In a recent Kinaxis Supply Chain Expert Community posting, (free sign-up required) I made the observation that perhaps the endless success of Apple’s various products portends broader problems.  Apple’s outsourced supply chain has been long admired, but one has to wonder how much Apple’s executives and marketing teams want to put Apple’s value-chain to the ultimate test. 

On the heels of the very successfully hyped iPad product launch, where worldwide orders remain in various forms of backlog, Apple is now in the midst of a highly oversubsribed pre-launch of the new iPhone4 due later this month.  The company and its wireless carrier, AT&T, booked more than 600,000 pre-orders on June 15 alone, causing a suspension of sales because of the sheer volume of activity.  The number is the largest Apple has taken in a single day, ten times higher than the previous iPhone3 launch last year, causing a sellout of all designated product allocation. 

Adding insult to injury, partner AT&T experienced two embarrassing order entry failures, with some consumers placed in other people’s customer data. The company also had a recent embarrassing security breach exposing email addresses of pre-order iPad customers, including some very high profile individuals.  Both Apple and AT&T have felt compelled to apologize to consumers for this series of events. AT&T reported that its web site had in excess of 13 million visits on June 14 by consumers making inquiries as to whether their existing iPhone was eligible for upgrade to the new model.

Let’s attempt to put all of this activity into a supply chain capability perspective.  First, one would suppose that most of you reading this would be thrilled to have your firm’s products experiencing such an overwhelming consumer response as the cult of Apple consumers line-up to be the first to have the latest and greatest device.  Give credit where credit is due, Apple’s design and product marketing teams have the uncanny ability to come up with innovative products that fuel such demand.  However, as I noted previously, the pressure to execute again passes to Apple’s extended supply chain community.

With two products now under everyone’s looking glass, the news of each of the subsequent snafus spread fast through social media outlets.  Apple’s supply chain planners have to be under enormous pressure as they continue to scramble to align supply and fulfillment with consumer demands. Prime contract manufacturer Hon Hai Precision (Foxcon) just recently granted new wage concessions to stem the tide of worker suicides, and the pressures for production volume will certainly continue through the coming weeks. As we all know, increased production demands will surely cascade to component suppliers who may have to face difficult capacity and  workforce decisions. As previously noted, wireless partner AT&T is struggling to take orders, let alone add more subscribers to an already taxed carrier network.

In past commentary, I posed the question: Has Apple introduced too much increased risk in too few value-chain partners? 

I believe Apple has, and I predict more snafus to come.  The signs are unmistakable, and the pressures are building. Good process and the best technology can only take you so far. The rest comes down to the combined supply chain capability of partners. In the coming weeks Apple will have to demonstrate what being number one really means.

 Bob Ferrari