Companies That Can’t Keep Their Products On The Shelves

It is not unusual for companies with highly successful products to run out of inventory. Oftentimes, companies are forced to scramble at the last minute to meet an unexpected upsurge in demand. Some analysts suspect that companies “create” shortages to boost interest in their products among consumers and the media. There have been rumors that Apple did this with the iPad and iPhone, though this has never been proven. Apple’s success has been so spectacular that whether the shortages are planned or not probably doesn’t matter.

The problem with product shortages will get worse for some companies because of the Japan earthquake. Several car companies have already slowed productions because the availability of parts is dwindling. Honda and Toyota each expect some of their plants o be shut down for weeks. Several firms that make components for consumer electronics like the iPad will need to close their doors for a while as well. It will not be a public relations stunt if iPad 2 shortages begin anew in the next month.

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The duration of manufacturing interruptions in Japan may not be announced until the end of the spring.  Companies, however, face these types of challenges all the time. Mattel was unable to sell entire lines of toys when it was discovered that manufacturers in China had covered them with lead paint. Regional oil shortages happen when hurricanes shutter refineries.

Customers rarely care about why they cannot buy the products and services they want.  They are not usually in a forgiving mood, and that should worry companies facing potential shortages. A consumer may buy a competitor’s product or may decided to skip the purchase entirely.

24/7 Wall St. examined how companies such as BMW and Lululemon Athletica stumbled when faced with product shortages. The companies did poor job estimating product demand which probably cost them revenue.  Sales were further hurt by the news of the shortages.

This is the 24/7 Wall St. Companies That Can’t Keep Products On Their Shelves

The 24/7 Wall St., Companies That Can’t Keep Products on Their Shelves

1. BMW

In June 2010, BMW sold out of its popular 2011 5-series sedan.  Although the company’s sales chief, Ian Robertson, was quoted by Bloomberg as saying that “the 5-Series is at the core of the BMW brand and we knew it was going to be a very strong vehicle for us,” the company was not ready to meet demand for the vehicle.  Sales of luxury vehicles fell dramatically in the financial crisis of 2008/2009, then bounced back in the middle of 2010, with BMW sales increasing 11% in May alone.  This improvement caught the company off guard, and effectively used up the entire supply of 5-series in June.

2. Apple

Since its release on March 11, 2011, Apple’s iPad 2 has been in short supply.  Many stores sold out of the tablet computers in hours, and the company’s online store currently lists shipping delays of four to five weeks.  Supply may be further interrupted by the recent earthquake in Japan which would delay the production of parts needed for the device.  Apple has often fallen short of demand in the past with products such as the iPhone 4.