Analysis of Nokia Supply Chain Management - Case Study Example

Running head: Analysis of Nokia Supply Chain Management Name Course name Professors’ name Date Introduction Nokia Corporation, based in Finland, is the world’s leading manufacturer and distributor of mobile phones branded Nokia. It came into being in 1865 as a paper mill but began manufacturing phone in 1982. Nokia had interest in telecommunication, consumer electronics, cables and rubber. At the beginning of 1998 the company made a decision to strategically focus on telecommunication business. This subsequently elevated Nokia into a global leader position by the year 1998. The victory of Nokia is accredited to its prolific supply chain practices. Existence of an integrated supply chain that interconnect suppliers, manufacturing plant, sales, providers of logistics, and the ultimate consumers contributed to the success of Nokia Company limited. Establishment of long-term relationship with suppliers assisted the company in processing its products efficiently. The long run effect of this efficiency is reduction in cost of manufacturing and processing. Adoption of hybrid manufacturing system that has a combination in-house manufacturing and outsourcing improved the pace of production. So as to enhance competitiveness of manufacturing facilities, Nokia adopted Smart manufacturing technique that offered solutions to problems in real time basis. Nokia’s wide distribution network enabled it to reach many customers within a short period of time. This literature presents approaches used by Nokia when managing the product’s supply chain. In recognition of the fact that various companies including Ericsson deliver their products into the market, it is essential to examine how Nokia shapes its supply chain with an objective of outwitting its competitors. Supply chain situation analysis According to AMR Research (12), Nokia Company limited envisions sound environmental and social principles as critical elements in ensuring the success of a business. Ethically the company works hard to anticipate risk, improve governance practices, increase employee satisfaction, and take care of environment and communities were business is done. It is the expectation of Nokia Inc that players in its supply chain inculcate the same principles. Some of these principles include: integrating sustainable practices into the business, close co-operation with customers and suppliers, and perpetual improvement of products quality (Friscia, 32). Employee communication It is vital to set an environment with opportunities for communication and feedback. Nokia frequently involve their employees in deliberation on corporate strategy, career, development of competence, performance, diversity and a balance between work and life. The Company disseminates information covering on sustainability through internal campaigns. An employee is a critical factor of production in many manufacturing companies including Nokia Inc. To achieve profitability, earnings per share, and revenue, Nokia Company utilizes Workforce management strategy. New technology in the market allows a company to focus on demand signals such as behaviour of customer, status of the economy, and market trends. The response therefore is to staff and schedule workforce in a manner that enhances efficiency. This is a tendency towards a demand driven economy. Customers Network operators form the biggest customers for Nokia Inc. Their role is to furnish the company with information about social and environmental sustainability (Lam, 4). In response, the company utilizes customer account management interface. It is the responsibility of the customer to unplug chargers when the handset is fully charged and subsequently return handsets for recycling. Customers are valued by supply chain leaders since they consistently make choices that support industrial progress. At Nokia, products are produced to meet customer’s individual demand and not merely selling what the company can make. Customers are engaged through Nokia Care Support services that is available online and via call centers. Nokia also carries out customer satisfaction survey and independent market exploration. Providers of logistics Nokia uses one logistic service provider to synchronize inbound transportation to each manufacturing centre with a goal of consolidating shipment and making use of economies of scale. The fast pace of development of new product in the market and consequent obsolescence of old products is the current observable feature in the market (Cooper, 12). A fact that companies are under pressure to push technology to the market and compete for more customers has made mobile phone industry a changing model for supply chain unsurpassed practice. Nokia subcontract some manufacturing and logistic activities with an objective of developing competitive products. Research and development in addition to implementation of postponement strategies has led to better allocation of resources time to the market. It is critical to understand that enhancement of technology to accurately forecast demand and share such information with players in the industry. Serialized tracking of individual cell phone is an important task that gives wireless carriers a detailed observation of inventory disposition. The aspect of tracking individual handset makes it possible for carriers and retailers to gather essential information