Advertisement

Blog

Lessons From Apple & Pi

It has happened twice in as many weeks — underestimated demand for a product has resulted in “Sold Out” notices being posted everywhere. The first product to suffer this fate was the $35 Raspberry Pi computer. The second was the new $500 iPad.

Only one company has a legitimate excuse for being so wrong.

The Raspberry Pi Foundation, a tiny charitable operation, is in the business of spreading technology, rather than selling it. It had never really launched a product before. The foundation chose two global distributors, Premier Farnell and RS Components, to handle the initial orders. The device sold out within hours. (See: Distributors Sell Out of Raspberry Pi in Hours.)

{complink 379|Apple Inc.} is a $500 billion company in the business of selling technology products. It has been manufacturing and selling devices for more than 25 years. It has a cadre of supply chain experts, planners, operations managers, and sales and marketing gurus. It has released dozens of products over the years. It owns its own set of retail stores and distributes through global outlets such as Best Buy. The new iPad also sold out within hours. (See: Apple Watch: When Failure Equals Success.)

Both companies cited “unprecedented demand” as the reason for their shortfalls. I can see that happening if a company is only a couple of years old, focuses on education, has no experience in the supply chain, and partners with two industrial distributors that don't do a lot of retail business. Even they were caught off guard.

But let's say you are a company whose CEO used to run your supply chain. You have hundreds of suppliers, and there are no widespread product shortages. You have thousands of employees poised to build your products with a moment's notice. And you share forecasting information not only with your upstream suppliers, but also with your downstream partners. Oh, yeah. You also own retail stores, so you have some experience with supply and demand.

And yet you can't predict demand for a product already on its third iteration? Please.

I give Apple credit for releasing product after product that wows the market. I also give it credit for maintaining its quality, premium pricing, and reputation. I live in a capitalist society, so I'm also in favor of Apple making as much money as it can. But underestimating a forecast? Again? You've got to be kidding.

23 comments on “Lessons From Apple & Pi

  1. Nemos
    March 12, 2012

    “But underestimating a forecast? Again? You've got to be kidding.” Maybe they are doing it on purpose. A well-known product with a “sold out” sign give the impression that it is really good, and you have to buy it.   Apple,  know s very well about “psychology of the masses.”

     

  2. t.alex
    March 12, 2012

    I think demand for Pi comes from mostly developers/students as the board is so affordable. This might be just temporary. What would Pi next move? ANother very lowcost product?

  3. Anna Young
    March 12, 2012

    @Nemos, absolutely correct. I agree with you. That is exactly my thoughts too. It is a common strategy used by Apple. It has worked for the company over the years and still working.

  4. _hm
    March 12, 2012

    This is the way Apple thinks and behaves. They look after their interest first and foremost. May be thier products are so good, they walk away without much harm. yes, but they should be more careful in future.

     

  5. Daniel
    March 12, 2012

    Barbara, I think it’s so common with almost all Apple product release. The same initial pull was there for both IPad 1/2 and I Phone while releasing it. I am not able to get exactly, why such demands are there only for Apple products or whether “Out of Stock” is a marketing strategy.

  6. Daniel
    March 12, 2012

    -Hm, by quality and configuration wise it’s superior to all the competitors. But I can get it by tomorrow also, why I have to rush it for today itself. I think it’s purely an artificial demand creating technique from business division. Similarly, why other brands are not getting any such initial pulls; that doesn’t means that such products are not superior.

  7. bolaji ojo
    March 13, 2012

    Barbara, A report from an analyst today refuted reports of a display shortage associated with the new iPad. The news report titled: No display shortage seen for new iPad: Jeffries makes it clear Apple shouldn't have any problems getting supplies of displays. So, what exactly explains the unfulfilled demand for the new iPad?

  8. Barbara Jorgensen
    March 13, 2012

    Bolaji: I saw that too. I wasn't clear, though, if Apple claimed there was a display shortage or people were just guessing at the reason. (I think it was the latter.) Either way, the problem is Apple's. There is no shortage of capacity in the display business, the chip business, the IP&E business or the EMS business that explains the shortfall. Apple blew its forecast. Or claims it blew its forecast. Again, I point to the fact Apple's CEO used to run its supply chain. Apple has released the iPad 3 times. There is no reason it missed the mark by that much.

