a nokia baril

1 © 2006 Nokia

Company Confidential

Supply Chain Transformation

Jean-Francois BarilSenior Vice President

Sourcing & ProcurementNokia Corporation

GSB-Stanford / IBM Supply Chain Management Summit

Stanford, October 24, 2006

Company Confidential2 © 2006 Nokia

Content

Introduction to Nokia•Mastering supply chain complexity•Moving from push to pull mode•Working together with best suppliers •Continuing to transform the industry•Summary


Nokia today

• Consumer devices and experiences• Mobile network equipment, solutions and services• Solutions for enterprise customers

Sources: Nokia estimates

Supplier to 58 WCDMA networks.Nokia for Business mobilizes enterprises globally.

10 phones manufactured each second.

800 million peopleglobally use a Nokia

device daily.


Nokia in the industry

A leading innovation company• The first Wi-Fi mobile device• The first commercial mobile TV

device• The first dual-mode, tri-band

WCDMA handset• …

Sources: Nokia, Businessweek Apr’06, Interbrand Jul’05

Top 10 Brands 6th most valuable brand


Nokia continues to grow faster than market

In 2005 Nokia’s mobile device volumes were up 28% compared to 2004.

Market volume for the same period was estimated at an increase of 24%.

24%

Source: Nokia

28%

Global mobile phoneyearly market growth estimates 1998-2005

-20%

0%

20%

40%

60%

80%

100%

1998 1999 2000 2001 2002 2003 2004 2005

Nokia volume growth %

Market volume growth %


Market change trendsUser experienceSimplicity, rich experience and products consumers can fall in love with.Sharing of experiences.

TechnologiesInternet convergence and non-cellular wireless

Role of AsiaChina and India increasingly drive demand and design preferences.

Business modelsMega-and regional operators consolidating. Fixed-mobile convergence. Internet-based business models.

Geographical and consumer diversityGeographical differences in consumer behavior and business landscape. Internet diversity.

Growth opportunitiesDevice market growing, traditional infra growing slightly. Growth potential in convergence services, enterprise mobility and infrastructure solutions & services.


Customers remain our top priority

CustomerGrowth

ProductivityBrand

Nokia priorities


The five businesses of Nokia

Create winning devices

Embrace consumerInternet services

Deliver enterprise solutions

Build scale in networks

Expand professional services

Bran

d &

Des

ign

Cust

omer

eng

agem

ent

and

fulfi

llmen

t

Tech

nolo

gy a

nd a

rchi

tect

ure

Nokia business portfolio Nokia strategic assets


Nokia is organized for growth

Customer and Market Operations

TechnologyPlatforms

Brand and designDeveloper supportResearch and venturingBusiness infrastructure

Mobile Phones

Multimedia Enterprise Solutions

Networks

Corporate FunctionsCorporate Functions

Hori

zont

al G

roup

s

Business Groups


Nokia at a glance

• Head office in Finland, operations around the world• Sales in more than 130 countries• Nokia sold its one billionth phone in 2005

Net sales (EUR million)

Operating profit (EUR million)

Operating margin, %

Earnings per share, diluted, EUR

Research and development (EUR million)

Personnel (year-end)

2005

34 191

4 639

13.6

0.83

3 825

58 874

+16

+7

+20

+1

+6

Change, %2004

29 371

4 326

14.7

0.69

3 776

55 505


Content

•Introduction to NokiaMastering supply chain complexity

•Moving from push to pull mode•Working together with best suppliers •Continuing to transform the industry•Summary


Nokia’s device businesses - differing needs

Mobile Phones Multimedia Enterprise Solutions


Wide product range

Case Nokia 6680

170 handset variants 250 sales package variants


Operations philosophy

NokiaContract manufacturer

• Local presence with a globally managed operations network• Late variation, products assembled to order• Planning for flexibility, usage of contract manufacturing

Enginemanuf

Final assembly & customization


Nokia supply chain in numbers

In 2005• we delivered 265 million mobile devices • from 10 own factories + extensive EMS network• we consumed over 100 billion components • from 60 strategic suppliers (200 total)• 4 full 747 cargo freighters per day

