Not enough new iPhones, strategy or supply chain challenge?

An article in the Wall Street Journal titled “Why There Are Never Enough New iPhones” (September 18, 2017) describes the new iPhones launched in September 2017 as being available only in November, with possible delivery delays. The introduction if many models, with significantly different price points, complicates forecasting demand. The tweaking of design details by Apple, Just-in-Time manufacturing, a complex parts supply chain, just one supplier of the new OLED screens, competitor Samsung’s independent division, add to challenges. Is the delay period, when customers preorder, a strategic choice to improve demand forecasts? Will Apple’s financial forecasts, that are in advance of sales, a reason to be conservative in providing suppliers with orders? Should Apple release its products in versions rather than tweaking designs until the last minute?

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93 Responses to Not enough new iPhones, strategy or supply chain challenge?

  1. Vijay Raisinghani says:

    iPhone shortage (and Apple products in general) are mix of both – an Apple strategy, Apple culture and the supply chain challenge. Apple culture to work on products till the last minute, i.e., just in time changes to tweak things, is a known part of their corporate culture that dates Steve Jobs era. Apple strategy to keep the hype for iPhone release to create the market expectations and build the lines on the launch day are consistent and dates back to 1st iPhone release. However the complexity in supply chain is at is highest as well. Keeping in mind that Tim Cooks has a history of mastery in operations management, it is still a challenge for Apple to produce enough phones of each type, i.e., 8, 8 Plus and X, in the right quantities to built the appetite but not have over stocked the shelfs. With Apple’s main channel being Apple stores, the channel strategy they have is quite unique and adds to the distribution challenges as well. Managing multiple types of phones with screen size/quality as a critical part and store/channel strategy while being carried by each phone carrier and being #1 or #2 phone manufacturer is a challenging task.

  2. Julia Eldridge says:

    I agree with Vijay that there is definitely a culture piece that allows them to operate with fewer products than are demand. I believe that the lack of product at launch is part of their strategy. For one they are able to maintain a low inventory and more importantly they aren’t losing those customers that were unable to get the new phone right away. This second piece is key so that they are able to maintain revenue and possibly even increase it as scarcity motivates more people to purchase and at a higher retail price.

    Additionally, as new iphones come out, there is a whole cohort of people that will use the time to upgrade to the version just before the new one as they are able to benefit from the lower prices and have a good percentage of the functions of the newest version. Because this phenomenon is seen and encouraged at practically each new launch, Apple is further able to decrease its inventory.

  3. April King says:

    I agree with Vijay and Julia that there is certainly a cultural aspect to Apple making changes to their products up to the last minute that shortens the amount of lead time Apple’s manufacturing facilities and suppliers have to generate the newest iPhone model. I also agree with Julia that Apple uses the (now) expected feeling of scarcity for their newest iPhones to their advantage, in driving demand and rationalizing the high price tags. However, I also feel that there is a significant amount of supply chain and manufacturing complexities that lead to shortages of the new phones. An iPhone has an incredible number of components from various suppliers. Many of these components are of a very high quality with strict specifications and requirements, and all of these components must be provided in vast quantities. Since 2015 to present, Apple has sold approximately 212 million to 231 million iPhones each year (https://www.statista.com/statistics/276306/global-apple-iphone-sales-since-fiscal-year-2007/). With the release of a new model, significant changes must be made at the manufacturing facilities all the way back up through the supply chain. If Apple ramps up production of the current model phone in anticipation of the increased demand Julia mentioned for the current phones once the new one is launched, then the manufacturing facilities and suppliers will be working hard providing the components and assembling the current model phone. Once the required number of units are produced, manufacturing facilities and suppliers must retool and prepare for the manufacturing of the new model of phone and it’s related components that also likely have different requirements, specifications, etc. Of course both versions of finished product and components can be manufactured at the same time, however this eats into the capacity to build one or the other, and retooling a line to make a new “thing” can be a very costly and complicated process that can impact product quality and also result in errors. Although Apple has redundancies built into their supply chain, some components such as the OLED screens do not have a backup supplier, and any issues, delays, or problems experienced by the suppliers or manufacturing facilities directly impact and delay the number of finished products built and able to be sold. With Apple’s penchant for last minute tweaking, bursts of demand, and a supply chain with critical pressure points, Apple may want to move away from it’s JIT manufacturing strategy if it wants to minimize supply shortages in the future.

  4. Freddy Horn says:

    There is not a lot to add to Vijay’s, Julia’s, and April’s comments other than that I believe that the real root of this is a changing business model. Other smartphone brands have similar supply chains, but they release the phones in versions and hence manage to deliver the demanded quantities in time. Apple wants to fight the commoditization of its smartphones and moves further into the direction of a premium brand and seller of the latest custom-made smartphones. This underlying strategy calls for a change in managing Apple’s supply chain and production, and requires better demand forecasting. Finished goods inventory building is becoming risky when products are custom-made and not produced in standardized series that could easily be sold to a larger customer segment. Therefore, reduced inventory numbers and better demand forecasting are not only positive side effects, but a necessity for this business model.

    Btw, this reminds me a lot of premium car manufacturers, where you can configurate your car and have to wait a few weeks before it gets delivered.

  5. Marcya Carter-Sheats says:

    Just like Freddy says, there is little to add. Again, it is a strategy that works and continues to propel this company closer to a trillion dollar business. Changing this strategy is a risky move, however, there is always room to remove waste and improve processes. Any part of the supply chain that can be modified to improve profitability and efficiency should be considered. Once again, they are close to a trillion dollars, so they have a pretty good strategy. The only thing that I can think of is their warranty costs. It seems that that is something that will impact their profitability, and that can be improved with a better product quality/release process. It takes a while to create new technology. The issues that apple has is that every tech person wants to hack the technology as soon as it is released. After this happens, they start the virtual blogging and the feedback starts to impact the sales. I think giving people more inventory and opportunity to read the reviews prior to purchasing might negatively impact sales. This is just a guess. I know that personally, the scarcity feeling is what attracts people to wait long hours for their opportunity to purchase the latest and greatest technology. I read the tech reviews and personally that is what motivates me to purchase as is or wait for the new technology. I do not generally like to purchase brand new because I know that there are a lot of upgrades before the bugs are fixed.

  6. Camilo Rodriguez says:

    I will try to focus only on things that have not been said, although I believe this is quite difficult at the moment! I think that part of the answer has alot to due with marketing. Long lines and a huge backlog in orders at some point is desired from a pure marketing perspective. Leaving this at a side, another reason why they have to do this would be demand elasticity. Demand elasticity is the mobile phones market would ultimately determine the amount in which the price will impact the quantity sold and since they are constantly pushing the limits (each model is significantly more costly than the previous one) they have no other choice. On a “The Goal” perspective, the strategy lowers inventory and costs, and grows throughput all at once.

  7. Kim Coldiron says:

    Everyone has such great responses, it is difficult to come in late with this group. 🙂
    We had a good discussion about the blog this week and we were lucky enough to have a couple of teammates that are very familiar with this industry. Ultimately, we believe that Apple’s release and availability are 100% strategic. They have sufficient data and analysis to fully understand their market and the resulting demand forecast. Each step of their plan is intentional and part of their overall strategy. Haris has experience and knowledge with their release strategy that indicates they have sufficient inventory available which they manage closely to create scarcity in the market with both vendors as well as end consumers. Sarah compared Apple’s supply chain to Dell’s which is quite impressive and capable to meet the demands of such a giant market leader. As other’s have mentioned, they have been highly successful with this strategy thus far.

    • Huili says:

      Also, with every new release of the iPhone it is possible to pre-order the phone. With this as a given, it is easy to analyse what the demand would be and adjust the supply chain.
      Another aspect that needs to be taken into account that the smartphone market is getting more mature. This means that there will be numbers available on things like how many customers will upgrade or replace their iPhone.

    • Sarah Rosnick says:

      Thanks for the lead-in, Kim. Apple and Dell frequently are compared in terms of their supply chain and their strategy. One of the most fascinating parts of Apple is their incredibly huge supply chain that spans much of China and is shifting in response to the changing disposition of suppliers. Once you peek under the covers, however, and you get down to the most basic supply chain concerns is that they really maintain just a few phone models. With so little variation in products, it’s a relatively simple set of variables to maintain. The big competition from their supply chain comes from the fact that many of their suppliers are getting far more lucrative business from other businesses like Tesla. When you have a relatively simple product portfolio, then it becomes obvious that the scarcity is largely strategic. Their suppliers are frequently qualified over a year in advance, global planning takes place to support demand for the new phones, and Apple has a single event in their history where they had excess phones that they were forced to reduce price on in order to sell. (Not Job’s finest moment, of course.) It would be foolish to think that they were surprised by the demand at each launch and suddenly unable to fulfill.

      • Sarah Rosnick says:

        ^next time, I’ll proof read my answer first. pardon the run-on sentences and poorly structured flow of thoughts 🙂

  8. Jordan McCroskey says:

    Great comments everyone! I agree that Apple uses the appearance of limited supply to create demand. We discussed this topic in our marketing class last module and all agreed that Apple is one of the leaders in marketing. Sarah makes a great point that their product line is very concise with few options. This makes production planning and procurement easier. Currently the shipping estimate for a new iPhone X is 1-2 weeks. This is a reasonable time frame that consumers will accept. The phone will arrive in time for the holidays – but they also create a sense of urgency that a delay in purchase decision may cause the delivery date to slip later.

    Another interesting thing about Apple is how they tend to acquire companies that make parts of their computers, accessories, or phones. This guarantees them the supply they need and keeps the advancements exclusive to Apple. Some recent examples (sapphire glass manufacturer, and recently the company that helps power the Face ID technology). The are also working to acquire a part of Toshiba’s NAND manufacturing (makes the storage used by their devices).

  9. Rohit Mohan says:

    I think it is primarily a supply chain challenge which Apple paints as a strategy of scarcity since it fits well with its image as a premium exclusive brand. Apple is known for innovative products which are tweaked endlessly to provide the best user experience. Apple’s latest versioning philosophy with price discrimination seems to be an attempt to reach out to multiple customer segments across developed and developing markets. An example of the complexity in Apple’s Supply Chain is that of the Samsung a competitor providing OLED Screens. Another contrast example is that of chips from Qualcomm vs Broadcomm in I-Phones which is a relationship dominated by Apple. Thus Apple’s Supply Chain complexities result in lead times which are tolerated by customers as what they truly value Apple for is its innovative differentiated product, so Apple is able to satisfy its customers with its current strategy.

  10. Abhishek Sharma says:

    There are multiple factors that are causing lack of I phones availability in the new product launch. such as “component shortages”, “Apple’s last minute design changes”, “difficulty in forecasting demand” and “free marketing”. However, these factors are not only associated with Apple but also with other mobile manufacturers. OnePlus used invitation based model for selling its phones in India primarily due to its supply chain limitations. However, it worked in the company’s favor by providing free advertising caused by creation of a halo of exclusivity in the initial growth phase of the company in Indian market.

