NOKIA BATTERY RECALL LOGISTICS CASE

Kayahan KAYA Gke Arzu YCEL Fatmagl ARANBALI

Introduction

Nokia Corporation

Nokia India

Manufacturing Process

Logistics in India

46 million defective BL-5C batteries recalled August 14, 2007 January 1, 2008 (Product Advisory) Media assault & Nationwide panic Phenomenal amount of effort at different levels

95% of batteries replacements completed, not 100%

Nokia Corporation

Nokia India

Manufacturing Process

Logistics in India

Battery Problem

Paper pulp industry in 1865, Nokianvirta River in Finland The company named NOKIA AB. In 1967, Nokia Corporation = Nokia AB + Finnish Rubber Works + Finnish Cable Works Diversification strategy in 1980s.

Nokia Corporation

Nokia India

Manufacturing Process

Logistics in India

Battery Problem

Concentrating on consumer electronics (40% of Nokias sales revenue) In 1984, the first car telephone

In 1986, the cellular mobile phone

In 1991, the worlds first Global System for Mobile Communications(GSM) was created

Nokia Corporation

Nokia India

Manufacturing Process

Logistics in India

Battery Problem

As of 2007,doing business around 120 countries

Mobile Devices Telecom Equipments Mobile Content Services

The company organized around 2 segments

Devices

Services

Nokia Corporation

Nokia India

Manufacturing Process

Logistics in India

Battery Problem

The Corporate Development Office,

Espoo, Helsinki

Asia-Pacific Regional Headquarters,

Singapore, Korea, China, India

R&D Centers,
Japan, China

Nokia India

Manufacturing Process

Logistics in India

Battery Problem

Recall Strategy

One of the fastest-growing mobile phone markets with 170 million subscribers Liberalization of the market Allowing private operators to give licences Nokia entered Indian market in 1995

In 2004, 70% market share & In 2006, 76%

Nokia India

Manufacturing Process

Logistics in India

Battery Problem

Recall Strategy

Strong network of sales and marketing centers in India,

More than 500 customer care centers (CCCs) More than 600 Nokia Priority Dealers (NPDs) Concept Stores for more technologically sophisticated customers

Some of the CCCs and NPDs were owned and operated by Nokias alliance partner,
HLC Infosystems

Nokia India

Manufacturing Process

Logistics in India

Battery Problem

Recall Strategy

In 2006, Nokia and HCL decided to coverage needs of both the urban and widely-dispersed areas Nokia India,
North West South East

Manufacturing Process

Nokias Supply Chain

Logistics in India

Battery Problem

Recall Strategy

Raw Materials

Automated Assembly

Software & Configuration

Manual Assembly

Customizing

Packing

Shipping

Nokias Supply Chain

Logistics in India

Battery Problem

Recall Strategy

Logistics Controller

In 2006, very complex supply chain handled 900,000 mobile devices per day 100 billion components Since 1995, trying to create a demand-driven supply chain linking with the consumers and host of suppliers In 2007, in a research Nokia ranked number one for the excellence in SCM.

Logistics in India

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Significant challenges for Logistics Management (LM),

Topography of India (25 states) Varying customer habits Diversity of languages Diversity of customs Highly congested airports, ports and roadways Inadequate warehousing and distribution facilities beyond major cities

Logistics in India

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Thats why Nokia had established its own storage and distribution facilities The complex and different tax regimes in each state and high bureaucratic control were another hurdles.
This requires third party logistics(3PL) service providers in providing logistics solutions.

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Up to comsumer complaints, Nokia discovered that BL-5C batteries were likely to swell during charging. After some analysis, some batches of batteries produced by Matsushita were found defective because of overheating. Then, Nokia management decided to issue a product advisory.

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Online check-in by keying the battery number from the web site of NOKIA If the battery is affected it could be sent to customers adress within 15 days

Thought a small-scale operation

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

SAP Problems,
The batteries were free. 25 different states & different set of tax rules Lots of details required SAP system did not have a provision for a zero priced item All documents and invoices were done manually All this software obstacles were overcome by the management within the same day

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Media Furor, Sensational panic occured Online-checking from the web was not very effective especially in rural India To avoid this panic,
2 different teams created
Crisis Management team Logistics Team

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

A local solution was required to prevent that time consuming, A Short Message Service(SMS) was activated that customers could text the battery numbers If the battery is affected, then customers sends another text which includes him/her adress.

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Also batteries were sent to the CCCs and RDs in case of directly coming customers. Reached local customers easily Then, more than 150 000 phone calls and messages within a couple of days

More than 3 million requests within a week

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

These options were not enough Independent mobile service and buyers So, Nokia could not reach all the customers A toll-free telephone helpline at each CCC and NPD.

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

The batteries started coming from several factories,

Chennai, Singapore, Dsseldorf

Blue Dart couriers, not able to handle large volumes Contacted with DHL (Blue Darts parent company)

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

DHL set up a makeshift packing and shipping facility 40 employees from DHL crew At least twice as many more workers needed Nokia warehouse Delhi did not let them A consultancy was taken,
80 temporary workers were hired

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Another empty warehouse was rented and began three shift operation Unpack cartoons each containing batteries Each battery wrapped in a bubble sheet four times Batteries were put in a DHL courier bag with Not For Sale sticker The bar codes and courier bags were scanned To avoid double delivery, each CCC also captured the number of batteries it replaced

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Nokia India DHL Blue Dart XPS First Flight FDC Gati Overnite TNT FedEx

Nokia paid a flat rate to DHL. DHL negotiated the rates with remaning courier companies Peak Business & Nokia offered DHL special incentives and DHL offeren cuurier companies too.

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Reasons for non-delivery, Incomplete adresses Missing Postal Identification Numbers Nobody at home
The courier left a call If no answer they went once more to deliver If nobody again, the battery was sent back to Nokia

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Reverse Shipment, Enviromental concerns were prevented Customers were asked to give back old batteries via DHL & Blue Dart The same courier bags Old batteries collected at CCCs

4 months recall operation

Overed in December 2007

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Coordinating and controling the cycle of transportation (shipment-partnership with DHL, Blue Darth) Organising the storage and distribution of bateries by using complex IT and telecommunications systems. Checking the quantity and quality of batteries which were sent to customers

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Allocating duties for temporary staff Developing business by gaining new contracts, analysing logistical problems and producing new solutions (tariff restrictions of exports) Organizing reverse shipment

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Routine data analysis of consumer complaints Awereness of defective batches Standart protocol for crisis Not appropriate for local areas (online check system form web) SMS solutions for media furor (local solution) Business management software database Manuel documents and invoices Completition of FOC and VAT processes within the same day

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Tool-free helephone helpline Communication with each CCC and NPD Successful third party logistics management Temporary workers Trying to reach each customer Prevention of duplicate records

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

A Recall Protocol that is known by all the stakeholders Special protocols for special regions Stable and contracted third party logistics support

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Key factors for Nokia; To create,

Agile Adaptable Alinged supply chains.

Battery Problem

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Perfect product customization in terms of agility Also Nokias supply chain should be agile in case of big breakthroughs
Smart phone technology

Nokia should try to sell devices with operators to catch the consumer information trends and choices

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Todays Nokia

Source: Gartner Group

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Todays Nokia

Source: Internet Data Center (IDC)

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Todays Nokia

Source: Internet Data Center (IDC)

Recall Strategy

Logistics Controller

Evaluations

Recommendations

Todays Nokia

Slow adaptation to smart phone technology Weak comsumer orientation Lack of operating system Corporation with Microsoft