Supply Chain Matters has queued-up a series of follow-up postings related to previous supply chain related commentaries we have featured on this blog related to important supply chain and B2B/B2C network fulfillment capabilities.
The following six updates provide updated developments.
We, along with other business and social media outlets called attention to the problematic last minute postponement of the scheduled release and availability of these new models across China. There was widespread speculation as to the cause of and potential length of the delay. Despite this situation, Apple had a rather successful first weekend of shipments. However, arch competitor Samsung countered with a quick maneuver in offering its new Galaxy Note 4 smartphone initially within China before other countries.
Today, various published reports now indicate that China’s Ministry of Industry and Information Technology has indeed granted the iPhone 6 models their network access permit.
The latest from Apple is that pre-orders for the new models will begin on October 10 and the phones will be made available by all three state-run mobile carriers. However, these state-run carriers have reduced the subsidies for high-end smartphones such as the iPhone 6, which implies that the higher-end iPhone will retail for 6088 yuan ($990).
According to a published Bloomberg report, the approval process included scrutiny on potential leaks of personal data, with Apple having to take measures in the new release of iOS 8 to eliminate risks from three background diagnostic tools. Apple reportedly continues to provide specific comment related to specific changes having to be made in the OS to satisfy Chinese regulators.
This latest development places Apple’s channel plans for China back on-track, albeit with a month’s delay in planned product availability. Apple supply chain planners will be adjusting inventory movement plans once again. While all of this is occurring, a robust grey market of product demand has been underway to get the new iPhone models into the hands of eager Chinese consumers who can afford them. That should ease in the coming weeks.
Supply Chain Matters has been calling attention to pertinent industry examples of how agile new product development and introduction (NPI) efforts are critically linked to the ability to integrate end-to-end supply chain fulfillment strategies with new product plans.
Today brings an important example in consumer electronics, namely the competitive battle among Samsung and Apple in the smartphones arena.
Readers will recall from our prior update on Apple’s current iPhone 6 product ramp-upand market introduction, that Apple’s prior plans to launch the two new models of smartphones concurrently within China were postponed. Apple communicated this last-minute decision to delay availability to the three state-owned mobile service providers even though these carriers had already queued advertising and launch campaigns. Increased speculation across Wall Street and business media corridors is that China’s regulators are still voicing concerns regarding national security associated with the iPhone itself.
Today, rival Samsung attempted to take advantage of that situation and announced that its new Galaxy Note 4 smartphone, which features a slightly larger screen, compared to the iPhone 6 Plus will go on sale in China later this month. According to a report from global business network CNBC, all three Chinese mobile carriers will release the large screen Samsung model smartphone before the end of this month offering Chinese smartphone consumers a potential alternative choice.
Further noted is that the Samsung announcement marks the first time the consumer electronics provider has chosen to release a flagship smartphone in China before other major global markets. As a supply chain community, we can all vision how Samsung’s supply chain planning, fulfillment and product teams had to scramble because of the decision to move the product launch ahead one month and to target China.
It is yet another today example of the increased informational and NPI decision-making dependencies across the extended supply chain, with the ability to ascertain unplanned impacts across the supply chain business network.
Today marks simultaneous but select global-wide product availability release of Apple’s latest announced iPhone 6 models, and as noted in our previous Supply Chain Matters commentary, the supply chain is again being again put to the test in assuring customer fulfillment expectations. Consumers from Hong Kong, select European countries and the U.S. now have the opportunity to get their hands on the new models.
The Apple marketing gods pay special attention in hyping sales in the first weekend of iPhone availability. It adds to the optics of long lines of consumers queuing-up to get their hands on the latest and greatest smartphones and motivating consumers to buy now, while there is still some in-stock. Like other consumer focused companies, revenues in the upcoming holiday quarter can account for a substantial portion of expected financial results.
Thus far, published product reviews concerning the new models have been positive, which adds to positive consumer perceptions. At this same time last year, Apple set a record of 9 million iPhone 5 smartphones being sold on the initial full weekend. That performance came in the midst of ongoing production yield challenges with the premium iPhone 5s model, which demonstrated the highest consumer demand. In 2012, 5 million iPhones were sold on the initial weekend. Wall Street analysts are floating a number indicating an expectation of 10 million as the bogey for iPhone 6 sales in the first weekend. The bar of expectations grows ever higher.
