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More Evidence to the Importance of Close Coordination Among Product Development and Supply Chain

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Some of our readers may find themselves frustrated by new product development efforts that due to various unforeseen engineering challenges or team miscommunication steps, impact global supply chain efforts and initial product timetables in a negative manner. Take some solace that your organization is not alone in that frustration.

Consider that Apple, one of the globe’s most visible companies is dealing with similar frustrations.

Readers are most likely aware that this consumer electronics icon has garnered tremendous levels of visibility of late, not all of which has been positive in nature.  Apple stock continues to hover at historic low levels because of concerns related to market momentum. An elongated period of absent introduction of new, cooler products has caused equity markets to deeply scrutinize every tidbit of speculation,  information leaks or rumors to ascertain where the company is headed in product development and future revenue potential.  Investors and consumers expect Apple to create or redefine new consumer electronics segments and this expectation extends to its extended global supply chain capability.

These past few days have not added positives to these concerns.

The Financial Times featured a front page article today indicating that Apple has embarked on a current hiring spree to tackle design problems with its rumored new “iWatch” wrist computer device. The FT article suggests that this external hiring raises questions over hard engineering problems that Apple’s in-house teams have not been able to solve and the ability of its in-house engineering team to develop wearable technology on a market timely basis. The FT article goes as far as to speculate that a new wrist computer device may not be introduced until the latter part of 2014. While a lot can change in the coming months, invariably, Apple’s supply chain teams will again be called upon to translate product design to high volumes of production in near record times.

According to postings on Seeking Alpha, Apple supply chain teams are further experiencing other setbacks concerning near-term new product introductions. One posting notes: “Reports are piling up that the retina iPad Mini launch is getting pushed back to Q1 ’14, (from mid-2013) and that an incremental Mini update (faster CPU, thinner form factor) may arrive later this year. “ Reports from Taiwan’s Economic Daily News issued a similar report last week along with Digitimes.

There have been continual information leaks from various Apple supplier sources that attest to designers constantly changing product specifications almost to the final moment.  This was a carryover from the Steve Jobs era of product innovation but Apple’s supply chain has become more complex with added suppliers.  In late May, Supply Chain Matters commented on the addition of Pegatron as a second source contract manufacturer for an expected low-cost iPhone model to be introduced later this year. At the time, the Wall Street Journal revealed that Pegatron experienced a challenging learning curve in meeting the volume production requirements of the iPad mini introduction last year and that Foxconn ended up producing the bulk of volume. Information leaks now indicate that production for the low cost model iPhone have now begun with build expectations of upwards of 75 million of various new iPhone phones available for sale in 2013.

Close coordination among product development and supply chain planning and operational teams is essential in any industry. In consumer electronics, it is table stakes as to who wins market share. Either team taking the other for granted is not healthy. Timely collaboration and coordination is essential.

Bob Ferrari

Disclosure: The author is a current investor in Apple stock.

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