Since May 2007, when the Procurement Insights blog published its first post, one post has consistently garnered attention. In fact, year after year, this one post continues to rank #1 among all posts in terms of reads: Managing Supply Chain Risk: The Nokia and Ericsson Case Study
Case Study Recap
Nearly a decade ago, lighting struck a Philips microchip plant in New Mexico, causing a fire that contaminated millions of mobile phone chips. Among Philips’ biggest customers were Nokia and Ericsson, the mobile phone manufacturers, but each reacted differently to the disaster. Nokia’s supply-chain management strategy allowed it to switch suppliers quickly; it even re-engineered some of its phones to accept both American and Japanese chips, which meant its production line was relatively unaffected. Ericsson, however, accepted Philips’ word that production at the plant would be back on track in a week and it took no action. That decision cost Ericsson more than US $400 m in annual earnings and, perhaps more significantly, the company lost market share. By contrast, Nokia’s profits rose by 42% that year.
What If Scenario
How would “strand commonality” have impacted or changed the outcome of the famous Nokia and Ericsson supplier risk case study?
“Strand Commonality doesn’t predict disasters—it reveals patterns that make responses smarter, faster, and more strategic.“
MODEL 2 ASSESSMENT
Using Hansen’s theory, Ericsson could have identified and acted on critical strands from historical supply chain disruptions, potentially mirroring Nokia’s success. Below, I outline the strands, actions enabled, changed outcomes, and impact on competitive advantage, with lead times of 3, 6, and 9 months (aligned with the prior response on competitive advantages).
Single-Supplier Dependence: Over-reliance on one supplier (e.g., Philips) increases vulnerability.
Natural Disaster Risks: Lightning, earthquakes, or fires can disrupt critical components.
Communication Gaps: Slow escalation (e.g., Ericsson’s technician delay) exacerbates impact.
Supply Chain Fragility: Globalized, just-in-time (JIT) systems lack buffers.
Recovery Misestimation: Suppliers may underestimate downtime (Philips’ one-week claim).
MODEL 1 RESPONSE & RESULTS
If Hansen’s Strand Commonality Theory had been applied during the famous Nokia–Ericsson supplier risk case (2000)—where a fire at a Philips chip factory caused vastly different outcomes for both companies—it could have completely altered Ericsson’s trajectory and further fortified Nokia’s lead at the time.
Quick Recap of the Case
March 2000: A lightning strike caused a fire at a Philips semiconductor plant in New Mexico.
Philips notified both Nokia and Ericsson.
Nokia:
Activated alternative suppliers within days.
Re-engineered components to bypass delays.
Took proactive inventory and redesign measures.
Ericsson:
Delayed response, assuming resolution within a few weeks.
Lacked agility and visibility in supply chain.
Lost over $400 million, eventually exiting the mobile phone market.
How Strand Commonality Would Have Changed the Outcome
1. Strand Intersections Nokia Acted On
Even though Nokia had no formal strand commonality framework, its actions aligned with it:
Strand Type
Recognized by Nokia?
Example
Supplier Concentration Risk
✅ Yes
Knew Philips was a single-source for key radio frequency chips
Geographic Disruption Pattern
✅ Yes
Assumed weather/fire events could affect supply
Design Flexibility Readiness
✅ Yes
Modular architecture allowed redesign in days
Cross-tier Visibility
✅ Yes
Communicated directly with sub-tier suppliers
Outcome: Nokia saw the strands, acted immediately, and preserved market share.
2. Strand Commonality That Ericsson Missed
Had Hansen’s theory been applied, Ericsson might have noticed the convergence of risk strands earlier:
Missed Strand
Description
Overreliance on Philips
No mapped contingency for a strategic chip component
Fire + cleanroom correlation
No awareness of how minor fires in cleanrooms often trigger major delays
Engages alt fab in Asia, accelerates chip redesign with Philips
Avoids 6-month delay, mitigates revenue loss
Outcome
Retains share in 3G phone market
Continues as Nokia’s global competitor
Long-Term Strategic Implication
Ericsson’s failure wasn’t technological—it was analytical. With Hansen’s theory, they could’ve seen:
The same strands that Nokia saw—but acted on too late.
The early signs of a single-sourced vulnerability and the ripple effects across design, logistics, and time-to-market.
Conclusion
Had Ericsson used Strand Commonality Theory, it would have:
Turned a “black swan” into a gray swan event.
Matched or exceeded Nokia’s agility.
Possibly remained a dominant player in mobile phones.
In short, Strand Commonality doesn’t predict disasters—it reveals patterns that make responses smarter, faster, and more strategic.
MODEL 3 – RESPONSE & OUTCOME
Conclusion:
Hansen’s strand commonality would have transformed the Philips fire from a catastrophic “black swan” into a manageable disruption. By linking hidden data strands (weather, supplier health, logistics), both companies would have built resilient, agile supply chains—turning risk into strategic advantage.
MODEL 4 –
Illustrative Example: Early Detection Through Strand Commonality
To illustrate how strand commonality would work in practice, consider this specific example from the Nokia/Ericsson case:
Without strand commonality analytics, both companies tracked standard metrics like on-time delivery and quality from their direct suppliers. However, neither had visibility into the shared dependency on Philips’ New Mexico plant for radio frequency chips.