    Apple’s reliance on Samsung for OLED screens can be regarded as one of the major supply chain risks faced by the organization, an area of concern which the firm has to address by building a competitive technology on its own or in collaboration with technical giants such as LG. Additionally, even minutest of the design changes cause a huge impact on the stakeholders of supply chain in the forms of performance changes, re-testing and re-assessment of overall user experience. Moreover, since every new I phone comes with a different price tag and features, it becomes extremely difficult to forecast the demand for the new offering without assessing the consumer response. In addition to that not only older versions of I phone but also the competitor’s offerings changing with time compete with new I phone version making the sales forecast and assessment of production quantity further difficult. These challenges however create an atmosphere of excess demand, further adding to the fuel of desire for the product. Though Apple’s strategy has been working in its favor but it is also exposed to several supply chain risks as mentioned above which need to be addressed by Apple for maintaining a sustainable market share and premium.

  11. Ashish Trivedi says:

    I don’t think that the OLED screen provided by Samsung would actually be a problem . Samsung will gain $110 on every Iphone X sold by apple. Going by the initial forecasts, Samsung will earn close to $14 billion from Iphone X sales alone. Although Apple is trying to develop more companies to produce the OLED screens and reduce the monopoly of Samsung, I see no reason why Samsung would jeopardize its source of income.
    (source:https://www.wsj.com/articles/why-apple-rival-samsung-also-wins-if-iphone-x-is-a-hit-1506936602)
    In my opinion, Apple uses this to understand the forecast demand much better. It has many products (existing models) in the market and a new product (Iphone X) which has touched the $1000 mark. This delay will help them monitor pre-order sales data and adjust their demand forecasts better and reduce unnecessary inventory build up.

  12. Prabhat Pustake says:

    Every product manufacturer, from BMW to Patanjali, would definitely love to have the loyal customer base as that of Apple’s, which creates a unique and probably unprecedented supply chain advantage for the firm. The acceptable delay in delivery of i-phones facilitates Apple with not just improved demand forecasts, but also lower working capital, better cash turn around cycle, and savings of millions of publicity dollars. If Apple would have shared these benefits with the customers then probably I would also have been able to join the queues outside the Apple stores. Nevertheless, I believe that Apple understands this strategic advantage and must be taking advantage worth every cent out of it. I am also sure that if this was a problem, then Apple as a firm is capable enough to sort out this supply chain issue. Hence, I don’t think that the delays are due to some internal reason such as conservative financial planning or last-minute tweaking in design or JIT fixation. Samsung and Google ensure that their phone is on the shelf as soon as after launch, not because of better supply chain management, but because they know that probably not every customer will wait for their new model.

  13. Atul Jha says:

    The strategy of tweaking the designs till last minute suits complexity of Apple’s supply chain and it gives a perception to the customers that they are special and product they are being offered is a very special and differentiated one but it might be a cover up for the add up in lead times due to outsourcing of different components.

  14. Simrat Bir says:

    This is a question that has always intrigued me and I think that the shortage of I-phones during the launch phase is basically a combination of a calculated risk strategy as well as inherent challenges faced by Apples’ Supply chain.
    One would imagine that a company like Apple would be able to accurately forecast demand for its new I-phones. However, this still remains one of its biggest pain points. This basically means that before every launch, Apple faces the issue of how many I-phones to stock, because of which it has come up with the concept of pre-orders which gives Apple the window that it needs to better gauge the demand for its products.
    Another major risk, which is that Samsung is currently the only supplier of OLED panels for Apple, increases Samsung’s bargaining power significantly. Apple is looking to mitigate this risk by tying up with LG to procure OLED panels. Even NAND chips are in short supply and Apple has been forced to source from Samsung for the same.
    Apple is also known to make changes to its hardware till the very end and this perfectionism also contributes to shortages during launch.
    While the newly launched I-phones tend to land up in the hands of a privileged few, thereby increasing the brand value, this strategy is not the only reason for the shortfall in supply.
    Hence, a combination of such factors, when analyzed in totality, gives a clearer picture of this phenomenon which repeats itself, launch after launch.

  15. Aayush Jain says:

    Apple iPhone X was a huge departure from the current trend of releasing incremental upgrades to iPhones year on year. It was whole new concept that required new materials including OLED displays and scanners for Face IDs. Samsung is the leader in the OLED display market with a market share of almost 90% (https://www.androidheadlines.com/2017/02/report-samsungs-amoled-market-share-drop-72-2020.html) and perhaps the only supplier who could meet Apple’s demands of quality screens at such a large scale. Similarly, the 3D face scanner introduced in iPhone X was a first for mobile devices and therefore had limited suppliers.The lack of supply for facial recognition hardware has been a mjor contributor to the delays. (https://www.cnbc.com/video/2017/09/27/iphone-x-delays-are-blamed-on-snag-in-facial-recognition-hardware-report-says.html)

    I believe, that a misjudgment of the demand for iPhone X and irregularity in supply for the new hardware has been the main reason for the delays in shipment and its not a strategic move on Apple’s part.

    Samsung has already released the Note 8 and the S8 plus is doing well in the market. Apple can ill-afford the risk of delaying supply of iPhone X and let the competition get ahead.

  16. Michael Minor says:

    I believe the preorder period serves as more than strategic choice to improve demand forecasts. Yes, preorders will give Apple a good sense how it’s sales forecasting algorithm worked but won’t affect its global supply issue(s). What the delay period does is allow the company to tweak its distribution plan, enabling them to divert shipments from underperforming locations to those that exceeded expectation based on preorders and waitlists. This distribution model not only prevents stockpiling it pushes revenue into the next quarter through its long lead times. As Vijay mentioned the conservative distribution of supplies is also about keeping up the hype. I will say that I don’t do much more with the iPhone than I did with my Blackberry 8 years ago. Yes, applications make things more accessible but most users don’t use all the capabilities of a phone. That 1-pound Otter case you bought that covers the all glasses design of the iPhone X now voids the reason the phone was purchased. For that, I believe that Apple would probably do better producing an IOS that correlates with a newer version of a phone versus a fancy design.

  17. Ameya Date says:

    I believe Apple takes calculated risks every time it tries to launch an ambitious new product. With the new iphone, it has increased demand uncertainty with the steep price, and has increased its ambitions by deciding to launch it in multiple countries. That being said, however, the delay could be perceived as strategic for Apple, since catering to the so called influential markets of North America and Europe without hiccups would be the first priority for the company. This could be extrapolated into its need to control the brand positioning of its products, along with coinciding with the holiday season in most of the world.

  18. Mansi Mishra says:

    According to past shipping estimates data, the shipping estimates have seen an improving trend which suggests that there is perhaps something more than just a strategic reason behind the limited supply.
    The issue did have severe implications such as 39% decline in net income of Apple’s main device assembler and large hold-ups. A dearth of suppliers for OLED coupled with production problems added to the complexity and ambiguity of the issue. Also, an emphasis on the end user experience means significant re-work and design changes to ensure the overall product performance. However, this means a great impact & stress on other parts of the supply-chain.
    Pre-ordering definitely helps in improving and fine-tuning the demand forecast hedging the volatility risk to some extent.

  19. Anwesha Dhar says:

    Apple releases a new version of the iPhone in September each year. We can divide iPhone buyers in 2 categories: those who upgrade versions each year and those who are new/occasional buyers. The first category are the loyal customers who upgrade to the latest version each year and the second category usually looks for reviews, etc before making their purchase. That means the second category of people wouldn’t preorder under usual circumstances. As a business, we can safely assume that Apple’s motto is revenue maximization. So by delaying the release of the iPhone by 2 months to November, Apple is essentially reducing the number of months of peak sale of the latest product to 10 months till the newer version is released. In doing this, the number of loyal buyers are remaining the same but the number who’d buy after looking at reviews is reducing because by September of the next year, they would buy the next version announced.

    In my opinion, even if the November release is done as a part of a strategy to look at the number of preorders, it defeats the purpose of getting a demand estimate. Even though just-in-time manufacturing could be a good thing for them, the delay of release doesn’t justify the motive of estimating demand of an iPhone.

  20. Devika R Krishnan says:

    In order to analyse the issue at hand, we need to understand in detail (i) the industry in which Apple Inc. operates (ii) the value chain of iPhone manufacturing (iii) operations strategy of Apple Inc.
    Apple Inc. is in a technology industry which is subject to radical innovations almost every other day and hence stands a high chance of the products turning obsolete. With this in mind, it’s natural for Apple Inc. to not push its products into market with an approximate demand forecast but to generate a pull demand. This can be a reason for iPhones facing shortage in the market, forcing customers to pre book them
    The value chain of an iPhone manufacturing can be divided into 4 main entities namely the suppliers for parts of iPhone, the manufacturer (outsourced facility for production), the distributors and the customers. Inorder to ensure the availability of iPhones, the coordination required among suppliers and the outsourced production partner must be at high levels. As Apple has cut down its suppliers over the year to ensure high quality and also as there are dedicated suppliers for parts like OLEDs, the flexibility within the supply chain might be low compared to other products in the same industry which do not call for these high quality levels. This in turn leads to a shortage of products in the market
    Apple Inc’s strategic position in the industry has been that of differentiation and thus it is able to get a premium from its customers. The profitability has improved over the last few years as Apple is consciously employing a low inventory strategy to cut down the costs, which can be another reason for non availability of products.

  21. Chaitanya says:

    The delay period for the shipments is strategic in nature, as it gives Apple an accurate demand forecast which protects their suppliers from unwanted inventory eating into their costs, by forcing the early adopters to wait Apple gathers accurate demand forecast and the long waiting lines in-front of their stores does add to the appeal of the new models. Apple’s financial forecasts which are released ahead of the actual sales can be another reason for them to be conservative in their orders to suppliers as they do not want to end up with finished goods inventory. And apple’s reliance on a sole supplier for OLED screen supply and that too from a competitor can add to apple’s conservatism in orders to suppliers. Apple should not make versions of the products and stick to their current strategy of incorporating important changes into the design albeit at the last minute, their responsive supply chain allows them to do it and the downside of releasing a bad or substandard product is huge for a premium brand like Apple.

  22. Ritwik Vimal says:

    Apple works on a pull-based strategy, which fundamentally incentivizes under-stocking rather than overstocking. Its customers are willing to wait in long queues from day one for new models and are willing to wait a little longer if it means they get their hands on their desired device. This is unique to Apple. Though not entirely intentional, understocking is a strategic choice by Apple. Apple customers are loyal and would ONLY buy Apple products. This is why Apple tweaks the design to perfection right up to launch day to ensure HIGH quality.
    A similar understocking model based on periodic flash sales (online) is followed by the Chinese phone manufacturer – Xiaomi, in India, that has surged to capture a 26.5% market share overtaking Samsung, by consistently generating more demand in the market by creating a paucity of its products. [Source – http://indiatoday.intoday.in/technology/story/xiaomi-becomes-top-smartphone-company-in-50-indian-cities-redmi-note-4-the-most-selling-phone-idc/1/1098776.html%5D
    For Apple, pre-orders provide a metric for demand forecasting, but the reason for its conservative supplier ordering patterns seems to stem from its need to develop products in secrecy. An Apple employee was fired when his daughter accidentally shared a video of iPhone X from her father’s office. Apple probably has infringement issues with Samsung or any other supplier. Even though patents and copyrights might be enforceable by law, the time it would take could severely jeopardize the model or product line. [Source – https://www.engadget.com/2017/10/28/apple-fires-employee-over-iphone-x-video/%5D

  23. Deepesh Moolchandani says:

    I feel that test marketing of products can be a good way to estimate the demand for futuristic products like IPhoneX. The only problem here is that the product can be copied and there can be IP rights dispute which apple has won before in a case with Samsung. I do believe that apple shouldn’t do vertical integration but what it can do is concentrate on having more manufacturing facilities like tie up with fox con under make in india initiative.
    Also the strategy of JIT is not suitable for products like Iphones as if any risk associated with the complex supply chain materializes then the whole plan can result in bad image in customers.
    The solution to me looks in through market study and launch different versions of products so that even if one is short the other can compensate as apple buyers are not price sensitive, also products can be differentiated as per geography for example india I phone can be different than USA which can boost sales and have differentiation.

