Samsung Galaxy S9
On March 11, 2018 Samsung released their Galaxy S9 Plus phone. Prior to this launch date, Samsung needed to decide what would go into their new phone, create the phone and then make sure everything was working with their new phones. After this, they needed to decide how many phones to make. This number was based on forecasts. Samsung needed to make sure the Galaxy S9 plus was a hit; a few years ago they had a problem with their Galaxy Note 7’s (they kept on exploding). Samsung’s S8 had done very well and they were hoping to continue this trend with their S9. Samsung had high hopes for their S9 and they forecasted sales of around 43 million phones, and 12 million in the first quarter. This number is up from their sales of the S8, which were 41 million. However, Samsung’s sales on the first day of release were only 70% of their sales on the first release of the S9. Phone sales as a market are also down from the previous year. It will be interesting to see if Samsung meets their targets. Samsung set high expectations for their new phones due to new materials.
Samsung’s bill of materials for the S9 Plus was much higher than for the S8. Samsung added an extra $43 of costs to their phones due to new additions, such as: a state of the art new and improved camera, and improved processors. However, Samsung has had some problems with their new phone. There have been certain dead spots on the phones. This is not good for a phone that costs around $730 and this phone was supposed to challenge the Apple iPhone. Samsung has issued statements allowing customers to ship back their old phones and receive new phones, however, the phones are on backorder. Samsung is now going to have to factors these returns into their master schedule framework. They are going to need to scale up their production and possibly incur costs of overtime workers. This is because they need to keep up with their forecasted demand and produce phones to fill that forecast, but they will also need to fix the defective phones. This defect could hurt their phone sales in general and it is possible that they do not meet their forecasted sales. Samsung is going to need to fix the phones as fast as they can in order to limit the damage to their reputation, because of the extra cost associated with overtime and the increased production needed to combat their new phone production and their defect fixing, Samsung’s bill of materials will greatly increase. Samsung already has a rocky relationship with their customers due to previous issues, so I am interested to see how their customers address this latest setback.
I have never personally owned a Samsung phone, so my opinion of their phones is solely based off of what I read. I am curious though for those who own Samsung phones: How do they compare to Apple products? Have you been affected by any of their defect problems? Have you had enough with their defect problems? I will monitor this situation closely, as I am very curious to see how their sales are affected by this latest setback.
https://www.androidauthority.com/samsung-galaxy-s9-sales-target-845026/
https://nypost.com/2017/01/20/samsung-finally-figures-out-why-its-phones-kept-exploding/
I have never had any problem with a phone, but it was pretty interesting to see how the defects of a product can rearange the inventory planning and sales forecast. When a company has back orders they can easily fix it by ordering items before that pedicted back order comes; so the back order is eliminated. But, if the company doesn´t predict all those defects, the do not expect all those phones that have to be replaced, so they do not order on time and at the en of the period, the do have back orders and they cannot meet the demand.
This is a big issue if the demand of the product is very high. In this case, the demand is quite high, but the thing is that, once customers find out about all the defects that have been found in many of the items, they stop buying the item because they believe is not good enough. So, by that point, the company has already predicted that customers are going to keep returneing phones because they have defects, so they should have increase the amount of orders. And that is where the problem comes, where they face a higher number of orders (so higher number of inventory on hand) and lower demand (because of the bad reputation); ending up with many holding inventory.
So, a way to avoid this is, once you see that there are many phones been returned, do not try to increase you orders, keep them where they are because the demand is going to decrease as soon as the customers start spreding the high amount of defects in the phone.
It seems to me like Samsung was a little too optimistic with the success of their new phone. Samsung has put in a lot of new and improved features into their new phone, but this new phone has dead spots in certain areas. There is a disconnect for the company in regards to their planning of resources for sure. They did not seem to properly anticipate anything like this happening in regards to the new release of their phone, and could not even have enough inventory for backorders. Like we discussed in class, a forecasting plan is only as good as the first thirty seconds one creates the plan. Samsung must properly address these backorders soon and fix the problems with their phones.
