NOKIA INDIA: BATTERY RECALL LOGISTICS

NOKIA INDIA: BATTERY RECALL LOGISTICS

1. India had one of the fastest-growing mobile phone markets in the world with 170 million mobile subscribers as of October 2007

   • Since the mid-1990s, the Government of India continued to liberalize the market, allowing private operators to license and provide telecom services to the end consumer.
     • Nokia served a wide range of market segments, which included entry-level, mid-level and top- end GSM and CDMA handsets
       • Nokia entered the Indian market in 1995, and within a decade established itself as a leader. Nokia’s market share in India was estimated at 70 per cent in 2004
         • Nokia had developed a strong network of sales and marketing centres within India, and boasted one of the largest distribution networks, with a presence in more than 130,000 outlets.

2. Nokia Corporation

   • Nokia’s roots lay in the paper pulp industry when, in 1865, Fredrik Idestam started a wood pulp mill on the banks of the Tammerkoski rapids in southern Finland.
     • A few years later he started another mill on the banks of Nokianvirta river — the location that gave Nokia its name.
       • As part of its diversification strategy the company forayed into consumer electronics; electronics accounted for more than 40 per cent of Nokia’s sales revenue by the end of the 1980s.
         • The Finnish multinational employed 128,445 people in 120 countries, and reported net sales of $69,395 million for 2007, with an operating profit of US$10,854 million.

3. MOBILE PHONE MANUFACTURING

   • Mobile phones, despite their small size, required thousands of parts
     • Nokia had an extremely complex supply chain. In 2006, this chain handled 900,000 mobile devices per day that were produced in 10 factories worldwide, and were made up of more than 100 billion components sourced from more than 60 strategic suppliers
       • Since 1995, Nokia had been working on creating a demand-driven supply chain, linking the consumer with a host of suppliers, factories, telecom operators, channel partners, contract manufacturers, banks, sales and logistics service providers
         • In 2007, AMR Research ranked Nokia number one for excellence in supply chain management.

4. LOGISTICS CHALLENGES IN INDIA

   • The diverse topography of India, as well as varying consumer habits and diversity of languages and customs in each of the 25 states posed a significant challenge for logistics management in India.
     • Nokia India had to create its own infrastructure of specialized storage and distribution facilities to meet its distribution needs.
       • Since the liberalization of the economy, some foreign entrants were also investing heavily in the logistics market, and prominent among them were DHL (Germany), FedEx (United States) and TNT (the Netherlands).

5. THE BATTERY PROBLEM

   • Nokia’s head office in Finland discovered that Nokia phones using particular batches of Matsushita BL-5C batteries were likely to swell.
     • Nokia received nearly 100 consumer complaints from around the world about batteries that swelled during charging.
       • As with all components sourced by Nokia, the batteries complied with established international standards: the Matsushita BL-5C batteries had been tested against internationally recognized quality standards as well as Nokia’s own stringent quality requirements.
         • It appeared that in some cases the battery overheating while charging caused the battery to dislodge.
         • India was one of the few countries affected by these batteries.
           • An affected battery could then be registered online and a new battery could be shipped to the customer’s address within 15 days.
           • Some states required forms from the regional distributors (RDs) to ship into and within the state. Since it was a zero cost item, we needed to provide a lot of details to the tax authorities as to why we were giving the batteries free and what the estimated cost of a battery was.

6. Media Furor

   • Nokia issued the product advisory on August 14, 2007. One television channel started reporting that Nokia phones could potentially burst, following which several other television networks began broadcasting the story.
     • To handle the fallout from the media panic, two teams were immediately formed: a crisis management team and a logistics team
       • If the battery was affected, it could be registered by texting the customer’s address, and a new battery would be shipped to the customer’s address within 15 days.
         • This new solution required that batteries be shipped to CCCs as well as couriered directly to registered customers.
           • The first shipment from the Chennai plant, of 10,000 batteries, arrived in Delhi on August 15, India’s Independence Day; however, due to heightened security concerns on Independence Day, entry restrictions were in force in every state and trucks were unable to operate.
             • In total, Nokia was bombarded with more than 150,000 phone calls and text messages within a couple of days and more than 3 million requests within a week

7. COMMUNICATIONS WITH CUSTOMERS

   • mobile phone customers in India bought their devices independent of the mobile service.
     • It was not feasible to reach customers directly on their mobile phones since the impacted consumers were a subset of the large subscriber base.
       • Nokia started an advertisement campaign aimed at its consumers.
         • The focus was to allay consumer fears regarding the battery recall, and to provide information regarding how to check for a faulty battery and request a replacement battery.

8. COMMUNICATIONS WITH LOGISTICS SUPPLIERS

   • Dhariwal contacted Nokia Singapore to work with DHL, Blue Dart’s parent company.
     • DHL was able to muster 40 employees for its makeshift operation, but needed at least twice as many more.
       • The Nokia warehouse in Delhi was unable to release any of its employees to assist DHL.
         • Dhariwal secured 80 temporary workers, so DHL now had 120 people at the makeshift facility.
           • DHL rented an empty warehouse that was in front of Nokia’s warehouse and began a three-shift operation, each with 40 workers.
             • Once the batteries were packed and scanned, DHL handed them off to different courier companies that covered the different parts of India, as well as to India Post.
               • Another challenge that the team faced was that some customers were not receiving the couriered batteries.
                 • The typical reasons for non-delivery included incomplete address, inability to locate the address, addressee not found that or nobody at home.

9. REVERSE SHIPMENT

   • In late September, Nokia global headquarters issued a guideline regarding environmental concerns, stipulating that the old batteries be collected and disposed of in an environmentally-friendly fashion.
     • Customers were asked to send their old batteries back in that envelope.
       • Blue Dart then collected all the old batteries and shipped them to Nokia India headquarters in Delhi by air. Finally, all the batteries were shipped to Matsushita.
         • To ensure that customers were given sufficient time to check for faulty batteries and request replacements, the recall of batteries continued for almost four months.
           • At the end of the recall operation, Nokia ceremoniously distributed mementos to everyone involved in the recall

10. ALTERNATIVES

    • As Dhariwal pondered over the processes and policies that had been so rapidly constructed to recall the batteries, it struck him that his task over the past few months would have been considerably easier had a streamlined set of procedures — a recall protocol — been in existence.
      • senior management was keen to extend Nokia’s reverse logistics capability beyond the small-scale capture and return of recalled batteries.