  24. Nachiketa Mohanty says:

    I feel that this issue is more a strategy to ease demand forecasting than a ploy to create demand. It is essential to consider that Apple has to deal with not just the demand for different models but also for that of different colors of each model. The demand for different models (with different price levels) as a whole would follow a more ‘financial-capability’ pattern whereas the demand for colors of each model would follow a more ‘cultural-preference’ pattern. For example, darker colors like Space Grey are preferred more in the US and Australia and lighter colors like Gold and Rose Gold are preferred more in the Asian countries. This makes for a very complex demand planning scenario. To be able to forecast the right quantities of each model and of each color for a particular model seems almost impossible without any kind of pre-sales survey of preference. And this is what the pre-orders for iPhones might be aimed for – to collect sufficient data before making production commitments. Another fact that seems relevant is that Apple has been releasing new models of iPhones each year. In a way, each model has a ‘top-of-the-line’ status for only one year – a very short time period. In such a scenario, the company wouldn’t want to have excess units of a model lying in the market when it is launching the next big model. Therefore, it becomes all the more imperative for the company to be accurate in its demand forecasts.

  25. Asiman Kumar Panda says:

    While Apple deliberately playing up its scarcity to jack up the ‘premium-ness’ of its products may still be in the realm of conjecture, what is less debatable is Apple’s desire for maintaining utmost secrecy of its design lest it should leak before announcement – now, scarcity may or may not induce a sense of enhanced value of product in the customer’s mind, but leakage of the design certainly would erode value, especially for a product whose launch is waited for with bated breath by millions across the world. It is in the anticipation of the new product is where I believe people conjure up value in their mind for the product. This desire for secrecy, besides the quest for making the product as free of defect as possible, is what keeps Apple tinkering with the design until the last moment. This policy is definitely going to create challenges vis-a-vis responsiveness in the supply chain and thereby, besides other factors such as constrained supply of parts (OLED etc.), may contribute somewhat to the delay.
    Coming back to the conjecture of Apple deliberately creating a sense of scarcity, I believe, sooner or later, customers are going to see through this tactic, if such a tactic were indeed being employed. A feeling of deceit is not taken kindly by the customer, and no company worth its salt would like to be seen as toying with its customers. Even if Apple were clandestinely employing this tactic for real, it would do well to camouflage the scarcity with an attribution to supply chain issues.

  26. Sethuraman Subramanian says:

    I agree with many of the comments made by commentators above me in the thread. I think much of Apple’s predicament is largely attributable to it’s own strategy of the need to roll out a brand new design of iPhone every single year. For a global product with unthinkable scales of operations in supply chain, such a tough deadline puts an enormous pressure on manufacturing to be able to acquire the final approved deign from the development and start sourcing for the different components to put them together. It is common knowledge that the iPhone is by far one of the most global products ever made, wherein every component seems to have its own distinct journey from its manufacturer in varied parts of the world to the final device. So, Apple certainly seems to have brought this challenge upon itself by insisting on completing re-designing the iPhone every single year.
    But, its also becoming evident that Tim Cook, as its operations specialist CEO is able to sense the stretch of the supply chain, and seems to have taken a conscious choice to phase out the dramatic hardware changes that could lead to frequent disruptions and delays. Hence, many of the iPhone’s constituting components appear to have remained fairly similar over the last few years and drastic design changes have been introduced as much smaller changes over several iterations. This is clearly an indication of the Apple team’s cognizance of supply chain constraints.
    But, Apple being the marketing genius that it always has been, has only used this supply chain pinch point as an invaluable marketing tool to create scarcity and make its customers value each product release higher than ever before. This supply chain constraint helps Apple market even its trivial product modifications as a monumental achievement, owing to the days and weeks its customers wait for finally having to own a phone.
    So,it only appears that Apple would wish that there remain a supply scarcity to keep its loyal customer base build up, and help each of its highly priced phones to be consumed almost immediately. This is the price Apple has to pay for having positioned itself as a niche device maker.

  27. Gautham Ravindar says:

    Not enough new iPhones – I believe that this is a bit of both, strategic decision and supply chain challenges as well, 80-20 split. There is a huge consumer base for Apple iPhones that prefer to buy them not for their functionality or ease of use but more for the ‘pride’ that they feel when they own them. This is where Apple has done exceedingly well. Their marketing is top notch. Not only did they concentrate on building an excellent device but ended up charging a premium for their device without affecting desirability. iPhone in some sense is on the track to be categorized as a Giffen good.

    Apple’s demand forecasting techniques, their cash reserves, relationship with suppliers (albeit the only one for OLED) are on point. iPhone X’s new component requirements can be attributed to slight delays and inefficiencies in the Supply chain but nothing significant enough to be the chief cause of shortages across the world. Apple has already begun working on de-risking its OLED supplier by developing LG (https://9to5mac.com/2017/09/06/iphone-lg-2019/) for its screens.

    Creating paucity is an age-old technique of creating hype/increasing demand for a product and Apple doesn’t necessarily need this but is using it brilliantly nevertheless. Flipkart pulled similar stunts with the sale of Oneplus 3 which was supposed to be an Amazon India exclusive. They not only caused slight damage to Amazon for that one product also attracted thousands of customers with that one product whose price was 50% of MRP. Flipkart personnel on the inside say the quantity of phone that went on sale was in single digits.(http://indiatoday.intoday.in/technology/story/flipkarts-oneplus-3-sale-screwed-amazon-india-even-if-it-wasnt-nice/1/838100.html)

  28. Gaurav Suri says:

    In today’s world where the consumer is spoilt for choice, it is very rare that a firm enjoys the kind of brand following that Apple does. I have always felt that the demand shortage for newly launched iPhones is somewhat a strategic decision that Apple takes every year. I feel that the pre-order period that Apple gives to its consumers helps Apple to gauge the demand for the new iPhone better. Also, the lines of thousands of consumers outside the Apple store creates a sense of mass hysteria for the new iPhone and is free publicity for Apple. Apple enjoys a “cult” following and knows that its consumers are going to stay even if they don’t get their hands on the latest iPhone immediately which also gives a sense of exclusivity to the general public.
    Apple has a truly global supply chain with sourcing of iPhone components from across the globe from multiple suppliers. Apple has successfully managed this sourcing strategy for all the versions of iPhone and its suppliers by now have an understanding of the production capability they are looking at for meeting demands of the new iPhones. Apple has recently made the switch to the OLED screen for its recent range of iPhones and tied up with Samsung for the supply of these OLED screens, Samsung is also providing NAND flash and DRAM chips for the iPhone and is the only company capable of producing these items at the scale Apple desires. If recent estimates are to be believed Samsung would earn billions more than it had made on selling its flagship phone, the Galaxy S8.
    http://fortune.com/2017/10/04/samsung-apple-profits-iphonex/
    Though, many are debating it is a risk for Apple’s supply chain in sourcing these materials from Samsung, I believe it is a well-thought decision made by Apple which is a win-win situation for both the parties involved. Apple in the meanwhile is also in talks with another technology giant LG for the supply of OLED screens.
    Apple is known for the product quality it gives to its consumers. The last-minute tweaking in designs is something that Apple has been doing for the past several years dating back to the launch of its initial Mac. Consumers associate this with something that is a sign of perfection. It is perceived as Apple’s thrust on giving its consumers the very best and upholds brand Apple. Further, Apple has always been tweaking the software with free upgrades to all its consumers, which I feel is the best approach.

    • Vijay Raisinghani says:

      Gaurav’s point of software update made me think about the trends of software releases on iOS products. I reviewed the release date for recent iOS releases (7 through 11) at https://en.wikipedia.org/wiki/IOS_version_history#Overview. The important trend in the very recent release from 9 onwards, Apple releases about 4 patches (x.0.y) releases within a month of each big iOS release (an example of JIT software manufacturing culture). The recent iOS 11 had most updates in the shortest time time, i.e., 7 releases in less than 3 months of initial release. Being an ex-phone OEM Platform manager, the matrix of complexity is quite high considering Apple supports at least 4 versions of hardware (iPhone 5,6,7,8 or a mix like that) at all times so besides the sourcing complexities of hardware components, the software components would pose challenging problems as well. As we know that perfect software never exists, they have used the brand loyalty and the “Apple culture” as a good disguise to keep working on normal challenges.

  29. Nishant Agarwal says:

    I believe that not having enough iPhones is a supply chain challenge that Apple is still trying to figure out rather than it being a strategic choice made by Apple. Although the long queues and unmet demands does have positive consequences such as the exclusivity of the brand and the adjustment in demand forecasts but it may have equally negative consequences in the form of loss sales and brand equity. A lot of challenges that Apple faces have already been covered in other comments, I would like to point out at a couple more:
    Continuous hardware and technological updates – which may require continuous investment in capability and capacity development of the suppliers. Such upgradations are bound to delay the supply of the critical components of the iPhones. Although, all the manufacturing components are assembled in a single unit in China, a problem with a single supplier of these components may have ripple effects across the whole supply chain right up to the availability of iPhones at the point of sales.
    Intellectual property protection – iPhones are the Apple’s most prized possession, the development of which has been the sole focus of Apple since 2013-14. The current supplier base of Apple is present in China, where the IP protection laws are not up to the international standards. It may happen that Apple delay the release of the production designs to the outsourcing units in China till the very end for this particular reason in order to safeguard its proprietary technology.

  30. Nishant Dhiman says:

    Launching a new phone priced upwards of $1000 is something which only Apple could attempt and it comes with its own risks in the whole value chain. Anticipating the demand for a product which is priced much higher than the previous models is a much difficult task which can be solved to some extent by analyzing the pre-booking numbers and then working out demand forecasts. For any new product, the early adopters are the people who are willing to spend such kind money and the firms obtain real feedback for further improvements and the reviews by these people give confidence to the followers to invest in such products. Figuring the demand and adjusting the manufacturing accordingly leads to lower level of inventories and hence saves money at each supplier level in the supply chain, especially considering that some components are custom designed and cannot be used anywhere else. Procuring OLEDs from its competitor, Samsung, may look like a risky move but considering the relationship investment by both the firms and how Samsung will gain quite a good amount of profit from this deal actually minimizes the risk. Developing alternative vendors will surely lead to lower procurement costs but it’ll also increase the supervision and transactional costs for handling multiple vendors to ensure quality coherence. Considering all the aspects the move looks like more as a strategic rather than the actual shortage of components or production capacity.

