Daily Archives: December 11, 2006

The Nokia Saga

Both Spend Matters and Supply Excellence have recently discussed Nokia and their journey to a center-led organization. According to Tim, Nokia has made the move in an effort to save $300 M Euro over three years by better aligning supply strategies with business requirements, reducing purchasing operation and transaction costs, and better integrating supply management with supply chain management and product creation.

The reality is that they are doing a lot more than just moving to a center led model. According to the presentation at eyefortransport‘s recent Supply Chain Directions Summit in the San Francisco Bay Area, they are also focusing on:

  • improved capacity planning
  • 3PL cost management programs
  • offering new service levels to manufacturing centers and to sales
  • collaborating with suppliers to reduce packaging requirements
  • better supply base management
  • improved frame agreements
  • location-based supply chain improvements

Although they did not release the dollar values associated with improvements they have made to date, they have reduced packing requirement ratios from as high as 2.0 to under 1.4, almost doubling the amount of product they can fit on the same shipment. They have improved capacity utilization by focusing on lane-based planning and dealing with short term and mid-term plans separately, with long-term plans updated quarterly. They have evolved outbound shipments to small lot order sizes which they are better able to optimize, since the vast majority of their orders (> 85%) are now small lot sizes. They are also evaluating non-traditional delivery methods in some regions and achieving great success.

They’ve restructured their frame agreement to include a standard contract which includes all of their standard clauses and SOX compliance, fill-in-the-blank appendices to deal with standard requirements such as compensation, storage, service levels, and service levels, and customized fill-in-the-blank appendices for each region to deal with specific local requirements such as TAPA or C-TPAT compliance, GPS monitoring, driver screening, security escort requirements, etc. This allows them to draft better contracts, faster, with reduced risk.

They’ve found that:

  • controlled variables can be a large source of improvement
  • tangible metrics are essential to achieving success
  • the revised frame agreement regulates requirements
  • risk management, security teams, and 3PL collaboration guarantee risk reduction
  • constant audit and process reviews sustain growth
  • collaboration is essential in strategy, tactic, and action plans

Note that eyefortransport‘s sister organization, eyeforprocurement has a number of upcoming events next year custom designed for today’s procurement professionals, including the Supplier Management Forum next April in Miami. Registrations received before year’s end save $400 off of the regular registration rate and those who quote “sourcing innovation” in the discount code field save an additional $100.