Optimization of Cost and Quality in Global
Customer Deliveries of Network
Infrastructure Products
Service Level
Total costs
Jarkko Kuisma
Supervisor:
Instructor:
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© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Prof. Heikki Hämmäinen
M.Sc. Toni Valonen &
Mr. Veikko Loponen
Contents
1. Background
2. Scope of Research and Research Methods
3. Theory for Delivery Optimization
4. Results
5. Conclusions
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© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Background
• There are altogether hundreds of network operators in the world. A network
infrastructure vendor may have production plants and distribution hubs in almost
every continent. The network infrastructure vendor has to examine how to
optimally serve its customers in this kind of a multipoint environment - with
reasonable costs.
• This diploma thesis was written in the premises of Nokia Networks, a big network
infrastructure vendor. This work examined the company’s prospects, the
distribution models it uses, network operators as customers and the cost and
service level viewpoints of the demand supply network. An empirical case study
was carried out and in conclusion, a method how the infrastructure vendor can
sensibly manage the demand supply network and carry out cost estimate studies
was introduced.
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© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Background
• Delivering always from the nearest site to
a customer, would sound as the best
solution.
• It would be very expensive to have all the
necessary materials buffered in every
plant and hub in reality.
•
•
•
•
•
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capacity constraints
terms of transportation
delivery lead-times
technology transfers
political issues
customs
• The infrastructure vendor has to choose
the correct distribution model for each
customer. This decision has to offer good
level of service to the customer and
optimal cost efficiency to the vendor.
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© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Company objects
Country
specialties
Customer
specialties
Strategy issues
Operational models
Distribution models
Delivery quotas
Customs
Other fees
Embargos
Confines
Feedback
Contracts
Confines
Demand
Service level agreements
Current capability
Volume trends (planned &
actual)
Transportation
Service
level
Costs
Products
Manufacturing
Transportation
Services
Fees
New products & items
Ramp up & down plans
Ramp down plans
Technology transfers
Alternatives
Capacity
Transport methods
Lead-time
Flexibility
Contracts
Actual situation
Company targets
Delivery capability
Scope of Research and Research Methods
Scope of Research
Global business
Macro Level
Telecommunication networks
Telecommunications management
Management process
Products & software
Micro Level
Research Methods
• The research methods used in the thesis are literature review, case study
and interviews. The author chose several books that he thought would
contribute to this dissertation. For the empirical case studies real product,
customer and cost data were researched and the case studies were carried
out using several computer programs. All the interviews were carried out
either face to face, by phone or by e-mail.
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© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Theory for Delivery Optimization
THE CDNM PROCESS – A WAY TO
HANDLE GLOBAL DELIVERIES
1. COLLECT GLOBAL INFORMATION
•
Change requirements from the customers.
Urgency is analyzed. Change requests,
work groups coordination, special
knowledge, real time information agenda
for the pre-CDNM meeting.
2. ANALYZE
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Possible solutions are analyzed. The most
promising solutions is selected. E2E costs
of each solution are calculated.
3. DECIDE
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The CDNM meeting. Decision making.
4. COMMUNICATE & IMPLEMENT
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•
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The memorandum is also saved to a NETwide database.
The process integration specialists
implement the decisions instantly into the
data systems.
© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Theory for Delivery Optimization
ENHANCEMENTS TO THE CDNM PROCESS
1.
REAL TIME WORKING MUST BE IMPLEMENTED
•
2.
DATA SYSTEM DESIGN FOR INFORMATION
MANAGEMENT
•
3.
•
Every decision made in the CDNM process means new
immediate costs for Nokia NET, although in the long run these
decisions might mean cost savings.
The process must function so well, that the amount of wrong
decisions is as minimal as possible. This responsibility belongs
to every individual in the process.
SIMPLIFY THE PROCESS
•
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The CDNM process contains huge amounts of information and
data. A central database system is needed to handle the
information management of this process.
MINIMIZE THE AMOUNT OF WRONG DECISIONS
•
4.
The CDNM process is a real time process. The process manager
must make sure that all functional groups, that is, supply
capability planners, delivery managers, delivery execution team,
hub & plant team etc. are working constantly.
Unnecessary work. No parallel work. The process time horizons
and different phases. Process members should be defined
carefully. The process workflow must be well documented.
Awareness of the process within the company.
© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Theory for Delivery Optimization
TOOL
• The DSN Setup tool is a cost and performance simulation tool for further
development and optimization of Nokia Networks end-to-end demand supply
network.
• In Nokia NET, the operational performance of demand supply network is strongly
impacted by product design. This implies that the demand supply network must
be designed at the same time as the product design takes place.
• The main benefit of this tool is its ability to provide reliable information for the
CDNM process use.
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© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Results
CASE ARGENTINA
• E2E costs. The Roosendaal hub was
selected because the products that the
customer ordered (Products A and B) are
already available in the Roosendaal hub.
The Suzhou hub was selected for
comparison because Nokia NET is
planning to move production to China.
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© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Results
total costs of one year demand
costs per one base station configuration
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© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Results
PROPOSAL
The results achieved in this case study
show that if sea freight was used, the
Suzhou hub would be the cheapest
scenario. The most expensive scenario
is delivering from Suzhou by air.
In this specific case, customer’s leadtime requirement can only be kept
when using the Roosendaal hub and
air freight. Sea freight would be an
option if the customer configurations
were known earlier than three weeks
before the site implementations. To
offer the best possible service level to
the customer, the Roosendaal hub
should be used.
However, with possible longer lead-time
requirements in the future deliveries,
considerable savings can be achieved Total costs
using sea transportation from the
Suzhou hub.
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© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK
Lead-times
Service Level
Conclusions and Recommendation for Further Study
• The purpose of this dissertation was to find methods for Nokia NET to achieve cost savings in its own
demand supply network and a way to manage real time customer processes with optimal service
level.
• Many enhancements were found and presented to the CDNM process. The main enhancement is a
method for modeling and calculating the expenses of the demand supply network. This method
substantially improves the value of the process and improves the decision-making capability of the
process. Other enhancements to the process were a carefully designed concept of different
specialists working as functional groups and an implementation of a common database for information
management of the process.
• It has been a problem for managers at Nokia NET to make decisions. Some of the decisions have
been solely based on feeling and inaccurate cost estimates.
• This dissertation helps managers to differentiate costs rationally, run analyses and base their
decisions reliably on real cost and service level aspect. Some of the suggestions presented in this
thesis have already been implemented at the Nokia Delivery Operations organization.
• This dissertation is also suitable for training purposes.
• Hardware prices are sinking and that means less profit for companies that produce them. If this is a
global effect, profit must come elsewhere. For a network infrastructure vendor, this could mean
producing services.
• The future of a network infrastructure vendor might lie on the services and software development and
support. Therefore, I suggest further study on the possible changes in a company’s revenue when it
tries to put more weight on services and software.
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© 2006 Nokia
kuisma_170106.ppt / 2006-01-17 / JIK