SNES Classic: A Problem with Long-Term Planning or Supply Chain Execution?

Posted by Martin Verwijmeren on Aug 23, 2017 2:31:11 PM

Find me on:

Yesterday, preorders for the new (or old) SNES Classic were made available at multiple retailers including Target, Amazon, Best Buy and Gamestop (Toys R’ Us is offering them in-store only on 9/29). It was an exciting moment especially for all the people who grew up playing 16-bit games in their youth.

But it quickly turned into a mess. Again!

mario-luigi-yoschi-figures-163036.jpegAlmost a year after a similar chaos and disappointment with fans trying to buy the NES Classic, Nintendo has once again disappointed its fan base which was more than willing to pay the cost for this nostalgia console. The demand was high and Nintendo failed to anticipate (or woefully ignored) the supply needed to meet this demand.

Now, you can argue that Nintendo is doing this to ensure it doesn’t to cannibalize sales of it’s most recent Switch console (which is also incredibly hard to find) and/or create artificial demand by garnering a ton of press around the launch due to the subsequent scarcity. However, if you read social media, a lot of “fans” are incredibly mad at the company.

It will be hard to judge the PR benefit or detriment from this whole situation and its impact on sales with its customer base but let’s assume this was a mistake on Nintendo’s part. And while many have noted that this is Nintendo not understanding “simple” supply and demand, we all know that supply chain complexity is making these decisions increasing difficult for organizations in the digital age.

On that note, let’s look at the Supply Chain impacts that could have led to this limited supply and missed opportunity for Nintendo.

Is it a Supply Chain Planning Issue?

After the woefully under-supplied launch of the NES Classic, Nintendo had a tremendous amount of data on the potential demand for a similar product across its fan base. From monitoring social media to receiving data from its ecommerce and omnichannel partners, there definitely was an argument for a lot more supply for this upcoming release. Nintendo even acknowledged this as fans prepared for launch saying that there would be more units produced and available for this launch.

Enter pre-order launch day and the same issues persisted. Units sold out for nearly every retailer within minutes not hours and the increased traffic crashed multiple sites including Gamespot’s for nearly half the day.

There are two things to take away here in my opinion.

  • First, Nintendo obviously didn’t plan inventory any better than the first release. Not only is this a huge missed opportunity for Nintendo to sell more units but also to provide a great nostalgic sale to a fan base that grew up on their games and may lead them to buy future Nintendo consoles and installments. Is this because they didn’t have the data to make an educated decision? I tend to think this is less of an issue than the other potential execution related issues below.
  • Second, nearly every retailer has had issues with their ability to take orders with Best Buy and Amazon managing better with early morning releases. It is a good look at how retailers prepare for the amount of demand that was coming to their ecommerce platforms and in stores. Some seemed better prepared than others to serve this surge of demand.

It’s obvious that Nintendo could have supplied their retailers with more appropriate unit levels to meet the demand of their fans. However, why was what was an clear planning decision so woefully underserved?

Is this a Supply Chain Execution Issue?

When we think about this situation, it’s probably not just about the plan and understanding of the approximate demand for this product. It’s also about the ability to execute on that supply chain plan. I could see a few key issues that could inhibit Nintendo from truly taking advantage of the opportunity they saw that existed with the SNES Classic.

Current Supplier Capacity: The ability to manufacture these consoles is by far the biggest constraint in being able to meet demand but a huge part of building the consoles is the parts necessary to construct them, which can be highly sought after. The question is did Nintendo have visibility into the production capacity of their current suppliers for the parts they need? Were they able to communicate their supply needs early enough and on good enough terms with suppliers to secure the parts they needed for the right quantity and on the right timeline? I would have to believe that there was limited capacity secured with their existing suppliers and couldn’t add enough additional suppliers to meet demand. It’s been documented that Nintendo has struggled with securing relationships with parts suppliers in the past.

Ability to Ramp Up Production: The next question is if they can get the parts do they have the ability to easily ramp up production to manufacture more of these units either internally or outsourced? This may have been a case with not building a good enough supply chain network to collaborate with manufacturers to meet production demands for both their landmark products in the Switch and this one-off product in the SNES Classic. It also probably is a result of not having great understanding of production timelines to meet the release date. All in all, if their supply chain was agile enough to work with a network of potential suppliers and manufacturers to help them ramp up production when needed this may have helped them take advantage of this opportunity.

Robust Supply Chain Network: Last but not least, there is also a question of being able to deliver this inventory to their resellers by the release date. This could be better understanding the storage of this inventory from the manufacturers in their own warehouses or through 3PL partners and maintaining cost efficiency in the fulfillment and transportation of this inventory to their resellers. It could be possible that due to inefficiencies in their supply chain flows, the cost to serve their resellers cut deeply into the $80 per retail price that it cost (cutting into the Nintendo share of this sale). The additional cost to store and fulfill this demand might have been a decision to shift production and supply chain focus to more profitable systems and consoles. This is an area where better supply chain orchestration could have helped them ensure better cost efficiency while delivering on-time and in-full.

Supply Chain is Not Table Stakes, It’s Competitive Advantage

Nintendo historically has always been great at making games while leaving a lot to be desired with the supply chain side of the business. However, what is becoming increasingly clear is that this is not a great path to success. Customer experience is becoming a huge part of customer choice and retention and companies cannot afford to act like the supply chain is just table stakes. Supply chain and our ability to meet demand with supply on-time and in-full is becoming a core competitive advantage to reaching new customers and retaining your best customers.

The companies that build a robust supply chain network, develop supplier and partner relationships that enable flexibility through collaboration and use order orchestration to remain agile to leverage all their internal and external supply chain investments in the most cost efficient way possible will be the companies that win. The fact is, supply chain prowess is as important as it’s ever been and it will continue to be.

 

Join us for our upcoming webinar tomorrow on Supply Chain Control Towers and the need for them with our Digital Age:

Supply Chain Control Tower

Topics: Supply Chain Orchestration, Supply Chain Complexity, Supplier Collaboration, Supply Chain Execution, Inventory Management

 

Recent Posts

RSS

Subscribe to Email Updates