A Week of Two High Profile Supply Chain Snafus- Commentary Two
This has been a week that business media has featured two high profiled supplier related snafu’s, or at least, that has been the business media slant. Each is yet another important reinforcement for a more constructive and collaborative relationship with a key supplier.
This is the second of two separate Supply Chain Matters commentaries related to these high profile snafus. Commentary One related to chic sportswear retailer Lululemon Athetica. We now turn attention to smartphone manufacturer HTC.
Earlier this week, this Taiwan based smartphone designer and manufacturer indicated that it was pushing back the rollout of its newest and most important flagship smartphone, the HTC One. The company’s sales of smartphones declined 41 percent in its latest quarter and this new model is strategically important toward regaining prior market share. This announcement was further significant because rival Samsung, with much fanfare, had just unveiled its new Galaxy S model smartphone to the market. As readers are aware, this market segment is highly competitive where a new product becomes ever more critical to sustain innovation and consumer buying interest. That is why an Apple or Samsung product launch literally moves equity markets. Availability in the market is doubly important. HTC initially unveiled the HTC One to the market in February, indicating consumers could get one in late March.
According to business and social media reports, HTC executives attributed the delay in planned March sales to shortages of components including casings and camera parts. An HTC executive is quoted in a Wall Street Journal report as acknowledging that the company “has changed its order forecasts drastically and frequently following last year’s unexpected slump in shipments.” This executive addedthat “HTC has had difficulty in securing camera components as it is no longer a tier-one customer.” The WSJ further notes that CEO Peter Chou informed senior executives that he would step down if this new smartphone model does not succeed in the market. As our readers are well aware, that statement alone would intimate that a lot of management roles are at-stake with an unsuccessful product launch not to mention lots of tendencies for “saving-face”.
Is it any surprise that the hottest consumer electronics segment supply chains is experiencing component supply problems? Not really. The sheer volume numbers and overall pace of Apple and Samsung have produced many commentaries related to various select component shortages these past months. Apple admitted it was supply constrained in its latest quarter.
Smartphone supply chains have plenty of supply commitments and demanding customers. Thus, inconsistent and constantly changing forecasts of product demand are not going to place a customer on the most favored listing, especially if other customers exercise synchronized planning and execution of supply needs. Large contract buys also place bigger players in higher service and supply categories. Any small of medium sized manufacturer is acutely aware of this condition.
The HTC One has had other issues. The WSJ reports issues with employee turnover as rivals poach engineers from the company. For the first time, HTC suspended its year-end bonus for employees supposedly to fund added marketing programs. The queuing of various telecom operators and major retailers to support a March product launch, only to inform these same partners during the execution window that the product is delayed by a month, has not helped on that end as well.
HTC has experienced a 50 percent decline in market share for its products and desperately needs to have a winning product. Instead of pointing the finger at component suppliers, the company would be better served by admitting that there have been some product launch issues and that it is diligently working with both suppliers and channel partners to insure adequate supply of new product.
To dis your key suppliers, especially when you hold some of the blame, is a no-win situation. Positive supplier relationships are built on openness, candor and team collaboration behind the scenes. Even if your company does not hold the highest priority with a supplier, consistency in planning and candidness as to fulfillment needs are certainly more constructive.
Winning in the marketplace is a team sport that involves positive supplier and partner relationships.