Apple's Networking and Supply Chain Mistakes Take a Bite Out of Its Shine

Apple's self-inflicted wounds during the iPhone 3G, App Store and MobileMe rollouts and iPhone software upgrade could have been prevented. And while CEO Steve Jobs has owned up to the mistakes, will they have a lasting effect on Apple?

In an internal company e-mail obtained by several media outlets in early August, Apple CEO Steve Jobs fessed up to the problems surrounding the company's summer product blitz. "It was a mistake to launch MobileMe at the same time as iPhone 3G, iPhone 2.0 software and the App Store," Jobs wrote in the e-mail, which was obtained by Macworld.

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"We all had more than enough to do," he added, "and MobileMe could have been delayed without consequence."

MobileMe's initial problems during the launch on Friday, July 11, the subsequent 11-day outage that roiled Apple's rabid customer base and another service outage on Monday, Aug. 11, have generated even more pressure and public ire on the company: That's because of iPhone 3G out-of-stocks and activation nightmares in the U.S. and abroad during the iPhone 3G's launch and concurrent 2.0 software upgrade.

3G iPhones
Coming to a store near you? Maybe.

There are more than technical issues involved in Apple's recent customer service problems. The company's business practices, and the way it develops and unveils products are key factors. Analysts, including Ken Dulaney, a vice president at Gartner who closely follows Apple and the iPhone, contend that Apple's policy of limited beta testing and intense product secrecy, while helping to generate public interest also may hurt the company in the long run. "If they opened it up a bit more, I don't think it would hurt them, and it would give them a lot better quality assurance," he says. "They just can't control everything, and they're losing valuable input that they could get from lots of people."

But Job's mea culpa (however it eventually came out in public) was a shrewd business move atypical of most CEOs, notes Dulaney.

"It's OK to have problems as long as you admit to them and fix them. In fact, if you admit to them and fix them, it turns out to be an effect that creates more intense loyalty than you would expect," he says. "I've seen a number of issues [with Apple] that would stop other vendors in their tracks, and people are willing to give Apple a break there."

Apple's Supply Chain Put to the Test

In late May 2008, AMR Research proclaimed Apple's supply chain and digital distribution channels as tops in the world. The iconic Mac, iPod and iPhone maker took the number-one spot due to "an intoxicating mix of brilliant industrial design, transcendent software interfaces and consumable goods that are purely digital," gushed the AMR analysts in the report ranking the world's top 25 supply chains.

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