Industry analyst firm IDC published actual Q4-2012 worldwide tablet shipment numbers (paid subscription required or free metered view) which should be of interest to B2B and B2C fulfillment teams. Supply Chain Matters readers might recall our late November commentary which contrasted the latest IHS teardown analysis of various Tablets to supply chain strategies addressing the desired business outcomes.

According to IDC, worldwide shipments of electronic tablets grew by 75 percent to a fourth quarter record, thanks to lower selling prices and new product offerings.  Tablets were also high on the holiday wish lists of global consumers. Nearly 53 million tablets were shipped, up from a near 30 million shipped in the previous quarter.  That is quite a hockey-stick uptick and kudos to the supply chain fulfillment teams that managed this surge in product demand.

This author does not subscribe to any notion that supply chains may be failing- quite the contrary.  Supply chains and fulfillment teams, for the most part, have successfully responded to unprecedented challenges related to economic uncertainty, supply disruption, volatile markets and more demanding customers.

Getting back to the IDC numbers, as Supply Chain Matters previously noted, shipments of Apple’s iPad tablets grew 48 percent from a year earlier, boosted by the introduction of the iPad Mini. This was accomplished in a mainly supply constrained period where demand stayed ahead of supply. However, IDC notes that Apple’s overall market share in the Tablets market actually slipped roughly three points, which brings home the severity of market competition.

Samsung’s shipments almost quadrupled on a year-over-year basis, shipping upwards of 8 million combined Android and Windows tablets in the quarter. We previously called for due recognition of Samsung’s supply chain prowess and consistent fulfillment capabilities. IDC names this vendor as second in overall tablet sales.

One of the most anticipated questions for this blog prior to the holiday buying season was how would Amazon, Barnes and Noble and Microsoft tablets fare in the quarter? It turns out that Amazon shipped more than 6 million of its Kindle line of tablets.  IDC notes however that Amazon market share slipped over 4 points.  This author was candidly surprised to read of that number.  The Nook family from Barnes and Noble shipped close to a million units, also suffering a significant market share decline.  Rounding out the top five players was Asus and its Nexus 7 line which IDC notes as experiencing the highest year-over-increase of the top five players, but also slipping 2 points in market share.

IDC reports that Microsoft’s Surface tablet shipped just shy of 900, 000 units. In our view, the Surface suffered from a late introduction to the market, a tepid response to the Windows 8 operating system and limited channel distribution leverage.  Microsoft purposely limited production and distribution because of the sensitivity to its existing hardware partners who did not take well to the company’s direct market entry. Considering that Microsoft’s strategic purpose was perhaps to make a credible market presence, more work may be required.

I don’t know about you, but reviewing these market results leads to this author’s conclusion that the competitive stakes in the Tablet and the impacted PC markets have dramatically accelerated, and synchronized planning, response management and fulfillment are mandatory just to stay in the game.

Congratulations to all teams in their accomplishments in this dynamic market.

Bob Ferrari

By far, the largest attention of business media this week was on Apple and its reporting of December ending financial performance.  By now, many of you have probably viewed the headlines and bylines.  Being designated as one of the most valuable companies on the planet comes with rather high, or perhaps, insatiable expectations.  The majority of reporting seems to have tended toward disappointment, and Apple stock literally lost $50 billion in value overnight. Then again, the results in our view, were not all that bad, considering the supply chain lens.

In terms of the highlights, Apple reported new records in total revenue and for iPhone and iPad sales. The problem was that total revenues came in at $54.5 billion vs. a Wall Street expectation that was just a bit higher. Sales of the company’s flagship iPhone grew 78 percent over the September ending quarter. Equity analysts are also expecting in excess of 20 percent revenue growth in 2013. Gross margin at 38.6 percent seemed to also disappoint, given Apple’s margins of 44.7 percent a year earlier, but then again, Apple had a lot to deal with in its traditional holiday surge quarter. Cash on-hand now stands at $137 billion, which is not at all shabby.

In terms of unit volumes, Apple shipped a total over 47.8 million iPhones, an average of 3.7 million per week, compared to an average of 2.6 million per week a year ago.  As of December, the iPhone 5 is now distributed in 100 countries., the fastest global product rollout, ever. The company also shipped 22.9 million iPads, an average of 1.7 million per week, along with 12.7 million iPods. In addition, Apple shipped 4.1 million Mac computers.

During the earnings briefing, CEO Tim Cook specifically refused to address any specific rumors related to supply cutbacks but did address the complexities of having a supply chain with multiple supply sources, manufacturing yield challenges, supplier performance and inventory shortages.  By our view, the very fact that Mr. Cook, who’s background personifies a highly experienced operations and supply chain executive, has mentioned these challenges is a good indication of what Apple’s supply chain was actually dealing with during the December quarter.  Supply Chain Matters has featured and highlighted a number of previous commentaries related to each of these challenges being either rumored or reported to have occurred.

Another important factor has been the ongoing strained relationship with arch competitor Samsung, as result of both company’s ongoing patent infringement litigation. Samsung happens to serve as a key strategic supplier for the iPhone processor chip and other display components, and indeed tends to source a good majority of its own smartphone components internally with its components division.  Samsung recently disclosed that it had shipped more than 100 million of its Galaxy S model smartphone since 2010, and further indicated that its new model may include up to eight processing cores.

