Getting Xbox 360 to market requires coordination
Today is the launch date of the new Xbox 360 video game system. Although it's a Microsoft product, it follows the typical Asian contract manufacturer supply chain path.
“Mr. Holmdahl is the Microsoft vice president in charge of Xbox manufacturing. He works behind the scenes as the conductor of a global train of component suppliers, factories and distributors that are turning 1,700 different parts into what will likely be one of the hottest holiday gifts of 2005.
How he and his team perform will help determine whether Microsoft can challenge Sony Corp.'s position as the world's No. 1 videogame-console maker. How they do will also be crucial to Microsoft's strategy to use the Xbox to link the Web and entertainment of all forms in consumers' living rooms. One manufacturing misstep — a shortage of graphics chips or a recalled hard drive — could derail those ambitions and drag Microsoft's unprofitable videogame business even deeper into the red. ‘With 1,700 components all it takes is one not being there and it's an issue,' Mr. Holmdahl says.”
I highlighted that last line because it always makes me chuckle a bit when people feel the need to highlight the “if we're missing just one part, we can't build them” concept. You'd think that was a “well duh” comment, but think about it…. how many times is that NOT true in the auto industry? How many times does a Ford or GM plant keep cranking out trucks although they're missing a part, even if it's something major like seats (I recall that being done with SUV's when there was a parts plant strike a few years back).
I'm sure the Microsoft Xbox supply chain isn't a “lean” model, but at least they don't crank out thousands of Xboxs, each one missing a video chip, only to park them in a “rework parking lot” to be fixed later. Remember the story of the Cadillac plant where “finished” cars went to one of two places: Major Repair and Minor Repair. No wonder GM is a mess, even today.
Anyway, click on the article link above and there are some more details about the Xbox supply base, factories, and supply chain. Interesting stuff to have to ramp up a product so quickly.
What's inside the 360 box? Click here to see a tear-down analysis.
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I heard something interesting about the Xbox 360 deliveries on the radio this morning as well. I’m sure the situation is the same right accross the continent. The radio spot focused on consumers who had lined up over night at various stores to be the first to buy the new system.
A store manager was interviewed and was asked how many units they were expecting. He had no idea. “They will ship what they ship” was his comment and he later indicated that he would be surprised if his store received more than a couple of units.
I have not looked into this any further, but the small amount of information presented by the radio spot suggested that at this early stage the units are being ‘pushed’ into the stores and that consumers will have to be early and be lucky in order to purchase one.
I wonder if those who are not able to purchase today will be able to place orders through the stores that link directly back to the factories. This would certainly be great information for the manufacturer and suppliers as they work to fill the pipeline (inventory) and match supply to demand. They would be able to use this information to match the timing and intensity of their launch curve directly to consumer orders.
I’m sure it’s absolutely a push system. I’ve seen the store do “pre-orders” on games and wondered how much of that info is really fed back into the supply chain. Microsoft could have done a lot of planning and pre-orders of Xbox 360. It benefits the retailer to have a customer place an advance deposit, because they they’re locked into the sale whenever the units arrive.
There’s also some “false scarcity” at work here, to get news stories about how popular the damn thing is???