  31. Ankur Bansal says:

    Apple not able to supply enough iPhones has both strategy side to it as well as supply chain challenges aspect to it. However, I for once will like to believe that it is more of a strategic decision than a supply chain issue. Though there are a number of supply chain issues apple faces whenever it launches a new iPhone. However, with Tim Cook (Operations Guru) at the helm of the company, it is very difficult to imagine that Apple is not able to solve these issues. On the other hand, there are a number of benefits of adopting this methodology
    1. Creates a premium attraction: As correctly pointed out by Marcya Carter-Sheats, scarcity feeling creates an attraction to the consumer.
    2. Forecasting demand: With ever-changing prices and model specification it is always difficult to forecast demand for any electronic product in today’s world. This is one of the main reason concepts like “flash sales”, “reference sales” are gaining popularity. Nevertheless, the lack of supply increases the pre-order of Apple iPhones and approximately 2 months in between model launch and model availability gives them enough time to plan the production.
    3. Just in Time Manufacturing: Apple operates at a minimum level of inventory, which is again a strategic decision. By under-producing the iPhones, Apple is able to keep its inventory in check.
    4. One supplier for OLED screen: I really do not think that Samsung is really a factor limiting the supply of iPhone. Supplying OLED screens to apple is one of the major ways in which Samsung hedges its operational risks.
    Due to all these points, I personally believe that scarcity of iPhone is more of a strategic move rather than an operational constraint.

  32. Bhawarth Sangwan says:

    Though Apple has a complex supply chain in terms of different suppliers of components, manufacturing base in China (away from the target markets) etc., however, the delivery delay has been a consistent phenomenon for almost all iPhone launch. It’s bit hard to digest that a technology based firm like Apple, which thrives on supply chain agaility cannot reduce lead time in delivery. The technology gadgets depreciates really quickly and responsiveness of Supply Chain forms the core for this industry. Given these facts, had it been a supply chain issue. Apple should have already figured out the way to improve supply chain responsiveness. I believe it to be strategic move rather than supply chain issue for the aforementioned reason. A deeper look at the motives for purposefully doing so leads to following benefits for Apple;
    1. Principle of Scarcity/Free Publicity – Flooding the market with iPhone at once will reduce the charm/excitement among the customers.
    2. Lower Inventory Holding Cost – The post order production shifts the supply chain risk from Apple to its manufacturers (Foxconn in this case).
    3. Very high cost of overstocking – Given the nature of product, the inventory can get obsolete very quickly, thus apple wants to improve demand forecast before placing an order with manufacturer.
    4. Breathing space to make minor changes/eliminate bugs based on consumer feedback – iPhone X had an issue with screen. The delivery delay allows Apple to rectify mistake at production source itself based upon the feedback of few initial users.
    https://www.engadget.com/2017/11/10/iphone-x-green-line-glitch/
    I would like to strengthen my point by mentioning the example of Zara. Zara thrives on its responsiveness of its supply chain. According to 2010 study by Prof. Fraiman (Columbia Business School), Zara can get a product out from concept to store in just 15 days against the industry standard of 6 months.
    https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success
    It might be unwise to compare the Apple with Zara, however, the point that I want to make is that the nature of both industry are same. Responsiveness forms the key for both the industry, be it fashion or electronic gadgets. Thus, assuming Apple grappling with supply chain challenge is bit hard to digest.

  33. Debojyoti Ray says:

    I believe, the answer, to the question which the topic of the blog so astutely asks, is partly strategy and partly supply chain challenges.
    Why Strategy?
    1. Understocking Vs Overstocking: Given the cut-throat competition in the mobile industry, where a yearly refresh is a kind of norm for almost all players, the cost of overstocking exceeds the cost of understocking by a significant margin. It can, further, be argued that understocking helps in creating a hype and halo around the product, which the early adopters very much prefer.
    2. Demand Forecasting: If we take the specific example of IPhoneX – the product is being launched at an unprecedented price point of $999. Demand forecasting, using historical data, can never be trusted in such cases of product launches.
    Given the various versions of the product, postponing production helps the company in catering to the vagaries of the customer demand. Also, given the fact that one of the primary USP of Apple over other competitors is the quality of its products, the delay ensures that the company spends significant amount of time in ensuring quality and defect free models.
    Why Supply Chain Challenges?
    1. The fact that Apple is sourcing one of the bottleneck components, from a single supplier, and that too, from its competitor, speaks volumes of the supply chain issues the company is facing.
    2. Even some other crucial components, like NAND memory chips, are facing a supply crunch, due to the availability of a very limited number of suppliers.
    Therefore, I do believe that the jury is still out on the query.

  34. Siddhant Khattri says:

    Adding to Deepesh’s point, it is important to forecast demand using various techniques – Assessor model, Bass model are some of those. Apple’s iPhone are a much coveted product in the global market. Hence, a blend of both – strategic choice and supply chain capability – is required. iPhone procurement of OLED’s from Samsung seems to be a strategic decision rather than a supply chain issue.
    However, increasing the number of SKUs is going to complicate things further. It is similar to a problem faced by Sports Obermeyer. Serving long tail customers will become an issue with manufacturing requiring MOQs.

  35. Pulkit Gupta says:

    Apple shortage at the launch of the new product is something that all of us have seen over years. I believe this could be attributed to multiple reasons – 1) Poor forecasting – Even with whole lot of experience, I believe launch of any new product would cause high uncertainty in demand predictions. 2) Supply Side Issue – As we know, iPhone is a complex product with multiple parts and this makes its supply chain really complex. With shortage in any component, the production gets hit and hence the shortage of supply. 3) Apple last minute changes – Apple is known for achieving perfection in its product which ultimately leads to last minute changes/upgrades which also causes certain delay. 4) Last but not the least, marketing gimmick – It could very well be a very thoughtful way to create artificial demand by reducing the supply. I believe combined all these reasons would be contributing to the shortage of iPhones at the launch.

  36. Amit George Mathews says:

    I think the supply shortages of iPhones are generally because of 4 reasons which are split between strategy and supply chain issues
    1. Last minute changes to the hardware and since the product lifecycles are too short in the smartphone space they can’t afford to extend the launch date
    2. Creates that perception of exclusivity and hence enables them to have a higher price point
    3. Non-availability of suppliers that can provide components with Apple’s specific requirements (in this case the OLED panels and the NAND memory chips)
    4. When the shortage is announced to the world there seems to be a spike in its stock prices
    With respect to iPhone X, the supply chain issues are being sorted with Apple trying to bring in other vendors to pick-up the shortfall of the components. This shows that in this particular case there seems to be more unprecedented supply chain issues than strategic decisions to deliberately create this unavailability.

  37. Ankur Jain says:

    Apple as a brand is one of the very few ones in the market today who can launch drastically innovated product every year. That too with a pull based strategy on a high value product. This has happened over years because of their brand image and razor sharp supply chain strategies. I feel Apple takes these calculated risks to go through shortage of products on shelves to ensure that the product always command a prized trophy image. Also the pull strategy supports maintaining a lower stock and fulfilling based on demand. The changes in product design every year will require changes in supply chain and it can stabilize om;y over a time period. In modern times, having a vast vendor base is actually troublesome. Pruning the supply chain is of paramount importance to achieve cost & efficiency. Ordering only from Samsung provided two opportunities: Keeping Samsung interested in the profits and the reputation at stake. And, Apple getting the best technology at a decisively lower cost from a lead supplier in the market.

  38. While the delays might be intentional to some extent to pent up demand for the latest iPhone, it definitely provides Apple some idea as to the extent of demand. As Nishant points out, these products are very expensive and Apple gets an idea of the demand for each product in the delay period. This can help them provide right orders with their suppliers considering Apple follows just in time manufacturing. However, the delays in this case may not be intentional, because of changing of sensor design till last minute and reliance on a single OLED supplier (which led to significant delays when an accident occurred in the OLED supplier’s factory).
    Apple may follow stricter timelines w.r.t design and not tweak designs till last minute which affects their entire supply chain. Releasing product in versions may not be a good idea as this would clash with their strategic positioning and the launch scheme that they have been following for so many years (and it has proven to be highly successful for them too). Also they should have at least 2 backup suppliers for critical components to minimize the risk in their supply chain.

  39. Prasant Goel says:

    Apart from being one of the leading players in the Mobile phone industry, Apple is known for its supply chain excellence with top management being involved in closely coordinating and developing supply chain players while deciding the Technology, quality, quantity and as well as sourcing of the various components in conjunction with the suppliers. However, The iPhone X release and its subsequent shortages became a nightmare that Apple is still trying to come to terms with. And it is not just the shortage of iPhone X production but strategic decision leading to iPhone X design and subsequent bottlenecks in the supply chain that need to be addressed. One of the reasons as highlighted by many is the short supply of Organic LEDs. Samsung, one of the leading OLED manufacturer operates separately from Samsung Phone Manufacturing Business but it still took a risk of short supply of OLEDs looming large over the fate of iPhone X with only one manufacturer, given the demand across the entire mobile phone industry, and this shortage of OLEDs has currently limited its supply of iPhone X to 10,000 units per day. Apple knew that the monopoly of Samsung might risk its supply chain of OLED and bought the CVD- Chemical Vapor Deposition Machines but the steps could have been preempted much earlier as Apple is still trying to get the collaborators to work on the Apple’s equipment. Another reason for restrained capacity to supply enough iPhone X in the market was a parallel supply of iPhone 8 in the market restricting the manufacturing of iPhone X units. Again the production of iPhone 8 was slashed by 50% to ramp up the iPhone X supply but these remedial measures could match the mammoth demand in the market. Moreover, another Challenge that Apple faced due to OLED in iPhone X was the development of fingerprints sensors that could work through the OLED screen but unfortunately, the engineers failed to get it in time for the iPhone X Release. Now the only option left was the Face ID recognition which involved two-part sensor creating another bottleneck in the already strained supply chain. These supply chain issues have not cropped up suddenly, but have been there since 2012 when the Chairman of Hon Hai Precision Industry Co., a major supplier of Apple, confessed that they just could not fulfill the demand as Apple has constantly struggled to produce enough iPhones for their customers upon the mega launches. Going ahead preempting the designs of future iPhones with ever-shortening product life cycles (less than a year) and building a supply chain for these models in diversified geographies is a key that Apple must be working at, as much bigger issues in the supply chain are yet to unfold and they may come from geopolitical risk, cutthroat competition or technology disruptions among many others.

  40. Surbhi Sachdeva says:

    I believe that the kind of customer loyalty that Apple enjoys allows it to operate in the manner it does. It is clear that the shortage doesn’t discourage people from buying a new iphone. An iphone enthusiast will buy the phone even after a long wait in a queue or a week long wait. I believe that the shortage is created by a combination of all the reasons i.e. working and tweaking till the last moment, supply chain challenges. Apple should create back-up suppliers for critical components and not just rely on one supplier to improve its supply chain. But the fact that it may be a strategy can’t be denied either. The shortage helps apply in multiple ways such as creating a hype and generating publicity around the new launch, also it helps to reduce inventory carrying costs. Hence the shortage seems to arise due to supply chain challenges, but seems to be contributing positively towards Apple’s strategy.

