NOKIA

NOKIA BATTERY RECALL LOGISTICS CASE

Kayahan KAYAGökçe Arzu YÜCEL

Fatmagül ÇARŞANBALI

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.


• Concentrating on consumer electronics (40% of Nokia’s sales revenue)

• In 1984, the first car telephone

• In 1986, the cellular mobile phone

• In 1991, the world’s first Global System for Mobile Communications(GSM) was created


• As of 2007,doing business around 120 countries– Mobile Devices– Telecom Equipments– Mobile Content Services

• The company organized around 2 segments

Devices Services


•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%


• 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 Nokia’s alliance partner,– HLC Infosystems


• 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 Nokia’s Supply Chain Logistics in India Battery Problem Recall Strategy

Nokia’s 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

• That’s 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.


• 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


• 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


• 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


• 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.


• 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


• 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.


• The batteries started coming from several factories,– Chennai, Singapore, Düsseldorf

• Blue Dart couriers, not able to handle large volumes

• Contacted with DHL (Blue Dart’s parent company)


• 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


• 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


• 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.


• 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


• 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


• 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


• 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


• 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


• 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


• «A Recall Protocol» that is known by all the stakeholders

• Special protocols for special regions

• Stable and contracted third party logistics support


Key factors for Nokia;• To create,– Agile– Adaptable– Alinged supply chains.


• Perfect product customization in terms of agility

• Also Nokia’s 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 Today’s Nokia

Source: Gartner Group


Source: Internet Data Center (IDC)


Source: Internet Data Center (IDC)


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

Documents

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