#2 Supply Chain in the World (AMR research, 2005)


Content

•Introduction to Nokia•Mastering supply chain complexity

Moving from push to pull mode•Working together with best suppliers •Continuing to transform the industry•Summary


The start of the turnaround story

0

40

80

120

160

1995 1996 1997 1998 1999 2000 2001 2002 2003

Inventory in Days of Supply(DOS)

TOWARDS WORLD CLASS

COMPETITIVE ADVANTAGE

SHAPE-UPAnnual report 1995:

“Despite strong sales growth, Nokia Mobile Phones profitability was adversely affected by a number of factors during the year. The principal factor affecting profitability was the difficulty of meeting the challenges created by the 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.”


Extended enterprise ”Replacing inventory with information”

• End-to-end integration of Demand Supply Network• End-to-end efficiency, speed and visibility• Backbone

• Process integration• Web based process integration (Extranet portals)• System-to-system integration (ROSETANET)

SuppliersSuppliers

ContractContractManufacturersManufacturers

SalesSalesiHubsiHubs &&LSPsLSPs

ChannelChannelPartnersPartnersFactoriesFactories

BanksBanks

NokiaNokia

Consumer

TelecomTelecomOperatorsOperators

Lean material flow

Rich information flow


Pull-driven supply chain

SYNCROprocess

Extranet Portal

E2E CollaborationPlanning tool


Overview of iHUB business model

Nokia FactoryiHUB/LSPGlobal/Regional/Local

Suppliers

LineReplenishment

Material flow

iHUB replenishments

Nokia GLOBAL

Call off

DV for capacity booking and shipment planning

DSB

FC for capacity reservation

LRVP

GIT, DOS DOS

ConsumptionSelfbilling by consumption

Information Money flow

Real time customer demand

LRVP – Long Range Volume PlanFC – Midterm forecastDV – Demand VisibilityGIT – Goods In TransitDOS - Days Of SupplyDSB - Demand Supply Balancing


One standard for supplier integration

Money flow

Inbound fulfillment

Collaborative Forecasting

Nok

ia

InboundHub

3B2 Notify of advanced shipmentProduction line call offs

3B2 Notify of advanced shipment HUB to production line

3C7 Self billing invoice

3C6 Notify of remittance advice

Supp

liers

4B2 Notify of shipment receipt

4C1 Distribute inventory report

4A1 for Rolling Forecast & 4A3 for Demand Visibility4A5 for Response to RF unconstrained & DV constrained

The Rosetta StoneA slab of basaltMade 196 b.c.Discovered July 1799 by Pierre Francois Xavier Bouchardon the stone: Hieroglyphs, Demotic and Greek


EDI (300+ Partners)Existing standard. Nokia recongises that EDI is neededby some partners, and will be supported accordingly

System to System

Nokia Portal (NGSW)

NGSW is Nokia's webmarketplace. Easy to set up and operate, but does not deliver a system to system connection.

Human to System

Rosettanet is a non-proprietary XML protocol allowing System to System connections.

eBusiness Tools for doing business with Nokia

© NOKIA – NMP Global Supplier Day 2001 / Jean-Francois Baril / Date / page 22


Big share of Nokia business RosettaNet-enabled

SuppliersSuppliers

ContractContractManufacturersManufacturers

POSPOSHubs &Hubs &LSPsLSPs

ChannelChannelPartners & retailPartners & retailFactoriesFactories

BanksBanks Consumer

TelecomTelecomOperatorsOperators

RosettaNet in production with 12 customers

RosettaNet in production with 74 suppliers

PIP4A1/4A3/4A4/4A5 forecast

PIP4B2 shipment receipt

PIP4C1 inventory report

PIP3A4/3A7 order

PIP3B2 shipment notification

PIP3C6 remittance advice

PIP3C7 self-billing

PIP3A4/3A7/3A8 order

PIP3B2 shipment notification

PIP3C3 invoice

PIP4A4 demand plan

PIP4C1 inventory report

PIP4E1 sales report


Realize the RFID PotentialLimited benefit from RFID technology as such

RFID will explode the amount of real-time supply chain data available

Value of the data depends on speed of making it available for operative decisions within the supply chain