about a phone through its lifecycle thus being able to deduce when a unit is shipped, received, returned and refurbished. This intelligence is used by producer and customers to analyze consumer habits and pinpoint merchandise that are poorly selling or defective. Nokia manages its supply chain by better responding to demand signals. The company is building value by coordinating directly supply chain and by utilizing outsourcing as a means of adding flexibility. Nokia manufacturing Nokia has an immense manufacturing plant stretching from Mexico, Hungary to China. Inputs into the system were about 275 million components whilst the output which mainly comprised finished items summed up to millions. To handle such a huge volume was a difficult task which then forced Nokia to turn High-tech manufacturing and logistics into one of its areas of proficiency. From 1990 Nokia has improve its manufacturing though it faced a slump in 1995 when rapid growth outpaced capacity of Nokia system. This directly affected logistics and supply chain management since orders piled up. Presently, Nokia operates nine major handset factories located in Europe, Asia and America. A tenth facility is being constructed in India that will produce output to meet market demand. To manage procurement and delivery of inputs, Nokia exploit large and sophisticated IT system The ever growing demand for customization is among the challenges affecting Nokia Company. Vodafone and Cingular wireless are increasingly differentiating themselves through unique software and specialized features installed in their phones. They require Nokia to install the software prior to releasing handsets from the factory. This means that Nokia has to reorient its production in manner that phone engines are built to take on different tasks. An aspect of “assembly to order” is pursued by Nokia with an objective of meeting specialized needs of its customers (Haag, 45). All these manufacturing procedures are complex in nature thus forms a reason why Nokia does not outsource its manufacturing but instead subcontract activities that does not need customization or rapid delivery. Existence of Nokia manufacturing experts is a strategic advantage that enables efficient production of large volumes of output. Nokia supply Channel Nokia is a leading provider of mobile communication in the world as a result drives growth and sustainability of mobile phone industry. Nokia pride itself in connecting people to each other and the most important aspect is ease of use and innovativeness of products in the market including mobile phones, devices, and other solutions. Market research indicates that a third of mobile phone users use a Nokia branded phone. Currently, India is leading in provision of Nokia with manufacturing facility located at Chennai. Distribution is essential in any organization seeking to capture many clients through sales (Larson, 20). Depending on demand, products are expected to reach the final consumer within a short period of time. Effectiveness of supply and distribution channel will determine whether final manufactured product will arrive at the final consumer. Nokia works with distributors, re-distributors stockiest, and finally the retailer who directs the product to the final purchaser along the ladder. Distributors and outlets Nokia market share in Asia has increased substantially due to HCL - Nokia relationship. At the moment, mobile phones tend to exercise penetration where the remote location and small towns are the target niches. To achieve greater level of penetration, all possible channels must be aligned with global policy of balanced channels. The relationship between Nokia and HCL plays a vital role in increasing sales and ultimately hold the position of market leader (Lavassani, 90). Collaboration between the two parties has enabled the consumer access products within the nearest location in the Indian market. Bright point offers diverse brands in the wireless industry ranging from handset, integrated devices, modems, and other phone accessories. This distribution outlet distributes products from leading handset manufactures including Nokia. Nokia priority dealers are among the outlets utilized by Nokia to distribute its products. The outlet is directly controlled and coordinated by Nokia thus makes them directly accountable to Nokia. Customers normally prefer purchasing their handsets from Nokia Priority Dealers since they are genuine dealers of the product. The outlet is well furnished with Nokia portfolio existing in the market. This therefore increases the variety of choices available for a customer. Multi brand outlets forms another category of channels utilized by Nokia Company that deal with company products in the market. Their responsibility is to avail services and space to competitors as they market all products. These outlets are many in Indian market and they provide all products demanded by consumers. Reliance web world are fashionable outlets dealing with reliance products. Apart from providing connection and billing of the connections, the outlet sells mobile phones of various brands. One of the advantages of these outlets is that the stock is directly sent from Nokia manufactures. Reliance web world express is an additional category of reliance outlet that is franchising. In addition to pre-stated outlets there is Tata true values Shoppe that pursues the same role of providing