- Apple advised suppliers to send 20% fewer iPhone parts due to the tech company's lower expectation for iPhone demand later this year, the Nikkei Asian Review reported.
- According to the Asian Review, Apple fulfilled 100 million orders of iPhones last year but expects 80 million this year.
- The news comes as iPhone demand has gradually fallen over the last few years. Apple's demand forecast is particularly conservative given its plan to release three new models later this year, instead of one or two.
Apple’s warning to suppliers about reduced orders for iPhone parts is good news, not necessarily for Apple, but for the supply chain.
While no company likes to see a decrease in customer orders, the advanced notification of Apple’s production requirements will allow its suppliers to adjust their business accordingly, aligning supply and demand. After all, isn't that what efficient supply chain management is all about?
The reduction in forecast also admits that technology-driven consumer products have a product and economic life cycle like most other products. This reality check should allow Apple, and other tech giants, to better plan its supply-side strategies and also permit suppliers to better run their businesses. Most suppliers who count Apple as a customer probably have other customers to worry about as well.
While a 20% reduction in forecast is not huge, it does send a clear message that Apple has a handle on its upcoming needs. Information and communication throughout the supply chain, either good or bad, is essential. All businesses go through peaks and valleys and it is incumbent on them to let their supply chains know about their business plans.
Apple is right to share this information, and hopefully they set an example for other companies to have frank discussion with their suppliers.
Good news is easy to share, and most buyers enjoy the rush of placing larger and larger orders. The "more, more, more" mentality can be fun, and many buyers enjoy the so-called "buyer’s market," where most of the power is with the buyer and little with the seller.
But I’ve seen far too many buyers on a power trip in this kind of market. Hubris is not an effective supply management strategy.
Having worked in a highly cyclical business for many years, I found that I learned more about myself and my suppliers when business took a dip…or sometimes a dive. That is where the skill of the procurement professional is honed.
Cutting or canceling orders takes a whole different set of communication and negotiating skills than placing them. I ultimately found that operating in a "seller’s market" is more interesting and challenging. But I did particularly enjoy an occasional production ramp-up and the feeling that came with it, hubris and all.