Proprietary RFID solutions will not work in big scale

Standard communication between trading partners a prerequisite to realize full RFID potential


Content

•Introduction to Nokia•Mastering supply chain complexity•Moving from push to pull mode

Working together with best suppliers•Continuing to transform the industry•Summary


Foundation of Nokia’s leadership

OPERATIONAL EXCELLENCE

SupplierNetwork

CUSTOMER SATISFACTION

GREAT PRODUCTS


People, Leadership & Value Based Partnership

Nokia supply chain fundamentals

Flexible and Trusted

SupplyQuality

LeadershipCost

LeadershipPerformanceLeadership

Fact Based Process Management

Technology Planning

Customer Delight


Sourcing ”Family” to create solution

LogisticsSourcing and R&D

Solution Creation

Business Groups

Operations

BusinessPlanning

Business Planning &Product Program Mgt

Supplier Management& Development

MaterialsManagement

End to End Processes


Strategic goal: Customer first

Speed-up Product & Technology Introduction

Drive Quality for CompetitiveAdvantage

Ensure Flexible and TrustedSupply

Create Total Cost Leadership

Key Sourcing Strategies Strategic AssetsSu

pplie

r Bas

e

Proc

ess

Inte

grat

ion

Peop

le a

nd C

ompe

tenc

es

Collaboration


Transforming supplier portfolio

Top 11-30

20%

Rest20%

Top 10 Suppliers

60%

Economy of scale

Competition

Deep Co-operation

% of Purchases

#1 customer

• Far less suppliers than competitors

• Long-term relationships


Coherence and interaction of the four elements bring leadership

25% Brain

25% Heart

25% Hands

25% Guts

Passion and Trust


Partnership Journey

Mutual PASSION and TRUST

120% Target Setting

Optimized Processes

Creation of Positive Delta

Customer Delight


Content

•Introduction to Nokia•Mastering supply chain complexity•Moving from push to pull mode•Working together with best suppliers

Continuing to transform the industry•Summary


Sourcing & Procurement strategic intent

The Most Efficient Supplier Network to Offer the Best Solutions

to Meet Customer Expectations


Working together beyond the obvious

Collaboration Inside Outside

Execution

Company Transformation


Examples of supplier network

Mechanics ClustersModules

Nokia Standard Tooling“Pseudo ODM”

Supplier Day


What’s Next… Sourcing Excellence

Sourcing Excellence as a key ingredient for Nokia’s business model transformation

Benefits:• Innovation• Time to market• Risk management• OPEX/CAPEX efficiency• Financial model flexibility• Agility

Redefines core/context


Excellence and Excitement

Vision

Deeper Collaboration

Operational

Lead

ersh

ip C

ultu

re Miracles

Excellent

Basic

and

Everyone doesDirectly orIndirectly

Very few do

?


Excellence in Sourcing

Excellence DomainsExcellence Domains

Perf

orm

ance

Perf

orm

ance

Known Known Best BenchmarkBest Benchmark New 1. Close gap to benchmark

2. Identify new excellencedomains

3. Help Nokia to transformbeyond the obvious


Content

•Introduction to Nokia•Mastering supply chain complexity•Moving from push to pull mode•Working together with best suppliers •Continuing to transform the industry

Summary


Working Together

PARTNERSHIPRELATIONSHIP

SUPPLIERPORTFOLIO

ORGANISATION

INTEGRATIONINSIDE NOKIA

Top 11-30

20%

Rest20%

Top 10 Suppliers

60%Mutual TRUSTand PASSION

120% Target Setting

Optimized Processes

Creation of Positive Delta

End Customer Delight

OPERATINOAL EXCELLENCE

SupplierNetwork

CUSTOMER SATISFACTION

GREAT PRODUCTS

EXECUTION


Summary• Managing Supply Chain complexity • Moving from Push to Pull mode through

supplier integration• Extending the Lead with the Best Suppliers• Passion for creating superior solutions to

lead the market

Transformation Continues

Make the impossible possible through collaboration

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