Whether facing a major product launch or compiling standard monthly forecasts, the accuracy of demand forecasts are crucial. No one understands this as intimately as Apple who is fresh off of its much-anticipated iPhone X, 8, and 8 Plus product launches. Apple, despite its affinity for releasing limited amounts of its highly demanded new devices to further stoke demand, offers an interesting example of the complexities associated with forecasting.
The consumer electronic behemoth has mastered the art of delivering a high-profile, and highly anticipated, product launch. There are few product launches as massive and complex as Apple's. Even more impressive are the droves of customers that line up, sometimes days in advance, to get their hands on the gadgets the second they hit the shelves. With this overwhelming demand, it is mission-critical for Apple's demand forecasting, production, and delivery operations to go perfectly to avoid any detrimental delays, which inevitably take a large bite out of profits.
Photo courtesy: Apple
Personalization brings greater complexity
Essential to predicting iPhone demand is allowing customers to pre-order their device in the model and color they desire. While this alone is challenging, at best, to forecast, Apple is facing its biggest demand forecasting hurdle since the launch of the original iPhone, according to The Wall Street Journal. Given the heightened price point of iPhone X, Apple has no precedent to gauge demand for this device, therefore data from pre-orders will provide critical insights that will fuel ongoing production.
While Apple limits what customers can customize when pre-ordering a device to simplify the “last mile touch” piece of production, the process remains complicated. Once the hardware has been assembled, devices must have the proper software and language installed, while packaging must also match the recipient’s language before shipping to stores or directly to the consumer.
Driving efficiency among channels & partners
Further adding to the iPhone launch complexity is the variety of sales models and channels in play. With several different distribution points available to customers, including online orders, Apple stores, and partners such as Verizon and AT&T, Apple requires an integrated end-to-end supply chain. Luckily Apple has several advantages, most notably a sizable budget to address any issues that it might face and access to world-class vendors that manage every facet of their supply chain needs. Alternately, most brands are not as fortunate thus it becomes even more critical that they are working seamlessly and transparently across their various channels.
To do so, it is critical to share all relevant information with everyone involved in the supply chain, including partners, suppliers, and delivery companies as well as the stores expecting to stock a product. When all parties have insight and there is transparency, there are fewer surprises (overstock, understock, assembly delays, etc.) resulting in a smoother process of getting the product in the hands of consumers.
Fueling more accurate demand forecasts
The ability to hone forecasting skills can make the difference between a successful product rollout, or injuring the brand image with product shortages. While there’s no way to accurately forecast demand 100% of the time, companies have the insight to make better planning decisions by getting a real-time look into how much stock is on hand, whether it's feasible to assemble more if needed and being alerted if that product is -- or isn’t -- selling well.
The good news is companies don't need to have a budget the size of Apple's to make smarter, data-driven decisions. With advances in technology and data collection providing more actionable layers of insight, brands can simulate changes in supply and demand and run real-time material requirements planning scenarios in just seconds, storing snapshots of history to enhance analytics for predictive planning. As a result, companies can quickly identify and fix any supply chain problems, such as sourcing delays. By implementing fluid demand and supply plans that are updated in real-time and based on true demand signals, material availability, and capacity, the revenue and profit potential is significantly maximized.
As a testament to the tangible impact of demand forecasting on the bottom line, one of the world’s leading manufacturers of personal computers was able to dramatically improve its forecast accuracy, skyrocketing from 35 to 99% accuracy. By creating a lean supply chain, this company reduced inventory levels by 52%, resulting in $2.3 million in savings.
Developing a lean supply chain
While accurate demand forecasts are essential, running a lean and efficient supply chain is paramount to maintain profitability. The possession of inventory can be considered an asset, but it is an asset that no company wants too much of -- or too little. Finding that level of balance is what will ensure a smooth process in production and sales, as well as within warehouse operations. Implementing certain technologies -- such as point-of-sale data from partnered retailers -- could make a huge difference by providing real-time information to determine the specific time to replenish stock and fulfill customer orders without doing so in excess
No matter how closely product operations are managed, some factors always remain beyond control. By closely monitoring inventory levels and sales forecasts, it's possible to properly anticipate these happenings by keeping an effective amount of safety stock on hand. This safety stock provides increased flexibility and proves beneficial in the event of a product shortfall due to demand having a sharp increase, an issue that Apple most certainly faces.
While most brands would kill for the cult-like following that Apple has amassed, emulating the company's mastery of a seamless end-to-end supply chain operation is undoubtedly more attainable.