Logistics beyond a mobile Logistics conference 26 27

Logistics beyond a mobile Logistics conference, 26 -27 th September 2008 Portoroz Jussi Laaksonen Director, Logistics Western Europe Sales Cluster 1 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Nokia at a glance Nokia is the world leader in mobility, driving the transformation and growth of the converging Internet and communications industries 2 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Our Vision, promise and approach Vision Our vision is a world where everyone can be connected. Promise Our promise is to help people feel close to what is important to them. Approach Trusted consumer relationship. Best mobile devices everywhere. Context enriched services. 3 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Nokia’s Demand Supply Network Management Nokia devices are available at approximately 350 000 pos Device manufacturing in 9 countries More than 20 000 employees in production 437 million devices in 2007 ~1. 2 M / day ~14 / second 120 billion components in 2007 ~330 M / day ~3800/second 4 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Contents üWhat is Lean supply chain management? How to build in both agility and efficiency? ü Demand supply network structure ü Synchronizing inbound logistics ü Smart manufacturing ü Collaborating with customers ü KPI’s 5 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Refreshing our memories about LEAN production “Lean” is the optimal way of producing goods through the removal of waste (muda, muri, mura) and implementation of flow • Lean recognizes 7 types of waste (muda): • • Transportation (moving products that is not actually required to perform the processing) Inventory (all components, work-in-progress and finished product not being processed) Motion (people or equipment moving or walking more than is required to perform the processing) Waiting (waiting for the next production step) Overproduction (production ahead of demand) Over Processing (due to poor tool or product design creating activity) Defects (the effort involved in inspecting for and fixing defects) • Muri addresses non value added work demanded of workers • Mura addresses fluctuations at schedule and operational level Source: Wikipedia 6 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Applying LEAN to supply chain: Three key components: • Logistics is about managing inventory • Lean is about speed, flow and the elimination of waste (inventory) • Six Sigma is about understanding and reducing variation Lean Logistics, can then be defined as: The elimination of unnecessary inventories through disciplined efforts to understand reduce variation, while increasing speed and flow in the supply chain Source: http: //www. ltdmgmt. com/mag/understanding-lean-logistics. htm 7 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen Reduce variation, cost & inventory • No disruption • Long lead times • Standardized products • Standardized quantities Responding to customer Expectations • Fast response • Short lead times • Maximum flexibility • Customized products

Do we understand E 2 E supply chain? Inventory profile of UK Automotive Supply Chain Source: http: //www. 3 daycar. com/mainframe/publications/3 daycar. pdf 8 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Contents ü What is Lean supply chain management? How to build in both agility and efficiency? ü Demand supply network structure ü Synchronizing inbound logistics ü Smart manufacturing ü Collaborating with customers ü KPI’s 9 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

The story begins already at 1995… 160 120 COMPETITIVE ADVANTAGE Inventories in Days of Supply (DOS) 80 40 TOWARDS WORLD CLASS SHAPE-UP Annual report 1995: “Despite strong sales growth, Nokia Mobile Phones profitability was adversely affected 0 by a number of factors during the year. The principal factor affecting profitability was the difficulty of meeting the challenges 1995 created 1996 by the 1997 business group's rapid growth. …. Profitability was also affected by … interruptions in the supply of certain components, as well as logistical issues. Consequently, the business group experienced certain difficulties in bringing this production capacity and logistics associated therewith up to optimal levels. ” 10 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen 1998 1999 2000 2001 2002 2003

Nokia’s award winning supply chain AMR research ranks top 25 supply chains in the world by following criteria: • Financial performance • AMR expert evaluation • Peer assessment Nokia’s supply chain rankings: #2 in 2004 #4 in 2005 #1 in 2007 #2 in 2008 Source: http: //www. amrresearch. com/supplychaintop 25/# 11 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Modularity in products Engine Operation Supply Operation: Final assembly and variation 234 handsets Example: N 95 12 12 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen 336 sales packages

Modularity in production Engine production Push driven by plans 13 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen Engine buffer 2 -6 days of supply Assembly & delivery Assembly & delivery Pull driven by orders

Nokia’s global network of operations Komarom Beijing Dongguan Chennai Manaus Nokia Contract manufacturer 14 © 2008 Nokia Masan Longhua Reynosa Monterrey Guadalajara Manaus Salo Tallinn Cluj Tiszaújváros Pecs logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Being closer to customers enables us to build lean logistics – sense and response in SCM Nokia factory Nokia Contract manufacturer Nokia is the only large scale manufacturer in Europe Key benefits: • Manufacturing only against customer orders • Fast respond to volatile market and customer demand changes • Minimized order fulfillment lead time without inventories • High number of customized products with small order lot sizes 15 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen Salo Tallinn Komarom Cluj Tiszaujvaros Pecs

