The rise of the smartphone is a global trend that’s impossible to ignore. From 2010 to 2016, smartphone connections increased 7.5x ending 2016 at 3.3 billion connections worldwide – a number expected to increase by 2.6 billion by 2020. On October 20, 2016, Google, the leader in the smartphone operating system market with 87.5% of the global smartphone OS market, launched their iPhone competitor, the Google-branded Pixel smartphone, in an attempt seen by many to capture an even larger part of the mobile ecosystem. As the first public launch by Rick Osterloh, former Motorola president who now heads Google’s new hardware group, the Pixel is Google’s first foray into producing smartphone hardware as a company traditionally specializing in mobile software. Could Google reap the benefits of owning the supply chain and getting visibility into each step?
In order to compete with the success of Apple’s iPhone, Google decided to “own” the production of the Pixel, effectively purchasing the HTC team that initially worked on the Pixel in a $1.1B deal. Through this sale, Google theoretically had visibility into all stages of the supply chain, from parts manufacturing, to warehousing, to shipments. The Pixel launched to critical acclaim, and consumer demand spiked. However, it quickly became apparent that Google was not prepared to handle the consumer demand. As people hit the Google store website, they were greeted with “out of stock” messages – for over a year. Predictably, this enraged consumers; as Stan Shroeder from Mashable wrote, “No matter how much you love Google’s Assistant, the stock Android experience or the Pixels’ subdued design, simply not being able to order one, or having to wait many weeks to get one, is a deal breaker.” How could a company that had visibility into its entire supply chain be unable to fulfill orders for months, damaging their brand, enraging potential customers, and losing a revenue opportunity with a good product?
While we do not have details nor visibility into the inner workings of the Google Pixel team, it is immediately apparent from attempting the purchase flow that basic information about consumer demand was not being collected nor sent to the manufacturing team, at all. Whereas Apple allows people to pre-order the iPhone, Google did not have an option to do so – you could simply enter your email to be notified when phones were in stock. Here, Google missed an opportunity to implement digitization into their supply chain to better capture, predict, and eventually execute on demand. They addressed that the following year with the Pixel 2, whereby users were able to pre-order phones, but it is likely many who were going to make a big ticket purchase of the Pixel have already bought another phone.
Google is not the only smartphone company to experience problems with their supply chain. Apple, long-lauded as an extremely savvy controller of their iPhone supply chain, is also currently suffering a shortage of their new iPhone 8 devices due to a global shortage of organic light emitting diode screens (OLED). This shortage led to a “series of pile-ups along the supply chain” which starved other parts in the manufacturing process. An analyst at Credit Suisse commented on Taiwan-based Hon Hai Precision Industry, the company assembling Apple’s latest iPhone, saying: “We knew there was going to be idle capacity, we just didn’t’ know it was going to be this size.” While we don’t have exact visibility into where in Google’s manufacturing process the problems arose, from looking into Apple’s production of the iPhone, it is quite clear how sensitive the smartphone manufacturing flow is to component availability and inventory. Companies like Google and Apple need to ensure their manufacturing teams are well stocked with a supply of parts, enough to satiate any level of consumer demand, lest risk losing revenue from people who cannot purchase phones when they want. Digitization, in the form of real-time inventory reporting, could help reduce the time it takes to fix bottlenecks in the process. Google should implement a digital inventory tracking and measurement system to ensure parts are well stocked at every step of the supply chain, to avoid this problem.
While Google has not revealed their long-term plans to digitize their supply chain, one would hope their implementation of a pre-order function for their new Pixel 2 is an encouraging sign they are looking towards some improvements in the short-term. With large players like Apple and Samsung vying for the same consumers and components, it is critical that Google collect and use every advantage they can get.
 The Mobile Economy 2016 (GSMA, 2016), https://www.gsmaintelligence.com/research/?file=97928efe09cdba2864cdcf1ad1a2f58c&download
 Kharpal Arjun, “Google Android hits market share record with nearly 9 in every 10 smartphones using it,” https://www.cnbc.com/2016/11/03/google-android-hits-market-share-record-with-nearly-9-in-every-10-smartphones-using-it.html
 Savov Vlad, “Google sets its sights on the iPhone with HTC deal,” https://www.theverge.com/2017/9/21/16343342/google-htc-deal-apple-iphone-war
 Schroeder Stan, “The most important Pixel 2 upgrade is hopefully, availability,” http://mashable.com/2017/10/05/google-pixel-2-availability/#i_Wycq88AOqR
 Culpan Tim, “Apple swallowed a fly,” https://www.bloomberg.com/gadfly/articles/2017-10-23/apple-losing-its-supply-chain-mojo-is-a-major-threat
 White Edward, “Foxconn profits tumble on iPhone X supply chain challenges,” https://www.ft.com/content/a7421056-c9d4-11e7-ab18-7a9fb7d6163e