Three supply chain challenges for the Apple Watch - Supply Management

Three supply chain challenges for the Apple Watch

Mickey North Rizza
30 April 2015

On 9 March, Apple opened up the gates to the Yerba Buena Center in San Francisco, California, to announce what may have been the worst-kept secret in tech history: the Apple Watch.

With typical Apple flair, the company walked through the features, benefits and different models – including a gold edition for a whopping £8,000.

The Apple Watch is a revolutionary and high-profile item, and undoubtedly the world will be scrutinising the company's every move up to the launch and even after. Luckily, Apple is smart, and has perfected its supplier development activities in the APAC region. However, creating a completely new product comes with its own set of challenges. There are no standard configurations to work from and no competitors to mimic. The stakes are high, and Apple will have to do everything in its power to make this as smooth a launch as possible.  

Apple is working hand in hand with new suppliers, including its tier-one suppliers and beyond, to make sure all aspects of product development and the supply chain run smoothly. It is vital to have full visibility into what suppliers are doing, and any potential challenges they may run into.

Here are three supply chain challenges Apple is likely to encounter when producing the new Apple Watch:

1.    Supply constraints. Creating a brand new product means Apple will be sourcing new materials or parts. Often, because suppliers are inexperienced working with that particular material or part, constraints appear at some point in the supply chain. If they are unable to fulfil orders at the capacity and speed that Apple needs, manufacturing could slow and create delays. Leveraging supplier relationship technology can help Apple keep tabs on the production and yield rates, delivery performance, compliance factors and the unique risks that each supplier may face.  

2.    Lack of employee training. Sourcing new parts and materials requires suppliers to train their employees on how to handle them. Without proper training and development, the Apple supply chain team may see severe delays in production. It’s up to Apple to work with their suppliers directly, and get on the factory floors in order to assess the quality of work being produced. Helping suppliers with training and process improvement can help Apple to see product quality at the level and volumes that they expect.  

3.    Initial low volume production. We’ve all heard the description of something working 'like a well-oiled machine'. Manufacturing the Apple Watch will be the exact opposite. Kinks and issues are bound to arise due to the fact that this is a new product. As suppliers ramp up from pilot to production quantities, they may find that certain components have supply issues. It's possible Apple expects this, given it is choosing to release the product in the spring rather than at Christmas time. They are most likely testing the market now, in order to identify where there are potential development and supply chain issues and how they can increase the volume of throughput by November.  

Apple has done a tremendous job of generating interest around the Apple Watch. Now we’ll just have to wait and see if they can overcome the challenges new product development brings, in order to meet the high demand of consumers. Of course, if history repeats itself, the Apple marketing machine will undoubtedly use short supply to drive demand, but if they can’t get it up and running by this autumn – patience and demand just might start to dwindle.

☛ Mickey North Rizza is vice president of strategic services at BravoSolution.

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