Smartphones and the battle of the supply chain

The major smartphone manufacturers compete fiercely on the quality of their design and level of specifications to attract customers and maintain loyalty. However, they are increasingly focused on their supply chain infrastructure as another way to maintain profitability.

The rise and reign of the smartphone

In the telecommunications industry, the appeal of the smartphone is that it allows operators to offer new services to their customers. Three examples come to mind. The mobile bank, which has developed remarkably fast in Africa, and is growing in the West. Waze, the mapping application bought by Google for $1.15 billion (£0.8bn) in 2013, which is quickly rendering obsolete the automotive GPS. And content streaming, which has become the rule for the distribution of audio/video content.

With a penetration rate that is slowing to single digit growth for the first time globally, a device lifespan of less than three years, and market share to win or defend, the stakes are huge. Smartphone manufacturers are constantly fighting to reach the number one spot. Samsung and Apple, the two co-leaders of the market, are facing the arrival of new Chinese manufacturers (Huawei, Meizu, ZTE) and the pugnacity of historical manufacturers like Sony and LG.

Winning the battle of the supply chain

Winning the design (and price) battle is the first step. To get the right smartphone at the right time in front of the customer is the second. For this, a business must ensure it is equipped to deal with change – this includes supply chain flexibility and the power to scale up at a logistical level when needed. This is particularly complex since it must first involve a marketing campaign across multiple channels (radio, TV, press, billboards, web, email), then a production of smartphones based on the success of this campaign, and finally the transportation of these smartphones to bricks and mortar store or a warehouse for e-commerce.

To achieve this, the advantage of connecting the various lines of business (marketing, supply chain, distribution) is obvious. One of the important issues is to produce what is selling rather than being forced to sell what was produced, which may no longer match final demand. Being able to harmonise production facilities, supply chain, and final demand allows vendors to avoid costly build-up of stock, protect margins, and to optimise the return on capital.

Looking to the cloud

However, any attempt to do so solely by connecting applications on various servers scattered at every critical step is doomed from the start. The key is to ultilise a cloud-based solution which is natively collaborative, where marketing plans, supply chain, and production are more closely connected.

Once the consensus between the predictive visions of sales, marketing, and finance has been found for a given smartphone, production and logistics can be adjusted to take into account the available inventories. With the right tools in place, even potential volatility in demand can be responded to with different strategies.

A modernised infrastructure will prevent smartphone firms becoming a victim of the Bullwhip Effect (the concept that consumer demand forecasts become more inaccurate as you move up the supply chain) which can lead to the overproduction of devices. Regardless of the sector, it would be catastrophic for any business to win the design battle only for profits to be undermined by a supply chain still based on aging or obsolete technologies - no longer fit for purpose in the modern business world. For many, this remains a very real threat.

Ian Stone, General Manager UK and Ireland, Anaplan