Nokia’s Supply Chain Management

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Nokia’s Supply Chain Management |

Executive Summary |

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2/28/2015 |

When a fire at the Royal Philips Electronics plant in Albuquerque, New Mexico destroyed a significant amount of their stock of semiconductor chips, both Ericsson and Nokia Corporation experienced supply chain disruptions. This case study discusses the very different ways two cell phone manufacturers, Ericsson and Nokia, handled this disruption.

Nokia had a process in place so that once news of the disruption was received by a supply manager, the word spread and reached a component purchasing manager. A call was placed to Philips and the initial estimate of one week to restart production was received. The news travelled up the ladder to the senior vice president of operations who began tracking the components that Phillips provided and began calling daily for updates. Ten days later, Philips contacted Nokia to let them know that the damage was worse than expected and it would be a six week stoppage, rather than the original one week estimate. The folks at Nokia ran the numbers and determined that the disruption could affect five percent of the annual production. Rather than accept this loss, Nokia’s people started working on the problem. Engineers began working on a chip redesign to leverage other suppliers. Other members of the team began exploring other suppliers that could provide some of the components that Philips typically provided. They were able to secure them in five days from the US and Japan. Nokia placed pressure on Philips, and Philips was able to acquire more inventories from the Netherlands and Shanghai. This global effort allowed Nokia to get the chips they needed, and as an added benefit, the engineers at Philips had figured out how to make and additional two million chips when production could begin again.

This excellent response to the disruption was successful and Nokia avoided any production loss. The process Nokia used to handle the disruption was born from...