Anything Irreplaceable is lost!

  

  Back in 2000, fire broke out in the Philips microchip plant in New Mexico, affected both Swedish company Ericsson and the Finnish company Nokia. This incident can be considered as a classic example of handling a supply chain disruption, because, it forced the Ericsson to leave the business. Philips plant was the microchip supplier to both the companies. Though the fire in the Philips plant is small, it contaminated almost the entire stock of the plant. Nokia realized the seriousness of the situation and started procuring chips from other players in the market, and also modified its phone, such that, it can buy chips from other global suppliers. But, Ericsson on the other side, planned to wait until the issue gets sorted out in the Philips plant. This decision resulted in loss of almost $400 million in sales, and Nokia had strengthened its presence in European market. Ericsson, on the other hand had to merge with Sony to survive.

    This case shows the importance of supply chain risk management, and a lesson that can be learned from this case is that, single sourcing may provide benefits, but it also has some costs.