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Nintendo, Apple, Amazon: Even the Best OEMs Face Supply Chain Challenges

Every year, there are a few hot tech products that grab attention during the holiday season. Every year, consumer demand leads to a few high-profile incidents of product scarcity during the high-volume sales period. 2016 was no exception, with supply chain giants such as Nintendo, Apple, and Amazon plagued by stock shortages of premier products at the retail level. These names generate significant consumer buzz in response to most of their product launches, and the introductions of the NES Classic, AirPods and Echo, respectively, were no different. In all three cases, though, the demand generation strategies appear to have been slightly too successful, leading to outages at the point of sale.  Here, I’ll outline what happened with each launch, and make some suggestions as to what could be done differently to keep products on the shelves and sales going strong.

Nintendo NES Classic

Nintendo’s supply shortages are the easiest to reconcile. The company is famous for purposely under-forecasting product production as a means to generate artificial scarcity that can further drive demand. While it’s a strategy that dates back to the days when the NES was brand new and not a nostalgic throwback, this tactic was most notable during the launch of the Wii game console when the lack of product extended the launch window of the device many months past what would otherwise be expected.

Nintendo NES

Nintendo NES

If Nintendo is to continue its planned scarcity approach while still satisfying its loyal customer base, they will need to ensure that a closely monitored and flexible supply chain is in place. If the company doesn’t, retailers will be the ones feeling the burden of customer demand and will need to scramble to ensure equitable stock levels across accounts – or alternatively, funnel larger volumes to “preferred” locations. Neither solution is likely to do anything but reinforce Nintendo’s reputation for having challenging relationships with its retailers. 

Apple AirPods

When Apple launched the iPhone 7 in September, the headlines weren’t focused on a new feature or capability, but rather the removal of a longstanding component: the standard headset jack. Apple’s AirPods, shown off at the launch event, are Cupertino’s answer to this removal. However, the wireless earbuds started off behind the 8-ball, with their launch being pushed well into Q4, significantly after the launch of the iPhone 7.

Apple AirPods

Apple AirPods

In situations like these where a popular product launch is delayed, companies have two options:

  1. Wait for manufacturing to totally catch up with demand 
  2. Launch as early as production will allow in order to get some product into the hands of customers, and then let manufacturing play catch-up

Neither option is perfect. The first option gives companies the luxury of taking care of all customers while also ensuring that full channel fill is possible. The downside is that production takes time, which reduces momentum from the announcement and affords competitors time to capture customers while they wait on your product. The second option is a quicker path to market, but requires a buttoned-up supply chain to ensure that the company delivers the right product at the time originally promised.

Amazon Echo

Amazon’s problems stemmed from having a niche product in a niche market suddenly skyrocket in popularity. While the Echo had actually launched all the way back in Q4 of 2014, it had lived as mainly a curiosity until mid-2016. Seeing a market opportunity – and seeing competitors (Google and Apple most notably) potentially lining up their own entrants into the smart speaker space, Amazon launched product awareness campaigns in the summer and fall of 2016. What followed was a holiday marketing blitz as well as tertiary exposure from other manufacturers integrating Alexa into their devices, helping to make the Echo one of the must-have gadgets of the season.

Amazon Echo

Amazon Echo

Part of Amazon’s product awareness strategy was placement of the product with brick and mortar retailers in addition to their own virtual storefront, which complicated the supply chain immensely. Availability of Amazon’s flagship product was no longer solely in the control of Amazon – and worse yet, the heavy push to shop online this holiday season led to instances where Amazon proper had stock outs on the Echo and yet was available in many of its competitor’s brick and mortar locations. Because demand had outstripped supply, Amazon was forced to push consumers to their competitors and risked losing future sales. 

How to handle a good problem in the short- & long-term

In all of these cases, companies were faced with scenarios where strong demand drove outages at the retail level, but that’s always a better problem to face than lack of demand of any sort. Each outage scenario was driven, at least in part, by conscious decisions of the manufacturer. This makes the short-term solve simply “don’t make those decisions again,” and in each of these cases, the demand that outstrips supply is moderated.

However, the long-term view leads us to focus on the necessity of having a strong, flexible and responsive supply chain services provider in place, and focused on your preset goals, in order to meet the demands of the high-volume holiday season. Your supply chain partner can either be an in-house arm of your company or an external services option, but in either case will ensure that you have collaboratively pre-mapped your strategy. Uncovering the potential pitfalls and outlining solutions to each scenario is critical to ultimately delighting your end-users as well as the point-of-sale providers that will get your products onto (real and virtual) store shelves during critical selling periods.

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