Four recent events are clearly undermining the most successful product launch of iPhone4.
- First, given the predictable brand loyalty of the fan-boys network, AT&T and Apple chocked on pre-orders. AT&T could just not take the surge in web-orders. Despite this hiccup, Apple did manage to sell 1.7 million units within 3 days of its launch. No small feat!
- Second, Apple has been plagued by a supply constrained environment. Seen earlier with iPad, history repeats again for iPhone4 with the limited availability of Retina displays supplied by LG. I would not be surprised if the projected sales forecast for iPhone4 for the next two quarters gets hampered. Something not to be dismissed off by the #1 Global Supply Chain (see AMR 2010 Top 25 Supply Chains).
- Third, Apple is now battling a PR nightmare. While consumers typically don’t care about workers ergonomics and their working conditions, the FoxConn suicides have garnered enough media attention demanding a serious reassessment of contract manufacturing environments. Contract Manufacturing is a $250 Billion highly-competitive low profit-margin industry, and electronic manufacturers (OEMs) heavily rely on them for upstream capacity (read about iPhone Supply Chain economics).
- Fourth, adding to the PR trauma is the antenna attenuation issue, a significant engineering flaw, that has jokingly called for a duct-tape fix.
While the media has been chewing on the Apple literally, what we need to realize is none of the above challenges are major barricades to Apple’s bastion. They are just a new set of constraints in the world of evolving global supply chain.
- First, as Apple expands its contracts with other non-At&T carriers, the larger would be the network coverage, and that means increase in mobile instrument sales. With a tightly honed S&OP process, forecasting would be a non-issue for future product releases.
- Second, Apple has to tend to its supply base. While a constrained supply can sustain the demand frenzy for a short period of time, it could back-fire in the longer run, eating into its market share given the competitors are not far off. While Apple continues to feed the impulsive buy-before-launch fan base, the common consumer, despite their brand loyalty, takes a wait and watch approach going by the 18-24 months upgrade cycles in anticipation of potential promotions and advancing of upgrades.
- Third, contract manufacturing is on an up-trend. However, increasing strength of foreign currencies, higher costs of labor, and regional economic booms only add to the woes of OEMs. Moving forward, the predominant challenge would not be with the process and technology, but with the knowledge base behind the making of some of these brilliant pro-mass gadgets in a make-anywhere, build-anywhere, sell-anywhere global footprint. There’s just no over-night fix to this problem, it’s a wake-up call for supply chain agility!
- Fourth, the signal-drain is probably the least of concerns for Apple. Be it a duct-tape or a free-silicon-sleeve or a user-guide on how-to-hold-the-phone-while-talking or a product-recall solution, the short-term financial and/PR dent Apple would experience, would fade off, thanks to our short memories, provided Apple acknowledges the engineering flaw and most importantly establishes stringent quality gates to prevent such basic product design misses in future roll-outs.
Bottom-line, Apple being the supply chain leader, would surpass all these hurdles and continue to tighten its supply chain. It’s time for prioritizing the underutilized capital on strengthening their upstream value chain focusing on increased collaboration (read Steve Keifer’s blog ) and communication with their contract manufacturers.
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