With strand commonality analytics:
1. The system would aggregate data from seemingly unrelated sources: component serial numbers, manufacturing plant codes, shipping manifests, and supplier financial reports.
2. Pattern recognition algorithms would identify that a significant percentage of both companies’ critical components shared the same origin point (Philips’ New Mexico plant).
3. This common dependency would be flagged as a high-risk “strand” connecting both supply chains.
4. When early indicators appeared (such as minor shipment delays or quality variances from the Philips plant), the system would immediately alert both companies to the potential systemic risk.
5. Both Nokia and Ericsson could have initiated contingency planning weeks before the fire occurred, based on these early warning signals.
In this scenario, Ericsson would have had the same early warning advantage that Nokia created through their proactive supply chain management practices, potentially changing the entire competitive landscape of the mobile phone industry.
Procurement Insights
What If? Revisiting The Famous Nokia and Ericsson Case Study
Posted on June 1, 2025
0
Since May 2007, when the Procurement Insights blog published its first post, one post has consistently garnered attention. In fact, year after year, this one post continues to rank #1 among all posts in terms of reads: Managing Supply Chain Risk: The Nokia and Ericsson Case Study
Case Study Recap
Nearly a decade ago, lighting struck a Philips microchip plant in New Mexico, causing a fire that contaminated millions of mobile phone chips. Among Philips’ biggest customers were Nokia and Ericsson, the mobile phone manufacturers, but each reacted differently to the disaster. Nokia’s supply-chain management strategy allowed it to switch suppliers quickly; it even re-engineered some of its phones to accept both American and Japanese chips, which meant its production line was relatively unaffected. Ericsson, however, accepted Philips’ word that production at the plant would be back on track in a week and it took no action. That decision cost Ericsson more than US $400 m in annual earnings and, perhaps more significantly, the company lost market share. By contrast, Nokia’s profits rose by 42% that year.
What If Scenario
How would “strand commonality” have impacted or changed the outcome of the famous Nokia and Ericsson supplier risk case study?
“Strand Commonality doesn’t predict disasters—it reveals patterns that make responses smarter, faster, and more strategic.“
MODEL 2 ASSESSMENT
Using Hansen’s theory, Ericsson could have identified and acted on critical strands from historical supply chain disruptions, potentially mirroring Nokia’s success. Below, I outline the strands, actions enabled, changed outcomes, and impact on competitive advantage, with lead times of 3, 6, and 9 months (aligned with the prior response on competitive advantages).
1. Identified Strands from Historical Disruptions
Hansen’s theory would analyze events like:
MODEL 1 RESPONSE & RESULTS
If Hansen’s Strand Commonality Theory had been applied during the famous Nokia–Ericsson supplier risk case (2000)—where a fire at a Philips chip factory caused vastly different outcomes for both companies—it could have completely altered Ericsson’s trajectory and further fortified Nokia’s lead at the time.
Quick Recap of the Case
How Strand Commonality Would Have Changed the Outcome
1. Strand Intersections Nokia Acted On
Even though Nokia had no formal strand commonality framework, its actions aligned with it:
Outcome: Nokia saw the strands, acted immediately, and preserved market share.
2. Strand Commonality That Ericsson Missed
Had Hansen’s theory been applied, Ericsson might have noticed the convergence of risk strands earlier:
With strand commonality, Ericsson would have triangulated these patterns and:
How Hansen’s Theory Would Have Worked Practically
Probable Alternate Scenario Using Strand Commonality
Long-Term Strategic Implication
Ericsson’s failure wasn’t technological—it was analytical.
With Hansen’s theory, they could’ve seen:
Conclusion
Had Ericsson used Strand Commonality Theory, it would have:
In short, Strand Commonality doesn’t predict disasters—it reveals patterns that make responses smarter, faster, and more strategic.
MODEL 3 – RESPONSE & OUTCOME
Conclusion:
Hansen’s strand commonality would have transformed the Philips fire from a catastrophic “black swan” into a manageable disruption. By linking hidden data strands (weather, supplier health, logistics), both companies would have built resilient, agile supply chains—turning risk into strategic advantage.
MODEL 4 –
Illustrative Example: Early Detection Through Strand Commonality
To illustrate how strand commonality would work in practice, consider this specific example from the Nokia/Ericsson case:
Without strand commonality analytics, both companies tracked standard metrics like on-time delivery and quality from their direct suppliers. However, neither had visibility into the shared dependency on Philips’ New Mexico plant for radio frequency chips.
With strand commonality analytics:
1. The system would aggregate data from seemingly unrelated sources: component serial numbers, manufacturing plant codes, shipping manifests, and supplier financial reports.
2. Pattern recognition algorithms would identify that a significant percentage of both companies’ critical components shared the same origin point (Philips’ New Mexico plant).
3. This common dependency would be flagged as a high-risk “strand” connecting both supply chains.
4. When early indicators appeared (such as minor shipment delays or quality variances from the Philips plant), the system would immediately alert both companies to the potential systemic risk.
5. Both Nokia and Ericsson could have initiated contingency planning weeks before the fire occurred, based on these early warning signals.
In this scenario, Ericsson would have had the same early warning advantage that Nokia created through their proactive supply chain management practices, potentially changing the entire competitive landscape of the mobile phone industry.
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