  41. Harihara Subramanian says:

    I personally feel this is the delays are more a Supply Chain Problem than a Strategy. Availability of stock on stores is of utmost importance if Apple has to cash in on the huge demand that its product develops by the launch of a new version by September. With a well developed pre-order system, the sales of the previous version combined with the average possession time span of a mobile version by a customer, it would be possible for Apple to predict demand. Even in this case of mismatching prediction, Apple can also overproduce during the first 3-4 months starting their launch in September and then compensate for this in the oncoming months when the forecast is more accurate. But this does not happen. Delays on especially pre-orders would be a grave blackmark on Apple and they would not do it as a part of their strategy. Hence, I strongly feel that there exists a problem within their supply chain that is delaying their deliveries. The new versions issue has 2 side to the same coin – with time it is mandatory for Apple to differentiate its products, excite customers with new strategies. At the same time, modular manufacturing that can help in ‘postponement’ within supply chain and mitigate demand variability issues. A call must be taken weighing the cost-benefits involved in the 2 attributes explained above.

  42. Ayush Bajaj says:

    Apple, as we all know, has been able to create an unparalleled brand due to its marketing activities and its product quality. This is only possible by carefully nurturing the customer relationship over time and always being ahead of the curve.What Apple does today the competitors do tomorrow. With immense competition from mammoths such a Samsung, LG, Xiaomi, Apple needs to continuously innovate. In this rapidly changing market, the innovation takes time. Given the strict timelines of product launch, the information about the product needs to transferred to the contract manufacturers in time. With such a massive and distributed supply chain of Apple this transfer of knowledge, accurate demand forecasting keeping in mind the competitor’s products, the colour/version of the iPhone the customer would want takes its own time. With several unique components in its iPhone, some of the components result in a bottleneck in the production process. For example, for iPhone X it is the Face Id components which have become a bottleneck in the production. Thus these factors combined with those stated by my colleagues above result in a dearth of supply of iPhones every time.

  43. Ramya Janakiraman says:

    On analyzing the launch scenario , delay is more of gap in the Supply Chain and cannot be attributed to Strategy though there were some strategy issues related to the Value Chain.
    ->The prime attraction of iphone 8 is the OLED and Apple had decided to cater to the entire demand by having only one supplier.It was very evident that even though the market demand needed mass production of these screens , the supplier was in the nascent stage producing only 2-4 million units during the launch phase.Major lesson is that Supply base diversification is necessary and if it’s a proprietary product like this, Apple should have had clear strategy and made appropriate investments in helping the supplier to go up and running in catering to this new technology need right from the first.
    ->In addition to velocity , there were also quality issues reported in Touch ID fingerprint sensor and 3D camera sensor and production issues in Stainless steel metal frame.These were not highlighted much though.So ensuring that the suppliers are capable enough to technically support the product is key.
    After the launch ,Apple tried pulling the strings by investing in getting new equipments for supplier and also contingent resource planning.But as part of the risk management process, being a Global player , Apple should have ensured that the products are available on the shelves in the launch phase so that it ensures the Apple fans are happy and retain their pride.

  44. Aditya Jain says:

    Apple’s strategy makes sense as a de-risking strategy.

    With every new product, Apple puts its brand image at risk. Irrespective of large number of quality tests there are always possibilities of a major defect being shipped.
    Shipping out a limited number of handsets is a risk mitigation strategy as in case there is a major defect, then the damage is limited.

    Shipping out phones in a controlled pace gives time to apple to respond and manage / limit the damage caused.

  45. Ankit Singh says:

    In my opinion the duration between apple’s announcements of new models and supply of new models is Apple’s strategy. Apple knows that they have a very loyal customer base who will not switch brands due to long duration to get Apple products. The long duration gives Apple enough time to create enough excitement about the new product launch. Also, it helps Apple understand customer’s expectation from the new product and gives Apple an opportunity to tweak the design/ specification if needed.

  46. Hanumantharao V says:

    I think the strategy is to forecast the demand well with pre-orders as it will help apple to estimate the demands properly for all the product variants. Had there been launch of one product, it would not have been difficult for Apple to estimate the demand as all the customers will order the same product, but given such variety of product launch at the same time, it would be difficult to estimate the demand for individual products. With such delays in product launch and customers placing pre-orders during this period gives more accurate estimates for each product and I think this is part of the strategy of Apple especially when it is launching different versions of the same product.

  47. bharath chintapatla says:

    The issue discussed of Apple having delivery delays, I would think is more of strategic decision rather than a function of Apple’s inability of forecasting demand. First thing to understand is the versions Apple released in 2017, they have iPhone 8 and 8 plus along with iPhoneX. iPhone 8 is very similar to previous iPhone versions and in the same price range whereas iPhoneX is an upgrade in terms of screen, face recognition etc. With iPhoneX being delayed it gives users who want to upgrade from iPhone6 or 6s to compare it with similar priced iPhone 8 rather than focusing on iPhoneX and get intimidated by its price.

    I think the delivery delays are related to Apple’s strategic choice to push iPhone8 as a replacement to users who are planning to replace their existing phone where as iPhoneX is targeted for premium segment user. Also with this kind of segmentation and inventory shortage will make iPhoneX even more desirable for most customers.

    Regarding releasing the phones in versions rather than tweaking design until last minute, I think is a bad idea considering that the general lifetime of these phones is around 2 years. Also, most customers who already bought the phone will feel cheated if a phone with a new feature releases in few months. Considering that losses loom larger than gains you would end up with more unhappy customers and customers postponing the purchase who might end up buying competitors phone.

  48. Monomit Nandy says:

    A lot has been said about the long queues outside an Apple Store during the launch of new iPhone and Apple’s inability to forecast demand properly. Apple’s last minute tweaking strategy has been in place since the days of Steve Jobs and I feel that since it is a part of Apple’s strategy to tweak design at the last stage, it is not impossible for Apple to forecast demand since this is a known risk. Tim Cook being an experienced Operations and Supply Chain manager has been in Apply long enough to handle such uncertainties and still forecast demand to an accurate level. In my opinion it is part of Apple’s strategy to create long queues outside the Apple stores and make this as a marketing gimmick. This is line with Apple’s strategy to market its product as an aspirational product and thus increase its overall sales and extract more premium from the end customer. Tim Cook is experienced enough to handle such known unknowns and there are many models which could be used by Apple, and I am sure are being used by Apples to forecast demand accurately. Managing such uncertainties by technology companies as big as Apple is nothing new.

  49. Charu says:

    Tweaking design changes till the last minute is not a good idea as it brings discomfort to consumers about the comprehensiveness of their iPhone purchased, bringing bad name to the company. However, the pre-orderers (consumers expressing intent to buy) can be asked to make advance deposits on their orders to ensure that the ones asking for an iPhone actually end up buying one and the demand forecasted through pre-order holds consistent. This would eliminate non-serious consumers / on-lookers from inflating the demand forecast numbers.

  50. Bikas Panda says:

    Apple iPhone X is one of the most anticipated launch by the company on the backdrop of not so warm reception received by some of its previous models. Within 30 minutes of Apple taking preorders for the iPhone X, promised delivery dates slipped from the Nov. 3 launch date until early December. The preorder allows apple to mitigate the risk of demand unpredictability and the lag time is utilized to make an accurate account of what the actual demand would look like. As per noted apple analyst Ming-Chi Kuo Apple struggled initially to source some of the component required for face recognition in Apple iPhone X. He also states that generally it sources only 60% of its components in advance and bases its order for remaining 40% only after a summation of sales report. I see apple following the same process here to mitigate demand forecast error.

  51. Mrigank Mishra says:

    Apple’s complete ecosystem revolves around design. Its in firm’s core culture to develop its products keeping design at the centre. Apple has a loyal customer base and its not very difficult for them to forecast their demand. In today’s era of faced paced technological advancements, its important to keep tweaking changes in design helps apple keep ahead of its competitors in the market. With such strategy, Apple is trying to minimize future demand uncertainties by keeping its products ahead of its competitors. Releasing products in versions will need frequent product launches, reducing exclusivity factor, leading to dissatisfaction amongst customers

  52. Balabhadruni Kamaraju says:

    Consumer dynamics for Apple products are different from those of other companies. Consumers are more loyal and are willing to wait to get their desired product in Apple. Consumers of other mobile and electronics companies are not loyal and can easily shift companies while purchasing. Therefore, Apple focuses on satisfying consumers to the fullest extent in terms of delivering the exact product they need though it may take some time to deliver. In addition, scarcity and shortage of products force consumers to pre-order or purchase products immediately after launch. Moreover, this model decreases the inventory cost, which is very significant especially when number of SKUs are high.

  53. I can talk about the forecasting process in Apple for new products which can be very challenging. A samaple of prospective customers are surveyed for their purchasing intentions for the new product given the features. They are then correlated with sales of previous new models and extrapolated to the product launch year with changes in wage growth and disposable income. Hence there is some forecast uncertainty; however they have the numbers to plan their supplies according to their foreacasts.
    I feel shortage of Iphones are due to challenges in supply chain and not really a strategy. Apple in India sell in the premium market where there is stiff competition from Samsung which comes up with some really good value for money phones. Hence they would want to take advantage of the buzz around the new product launch as much as possible and convert prospective customers. Considering the number of components that go into an Iphone, supply issues are bound to arise. Especially with a “breakthrough” design like the Iphone X which has overshot its sales expectations. The cannibalisation of the Iphone 8 was expected but was catered for the price sensitive iPhone user who would be reluctant on $1000 iPhone X. As of now, it is expected that the iPhone X will attain supply demand equilibrium by March 2018.

  54. Aditya Dembla says:

    The non-availability or delayed availability of Apple looks more like a strategic move. This is a common practice followed by Indian e-commerce companies as well to add the flavor of exclusivity. Most of the Apple customers are high-end and getting the new i-phone at the earliest gives a sense of an achievement and further raises the buzz in the market.
    On the front of improving features in an agile method even after pushing the phone in the market, Apple as of now is currently not doing it on the hardware side as the hardware is something with which a loyal customer is locked for 1-4 years (once bought). However software upgrades are quite frequent in iOS once a new version is launched as this is something customer can do remotely on his/her device.

  55. Vasu says:

    Apple has been strategically focusing itself on the differentiation dimension in the hyper-competitive devices space. Since its early stages of growth, it has always focused on delivering innovative products that create a sense of uniqueness to its consumers. Hence, the company closely focuses on developing new features even closer to the launch of the products. This delayed approach of producing products is what serves well in creating a huge anticipation amongst the consumers, thus driving demand.
    The fact that driving anticipatory demand, may put a lot of pressure on the company’s suppliers post the product release. Base forecasting of products can be done (based on Dogs vs Runners Analogy) but better availability can be ascertained closer to the product launch basis consumer market reactions. What works well for Apple is the deep funding it possesses that allows it to invest in expensive production and supply chain if required. Also, with high premium charged on the core product offerings, it can further reduce the lead times of delivery to few days by airlifting products.
    What is can further do to improve forecasting and thus reducing risk in the supply chain is estimating real demand through pre-orders, upgradation plan signups etc from consumers to gauge the increased interest (as compared to historical data) and do Bayesian updates in its forecasting methods, thus reducing requirement of safety inventory et al.

