Historically, Apple has an enviable track record with regard to quality control. Even though it relies on an elaborate web of external supply chain agreements, Apple has effectively managed its outsourced relationships earning it a stellar reputation for quality control within the industry. With the importance of producing quality products to its reputation this comes as no surprise. Maintaining quality standards at a high level when most components are made by third parties is no easy task.
Apple, however, ran into a major snafu with its recent rollout of the I-Phone 5. Unlike previous product introductions, the I-Phone 5 was a disaster compared to previous I-Phone version launches. The intricate design features of the new I-Phone made it very difficult to both produce and deliver in a timely manner. Many new, never-been-opened- before I-Phone 5s delivered to customers contained scratches, nicks, scrapes, and blemishes not typically found on devices fresh out of the box. Although these errors were cosmetic and not related to function, enough observers noticed the defects to cause Apple concern.
A more critical consequence to Apple and its I-Phone 5 rollout was the speed at which the new I-Phones were produced. Stricter production benchmarks along with the defects described above and assembly problems hampered the pace at which Apple built its stock of the new I-Phones. Foxconn, the Chinese supplier of the I-Phone 5s, had trouble efficiently producing the aluminum housings for the new I-Phones. Thus, Apple was in a tight spot trying to satisfy the hyped demand that accompanies most, if not all, of its new products. Apple devotees can’t get enough Apple fast enough. The excitement building up to the launch of the I-Phone 5 was not uncommon for Apple but in this one isolated instance Apple disappointed – not the outcome it or its fans were expecting.
So what penalty has Apple incurred as a result of this breakdown in quality control and supply chain mismanagement? While Apple sold a record 5 million units the first weekend the I-Phone 5 was introduced, the hyped level of demand left many customers upset and anxiously awaiting the next shipment of I-Phone 5s. Investors have not been pleased either given that the shares of Apple have declined 8.7% which erased close to $60 billion in market value since the stock’s record close in September, just two days before the launch of the I-Phone 5. Yes, Apple’s stock price is still very high as it should be for an industry leader but by no means is it incapable of heading further south if these supply concerns linger or worsen.
Given its past success in managing its third party supplier network, I am confident that Apple will learn from its I-Phone 5 mistakes and incorporate this knowledge into future product launches whether new generation I-Phones or I-Pads.
Do you see an Apple rebound on the horizon for the I-Phone 6 launch? What recommendations should Apple take into consideration to ensure the same does not occur next time?