Companies That Can’t Keep Their Products On The Shelves

It is not unusual for companies with highly successful products to run out of inventory. Oftentimes, companies are forced to scramble at the last minute to meet an unexpected upsurge in demand. Some analysts suspect that companies “create” shortages to boost interest in their products among consumers and the media. There have been rumors that Apple did this with the iPad and iPhone, though this has never been proven. Apple’s success has been so spectacular that whether the shortages are planned or not probably doesn’t matter.

The problem with product shortages will get worse for some companies because of the Japan earthquake. Several car companies have already slowed productions because the availability of parts is dwindling. Honda and Toyota each expect some of their plants o be shut down for weeks. Several firms that make components for consumer electronics like the iPad will need to close their doors for a while as well. It will not be a public relations stunt if iPad 2 shortages begin anew in the next month.

Click Here For The Companies That Can’t Keep Their Products On The Shelves

The duration of manufacturing interruptions in Japan may not be announced until the end of the spring.  Companies, however, face these types of challenges all the time. Mattel was unable to sell entire lines of toys when it was discovered that manufacturers in China had covered them with lead paint. Regional oil shortages happen when hurricanes shutter refineries.

Customers rarely care about why they cannot buy the products and services they want.  They are not usually in a forgiving mood, and that should worry companies facing potential shortages. A consumer may buy a competitor’s product or may decided to skip the purchase entirely.

24/7 Wall St. examined how companies such as BMW and Lululemon Athletica stumbled when faced with product shortages. The companies did poor job estimating product demand which probably cost them revenue.  Sales were further hurt by the news of the shortages.

This is the 24/7 Wall St. Companies That Can’t Keep Products On Their Shelves

The 24/7 Wall St., Companies That Can’t Keep Products on Their Shelves

1. BMW

In June 2010, BMW sold out of its popular 2011 5-series sedan.  Although the company’s sales chief, Ian Robertson, was quoted by Bloomberg as saying that “the 5-Series is at the core of the BMW brand and we knew it was going to be a very strong vehicle for us,” the company was not ready to meet demand for the vehicle.  Sales of luxury vehicles fell dramatically in the financial crisis of 2008/2009, then bounced back in the middle of 2010, with BMW sales increasing 11% in May alone.  This improvement caught the company off guard, and effectively used up the entire supply of 5-series in June.

2. Apple

Since its release on March 11, 2011, Apple’s iPad 2 has been in short supply.  Many stores sold out of the tablet computers in hours, and the company’s online store currently lists shipping delays of four to five weeks.  Supply may be further interrupted by the recent earthquake in Japan which would delay the production of parts needed for the device.  Apple has often fallen short of demand in the past with products such as the iPhone 4.

3. Microsoft
Video game sales were down throughout most of 2010, although they were up during the holiday season.  One of the most popular products, Microsoft’s Xbox 360 and its Kinect add-on unit, sold out.  This caused Microsoft to ship units early to stores which were meant for January and February of 2011.  These unexpected early shipments caused the company to temporarily run out of products for two months.

4. Amazon
After Amazon cut the price of its Kindle 2 in June 2010 from $359 to $299, sales increased significantly.  This rush of customers quickly caused the company to run out of the e-reader in July.  It isn’t the first time that Amazon has run short on products.  The original Kindle sold out within hours of its 2007 release, and faced supply shortages throughout 2008.

5. Target
This past holiday season, demand for the popular Squinkies toys outpaced the manufacturer’s ability to produce them. Despite quick action on Target’s part to order more of the toys, the limited abilities of the 16-person factory that makes Squinkies caused a 60-day lag between Target’s orders and the shipment of new products.

6. Lululemon Athletica
Lululemon Athletica’s, the Canadian yoga wear company, has exploded in popularity in the past two years, with shares up more than 1,000 percent in the same period.  The company has expanded  throughout North America and Australia, and while it has added to operations to meet the widespread popularity of its clothes, it has not been able to meet demand. The major reason for this is a lack of inventory. The company has also had to increase spending on air freight to get products on the shelves after they are manufactured. Since the company announced its dwindling inventory, some investors have become worried.

7. Toyota Prius
As the recession fades into the past and gas prices rise to new highs, electric and hybrid vehicles are once again in hot demand. Orders for Toyota’s Prius are backed up for months. The Prius is the best-selling car of its kind in history, with more than 3 million vehicles sold to date. The demand for the car has not been diminished by new electric cars from GM and a number of hybrids from nearly every major car manufacturer.

Also Read: Google is World’s Most Valuable Brand

8. Johnson & Johnson
In the midst of recall after recall, it makes sense that a slew of Johnson & Johnson products would be disappearing from store shelves. In the case of J&J’s “Pepsid Complete” tablets, no one seems to have any idea why stores have been out of the medication for months, and heartburn sufferers have resorted to buying the product on eBay and Amazon. Several thousand bottles of Pepcid were recalled last fall, but that does not explain the products widespread disappearance. Thus far, Johnson & Johnson’s response for why the shortage has occurred has been vague.

9. Rip Van Winkle Bourbon
The small-scale Kentucky bourbon does not mind testing its customers’ loyalty. Van Winkle sells only 7,000 cases each year, enough to let consumers whet their whistles and little else. Bottles of “Pappy Van Winkle” bourbon are notoriously hard to find, and because it sells out so quickly, many liquor store owners keep bottles behind the counter rather that waste shelf space. An added bonus of low production, the owner adds, is never having to worry about being stuck with large inventories in the case of financial downturn.

Douglas A. McIntyre, Charles B. Stockdale, Michael A. Sauter