Global Supply Chain Management Of NOKIA

Submitted to : PROP:-

KANCHANNA SATTUR

Submitted by :

MARUTHI BONGANI
TYBMS-B ROLL NO: 87

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 longterm 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 globallyBrazil, China, Finland, Great Britain, Hungary, India, Mexico, Romania and South Korea. Then it transfers to nokias 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 Nokias business model transformation. Benefits include time-to-market, risk management, agility and financial model flexibility. Nokia believes two critical factors were instrumental to Their Transportation success leadership and communication of the vision . The leadership philosophy on four equally elements: heart, head, hands and guts. The leadership attributes are exemplified through energy and passion, trust as the base for business, 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

Nokia factory

Nokia Warehouse

Distributor

Re-distribution Stockist Supplier

Retailers

DISTRIBUTORS 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, ValueAdded 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.
Distribution Channel Assist in new product Sales Force Penetrate market deeper Share & gain market insight Explore new markets Nokia Care Centres

Receivable collection

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 Nokias 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

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 Nokias 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 networks 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 doesnt 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 suppliers performance level and compliance to Nokias 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 Nokias 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 Nokias 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). Nokias 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 Nokias 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 Nokias 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 Nokias 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

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 Nokias 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 Nokias responsibility go down the supply chain? Nokias 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 subgroups working together with EICC. Shared Audits Industry shares many of the same suppliers and Nokias 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:

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 industrys 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 webbased 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 firms 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.