News from the mobile phone market tends to hype innovation and sexy high-end products, like the one just released by that one company… what was it called? Ah, yes, the Apple iPhone. Behind the scenes, however, supply-chain management rules king. With 37 percent of the global market, Nokia is the Stackelberg leader in mobile phones. Not coincidentally, the company has been recognized as the best supply chain operator on the planet. It’s Nokia’s combination of product innovation — especially in the vast lower end of the market — and supply chain efficiency that has analysts saying it could expand its global market share to 40 percent by the end of the year. BusinessWeek has a great article by Jack Ewing about Nokia’s strategic one-two punch of expanding into the “bottom of the pyramid” and running the leanest supply chain around:
Nokia makes money at the low end because of its superefficient supply-chain and manufacturing systems. It also keeps costs and complexity under control by sharing components among devices and designing phones that have fewer parts than competing models. Such practices pushed Nokia to the No. 1 spot this year in Boston consultancy AMR Research’s annual survey of top supply-chain operators, ahead of logistics champions such as Toyota and Wal-Mart. (Motorola was a respectable No. 12 in the ranking, which was based in part on a poll of supply-chain executives.) Analysts say even low-cost Chinese producers such as Huawei Technologies can’t match the efficiency of Nokia, which operates its own factories in Vietnam, India, and other low-wage countries.
On balance, a sort of complimentary relationship exists between innovative product development and world-class supply chain management. The leanest supply chain won’t do you any good if your products aren’t demand magnets. On the flip side, the hottest products won’t make any money if your margin gets eaten up by supply chain inefficiencies. And Nokia has achieved unmatched excellence and coordination to become the exemplar for all manufacturing and retail organizations.
