Apple at Fault, not AT&T

As you no doubt have read, I have bought an iPhone.  This makes for the third iPhone in the family, and the first of the 3G variety.  I have replaced my Cingular 8525, which was a nice Windows Mobile phone.  I bought my phone at the AT&T store near me the day it was released, and even twittered while in line.

Order Fulfillment

Apparently, though, I was one of the lucky few.  According to one source close to AT&T, Apple fills the purchase orders for the Apple Stores first, and then fills the ones for the AT&T stores.  On top of that, they will be satisfying the AT&T direct-fulfillment orders first, before sending any to the AT&T stores for general (walk-in) sales.

This is an interesting situation, because it is a conflict with selling one product through two different distribution channels.  Apple has two retail distribution channels–the AT&T channel, and the Apple channel (and admittedly, but have online and storefront channels.)  Apple will sell phones through both, but I suspect they sell to AT&T at a “wholesale” price, and they sell through their stores at the higher retail price.  (Yes, I realize there is the AT&T subsidy involved.)  It is understandable that a manufacturer would prefer to sell their product at a higher rate of return through their own channels.

Of course, this approach isn’t without problems.  The fact that the Apple Stores have iPhones in stock, and the AT&T stores do not, leaves customers (especially the Apple-fan types) being hyper-critical of AT&T while applauding how good Apple is at satisfying demand.  Really?  Not that hard, when you control the stock.

You see, according to my source, Apple provided up to 10 times as many iPhones to their stores as they did to the AT&T stores.  And, as mentioned above, they are still sending iPhones to Apple Stores for store-front sales, while they are forcing AT&T customers into a 21 day wait for their “direct fulfillment” orders.

So who is to blame?  Wrong question, really. I hate the “blame game.”

But–I do believe we must acknowledge that the end result is because of Apple’s decisions, and NOT AT&Ts’.

(see next post for part 2)


5 thoughts on “Apple at Fault, not AT&T

  1. I would agree, except now we have to have a discussion about whether Apple adequately planned to meet that demand. Accurate forecasting, and planning for replenishment, is crucial for any manufacturing operation.

    One would think, given that Apple had removed the original iPhone from their online store several months ago, and had AT&T return any unsold units weeks ago, that they would have been planning for “pent up demand” with an adequate supply–and an adequate plan for their distribution channel.

    Again, I am not trying to play the “blame game” but rather point out that it is not appropriate to blame AT&T, as some at places like the Apple Phone Show ( are wont to do.

  2. “Accurate forecasting, and planning for replenishment, is crucial for any manufacturing operation.”

    I don’t think anyone saw this level of demand coming. Apple is good, but no one is that good. So, I still blame the demand. Now we’ll see how fast they can ramp.

  3. Of course Apple is notorious for undersupplying in the early days of a product. Bad logistics? Hard to imagine for such a strong company. Marketing and PR to build the hype? Yes, that would make sense. When you add another company to the chain, well that just makes it all the more complicated.

  4. Chris, it’s not just an issue of undersupplying (and if they conciously chose this approach it remains a wrong-headed one). It’s really an issue of Apple choosing to short-change their most ubiquitous retail point to instead sell through there (rather limited number of) retail stores.

    And I have no problem imagining Apple having problems with their supply chain. I can’t think of any company that hasn’t experienced supply chain problems at one time or another. Even the firms with the best supply chain reputations falter. And adding another partner to the supply chain is just the sort of complication that can derail a logistics channel.

    By the way–it’s not even a really complicated addition. And they aren’t “new” since the original iPhone also followed this distribution channel approach.

    I have to ask, could the Apple-love blinders perhaps get in the way of Apple recognizing, and fixing, real *internal* problems?

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