In a situation such as Samsung’s, where a new product is ready to enter the market but has a history of potential defects, I believe it is truly important for Samsung to first deliver a select amount of the product to the public prior to heavy mass production. Doing this will allow for the company to correct any issue of defects noted by the public in the first month or two, and because not many products were distributed, there would not be a hindering back order. After some set time, Samsung should then blast out the rest of its inventory and enjoy positive returns on their sales.
An interesting problem that Samsung faces with product releases that not a lot of other companies face on such a large scale is the amount of purchases close to release dates. Both Apple and Samsung need to be able to have an extremely large number of phones available immediately after their release and then demand drops as months pass until a new phone is released. The first link I attached shows the global iPhone sales for Apple for each quarter which reflects the effect of phone releases in the market. Forecasting demand is extremely important but so is planning production. As the date of a phone release approaches a much larger number of phones need to be produced to meet initial demand than in the following months. With this increased production the capacity cushion is likely small as they approach full utilization. It’s very hard for Samsung to then must deal with replacing newly purchased phones due to technical problems. Little capacity exists to meet new orders as well as replace prior orders so I’m not surprised Samsung is facing some issues. Another unfortunate part of their market is that because phones are used so much and are so important to daily life most issues with the phone can likely be found very quickly by customers. Companies in other industries like the automobile industry could have some product defects go unnoticed for years before a product recall is necessary. I have also attached an article with a few examples of car recalls highlighting the timing differences. Due to the nature of their product Samsung needs to remain extra vigilant that their products do not contain any defects.
https://www.statista.com/statistics/263401/global-apple-iphone-sales-since-3rd-quarter-2007/
http://autoweek.com/article/recalls/top-5-car-and-truck-recall-stories-2017
I agree with your saying that the company should focus more on catching defects and eliminating them. I do think it is beneficial for such big companies like Apple and Samsung to be planning ahead before launches, but often the mass production ends up with quantity over quality when it comes to hazardous defects. Because Samsung has had trouble with user safety before (cue the exploding tablet-yikes), it should take more care to prevent this in the future. Is it possible to create them in large batches well before the release date? This could eliminate rushing any processes and catching defects early.
An interesting problem that Samsung faces with product releases that not a lot of other companies face on such a large scale is the amount of purchases close to release dates. Both Apple and Samsung need to be able to have an extremely large number of phones available immediately after their release and then demand drops as months pass until a new phone is released. The first link I attached shows the global iPhone sales for Apple for each quarter which reflects the effect of phone releases in the market. Forecasting demand is extremely important but so is planning production. As the date of a phone release approaches a much larger number of phones need to be produced to meet initial demand than in the following months. With this increased production the capacity cushion is likely small as they approach full utilization. It’s very hard for Samsung to then must deal with replacing newly purchased phones due to technical problems. Little capacity exists to meet new orders as well as replace prior orders so I’m not surprised Samsung is facing some issues. Another unfortunate part of their market is that because phones are used so much and are so important to daily life most issues with the phone can likely be found very quickly by customers. Companies in other industries like the automobile industry could have some product defects go unnoticed for years before a product recall is necessary. I have also attached an article with a few examples of car recalls highlighting the timing differences. Due to the nature of their product Samsung needs to remain extra vigilant that their products do not contain any defects.
https://www.statista.com/statistics/263401/global-apple-iphone-sales-since-3rd-quarter-2007/
http://autoweek.com/article/recalls/top-5-car-and-truck-recall-stories-2017
It is interesting to note that Apple faced similar issues when they released the iPhone X, such as poor forecasts and breakdowns. Nonetheless, as ironic as it sounds, Samsung’s pricing is a significant asset. Both phones are wildly expensive, but the difference of almost $300 in Samsung’s favor makes it a much easier financial commitment than the $1000 iPhone X. Even with the emergence of some problems with the S9 Plus, Samsung will still most likely continue to hold the lead over Apple. Looking at smartphone market share data from the last 5 years, we can see that Samsung has almost consistently beat out Apple on a global scale, not to mention their growth from 2.4 million shipments at the beginning of 2010 to 74.1 million at the end of 2017. Ultimately, despite Apple’s attempts and some unfortunate issues upon the S9 Plus’s release, Samsung’s cheaper option should solidify their position as international market leaders for the near future.
