12.11.2007

The Wii Shortage: Would Lean Have Helped?

Whenever a manufacturer says there is a shortage of their product because they didn’t anticipate the huge demand, I can’t help wondering: Would they be able to keep up if they were lean?

Lean can provide the flexibility to ramp up production quickly in case of sudden spurts in demand. So would you have a better chance of finding a new Wii game console if Nintendo were lean?

Consider the following from Wired:

The Nintendo console's broad appeal -- and a maxed-out supply chain that can't be ramped up to meet holiday demands -- is making it almost impossible to snag a Wii at normal retail outlets. With eBay scalpers selling them for hundreds of dollars over the console's $250 list price, it's easy to envision fistfights in store aisles as desperate shoppers compete for the few units on the shelves.

"I've never seen anything like this," says Michael Pachter, a videogame industry analyst with Wedbush Morgan Securities, about the overwhelming demand for Wiis. "Nintendo could not have expected this level of popularity."

So, why doesn't Nintendo just make more and cash in?

It's not that the company isn't trying. It's bumped up production from about 1 million to 1.8 million a month, says Nintendo Senior Vice President George Harrison, with roughly a third of them earmarked for North America.

Part of the problem may be not just the ability to ramp up production quickly, but to decide to ramp up production quickly.

The shortage stems from this unprecedented demand, and from the fact that Nintendo had to make its final production decisions for the holidays early this year, Harrison says. The company planned on being able to stockpile Wiis through the summer, when demand for videogames typically slackens.

But Wii, Nintendo has since found out, isn't like any other videogame system. Unceasing demand throughout the year has thrown the game industry veterans for a loop, disrupting what had been a "very seasonal business."…

Ultimately, Wii production numbers -- and the United States' allocation of consoles -- are determined by Nintendo's home office in Kyoto, Japan. Harrison says the company will continue producing 1.8 million Wiis every month until demand subsides.

That should happen next spring. But with many high-profile game releases coming after Christmas, like
Super Smash Bros. Brawl and Mario Kart, Wiis could be hard to find well into 2008.

To be fair, a lean strategy doesn’t guarantee that you will accurately predict demand for a new product. So even if Nintendo were lean, there might still be a shortage.

But as far as I know, Nintendo does not follow a lean strategy. I’ve been unable to find any evidence suggesting that they do. Perhaps if they had, the shortage wouldn’t be as severe.

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