Nintendo has done it again. A few days ago, Nintendo released the NES Classic Edition to much anticipation, only to have units sold out within minutes from stores across the country. This certainly hasn’t been the first time the company seemingly fall short in terms of meeting demand with sufficient supply. The Wii console was notoriously difficult to obtain for nearly years after its début, and more recently, Nintendo’s amiibo (a near field communication device in the shape of popular Nintendo characters that lets players store personal gaming information) also experienced supply shortages.
Since Nintendo has always been pretty hush about any internal manufacturing problems, this has lead to a lot of speculation about whether the company’s supply issues have been intentional or if they’re just really bad at demand forecasting. Purposely keeping supply way below demand might seem counter productive when it comes to selling products, but it’s actually a technique that could drive up sales in the long run. For instance, when lots of customers are hoping to buy a product but cannot, then these stories tend to quickly generate quite a bit of hype and attention. It gets more people interested in the product, which usually means more sales once units arrive back in stores.
So what does this mean for Nintendo’s material planning process? Nintendo would need to determine how many units of the console it hopes to sell and over what period of time. Generally, forecasting is done on past sales data coupled with some market analysis, but for new products, this is not always a sure thing. I would imagine that they have a pretty high sales target in mind and have planned out the materials for an initial production plus future production after the first release. The extra public hype generated from the early storages is supposed to bring actual sales closer to the targeted sales goals.
However, there is a risk to releasing a limited number of units during the first round. Nintendo has other competitors in the gaming console market (Xbox, PlayStation) and making customers wait could lead to those customers losing interest and buying another console altogether. If they don’t end up selling as many units of the Classic Edition as planned, then the unsold units means lost sales and a loss write-off.