Source: https://www.statista.com/statistics/271496/global-market-share-held-by-smartphone-vendors-since-4th-quarter-2009/
This data that Justin provides is extremely interesting, and I feel that it highlights a key point about companies in the marketplace. The first is that it is extremely hard for a company to maintain growth and stay on top. For example, as years go on, it becomes harder and harder for a company like Apple to continue to innovate. If a company constantly grew, at some point it would become bigger than the economy, and this is simply not possible. Therefore, when innovation slows, and competitors like Samsung begin to take considerable market share, it is a good time for a company to begin to thoroughly analyze all of their processes in order to maintain their status and power in the industry.
Zack, this is a great article to pick because it shows how for the big global companies how hard it is to forecast the demand for new products. The phone industry has definitely been a tough forecasting industry over the past year with Samsung’s biggest competitor Apple, initially struggling with their newest and best phone, the iPhone X. These forecasting problems can be compared in many ways to forecast sales for the next year for the Galaxy S9. You talk about how sales for the S9 were only 70% of predictions and how that might be attributed to the rise in phone price and the overall market struggles that have plagues the phone business. The apple iPhone X was the most expensive iPhone ever and it attributed to rumors that apple might cancel production of this phone after the low initial demand for the product was released. Samsung should have learned from Apples production problems after raising their prices, that if Samsung raised their own prices for their new phone, demand for the product would suffer. If Samsung’s demand is comparable to Apple’s then they are looking forward to an inflow of demand over the next two quarters. After starting off with week demand for the iPhone X, the demand for the product took a turn, and is now having sales that have surprised many analysis. This is not unheard, as many products that have an initial expensive description tacked on to them will experience low sales initially, but if the product works well and is useful to the consumers, demand will turn around. Like Zack, I have never had a Samsung phone, as a company that produces a product that is know for exploding is not something I want to buy, however, my friends that do own them promise that they would never switch to an iPhone, and that they love the product they purchased. Samsung should worry about the quality of their new phone, and if they have features that consumers feel are necessary to their lives, then the demand will follow.
https://appleinsider.com/articles/18/01/23/after-speculative-reports-of-slow-sales-iphone-x-is-now-said-to-be-in-the-high-end-of-the-industry-range
I have never had a Samsung so I am not entirely sure how close it matches up to the iPhone, but one thing that I have noticed is that Samsung phones are more complicated. In my opinion, Samsung should stop trying to make sure many high-cost changes and instead work to simplify their interface and style. Also, the defects coupled with the backorders will mostly like cause Samsung to miss their target sales. In addition, the cost of hiring more works and scaling up production to catch up seems like it costs more than the potential benefits. Samsung should reevaluate its position in the market and how to go forward with it is cellular device production.
Well Zach, as a proud owner of a Samsung phone, I have some insight into the Android operating system and its functionality. Despite being an Adnroid fan, I have yet to own an Android phone for over a year due to either phone malfunctions or breaking the phone unintentionally. It is hard for me to say that I still enjoy using Samsung/Android phones when I know I will need to replace it every year, but I still prefer the ease of navigating my Samsung over an IPhone. Most of the issues I have had with my Samsung stem from freezing and problems with the hardware and software interacting. I believe this is because Samsung sometimes overreaches its software capabilities and will interfere with the operating system on Androids instead of leaving that to Google. Samsung is known for coming out with new products that add features that every little customer niche will enjoy. Samsung should learn from its past mistakes of consolidating phone features instead of adding complicated features that give its phone a higher chance of malfunctioning. Samsung is not new to backorders. Samsung should increase its safety stock and find ways to decrease its lead time to get new materials into its inventory to prepare for backorders. Samsung does an effective job at interacting with its customers to find out what they want, however when they implement these features into their products, the phones lose simplicity. https://www.wsj.com/articles/samsung-galaxy-s9-is-impressive-and-infuriating-1520514000.