Earlier this week Apple reported that it had more than 4 million preorders in-hand among the new iPhone 6 and iPhone 6 Plus models during the first 24 hours since the product launch event. Apple also indicated that many of these pre-orders will be delivered in October, a sign of setting proper supply chain realities. Indeed, smartphone carriers such as AT&T, Sprint and Verizon are quoting October availability with the U.S., with the Plus model being especially stretched-up for availability.
One rather critical difference this year is that Apple has not been able to extend planned availability of the new model iPhone within China. Last year, China was included in first weekend sales availability. A published article in the New York Times last week (paid subscription or free metered view) reported that Apple communicated a last-minute decision to delay availability to the three state-owned mobile service providers even though these carriers had already queued advertising and launch campaigns. Increased speculation across Wall Street and business media corridors is that China’s regulators are still voicing concerns regarding national security associated with the iPhone itself. No specifics as to when these concerns will be alleviated has led to added speculation that a grey market for both the new iPhone 6 and older iPhone 5 models will become rampart during the weeks leading up to the end of the year.
However, if Apple’s supply chain planners had factored availability of new models for China on weekend launch, they well may be scrambling to re-configure that inventory to satisfy pent-up demand in adjacent regional markets.
As a community, we often commiserate on the dynamic tensions and often conflicting goals among sales and marketing and supply chain teams which often manifests itself in the S&OP process. Apple’s supply chain teams are not immune to such tension. Over the coming weeks, as the marketing and sales machine cranks-up consumer motivations to buy, the supply chain will deal with the realities of limited supply, production hiccups and product allocation conflicts among various channels that invariably come up in such situations. Air freight capacity is already allocated and we can all look for the clear signs of scramble and response.
While some supply chains are challenged with collaborating with sales and marketing on stimulating and shaping product demand, Apple has the current challenge of meeting very high expectations involving an outsourced supply network with many moving parts. They have pulled miracles in the past, and the stakes get even higher.
Stay tuned for updates.
The current waves of industry acquisition frenzy continue as cheap money remains available, and as usual, industry supply chains are impacted.
Today’s business headlines include a massive deal involving two global automobile systems, components and parts suppliers. ZF Friedrichshafen AG announced its intent to acquire TRW Automotive Holdings in a reported all-cash deal that is estimated to be in excess of $11 billion. According to reports, this deal would form an industry supplier with combined annual revenues near $41 billion, rivaling the size of other major global industry suppliers Robert Bosch and Denso. Under the deal, TRW would become an integrated but separate operating unit of ZF. The combined research and development investment portfolio exceeds $2 billion. This transaction requires several closing conditions and the approval of TRW stockholders, and is expected to close in the first-half of 2015.
According to the press release and statements from ZF’s CEO, the prime motivation for this combination is combining of product innovation resources applied to markets in electro-mobility and autonomous driving. TRW Automotive is a supplier of automotive integrated safety electronics, sensors, steering, suspension and integrated braking systems. TRW’s production and supply chain resources are global in scope and include support for major automotive production regions of United States, Europe, Asia and Latin America. ZF is a closely-held global supplier in transmission driveline, axle and chassis technology with 122 facilities in 26 countries and is a major supplier to German based mainline and premium model OEMS’s including Volkswagen. Combined, both suppliers will more than double revenues in support of major regions of China and the United States, and be able to support a fairly broad area of automotive and truck component system supply needs. With its combination with TRW, ZF has the opportunity to significantly increase its revenues and presence in the U.S. market.
The talks between these two automotive industry suppliers have been percolating for some time, and according to a published report from The Wall Street Journal, other suppliers such as Delphi Automotive, BorgWarner and AutoLiv have each expressed interest in “bulking up through acquisitions” in order to have sufficient scale to further stay ahead of product innovation needs to support various global automotive OEM’s. OEM’s have a desire to move forward in electric drivetrains and autonomous driving systems but prefer that system component innovation come from Tier One and other suppliers.
This wave of acquisitions involves other industry as well. Business headlines today include reports of a percolating massive mega-deal between Anheuser-Busch InBev and SAB Miller that could involve upwards of $122 billion. That would involve the combination of two of the world’s largest brewers and according to the WSJ, put control of nearly one-third of global beer supply under one company, and a wide range of brands.