  56. Kreena Patel says:

    Apple has become the most valuable brand in the World by managing some of the most complex Supply Chain strategies.
    Accurate Forecasting is the foundation of any successful product launch. Companies always carry the risk of over ordering / over booking production volumes which will drive up the cost of the product. Companies walk a tight rope as far as forecasting is concerned.
    Apple has earned the trust of millions of customers world wide with their ability to get things done right, first time. They are not going to jeopardize their reputation and brand image by launching multiple versions of the same product. Apple’s patronage has been constantly increasing ever since the launch of iPhone, iPad, MacBook. And despite the long waiting periods, Apple’s popularity and profits have skyrocketed. So why fix something that isn’t broken? However, Apple are better served by fixing these issues before they become a problem and start losing market share. Pre-orders, better Market survey, data analytics on variant wise historical sales, preferred features, demographics etc., will help in better designs, accurate forecasting and serving the customer faster.
    Also, moving away from single sourcing to dual or multiple sourcing for critical commodities is essential for risk mitigation.

  57. Peter Rigakos says:

    Many good comments, and ideas in previous posts. I would agree that the pre-ordering and long lines has more to do more with creating demand especially since Apple must have a lot more forecast data now, than when the first iPhone was released. Also, if the lead time for an iPhone is under 3 weeks than most people would accept this and causes the demand to grow. Having said all of this, I also feel it helps the manufacturing plant to help with throughput; basically manufacturing to sales requests and not capacity. This model of throughput will protect manufacturing (suppliers) from not having unwanted excess inventory on the shelfs. Therefore this may be a reason for Apple to be conservative on initial financial forecasts. In my opinion it is a win win for marketing and manufacturing. The culture at Apple seems to be of a perfectionist, and no matter what it takes they will keep perfecting and innovating products. Therefore tweaking designs to the last min shows the high end product and thoughts put into the design and quality.

  58. Prateek Tiwari says:

    Apple when it comes to smartphones is trying to break innovation barriers constantly. With the promise of a new design and innovation every year, it faces challenges in getting the final design ready on time. It delays the design work till late because Apple is known for perfection and even one slip can cause millions. While some part of the delay is unintentional, there are advantages due to which I feel Apple deliberately make delays.
    The complex supply chain with only one supplier are the reasons for complexity in the system and unintentional delays. But delay period when customer preorder makes sense as it provides early data to the company. They can have a better insight into demand based on these numbers. When a company launches products like Apple X, there are barely any similarities to existing products, and as such, it becomes difficult to predict demands. With the margins getting lower and lower every day for suppliers, it makes no sense for them to overstock. Because of these reasons, a strategically delayed product after studying and capturing market response is better for the entire supply chain.
    Releasing different versions will not serve the purpose as then, early adopters may feel cheated if later, a bug is discovered and corrected in immediate next versions. It is better to have a perfect delayed product than an imperfect one which only captures initial demand. Also, a perfect delayed tactic will only increase anticipation for the product.

  59. Atul Shrimal says:

    The article “Why There Are Never Enough New iPhones” brings out several aspects of modern supply chain especially one which is multinational and has several entities across firm boundaries making coordination that much more critical in order to support Just-in-Time manufacturing. Common wisdom in complex systems such as spacecraft tells that complexity abhors reliability, it’s in this context one wonders that why should Apple not simplify its iPhone supply chain in order to avoid delays in delivery as frequently seen around new model launch. Article also discusses other aspects of the supply chain such as huge no. of suppliers involved and some of them being the soul suppliers that too a division (although independent) of a direct competitor such as OLED screens supplied by a division of Samsung. Implications of Apple’s strategy of introducing many new models are also discussed –It complicates forecasting of demand. This coupled with the fact that financial forecast which affect share market sentiment precede actual sales leads Apple to place conservative orders with its supplier which often leads to delay in deliveries due to aggressive actual market demand. Apple’s tweaking of design specifications until last minute close to the launch further complicates the matter. Most of us would remember how Steve Jobs decided to change the iPhone screen glass from existing to scratch resistant (leading to development of Corning Gorilla glass) just a few days before the launch. On one hand this incident represents ‘nothing but the best’ attitude of Apple and on the other the horror stories of worker shifts at Foxcon that worked day and night to meet the delivery schedule. Either way the fact remains that such decisions strain a Just-in-Time supply chain and therefore article suggest that Apple may consider releasing product versions rather than tweaking design elements till last minute to come up with radical changes through each models.

  60. Jennifer Greminger says:

    I think Apple calculates every move with such strategic precision, and the delay period is part of the demand strategy. With the pace of technology, they are communicating a release date far before the kinks have been worked out of their product. Working out technology flaws has to be incredibly difficult to calculate, which could impact delivery from slightly to significantly. This also creates delays. Financial forecasts, competitor roll outs/releases, obsolete technology could all be reasons to be conservative in providing suppliers with orders. The timeline before technology becomes obsolete would play a significant part in how tight Apple runs their inventory. Apple’s brand is so impactful – it’s a community/cult – releasing versions could exponentially impact sales, as the following (“have to have it” mentality) will ante up whatever price point it gets set at

  61. Ankit Raj says:

    I think it is an inherent challenge of operating in this industry while being a leader, which Apple has portrays as a strategy. Apple products have become aspirational goods in people’s mind. Design and ease of usage and the brand itself play a major role in giving that premium image to Apple products. Earlier Apple operated under phasing out methodology wherein during every new phone launch it used to reduce the price of older models to drive more sales and attract new customers to offer the experience. New versioning strategy of launching multiple products at different price points have made the decision making much tougher for consumer and hence the issue of demand forecast. Thus, the bullwhip effect is applicable here and due to the demand uncertainty and due to the complex nature of the product there is always a dearth of enough iPhones in the market. Adding to the complexity is the unique design component that Apple uses and hence has only one supplier of critical components. This affects the lead-time. Despite the higher lead times in delivering the product to the market, Apple is at advantage here due to aspirational nature of the product. Non-availability at every time has also made the product exclusive and has reduced the decision-making time for people leading to impulse buying.
    Apple has created its own band of brand loyalist who loves the simplicity associated with the product. Releasing multiple versions of the product (different designs and hardware specs) will lead to complex purchase decision making and carries a risk of losing out their brand loyalist. Brand loyalist acts as early adopters of new product and thus give the initial impulse and hype for the new product. Without this Apple risks losing out the strong premium nature of its brand.

  62. Paul Aoun says:

    Whatever Apple does, it seems to always do the right thing and in the case of launch under supply, it is probably due to be a combination of marketing savviness (exclusivity, and build-up of excitement) and operational considerations such as slow ramp of production to manage risks of bugs and failures, complexity of product line, and bottlenecks in its supply-chain.
    Financial aspect mentioned in the blogs are also probably contributing to Apple’s approach, since under forecasting demand and beating the numbers, has had a tremendously positive impact on its stock value.
    Finally, trying to do releases instead of last minute tweaks will probably be limiting to them since, typically, every new generation of their products depends on hardware upgrades and those can’t be done in iterations.

  63. Mike Carter says:

    It seems that whatever Apple touches turns to gold. Apple strategically creates demand by marketing the products early and creating buyer envy. They now utilized pre-order sales to ensure supply is adequate for the demand. I think Apple would not be as successful by launching revisions routinely. Apple consumers want the newest and latest hardware and creating small revisions would diminish the consumer’s appetite. Apple reduces just-in-time delivery constraints by strict relationships with suppliers that ensure capacity is adequate in the event the demand continues to increase.

  64. Rolando Saca says:

    I believe this is very strategic. Apple does this in order to create demand and use this marketing ploy to create the illusion that every single human being wants the new iPhone.

    Also, as we saw weeks after the launch of the iPhone X nearing Christmas, when Apple showed iPhone X could be delivered in a week instead of the 3-4 weeks the site showed, Apple’s stock suffered because it showed analysts that demand for the new iPhone wasn’t big enough.

    So, for Apple, this is not only strategy and marketing, but financial as well. If they don’t manage well the demand, their stock can take an unnecessary hit. On the other hand, if they’re savvy enough so that they can manage demand without losing sales, they can also get a double benefit with their stock price.

  65. srinivas tadepalli says:

    I would actually argue that its more of a a supply chain challenge than a marketing strategy. as most of you might have already seen/heard over the years, Apple is really the leader when it comes to outsourcing and as a result, they may have challenges managing their supplier relationships and expectations. one another major challenge with Apple’s internal processes is the fact that everything is kept under the wraps under the last minute until the product is unveiled to public. and in case of any last minute changes to the product, it creates an enormous pressure on the suppliers to produce high volumes of parts/products in a very short span of time. One possible way to alleviate this supply chain challenge is to bring some manufacturing in house instead of outsourcing every thing. this way, they will have more control over the process. On the contrast, if you compare Apple to Amazon, amazon has probably 100’s of millions of items on their store catalog compared to Apple and i would argue that Amazon is probably doing a better job of forecasting demand than apple and other competitors.

  66. Ken Janicke says:

    The delay period could be used as a buffer for Apple to help ensure it does not over produce or commit to an underselling product configuration, nor commit too much of its supply chain capacity to products with less demand at the expense of others.

    Financial forecasts do not seem a likely reason to delay supplier orders – unless Apple is significantly unsure of where and what portions of their earnings will gained. If this is the case, then I’d be very skeptical of the current Apple leadership. A company can’t reach excellence by waiting for the financial numbers to finally come in and tell them what they should have been focused on along the way!

    The version release approach has been successful for Apple in the past. Perhaps Apple believes that with stiffer competition now, that it can’t afford to allow product gaps which might be filled by a competitor.

    Rolando and Sri make some pretty interesting arguments above. Both are plausible, and yet both would cause me to consider the management of the company for various reasons. I hope we will soon find out what Apple’s reasoning and strategy is, and whether it pays off for them.

  67. srinivas tadepalli says:

    Interesting enough, after i posted my comments i read a very recently published article. please see link
    http://www.businessinsider.com/apple-iphone-x-orders-slashed-sales-2018-1

    i would like to point out a specific portion of the text ” At first, it looked like supply of the device was going to be lower than its demand, due to production issues, especially with the device’s delicate Face ID camera. But Apple was able to largely fulfill any iPhone X orders it received during the holiday season. Now, as Apple’s slow season kicks off, it looks as if the $1,000 price tag is hurting demand.”

    • D. Zekveld says:

      This is what came to mind for me as well, Srinivas. I saw this article and the impact on Apples stock price recently. Could this be the turning of the tides on the iPhone? In terms of financial earnings, they will certainly take a hit on the iPhone X. Perhaps $1000 / phone is the price limit and they need to seek ways to bring this price down.

  68. Jennie Dekker says:

    I believe that just-in-time, and the limited supply orders add to there marketing and mystique of an apple product. Apple repositioned itself as a lifestyle brand, with must-have products. By allowing the queue to build, and increasing wait times for the products – they are able to amp up the anticipation and hype surrounding the product creating a value-add to the moment of “yay, I finally got my device” and create distance from the painful wallet sensation at order. They were able to deliver when it counted during the Holidays, and since then the orders have been largely carried out by the mobile carriers, who have been well stocked and offer incremental monthly payment plans that lessen the shock value of the price tag.