Contents ü What is Lean supply chain management? How to build in both agility and efficiency? ü Demand supply network structure üSynchronizing inbound logistics ü Smart manufacturing ü Collaborating with customers ü KPI’s 16 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Ihub model Suppliers own and manages material flow until Nokia’s production line. Global suppliers deliver to inbound hub and local suppliers directly to factory. LSP’s Operate the supply chain: transportations to ihub, warehousing at ihub and replenishments to production line Nokia’s responsibility is to provide best possible demand visibility to suppliers, manage LSP relations and pay for the standard services 17 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Industrial village concept 18 © 2008 Nokia logistics beyond a mobile. ppt / 2008

Contents ü What is Lean supply chain management? How to build in both agility and efficiency? ü Demand supply network structure ü Synchronizing inbound logistics üSmart manufacturing ü Collaborating with customers ü KPI’s 19 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Smart manufacturing Smart Manufacturing Principles ("Smart Way", inner layer of the picture) • Empowerment • Get rid of waste • Keep it moving • Keep it simple • Visualize • Build quality in Continuous Improvement Concepts ("Smart Improvement", middle layer) • Select improvement opportunities • Execute improvement activities • Sustain the results • Practice continuous improvement Process Harmonization Concepts ("Smart Copy", outer layer) • Network - Process owner networks • Copy - Copy and standardize the essentials • Share - Share best practices and know-how 20 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Reduce, Reuse, Recycle • Eco-efficient materials • Innovative design concepts • Eco-efficient packaging • Energy-efficient chargers • Software and services to drive sustainable behavior and choices • Optimizing transportation logistics 21 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen • Between 65% and 80% of a Nokia mobile device can be recycled • Nokia participates in collection schemes with other manufactures • Nokia works with qualified recyclers around the world to ensure proper end-of-life treatment for used devices

Capturing Sales in Volatile Markets Terminal vendor shipments (M units) Example of daily demand fluctuation - % 400 350 Percentatage 300 250 200 Diff Median 150 100 50 0 -50 Source: released terminal shipments 22 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen Days

European delivery statistics 23 © 2008 Nokia logistics beyond a mobile. ppt / 2008

Contents ü What is Lean supply chain management? How to build in both agility and efficiency? ü Demand supply network structure ü Synchronizing inbound logistics ü Smart manufacturing ü Collaborating with customers ü KPI’s 24 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Modular logistics service offering consists of: Planning & Replenishment Capability Variant Management & Customization Capability Outbound Logistics Capability “When you “How you “Where you Want” want” Want” Information Management & Data Exchange Capability 25 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Sales package customization offering • Co-branded sales package graphics • Combos • Sleeves • Leaflets/brochures • Stickers • Customized labels • Closing and sealing • SIM cards • Sales package size and concept 26 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Customer Collaboration maturity stages Detailed delivery information, Channel priority Channel specific delivery schedules, Channel customization Vendor managed availability (VMA) “Nokia serves customer’s channel directly” + + Daily info sharing, S 2 S integration Vendor managed replenishments (VMR) “Nokia manages inventory within agreed target” Daily info sharing, S 2 S integration, Delivery schedules + Actual and planned sell-through, Visibility to channels + Purchase plans, Stock levels, Actual sell through, Campaigns Collaborative planning , forecasting and replenishment (CPFR) “Jointly managed inventory levels in customer’s DC” Collaborative planning “Regular weekly information sharing” Customer 27 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen Focused Campaign support + Proposed delivery plans, 2 nd opinion on demand plan, Backup / contingency plans Campaigns support + Supply indications, Order confirmations, Launch & End of Life, Nokia

Without customer collaboration… 28 © 2008 Nokia logistics beyond a mobile. ppt / 2008

Collaborative planning 29 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09

Collaborative planning, forecasting and replenishment 30 © 2008 Nokia logistics beyond a mobile. ppt

Vendor Managed Replenishment 31 © 2008 Nokia logistics beyond a mobile. ppt / 2008

Vendor Managed Availability 32 © 2008 Nokia logistics beyond a mobile. ppt / 2008

Role of tools to ensure scalability The old phrase: ” if you can do it with pen and paper you MAY be able to automatisize it” is very much true. And the focus should be in the process, not in the tools. However, tools will start to play a very important role when implementing the process on scalable way with many customers. 33 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

Contents ü What is Lean supply chain management? How to build in both agility and efficiency? ü Demand supply network structure ü Synchronizing inbound logistics ü Smart manufacturing ü Collaborating with customers üKPI’s 34 © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen

KPI’s – what gets measured gets done… Availability Days of supply Customer satisfaction Costs Additional measures – like the ones mentioned below -can have an explanatory role, but don’t lose your focus from the main KPI’s. • • 35 On time delivery performance, Perfect order fulfillment Planning accuracy Etc… © 2008 Nokia logistics beyond a mobile. ppt / 2008 -09 -26 / Jussi Laaksonen