization in the
year 2000. The company originally started out in wood pulp production but
converted to electronics by 1999. They had $19.9 billion is sales and 60,000
employees. Cell phones accounted for 70 percent of Nokia’s revenue. In 1999
Nokia sold 128 million phones. Nokia accomplished this transition by investing profits
into new technology and electronics. Nokia was always on the cutting edge and cell
phone become their core business.
The second company looked at in the case is Ericsson. According to the case,
Ericsson was founded in 1876. Ericsson started out as a telephone manufacturer. By
2000, Ericsson had 100,000 employees and their net sales were $25
billion. Ericsson continuously struggled to keep up with its competitors in
manufacturing phones and was branching out to building landline and mobile
networks .Network building was Ericsson’s core competency.
On March 17, 2000, a fire at Royal Philips Electronics effected both companies. This
is because both companies used the same same chip manufactured at this
plant. Together they used 40% of the plant’s capacity to manufacture this chip. Both
companies were basing new phones on this chip technology and both were set to
launch shortly after the fire happened.
PROBLEMS IDENTIFIED
• Problems at Philip’s end: Supply Chain Interruption
▪ Fire breakout in Philip’s clean-rooms
▪ Inability to determine the exact damage to clean-rooms
▪ Inability to determine their ‘time for normal production resuming’
Immediately after the fire outbreak at their clean rooms, Philips informed
Nokia and Ericsson of 1 week maintenance time before they resume their
operations, on the basis of assumptions and without proper analysis of
their damage
▪ Lack of emergency preparations Philips production plant in New Mexico
lacked in the pre-planned management in case of uncertainties
• Problems at Ericsson’s end:
➢ Weak crisis judgement:
 ➢ Failure to take prompt actions in time Since, managers and officials were
unable to identify the gravity of the problem upcoming from the lack of chip
supply from Philips, they did not take any measures to create action plan and
waited for Philips production to recover after a week
NOKIA’S ACTIONS TO STABILIZE SUPPLY CHAIN MANAGEMENT:
• Early speculations of possible crisis
• Preparedness against supply crisis
• Finding alternative source of chip supply