  69. Henry Reed-Schertz says:

    I think the timing and question of this article are extremely fitting. I myself am an apple user and am in “need” of a new phone and once again we sit on the verge of a September 2018 anticipated release of Apple’s next line of iPhones etc. I believe the delay period from release to orders shipping is absolutely strategic. It’s the model Apple has followed for years. I think it has proved to improve not only the demand forecast but the demand of the iPhone its self. Apple has an extremely brand loyal customer base yet like every other company they are releasing new products (really just redesigned products) on a yearly basis yet that demand has not diminished. I think this is partially due to its launch of a product and the “wait time” the customer has to contend with to receive the latest and greatest. Its developed to where people are not concerned with the price ($999 for iPhone X) but they have a “need” for the next best thing form Apple. I think Apple partially creates its own bottle neck by release the forecasts then holding its shipments to suppliers with its order as it does not have a complete understanding of the demand due to the quick turn around with a September release and November delivery. If apple started to release in versions, it would deviate from what they have proven a successful business plan (Valuing 1 Trillion $). The company has shown they do release versions via their software as the consumer upgrades that until the new model is available. By having what is now an annual release they are able to maintain their demand versus spreading it over a year with new hardware versions being released. I would maintain the current structure rather than mimicking that of Apple’s competitors.

  70. Alyssa Bybee says:

    Is the delay period, when customers pre-order, a strategic choice to improve demand forecasts?

    A lot of great comments have been made regarding this topic, and to me, it is especially important to reiterate the impact of Apple culture and brand loyalty as far as customer pre-orders and behavior are concerned. I think it’s an incredible strategic move by Apple when you consider production planning, and has also proven to be a successful marketing technique, given the remarkable response to any new Apple release. The pre-order option enables Apple to reduce future demand uncertainties while still generating hype among the public for the latest and greatest “must-have” Apple product to hopefully strengthen and improve their sales.

    Will Apple’s financial forecasts, that are in advance of sales, a reason to be conservative in providing suppliers with orders?

    Yes and no. The pressure of having to continuously innovate, and knowing competitors are constantly breathing down your neck, could lend itself as an influence for the output of conservative financial forecasts. Is it reasonable to expect Apple to be the “best” for the next 5 years? 10? Personally, I believe its entirely possible considering the brand loyalty mentioned above, however at what point is “smashing the financial goals” not enough?

    Should Apple release its products in versions rather than tweaking designs until the last minute?

    I completely agree with Henry’s comment regarding the release of versions. Why fix what isn’t broken (from a financial aspect) ? Regardless of software issues, being a loyal Apple consumer myself, the minor irritation of bugs and tweaks as newer versions are released are and have been exactly that: minor, in my personal opinion. As a consumer, I am more interested in having access to the latest technologies and the irritation and inconvenience of “bugs” and tweaks as newer versions are released are and have been exactly that: minor, in my personal opinion. I am more interested in having access to the latest technologies and their annual release strategy allows them to focus on that consumer “need.”

    • Alyssa Bybee says:

      Whoops. Copy/paste from Word issues. My last paragraph should’ve read as:

      I completely agree with Henry’s comment regarding the release of versions. Why fix what isn’t broken (from a financial aspect) ? Regardless of software issues, being a loyal Apple consumer myself, the minor irritation of bugs and tweaks as newer versions are released are and have been exactly that: minor, in my personal opinion. As a consumer, I am more interested in having access to the latest technologies and their annual release strategy allows them to focus on that consumer “need.”

      🙂

  71. Beth Hinchee says:

    Lots of very good comments have already been made. Don’t forget that Apple knows a lot about its customers. They know from your browsing history whether you’re checking out the new phone. They know from your purchasing history if you’re an habitual upgrader…or if you’re more inclined to wait it out. There is such a wealth of metadata on you that Apple has, they surely have a pretty solid forecast to work from. Most businesses forecast with a reasonable accuracy with far less information about their customers, and far less loyalty from a core base. As others have mentioned, Apple’s strategy clearly benefits from creating the illusion of scarcity. That’s not to dismiss the fact that there are real challenges that come from a long, complex and global supply chain that surely make it critical that they closely monitor and then react to shifts in consumer demand, but I think their challenges are more likely to be in the areas of unexpectedly high demand at launch due to new customers switching from other phone providers – they know the buying behavior of their current customer base very well by now. They likely have even modeled how long they can make us wait for perfection without risking defection, and therefore they can successfully afford to work in a couple more tweaks. Most of the value of the product is actually in the software rather than the hardware, so the “versions” are much more valuable in software updates rather than releasing multiple hardware versions throughout the year. That would be unnecessary cost that likely would erode the ability to create the “scarcity” premium in pricing.

  72. Jesse Kiste says:

    I would lean that Apple’s delay is a strategic choice. They know their customers very well and are great at creating a “hype” for the product. As Henry put it, they make people feel that they “NEED” the latest version well before their old phone is out of its usable life. It seems by cranking up the demand and limiting their supply, they can charge huge amounts for their phone…likely with tremendous profit margins. I don’t think Apple needs to change their process (be it strategy or dumb luck). It stems from Steve Job’s perfectionist mindset to keep tweaking the design right up until launch. At launch make it the biggest/best/fastest phone they have ever produced and market the heck out of it. It has worked thus far making Apple a superpower, why change it?

  73. Christian Kersten says:

    I agree with all of my previous speakers and really enjoyed reading this nice opinions.

    For me it’s absolutely a strategic choice – there are not a lot of companies globally with this extensive knowledge about their customers as Apple has. They know behavioral and buying patterns and individual preferences perfectly. They could forecast the demand better than most of other companies. Would it be a supply chain challenge Apple would have come over it the last years. Im pretty sure its a strategic choice of artificial scarcity to continue their premium pricing strategy, increasing prices (demand > supply).

    Apple confirmed their approach the last years very successfully, looking at their market capitalization. So why should they change a winning team?
    The money is made in the software – not with the hardware. Therefore I would recommend to stay on track as they are with improving the customer’s experience with a few software updates and once a year with a new model (hardware).

  74. Nick Vandal says:

    I agree with the comments above that it is more of a strategic move by apple to limit the number of phones it has available on launch. Apple is very good at marketing and creating hype behind their products, and they also know their customers very well. By limiting the supply they are increasing the demand and can start prices off on phones absurdly high in some cases (think iphoneX). I do think that there is also a bit of a supply/supplier/resource shortage as well, and that will become a bigger factor as resources become more scarce and technology more widespread. However right now I think apple is using any type of shortages to its advantage. The delay period is most likely used to improve demand forecasts but they can also use that time to create more hype and do target marketing to the customers that they know should pre-order if they had not done it yet, which improves the end sales results before they even happen. I don’t think apple should release its products in versions, as they would have too many different version in the market and that could create more logistic trouble and resource shortages than benefits.

  75. Aaron Wheadon says:

    Apple has a proven track record in the way it markets its line of iPhone products. No other product that I’m aware of has the kind of pull on consumers globally than the announced launch of an iPhone. Not even Apple’s other products generate this much hype. I’m not a marketing professional, but I would hope that I would notice that there are benefits to the type of strategy Apple employ with each launch. The strategy helps drive demand to even greater heights. Having just passed the USD$1 trillion mark in value, Apple continues to show its dominance.

    Regarding design tweaks, Steve Jobs legacy continues to show its enduring fortitude. Last minute fiddling with designs (and the ‘leaks’ from unnamed sources to the press) have ultimately become part of the strategy. In Apple’s chase for perfection, they blow up the internet and titillate consumers with what-if’s and rumors of design improvements – not to mention debate over what to even call the latest version (is it 10 or X?).

    Last, I know all companies struggle with forecasting. As we have begun learning from Ievo and Ivo in our other class, uncertainty is coming faster and faster, and we don’t know what we don’t know. We live in a complex world, with complicated situations facing us everyday. Forecasting is a tool to help ease the uncertainty, but companies have a tendency to forecast conservatively (under-promise, over-deliver sound familiar?). Their is a small part of me that believes this is also part of the public strategy Apple employs.

  76. Ross Ridge says:

    I concur with my classmates’ comments. I believe Apple’s timing for release of its products is strategic and not necessarily driven by supply chain or competition challenges. They have invested much time and effort in developing systems to track buying patterns and customer preferences. Their timing for product release and communications to the market and Wall Street are strategic. For Apple, supply limitations hype can mean higher demand and justifications for a premium price. While competitors are duking it out to be cost drivers, Apple is content to be a product differentiator.

    I agree with Christian, hardware development (e.g. iPhones) is expensive and costly. Money comes from the capabilities that software versions provide. Do I think Apple should release versions of its products rather than tweaking its designs until full release? No. Their business model works for them. Apple is known as an innovator. If they pushed multiple versions onto the market, I believe it would weaken its brand. When they introduce their new product, it reinforces the “wow factor” that keeps Apple customers coming back and lures new customers to try their products. They have built a loyal support base that passionately waits for and is willing to upgrade their devices as new versions become available.

  77. Lindsey Minto says:

    In very few industries outside of tech would you see people camping out for the newest product, clamoring to be one of the lucky few that gets their hands on part of the limited stock. Apple has seemingly capitalized on this trend and in doing so, created a demand, where others would have lost customers. The lines at Apple stores in advance of product release are so infamous that their competitors, namely Samsung, have created ads mocking the trend.

    Additionally, we have come to expect some issues with the newest product that typically requires a software patch or that we just get used to with the physical form of the product. There was the release with the bending iPhone, the antennae that didn’t work, the texts that would stop calls, and many others I have likely forgotten. While they wouldn’t call it this, I believe Apple releases a very hardened beta product and figure out the challenges later. Yet the customers still buy it.

    The iPhone has become a status symbol and an icon. The design release call is hyped up and something everyone looks forward to each year, with the headlines asking “what’s next from apple” and driving speculation and blogs dedicated to predicting what is next. They have created a launch cadence that works, again and again. With their buying power and seeming predictability of timelines, there is no way in my mind that this is a supply issue. This is a marketing and brand strategy. It helps Apple to not carry to much inventory, as it flies off the shelf as soon as it is back in stock. They are driving customer demand and frenzy with their tactics and they can better allocate inventory to the highest demand locations.

    Apple has built a loyal group of consumers, that are more like sports fans, that will continue to purchase the products year after year. There is a price and feature limit that will slow the frenzy, but they seemingly haven’t reached it yet.

  78. Bradley Wensel says:

    Apple is a powerful company with strong brand loyalty, and incredible insights on their consumers. The product release process that Apple has followed has helped build demand and provided consumers with this predictability on when to purchase their new or upgraded apple product. The delay period is a strategic choice for sure in my opinion to help with fulfillment of preorders, but also what to produce to ship for instore sales. This process allows Apple to fully understand consumer wants for the new products include colors, memory etc. This process not only helps them optimize their demand forecasts with suppliers and prepare the right allocations by region for shipments to Apple stores. These insights can help inform marketing, supply chain and future financials, which have been proven with their recent $1 trillion valuation.

    Financial forecasts I believe are important for apple to keep conservative and the delayed sales information until Q4 is a strategic move to control the market, which is always looking for any indicators for holiday time period to measure consumer spending patterns and apples timing allows it to be conservative in Q3 with only having pre-orders, but can focus on how to maximize sales in Q4 with this information, but not provide market full insight until after the holidays end of Q4.

    I think Apple should continue with the hardware update approach which drives consumer demand. Software versions are updated continuously and would not drive as much consumer demand in my opinion as the hardware, so I truly believe the new phone approach is the right strategy and something it should continue with.

    Apple’s strategic approach to product releases has been instrumental in their success today. The challenge will be if they can continue to keep consumers interested, which is a challenging task in today’s world with constant innovations pully consumer attention to the new idea/concept.

