Global Supply Chain Management

of

NOKIA

Submitted by:

Mohsin Shafait (22416)

MS-PM

Submitted to
Dr. Shahzad A. Khan

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 Table of Contents
Introduction .............................................................................................. 3
Nokia Products ........................................................................................ 4
Nokia Competitors .................................................................................. 4
Nokia Supply Chain Management .......................................................... 5
Nokia Supply Chain Design .................................................................... 6
Nokia distribution structure - GSM ......................................................... 6
Nokia distribution structure - CDMA ..................................................... 8
Sourcing Sustainability: ............................................................................ 8
Nokia Suppliers Requirements ................................................................ 9
Suppliers Performance ............................................................................. 9
Training and Building Capability ........................................................... 10
Sourcing materials ................................................................................... 11
Industry Collaboration ............................................................................ 12
Tie up with Sify Technology ................................................................... 14
References................................................................................................ 14

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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.

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Nokia Products:-
 Nokia 1000 series – Ultrabasic series

 Nokia 2000 series – Basic series

 Nokia 3000 series – Expression series

 Nokia 5000 series – Active series

 Nokia 6000 series – Classic Business series

 Nokia 7000 series – Fashion and Experimental series

 Nokia 8000 series Premium series

 Nokia 9000 series – Communicator series (discontinued)

 Nokia C series - affordable series (optimized for social networking and sharing)

 Nokia E series - enterprise-class series (business-optimized smart phones)

 Nokia N series - advanced Smartphone series (with advanced multimedia and connectivity
features)

 Nokia X series – for young audience (focused on music and entertainment)

Nokia Competitors:-
1. Erricson

2. Cisco

3. Huawei

4. Juniper Networks

5. Hewlett Packard (HP)

6. IBM

7. Arista

8. Dell

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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 to the 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

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.

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Nokia Supply Chain Design:-

Nokia Networks supply chain designs match three types of customer demand chains

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
Nokia Factory
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
Nokia Warehouse
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

Distributor
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.
Re-Distribution
In India, Nokia started distributing its phones through a partnership with Stockist Supplier
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
Retailers
there was a tremendous growth opportunity and it was best exploited
when the resources utilization of both companies was optimized.

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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.

Penetrate
Distribution Explore new
Sales Force market
Channel markets
deeper

Assist in new Receivable Share & gain Nokia Care

product collection market insight Centers

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

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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.

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 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
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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.

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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."

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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.

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.

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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,
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 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 customize 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.

References:-
 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

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