The beat goes on and industry supply chains will have to continue to deal with the opportunities and/or consequences.
This week, Gartner unveiled its annual regional listing of what the analyst firm considers to be fifteen of the best supply chains in the European region. Gartner conducts this ranking as a supplement to its Top 25 Global Supply Chain rankings that are traditionally announced in the fall. According to Gartner, the top three European supply chains, Unilever,Inditex and H&M, remain unchanged and continue to lead in supply chain excellence while Seagate Technology made its debut in the number four ranking. Three new company supply chains also made a presence in the Gartner Europe ranking.
The published ranking for Europe Top 15 supply chains were noted as:
- Unilever (ranked 4th in 2014 Top 25 global ranking)
- Inditex (ranked 11th in 2014 Top 25 global ranking)
- H&M (ranked 13th in 2014 Top 25 global ranking)
- Seagate Technology (ranked 20th in 2014 Top 25 ranking)
- Nestle (ranked 25th in 2014 Top 25 ranking)
- Delphi Automotive
- Reckitt Benckiser
Similar to our view of this week’s Gartner’s Asia-Pacific rankings, Supply Chain Matters believes that this ranking reflects how we would have voted if we were part of the external or peer voting panel. Unilever is indeed a great supply chain competing in a very challenging CPG industry group. As we noted in our commentary associated with Gartner’s Top 25 ranking, Unilever has made steady progress over the past three years and deserves special recognition. Inditex has long been an icon when describing a top retail focused supply chain that is extraordinary in sensing and responding to fashion and customer demand. Seagate Technology as well, has bounced back from the near disaster of disruption and supply shortages caused by the 2011 floods in Thailand. L’Oreal has made great strides in integrating supply chain planning and execution across its supply chain business network. Nestle deserves its recognition especially in leading with industry-leading supply chain sustainability initiatives.
Three of the Gartner European Top 15 reside in the automotive industry sector which has been an industry segment not previously noted for consistent supply chain excellence. Both BMW and Volkswagen have been deploying a global based product platform strategy and have weathered the European economic crisis through a focus on international markets.
Also noteworthy is the appearance of two pharmaceutical supply chains, Glaxo and Reckitt in Gartner’s Europe ranking.
We believe that a ranking of the top Europe supply chains has even more significance given the ongoing challenges related to the severe economic conditions that have impacted Europe. These are supply chains that had to demonstrate various aspects of resiliency to insure required business and product outcomes.
Supply Chain Matters again extends its congratulations and recognition to each of the named supply chain organizations for achieving such recognition. There is obviously hard work that goes into achieving such recognition and citation and it should be acknowledged.
In the week that Apple staged its massive media event announcing two of its newest iPhone models, BloombergBusinessweek featured an intriguing article titled: Apple’s iPhone 6 First Responders. The report serves as a very timely reminder of the critical importance for harvesting product performance and service reliability information very early in the product launch stages.
The Apple program outlined is termed early field failure analysis (EFFA). The Bloomberg authors had a novel spin as to the purpose, one that may well resonate with our reader audience: “ As customers line up to buy the device (iPhone) around the world, Apple employees will show up at work to learn how they screwed up- and fix it.”
Humor aside, the Apple program was conceived to resolve problems before they become far larger in-scope, when they are far more expensive to resolve across an outsourced supply chain. Bloomberg cites former Apple employee sources as indicating that EFFA testing is most stringent during the device’s first weeks of consumer sales, but can continue longer as problems arise. Therefore, the EFFA program for the iPhone 6 models is most likely underway as we pen this commentary. Once more, the report confirms that defective Apple devices returned at Apple retail outlets are directly airfreighted to Cupertino where the phone is physically examined and where manufacturing history can be traced to individual workers on an assembly line. There are some rather fascinating examples of how previous problems were found and resolved before they became a thorn.
The report is worthy of a read since it provides further evidence of the importance of connecting the service management business process with the product supply chain. It further provides evidence of how Apple’s product management and supply chain teams harness early feedback information related to specific products to avoid more costly issues and to protect the image of the brand. I suppose we could add that it also avoids the wrath of CEO Tim Cook when consumers feedback any displeasure in an Apple product.