Apple Watch Production Takes a Time Out After Supplier Parts Found Defective


There has been a huge amount of hype for the new Apple Watch – with some 1 in 4 people eyeing the flashy device. Yet already Apple has run into a snag in its supply chain with the rollout of its latest product: a critical part from one of its suppliers was “found to be defective.”

Specifically, some “taptic” engines (which have ability to deliver tactile feedback) produced for the watches by AAC Technologies Holdings Inc. are breaking, forcing Apple to trash the watches with the faulty parts. While it doesn’t seem that Apple has sold any of the defective watches to customers and doesn’t have to deal with a product recall, it still will slow production of the in-demand device, causing an even bigger headache for the tech giant already suffering from supply and demand issues with the watch.

(We should also mention the incident Apple had last year with another one of its suppliers, GT Advanced Technology. Again, could proper procurement have saved the company from another supplier/production hiccup?)

Thomas Kase, Spend Matters vice president of research, shared his thoughts on the news, calling the dilemma “cultural issues at work.” Here are his main points and suggestions for Apple:

  • The arrogant bully approach where the buy-side dictates and thinks that progress will be made by fiat can eventually come around full circle
  • Apple doesn't always seems know how to work strategically and collaboratively with its suppliers. It should learn from Toyota here – it needs to be deeply embedded on both sides. Toyota staff will be practically 24/7 at critical suppliers, and key suppliers go further with rollup bedding in place at Toyota's plants during the "line-up" phase, unless things are unusually smooth, of course (yeah, right)
  • Meanwhile, in reality (at the supplier), any complex (especially new) technology will not perform to a timeline, no matter the bodies thrown at it – especially not if software is involved – similar looking bugs can take days to fix, or months! You can scream and shout, but software issues are notoriously unpredictable to resolve – throw in new hardware, add lots of innovation requirement (with final versions coming in late, or "just in time"), and a marketing team that screams for more features, and it starts to look like rolling the dice in Vegas.
  • Insufficient testing – not many QA cycles at the end of the Apple Watch design to engineering to production tunnel. Someone is going to make an "executive decision" and say "that's good enough" and maybe "our potential fail rate is about 10%, which equals $30 million in RMA claims over the first 3 months, and we can carry that since were getting a lot of good press, have to show we're innovative, blah blah blah…”

Secondarily, how to mitigate for this? There is no "fix" – if I thought there were one, I wouldn't be working here, I'd be raking in speaking fees that'd make the Hillbillies green with envy.

  • Embed people on both sides (I wonder if our brilliant federal DOL regulations work against this – embedding a la Toyota could create scenarios where suppliers can argue that they are de facto employees, but let's ignore that)
  • Visibility, visibility, visibility – de-silo, integrate tracking, understand what's going on
  • Analyze – a company with Apple's history of product launches (with vast troves of PLM, logistical, PMP and other hard data) should be able to mine the data to be able to predict when projects are starting to resemble dead men walking
  • A dose or 2 of humility wouldn't hurt – these are strategic suppliers – treat them as fungible entities and it all becomes a short-term money game. Again, reference Toyota: it beat the living crap out of suppliers at times, but the company is loyal and does not dump suppliers. Don't expect this, though. Tim Cook was the head of supply chain, so while he might use a supplier sustainability/ethics issue to launch a program and tout the progress, this won't be something that we expect will follow that pattern
  • ​Traceability – luckily these devices are all serialized, so as long as the sub-components are also traceable by lot (at least) it should be easier to figure out what went wrong​​, which goes back to the data analysis capabilities above​

And, lastly, go all out and upgrade all who have failed watches – give them the gold-plated Swarovski-studded variety, or a free Mac Air or an iPad. Especially the last one is a bit of a "free" printer with proprietary premium ink device anyway, so not much lost!

Voices (2)

  1. Thomas Kase:


    Well, I don’t have no stinkin’ Six Sigma Black Belt – but I lived the Toyota system for 7 years in Japan’s mfg industry (including a couple years tending to the mothership Toyota), so I think I have internalized a good portion. 🙂

    My main concern with the watches is the painfully short charge they can hold – less than 24 hours, when new! That’ll be down to mere hours once the phone has been used a year – 400 charge cycles in one year doesn’t bode well.

    If power could be had via some motion-powered generator, now there’d be a green idea worthy of a Cali company.

    For now, personally, I will stick to my Swiss self-winding movement chronometer when I feel like a watch on my arm.

  2. Pierre:

    Is it just me, or is Thomas turning into Ed Deming! 🙂

    Hopefully Apple Watches won’t have a quality problem perception that will affect selling price. Probably won’t given how much the public follow the fashion herd re: of quality relative to competition (e.g., Beats headphones), but Boeing 787 Dreamliners are selling at a 48% discount to list, and at a significant loss. Just sayin! hat tip to the Dr. on this stat

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