Of the many articles and commentaries circulating around Apple latest results, we would call reader attention to a commentary penned Darren Hart, Apple Disappointed In Part Due to Supply Constraints, featured on the Seeking Alpha web site.  Hart cites specific statements made in the briefing and provides a candid assessment of broad supply constraints across the supply chain. For the iPhone, he notes a continuous supply constraint throughout the quarter and candidly states that Apple sold less iPhones than anticipated due to a lack of inventory or “supply constraints’. He specifically references the relationships with Samsung, and notes various other blog and media commentaries that seem to reinforce that Apple may be turning to global semiconductor chip fab producer TSMC as a new source for ARM processor chips.  Supply Chain Matters also noted these indications in early January. Hart also reinforces challenges in ramp-up of the iPad Mini, again noted in our commentary in November 2012.

Hart also hones in on Apple CFO Peter Oppenheimer’s statements that Apple expects to invest $10 billion in capital investments in 2013, $9 billion of which may be utilized to purchase production equipment placed in partner facilities. Hart speculates that some of this capital may be destined for new chip manufacturing equipment at TSMC. In April of last year, Supply Chain Matters also speculated that Apple’s cash could be utilized for major investments in more production robotics within Foxconn, its prime contract manufacturer as well as other supplier facilities.

Thus, from the global supply chain lens, Apple’s latest results were not so much a surprise, but rather a reinforcement that Apple’s supply chain continues to deal with noteworthy challenges.  They relate to sourcing, supplier performance, labor cost and social responsibility needs, inventory and other dimensions.  The fact that Apple’s supply chain teams delivered the noted results in the December ending quarter is a testament to resiliency and responsiveness. The open question however is that Apple will need to continue its product innovation and pushing the envelope of supply chain expectations.  The chain is already showing some signs of weak links.

Bob Ferrari

©2013 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.  All rights reserved.

An interesting twist to the upcoming 2012 holiday buying surge are reports that Nintendo Company’s new Wii U gaming device, which was introduced to the market this weekend, is already expected to be in short supply.  Both a Bloomberg published article and a CNET news article indicate that Nintendo’s executives expect supply shortages due to late start in production ramp-up. Bloomberg reports that more than 500,000 worldwide customers are currently on a GameStop waiting list awaiting the device. The Wii U features a tablet controller allowing for more game interaction as well as adding more online interaction in the playing of games. However, this first new video-game console for U.S. homes since 2006, won’t offer the Nintendo TVii service that the Kyoto, Japan-based company has touted as a centerpiece of its capabilities. The feature will be available sometime in December, the company said on Nov. 16, without being specific. According to Bloomberg, Nintendo also delayed the availability of some online services including Amazon.com Inc.’s Instant Video, and Google’s YouTube on the Wii U.

The delays could make it more difficult during the crucial holiday shopping season for Nintendo to position the Wii U as a whole-home entertainment center for parents and kids alike.

As much as a few weeks ago, these same executives had made indications that the new Wii U gaming device may not be ready for this year’s holiday buying period. The supply chain has obviously been pushed to make units available sooner.  In addition to the U.S., reports indicate that the new console is expected to be available in Europe and Australia on November 30 and in Japan on December 8. In late October, Nintendo indicated it expected to sell 5.5 million units by March 31, an indication that the supply chain must anticipate customer interest and order fulfillment efforts that extend into next year. IHS expects Nintendo to sell upwards of 3.5 million units during the upcoming holiday period. The Wii U will be introduced with 23 available game titles, with 29 expected by the end of march.  Similar to shades of 2008, a competitive race among game console providers Microsoft, Sony and Nintendo is underway to capture consumer interest this holiday period. Available game titles will obviously been a determinant. However, tablets and smartphones have gained even more interest for share of consumer wallets, and more and more gamers are turning to online options.

There is a lot at stake for Nintendo, including delivery of some level of respectable profitability for its fiscal year.  No doubt, gaming devices will be one of the supply chain related headlines for all of us to watch unfold in 2012 and early 2013.

Bob Ferrari

On Tuesday, Supply Chain Matters commented that something was up at supply chain planning technology provider JDA Software, and that an announcement could come soon.

This morning features breaking news indicating that privately held supply chain execution technology provider RedPrairie and JDA Software will merge into a combined supply chain planning and execution powerhouse with revenues extending beyond $1 billion.

According to the press announcement a cash tender offer of $45 per share, representing a 33 percent premium to JDA’s stock price on October 23, will be extended. The total value is estimated to be $1.9 billion, and there are certain conditions that must be met to complete this deal.  RedPrairie itself was acquired in 2010 by New Mountain Capital, and has since completed a number of other acquisitions to include cloud-based WMS provider SmartTurn, SofTechnics Shippers Commonwealth, Escalate, and Vortex Connect.  The JDA merger, however, is far more significant.

The announcement also indicates that current JDA CEO Hamish Brewer will lead the combined companies while existing RedPrairie CEO Michael Mayoras will remain on the board of the combined companies.

Obviously, this deal, if consummated provides significant implications for both management of the combined companies and for the supply chain best-of-breed technology market as a whole.  Supply Chain Matters has often reinforced the fact that in today’s new normal of highly dynamic global supply chains, where time is ever more critical, supply chain planning and execution processes have been compelled to morph as one contiguous process.  This announcement is a significant testimonial to that trend.

There will be an industry analyst briefing later today and Supply Chain Matters will reserve further commentary until more information is gleamed.

In the meantime, existing customers from both companies should be patient and await the full picture of the implications in terms of timing, resource impacts and product implications.

Stay tuned.

Bob Ferrari