The new Apple Watch can teach companies a valuable lesson about supply chain management.
The Apple Watch has seen mixed reviews since its retail sales began on April 24. Slice Intelligence estimated that when the device was put up for preorder on April 10, 957,000 watches were sold, with the average cost per order being $503.83.
Like the iPhone, MacBook and other products made by Apple, the new watch is already big news. However, as is customary with products originating from the Cupertino, California, technology giant, the demand for the Apple Watch may significantly outweigh the supply.
"Based on the tremendous interest from people visiting our stores, as well as the number of customers who have gone to the Apple Online Store to mark their favorite Apple Watch ahead of availability, we expect that strong customer demand will exceed our supply at launch," Angela Ahrendts, Apple's senior vice president of retail and online stores, said in a press release before the product was released on the consumer market.
Apple is certainly no stranger to supply chain issues. Whenever the company announces the launch of a new device, if consumers don't purchase them right away, there could be wait of weeks or months before the company is able to restock shelves. However, Apple is a perfect case study on supply chain logistics management.
Here are some best practices that can help a company effectively manage its supply chain activities and develop a stronger reputation in the marketplace:
- Centralization is Dangerous: Apple is notorious for using a single supplier to manufacture critical components of its technology devices. In an article for Manufacturing Business Technology, Paul Noël wrote that under this model, an assembly line that runs 24 hours per day, seven days a week still wouldn't be able to keep up with retail sales volume and satisfy consumer demand. Noël wrote that consolidation of this kind could cause major supply disruptions. That said, wherever possible, companies should partner with as many suppliers as possible to ensure that items are available at all times in the marketplace.
- Proper Forecasting is Important: Being able to determine the exact number of products that need to be on the shelf when a product comes out isn't always a perfect science. Apple was likely fully aware that there would be an overwhelming demand for its new watch, but there is no way the company could've anticipated close to 1 million units being sold once the device was made available for preorder. However, Business Bee wrote that sales forecasting is all important in a situation like this. There are a number of considerations that need to be made during this process, such as consumer purchasing trends and the time of year when a product is expected to launch. However, companies must decide on a figure that is as close to being accurate as possible, and then manufacture items in accordance with the anticipated demand.
- Supply Chain Management Software is a Must: According to Business Bee, technology of this kind can help companies quickly identify any inefficiencies in the supply chain and make changes before they become problematic. This can be related to logistics, available inventory and even the number of customer orders placed. Having this information at one's fingertips can help decision-makers plan for any contingencies, both seen and unseen.
Apple may be one of the world's most well-known technology companies, but even it isn't immune to challenges related to the supply chain. It may not be realistic to eliminate these kinds of issues completely, but there are certainly strategies that can be employed to minimize any detrimental impacts.