Nokia, the world's largest cell phone producer by volume is set to churn out 320 million phones this year - around 10 a second. How does it do it? Well, largely by automation although human interaction remains a large part. After all, components have to be tested and visually inspected and the final projects packed for distribution. Despite challenges, Nokia generates around 33% profit margin per handset, placing it ahead of most competitors.

Today, the company operates nine major handset factories—three in Europe, three in Asia, and three in the Americas—and it is ramping up a 10th facility in India that will be able to produce tens of millions of phones per year. A vast and sophisticated software system manages the procurement and delivery of those 100 billion parts, which range from basic electronics such as resisters and capacitors, to pricey processors and color LCDs, to mechanical pieces such as screws, keypad buttons, and covers. About one-fifth of Nokia's 66,000 employees work in manufacturing.

Nokia pumps orders from specific carriers into its production system and transforms the raw "engines" into tens or even hundreds of thousands of built-to-order phones in a matter of days. Each can have a unique faceplate, for instance, with the operator's logo on it, or special keypad buttons that take users directly to certain wireless services. The software inside also varies from one operator to another, with different menus, features, branding, and languages.

The need to control this complex process with the highest precision and quality is the reason Nokia has never chosen to outsource its manufacturing. (It does use contractors for a small number of handsets, mainly older models that don't require customization or rapid delivery.) Indeed, quite the opposite: Nokia sees its manufacturing expertise as a key strategic advantage, and with its unmatched volumes, Nokia can make phones more efficiently than any other company in the world.

Article and images via BusinessWeek. See rest of slideshow here.