By the end of 2018, the number of worldwide mobile phone and tablet users is expected to increase to over 12.1 billion, and roughly 84 percent of the world population will be using mobile technology, according to estimates from The Radicati Group, which researches social networking, regulatory compliance, wireless and web technologies and unified communications. For electronics companies, this soaring use of mobile devices translates into accelerating demands for mobile technology—and the need to further improve supply chains in areas of forecasting, inventory management, order fulfillment, and even how chips are designed and manufactured.
As a mobile device retailer, US Cellular took steps to improve its demand and inventory management after it found it was missing inventory targets by 40% to 100%. “You want to be some below and above the target, but we were consistently high, and in some cases grossly high,” said Chris Smith, senior director of US Cellular device supply chain in an interview.
U.S. Cellular had two supply chains – one for mobile phones, and a second for electronics gear that included antennas, switchers, and routers from telecommunications infrastructure providers. On the device side, its distribution network was relatively straightforward: it used five original equipment manufacturers that account for 90% of the cost of goods sold.
Despite a relatively simple distribution model, the company was using manual spreadsheets when it calculated inventory needs. These spreadsheets were not always shared between different supply chain functions, and the inconsistency of information created demand forecasting and inventory inaccuracies. Eventually, US Cellular purchased advance planning and optimization software and automated many of its manual spreadsheet processes. The accuracy of its demand forecasting and inventory management significantly improved.
Forecasting, inventory management, and order fulfillment are not problems unique to US Cellular.
In December 2014, Apple couldn't fulfill its iPhone 6 orders. Speculations ranged from the company deliberately “holding back” on orders as a marketing and sales strategy to something being wrong in the supply chain. Apple never commented—but one thing was obvious. Customers who stood in long lines, or waited for weeks or months for iPhones, were unhappy.
Can customer satisfaction, forecasting, inventory management and order fulfillment be improved in a burgeoning and difficult to predict mobile market?
US Cellular found that process automation and getting everyone throughout the company linked into a single version of “data truth” improved margins, inventory turns, and, most importantly, order fulfillment and customer satisfaction.
But the other prong of giving customers what they want when they want it, is the underlying device manufacturing and production that all of these end device providers rely upon.
Mattias Lewren, global managing director of Accenture's Electronics & High-Tech Group, refers to recent research on smartphone and tablet chip manufacturers, and questions the preparedness of chip manufacturers to meet the heightened demand for mobile devices. Lewren believes that so far, manufacturers have proven themselves unprepared to deliver on these requirements—and that they need to overhaul their supply chains so they can increase the speed and efficiency of their chip development processes.
Lewren's recommendations for chip manufacturers include:
- Gaining more visibility into design and supply chains so they get involved early in device manufacturers' product concept phases;
- Modernizing production with smaller semiconductor manufacturing processes so they can pack more processing power and long-lasting batteries within a smaller size product.
- Embedding software and moving to chips that are three-dimension circuits with multiple layers of active electronic components integrated vertically and horizontally on one plane.
- Recalibrating production capacity and inventory planning to fit within the shorter fulfillment window of new mobile devices.
Modifying chip-manufacturing processes is time-consuming and expensive. The providers of electronic end products that depend on these chips also have profit concerns when forecasts are grossly off target. Collaboration that brings retailers and manufacturers together to understand product development, product roadmaps, and product forecasting won't ensure that every customer can have the mobile device that they want exactly when they want it—but it will be a step in the right direction.