    BTW, I predicted the iPad 3 display would leapfrog the competition. Remember that $3 billion Apple spent on displays last year? Apple was well prepared for a spike in demand. There is no valid excuse for an iPad shortfall.

  9. ProcurementEtc
    March 13, 2012

    i agree with @Nemos and Anna it's a common ploy taught in economic 101 called illusion of scarcity  v. underestimated demand.  Apple has done this repeatedly to deliberately to drive sales, often during historically slow sales periods. making consumer think they need to get on bandwagon (pre-orders) and just maybe buy more than needed. Apple pre sets total units available for pre-orders, which is not the same as a sold out scenario.  

  10. Barbara Jorgensen
    March 13, 2012

    ProcurementEtc.–that is a good point, and an important distinction. I'll keep that in mind.

  11. prabhakar_deosthali
    March 14, 2012

    Going wrong on a sales forecast , this way , is good. This builds up a good image for the company, makes its brand stronger and adds premium to its price tag.

    So what is wrong? . It isa better than overestimating the demand and building up huge inventories and then selling it all out at discounted prices .

  12. syedzunair
    March 14, 2012

    @prabhakar: Going off target on sales forecast by miles is a grave problem. Although your point of adding premium through this exercise seems logical but let us just compare Apple products with its competitors. Apple is already a premium brand that charges more for its products and therefore it already has a market where price is not a major concern. 

    I believe that companies should try to bridge the gap in btw supply and demand. A little less supply to stimulate sales works but a faulty forecast will produce some disgruntled customers. 

     

     

  13. Barbara Jorgensen
    March 14, 2012

    Readers: There are now reports saying that Sharp was unable to meet its quota of iPad displays, which may account for the shortage. Assuming this is true, I have to give Apple credit for not throwing its partner under the bus (so to speak). There may be a very good reason for this: Sharp's troubles leave Samsung as Apple's primary display provider. And Apple and Samsung are embroiled in several nasty lawsuits.

    Samsung's stock, BTW, is having a very good day.

  14. Houngbo_Hospice
    March 14, 2012

    “But underestimating a forecast? Again? You've got to be kidding.”

    As any other human endeavour, Apple has its limits and can not    obviousely suceed in every aspect of the business. I would even say that it is also good for the brand to be making people longing for their products the way it is happening. This is rather a success than a failure as they don't have immediat competitors to whom their unsatisfied customers can turn to. 

  15. t.alex
    March 18, 2012

    I think for Rasperry Pi, at the time they receive the boards which is a few months away from the time of order, users excitement already died down.

  16. Wale Bakare
    March 19, 2012

    This is rather a success than a failure as they don't have immediat competitors to whom their unsatisfied customers can turn to. 

    Dont you think they merely seem to follow in the bandwagon just for the sake of over-hyping? Apple's quality is very unique, though.

  17. Wale Bakare
    March 19, 2012

    I agree with you t.alex. I bet you in the next few months electronics consumers may not able to grab Rasperry Pi for the initial price the designer announced.

  18. Barbara Jorgensen
    March 19, 2012

    Wale@ good point. With so much demand, it would make sense to raise the price. The reason I don't think this will happen is the developer of the Pi is a nonprofit organization that wants users to adopt technology. They may only be charging what they are now to cover the manufacturing and shipping costs. But it will be worth seeing a month from now if the price does go up.

  19. Anne
    March 21, 2012

    @Nemos,

    Apple shortage of its products is indeed deliberate, so they did when they released iPad2, I never expect any shortage of their new release base on the past supply experience but they did it again.

  20. t.alex
    April 2, 2012

    With the latest hit on CE label, it's gonna be delayed till August. This is quite unexpected though as the board is not supposed to be a finished product.

  21. Wale Bakare
    April 2, 2012

    Would that not cause it longer than that? Considering the fact that, RS is being manufactured/assembled in China and then get the product CE compliant in Europe.

  22. Wale Bakare
    April 23, 2012

    Wondering about the device using board of ARM11 costing at that low price:

    1 – It has SoC a Broadcom BCM2835 : with an ARM1176JZFS; floating point, running at 700Mhz, and a Videocore 4 GPU. The GPU is capable of BluRay quality playback, using H.264 at 40MBits/s.

    2 –  A fast 3D core with OpenGL ES2.0 and OpenVG libraries.

     

     

  23. t.alex
    April 28, 2012

    It is the hardware that cost. The software are mostly opensource, if not from vendor.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.