connectivity and sale of mobile phones. The arrows represent flow of information, logistics, capital, and other business transactions along the chain. All players in the chain are interdependent hence the success of one agent leads to the success of the other party. Analysis of supply chain Product design and development is vital in management of supply chain. Nokia has invested heavily in research so as to introduce innovative product in the market. This investment must be protected by accurately forecasting products that are highly demanded in the market. Both manufacturers and suppliers must work together so as to synchronize orders and production plans. Inventory management is also a necessity in management of supply chain (Mentzer, 20). It allows for management of sales purchases and payments. Nokia employs stock outs strategy as a means of making fashionable merchandise more responsive to the market. This strategy expands sales level and eventual revenue. Excess stock at the retail level may lead to losses due to deficiency of market demand. Nokia utilizes coding or rather serial system where handsets are tracked down to the final consumer. This is possible by the use of advanced information communication system. The approach has made it possible for recycling obsolete handsets and subsequently introduces new sophisticated products. Utilization of good Nokia Customer experience centres eradicate a phenomenon where phones produced are not sold due to customer rejection. In the long run manufactured handset usually meets customer’s expectations. Logistics management at Nokia is highly responsive with the use of efficient distribution centres and outlets. It has entered into partnership with call service providers like Vodafone to distribute products. Nokia is able to handle customer demands directly by acting on orders placed by the clients. Existence of professionals in the field enables Nokia to manufacture and supply any kind of customized product. It is imperative to note that global distribution centres located in different nations has enhanced timely distribution of products (Hertz, 140). In terms of Information flow, chain management at Nokia is conducted effectively by sourcing information from point of end use and linking them throughout the chain for speedy exchange of intelligence (Halldorsson, 289). The company does not tolerate deficient computer system or paper work in the present competitive world but foster innovativeness by organizing fast information flow throughout the system. Formulation of computers networks and streamlining information flow leads to consolidation of knowledge and subsequent fast pace of production. Responsive supply chain at Nokia The current competitive environment has forced Nokia to respond fast to feedbacks derived from customers. Nokia operates in a network of companies located in various countries and continents. The nature of information communication technology in the company enables it to go beyond improving internal productivity to develop productivity of partners in the supply chain. Flexibility and ability to respond rapidly and effectively to partners along the supply chain leads to competitive advantages. Problems and issues in Nokia supply Chain The supply chain of Nokia face a number of problems stretching from financial crisis, energy price fluctuations which makes the cost of labour expensive and other social, political and economic problems. Recession has the most impact in the supply chain of Nokia since it increases the price of inputs such as labour and raw materials. If a company passes on such cost to the customer, sales will decrease by a bigger proposition. As a step to minimize effects of downturn, Nokia has adopted steps to improve demand forecasting and strengthen business continuity planning. Intense customer based research provides accurate feedback that are used by the company to forecast into market dynamics thus respond appropriately. Presence of professionals in the company minimizes effects of financial downturn given that management strategies employed are feasible. Another strategy evident in the company is its global outlook. The company has outlets in all countries whist the brand is widely accepted by the customer. Recommendation A recommendation to the Nokia Company is to establish a possibility of building a manufacturing plant in all continents. Although the recommendation is capital intensive, successful implementation of the strategy will serve the purpose of shortening the time interval at the supply chain before a product reaches final consumer. With respect to customer satisfaction; Nokia must look into the opportunity of supplying phones which are sensitive to age of individual client. These models move faster along the supply chain. Conclusion From the literature, it was evident that supply chain is also termed as value chain since all agents have a role in the success of business. Nokia, based in Finland, has expanded its manufacturing centres into Europe, Asia and America. To understand vividly Nokia supply chain, the paper presented an analysis of major players in the chain. These are the consumers, communication channel, suppliers, manufactures and distributors. The essay further elaborated on different aspects of the supply chain e.g. procurement and inventory management, logistics management, information flow and product design and development. Read More