  79. Sarah C says:

    Apple’s supplying less products than demand is definitely a strategic move in order to create a ‘need’ for those obsessed individuals who ‘must have’ the latest Apple phone (for example). By having this strategy and marketing plan keeps Apple as a ‘premium’ brand even though their technology is lacking and proven to be behind other manufacturers. As you may be able to tell; I am not an iPhone/ Apple fan! But I do really appreciate and admire the loyalty and coverage they have in this market. Their marketing team do an amazing job and help to keep their customers hanging on for the next best phone upgrade.
    Let’s face it; getting people camping out in front of an Apple store for days on end just to be one of the first to spend nearly a month’s rent (for some) on a gadget which is basically the same as the one they already have, is a great marketing achievement.

    Apple are really good at analysing their customers information; all your browsing history, shopping choices etc. are all collected up for the Apple needs to look through.

    Having said all that Apple’s supply chain is global and a complex beast but part of the way they are easing certain pressure points is to buy up those companies supplying certain parts.

    I’m not sure if anyone else ready about the Chinese company taking Apple to court (about two-three years ago) over the use of iPhone as a trademark? They LOST this court battle which really makes me smile. The country in which most of Apple’s iPhone components are made cannot stop a Chinese company which sells handbags and leather items (I think) from using the trademark – LOVE IT!
    I’m sure that Apple will try to overrule this decision, but I really hope it doesn’t change!

  80. Marcello Sanzi says:

    I do believe Apple has a good strategy of limited numbers of new version phones and when they are going to release the new version; Apple consumers already expect when the new iPhone is going to be coming out and as a result Apple has a good planned demand numbers for the releases.

    Adding to Lindsey’s comment, I do think it is “crazy” how Apple was able to create a loyal customer base for so many years by establishing the culture of “having the latest version iPhone is important” even if consumers from their competitors argue that they haven’t changed much from one phone to another.

    Now, the question that Brad raised is important; for how long they are going to be able to keep this customer base interested in their product with all the innovations coming out?

  81. Vivek Chakrabortty says:

    The delay period is absolutely a strategic choice to improve demand forecasts. It provides Apple with valuable early data that is essential to predicting demand for a new iPhone as well as distribution of demand across its various configurations given that there are less pricey versions available. Another factor is the price point of the new iPhone X. At $999, it is the highest price point ever for an iPhone. Without early data, Apple would be gambling on their demand forecast.

    Apple should be conservative in providing suppliers with orders. Producing millions of phones means coordinating numerous component manufacturers to deliver parts on demand in a timely manner to facilitate assembly. Last minute redesigns, bottlenecks, single points of failure, and component shortages can leave several partners with unsold inventory which they cannot risk due to already razor-thin profit margins.

    Releasing its products in versions rather than tweaking designs until the last minute would make Apple like Microsoft which is known for putting out incomplete software and allowing consumers to perfect it for them over time through patches and versions. Apple’s brand is different – it is known for its obsession with perfection and this has garnered it a cult-like following. They should not mess with a good thing.

  82. Enoch Obeto says:

    I believe all the perceived issues and delays discussed in the article are part of Apple’s overall strategy to boost demand and financial forecast. One of the many benefits of JIT manufacturing is inventory reduction, all these strategies put together helps drive huge pre-order sales for products yet to be released. This is a luxury many companies will give anything to have, it enables Apple amongst other things to continue tweaking their product design as long as they want, no pressure. This is reminiscent of crowdfunding product development concept, you make the sale upfront and then use the revenue to develop the product, almost zero risk.
    I would not recommend they change this strategy, it has worked well and continues to work well. They have managed to build a cult following that’s not waning anytime soon, and continues to deliver stellar financial performance that has made them the first US company to surpass $1 trillion market value.

  83. Alan Cottrill says:

    Is the delay period, when customers preorder, a strategic choice to improve demand forecasts?

    The delay period absolutely seems to be a strategic choice to improve demand. The delay period allows apple to better forecast and structure it’s offerings at the best price point in various markets. It also allows Apple to craft marketing and adjust production needs based on ongoing current demand. It also helps create the element of “need” that helps drive the demand for their products as others have also commented on.

    Will Apple’s financial forecasts, that are in advance of sales, a reason to be conservative in providing suppliers with orders?

    At this point Apple has significant market data work closely with suppliers so that they can predict and adjust supplier orders. I would expect that Apple was multiple regression models constantly running and updating based on pre-orders and then sales at launch to help them manage suppliers production.

    Should Apple release its products in versions rather than tweaking designs until the last minute?

    It’s hard to argue with something that has worked so well. As Henry stated … why deviate from the plan that has brought them to a trillion dollar business with some of the most devoted best brand loyalty in the business world? We as consumers might like this approach but in reality we also want the uniqueness and newness of the product when it’s first introduced .. we as consumers have created this “need” that Apple has filled.

  84. Sandeep Singhatia says:

    Agreed to all the comments given above….
    Creating a product is a lot of work. But Apple has gotten that down to an art. They know what their market wants, they understand what people are looking for, and they have the engineers, software developers, and programmers to implement it. But having enough product on hand at launch time is a bit trickier than most people realize. Building millions of these devices takes a lot of time.

    There is a lag between when the product is launched, and when products are available to purchase. This time where people can pre-order is essential so that Apple can understand just how many units they need to make. Each year the phone’s price increases and it’s even more difficult to anticipate demand when a device is coming with a new price tag.; these risks driving away dedicated fans. Pre-order data helps to know how many are needed but doesn’t give much lead time to produce them.

    Now when it comes to marketing people, they are paid to create a buzz/demand before the product comes in the market; Artificial demand is a real marketing strategy, one of the most effective there is. By making a product totally available early on for pre-order, you take buyers out of the marketplace. Many electronics do this e.g. Game console makers do it as well.

    But marketers also understand that, by using the illusion of scarcity, they can accelerate demand. This false scarcity encourages us to buy sooner and perhaps to buy more than normal and we can see that by looking at the line outside of Apple stories or any other stores offing apple cellphones.

    To sum it all up, manufacturing something like the iPhone is incredibly complex, and most likely. Also, I ‘m in not favor of Apple releasing products in versions, Apple just wants to get its new iPhones into our hands as soon as possible. Although delays and shortages are disappointing in the short-term, it’s amazing to consider the awesome technology we have access to and how it’s evolving every year.

  85. Jessica Heaton says:

    Is the delay period, when customers preorder, a strategic choice to improve demand forecasts?

    I would agree with many comments stated above, that Apple is intentionally manipulating the delay period in order to better improve demand forecast. The delay period allows them time to gather very critical information about supply and demand, which can help them avoid unnecessary costs or errors in forecasting.

    Will Apple’s financial forecasts, that are in advance of sales, a reason to be conservative in providing suppliers with orders?

    I think there are a few reason that Apple should be conservative in providing suppliers with orders. As mentioned in the article Apple has a complex supply chain and just in time manufacturing. If apple were to change the design or miss the mark on the demand of its products and supply too many, there would be a tremendous cost associated. Because Apple has such a loyal following there isn’t much of a downside to their conservative approach with suppliers.

    Should Apple release its products in versions rather than tweaking designs until the last minute?

    I don’t think Apple should release its products in versions. Apple is a well established brand geared towards being “the best” and highest quality. If it were to change to versioning, I feel it would change the way customers view the brand, it could give the impression of lesser quality.

  86. Linda Sverdrup says:

    Is the delay period, when customers preorder, a strategic choice to improve demand forecasts? I agree with my classmates, the delay is a Strategic Choice and the “pre-order” provides a statistically significant projection for both Supply chain throughput and final Customer Demand. Past product launches, also provides an approximate idea of specific demand for model size, etc. and the pre-order tweaks these calculations.

    Will Apple’s financial forecasts, that are in advance of sales, a reason to be conservative in providing suppliers with orders? This depends on their strategic goals. The word “conservative” was an interesting choice. If they feel the product won’t launch on time or their will be some difficulties with product delivery (e.g., because of the new OLED screen), then conservative in orders is probably correct. They could be testing supply chain throughput and bottlenecks. Apple has been very good in projecting Shareholder value ahead of time – securing a strong backing.

    Should Apple release its products in versions rather than tweaking designs until the last minute? Apple’s business model is obviously working. Perfectionism in design and product reliability has captured a market share that has driven Apple to the top. I wouldn’t change a thing.

  87. Steven Jones says:

    I believe Apple’s delay periods are both strategic and unintentional. On the strategic side, Apple balances their marketing strategy with a competing demand generation strategy in order to both improve demand forecasts and increase demand.

    Apple is notorious for building a cult following by marketing to design and interface experience enthusiasts. This is particularly true for their phones and laptops. They sell a premium product for those people who want a slick and beautiful experience with the device. This marketing strategy would have some financial drawbacks because the broad market is more interested in utilitarian uses of phones and laptops. So, to increase demand, Apple markets their products as “catch up with the Jones’ ” approach. If you want to be “in the know”, then you get Apple products. So, to do this, they have to make big announcements way before the release date. Then, as the release date draws near, they take preorders to both dial in their demand forecast and perpetuate the notion that their devices are, indeed, exclusive. Long lines, then, outside of stores messages that if you want something cool and exclusive, you get in line. This strategy works. Many people do want what the “in the know” people have, so they get curious and look into it. People want to be carrying an Apple phone in their pocket, pull it out in front of others, and talk about the latest application that their friends are all using.

    It can also be that unintentional delays are found in their supply chain. In particular, it is the competition that is growing in their supply chain rather than the complexity in sourcing many variations that change often. As Sarah Rosnick pointed out above, Apple maintains just a few phone models with little variation in the models. This means that it should be a more simple set of variables to maintain than if they had large variations. The real trouble is in the expertise that is grown among their supply base, and how their supply base leverages that expertise. Although Sarah says that suppliers are often qualified over a year in advance, I am thinking that suppliers have more leverage in their contract negotiations because they have many suitors who want to employ them. Sarah should know because of her experience with Dell, so I tread lightly here. My position is simply to be suspect. It could be that Apple’s suppliers are getting far more lucrative offers from companies like Tesla, Microsoft, Lenovo, etc… as these companies are looking for premium suppliers in the chain. If this is the case, then Apple may not be able to dial in their supply chain as early as they would like. Apple’s marketing strategy, then, probably helps create a lead time to manage demand and supply.

    As for Apple’s financial forecasts that are in advance of sales being conservative, it probably is just another piece in the marketing strategy. To Apple, everything is marketing. Apple is most likely projecting conservative numbers through the supply chain as a means to create exclusivity in the market and keep low inventory counts for financial purposes. This makes their financial forecasts a marketing tool because it can drive stock prices up if their forecasts are met. and if their stock price increases, it makes news as being successful. People then flock to this exclusivity in the market where there is success.

    Apple does tweak designs until the last minute – and will most likely continue to do so. They want to dial in the experience with their software and devices for the core market. The secondary market doesn’t really care as much as their hardcore enthusiasts – but if their hardcore enthusiasts talk a lot about the products, it creates demand in the rest of the market. Under the hood, however, Apple may only be releasing versions. As Sarah Rosnick wrote, Apple doesn’t maintain much variation between their phones. From one version to another, the tweaks that are made under the hood are most likely one or two pieces to the entire phone puzzle.

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