asymco

Thanks, Kizedek. Good questions.

I note that others have commented the numbers probably do not include iPad2, for various reasons like Apple wanting to keep them confidential, and/or not being able to claim Samsung copied that product before its release. But let's focus on our inventory discussion.

"are they so dependent on the reporting mechanisms of individual retailers and whether or not these mechanisms are mature or proven in order to get accurate numbers?"

Basically, yes. Shipments to retailers are not sales, and while activations give some indication, these also could be delayed with people buying as gifts or shipping from US to other countries before their launch. Activations are not GAAP reporting, either.

I might have used the wrong words with "mature and proven." Here I mean there are new retailers getting iPad2 and it may be taking them longer to report their sales back to Apple as ones where the reporting is established and frequent, perhaps even daily. Some retailers may only be giving Apple a monthly or weekly report, which affects a product only out a month.

"I get the impression that you don't get thousands and thousands of Apple units sitting in a regional Walmart or Target warehouses awaiting shipment to final local store destinations ("stuffing the channel"). "

Not stuffing the channel, but getting enough units out for a big launch, balancing the risk of a large inventory v customers coming away from launch weekend empty-handed. These would be stored anywhere in the channel from the shipping company warehouses, the retailer warehouses, and the stores themselves. Apple sold about 15m iPads in its first year, so about 40k/day, all constrained by production. On launch weekend they sold at least 500K. That is over 12 days of sales, and probably two months of startup production ramp. See Horace's analysis of iPhone for context.
http://www.asymco.com/2011/03/28/predicting-iphon…

"But in Apple's case, isn't their "innovative" inventory channelling system a system more reflective of actual sales to end users anyway?…Apple seems to keep less inventory "in the channel" than any other manufacturer,"

Apple does manage inventory (and supply chain overall) extremely well (Tim Cook rocks) but they are not unique. Dell perfected this in the computer industry in the 90s, spawning many Harvard Business Review studies, and setting the example for many other companies to generate working capital from their operations. Apple did it, especially with their operations in Ireland, before the great offshoring movements to Mexico and Asia in the last decade. I work in this field and know it well.

But for a launch, companies make intentional decisions to prepare much more inventory than normal, and make financial provisions to cover recalling all that inventory in case of a defect (or carry it indefinitely in case of poor sales, ahem Galaxy Tab). That launch inventory may have been spread thin across thousands of Best Buys, but across all of Apple's channels the total inventory was many multiples of production and sales higher than steady state.

And just as Dell's advantage of immediate information about sales volumes and mix through direct sales became diluted as it opened up retail channels, same effect on Apple. You get more sales, but slower feedback to your supply chain. Having their own chain of retail stores keeps Apple in the loop better than Dell, but still affected by slower reporting from other retailers on a month-old product.

EXACTLY. Thank you.