1. Relationships in Supply Chain Management
11/2011
Miikka Lemmetty

2. Agenda Nokia company information Supply chain structure
Kraljic’s Matrix & Relationships
Comparison with Apple
Negative Impact of Relationships
Strengths and Weaknesses
Analysis & Recommendations
What is the role of relationships in the supply chain of communications industry?

3. Company information Nokia:
In 2010 sold 453 million phones in 150 countries
Operating revenue
€51bn (2008)  €42bn (2010)
15 manufacturing plants in 9 countries
Handles 100 billion components
60 strategic suppliers
Lost reputation as the world leader in supply chain management to Apple in 2008
Currently adjusts supply network to meet the market demand
Apple
Operating Revenue - €48Bn
Sources:

4. Supply chain structure
Relationships ensure quality
Raw Materials
Compatible parts
Parts Manufacture
Compiling final product
Nokia Manufacture
Quality control
Final Product
Enviroment plays a vital role with the supplier of Nokia and Apple
Role of relationships with Suppliers
Technology requirements
Quality control
Environmental impact
Minimising disruptions

5. Kraljic’s Matrix & Relationships
Supply’s impact on financial results
Supply risk
Leverage products
Bottleneck products
Routine products
Strategic products
Relationships
Linking relationships to Kraljic’s matrix:

6. Comparison with Apple Similar supplier relations for both companies
2010
2009
2008
2007
2006
Operating cycle
Nokia 87 88 86
101 66
Apple
104 75
Cash conversion cycle 34 44 49 50 33 48 60 67 42
Nokia
Apple
Delivery Time 3 10
Stock turnover
17,01
68,05
*O-Cycle: Payable periods increased from 69 days to 97 days in 2007
*CC-cycle: payable payment period has increased for nokia to 52 days from 44 days
Closed Supply Chain-Manufacturer exerts control over the whole supply chain from design to retail store
Stock turover= cost of goods sold/ average inventory
Operating Cycle: time period from inventory purchase until the receipt of cash
Cash Cycle: period from when cash is paid out, to when cash is received.
Stock turnover decreased a bit for nokia (From 21 to 17)
Design-to-market time: ~ 18 months
Sources:
Value-Added Logistics in Supply Chain Management By Henriette Bjerreskov Dinitzen, Dorthe Bohlbro
Similar supplier relations for both companies
Relationship lengths with suppliers vary
Very high quality and price pressure
Apple: ” we periodically review our relationships and add new suppliers as needed”

7. Negative Impact of Relationships
Personal and very good relationships can be harmful
Personal relationships can lead to losing business focus
Elcoteq – Nokia’s strategic EMS supplier
Trusts in Nokia
Increases production capacity
Nokia reduces orders
Production capacity too high for demand
Elcoteq is forced to declare bankruptcy
Nokia partners with Foxconn
EMS- Elctronics Manufacturing Service
Sources:

8. Strengths and Weaknesses
Fast cash cycle times
Low stock turnover value
Flexible supply chain to mitigate disruptions
Loss of market share reduce bargaining power
Control over suppliers
Large order volumes enable ruthless behaviour if required

9. Analysis & Recommendatios
Role of supplier relations in 5 years
Strategic suppliers will be increasingly more important
Supplier network will adjust according to new innovations
Recommendations
Maintain good relationships with strategic suppliers
Avoid requirements for bottleneck products

10. Thank you for your attention
Any Questions?