Matt Johnson: Why can’t supply meet demand in Father Christmas’s workshop?

Nov 14 2007 by Matt Johnson, Liverpool Daily Post

HERE, as they say on University Challenge, is your starter for ten. What do the following manufactured products have in common?

A desert island model serving as world headquarters for an international rescue service, a set of brightly coloured cuddly toys, a model of the lead character in a popular children's film and an early version of a digital personal music system.

The answer, or at least the one in mind, is that Tracy Island, Teletubbies, Woody from Toy Story and iPods have each been at the centre of massive pre-Christmas consumer spending frenzy in recent years. In these times when so many consumers (of all ages) seek the sort of instant gratification which is met by acquiring goods with "must- have" status, each of these products has, over successive years, seen itself as the season's number one best seller.

It's hard to understand why a firm would embark on production of a product in which it must have confidence if it knows supply is not going to match demand.

But it's still hard to fathom why, for example, the world's biggest toy makers invest heavily in licensing and manufacturing rights for a products they think will sell – then fail to make the most of their opportunity by seeing demand outstrip supply.

In such situations, there is a risk that the turned-on consumer becomes the turned-off consumer. Expectations go unfulfilled, aspirations turn elsewhere.

This year, the scramble is already under way for Nintendo's Wii machine.

Nintendo is expected to become the sales leader in the current generation of games consoles within weeks. Its Wii machine has become a social phenomenon, broadening the reach of gaming to new audiences and causing Nintendo supply problems.

There are reports, not denied by the company, that it will take another year before the firm can ramp up production to meet demand.

They say increasing production is not like turning on a tap. Maybe. But they have surely strived to ensure they have the capacity to meet demand for their product, haven't they?

Production issues aside, Nintendo has transformed its status as a key player in the industry to leader in just 12 months, while Sony has struggled with its PlayStation 3 and Microsoft continues to throw money at the Xbox.

Almost 10m Wii consoles have been sold since it went on sale at the end of last year and it is poised to overtake global sales of the Xbox 360 within weeks. Perhaps more crucially, it will reach the 10m mark in half the time it took Microsoft.

For the console business, though, the consolation is that technological development means new boundaries are being met and crossed every day – creating an almost insatiable demand. Can't really say that about a Tracy Island, can you?