For my first blog, I’d like to share a personal experience and link it to some questions of interest to the Operations Room, which has blossomed under the nourishing care of my colleagues Professors Allon and Lariviere. (Thank you, Gad and Marty!)
On March 2, 2011, Apple announced the “iPad2: Thinner. Lighter. Faster. FaceTime. Smart Covers. 10-hour Battery. Coming March 11. Starting at $499.”
Marketing works: On March 5, 2011, my brother and sister agreed that an iPad2 would be a great Mother’s Day gift. My mom lives in Belgium and uses her old laptop mainly for email, browsing, playing bridge, and skyping me, Shannon and our four kids in Chicago. We agreed that the 16GB wifi model would be more than sufficient. I was to buy one and carry it on my April 28 flight to Belgium (en route for Germany for my annual teaching in our executive MBA program at our partner school WHU).
That was the plan and … I put it on the backburner “for later” but never entered it as a task on my Outlook. So I forgot about it until suddenly on April 11 I realized there were only 17 days to go. I hadn’t anticipated the product would still be in short supply one month after introduction.
Quickly I placed an order on line which said “ships in 2-3 weeks,” but then received a shipping date of May 5th. (I wouldn’t be surprised if some third or fourth tier supplier of an electronic component in Japan were the bottleneck after the Tsunami. And while any supplier would jump for Apple, it still takes time to find alternate sources.) But May 5th wouldn’t work!
A call center rep at Apple.com suggested that I go and try to get a unit at a store and then cancel my on-line order (if it hasn’t shipped yet). I called our local Apple store at Old Orchard Mall and was told: “Every day we receive a shipment of iPads but we don’t know how many or what types. You can come and we start selling at 9am.” … “No, I can’t tell you when or how many people line up and what your chances are.”
I figured a Monday morning would be a good day and showed up at the store on April 18 at 8:30am. There I learned that Apple starts giving tickets “sometime between 7am and 8am.” Could they have told me over the phone? And: “All we still have now is 64GB, Wifi, 3G models.” Aha, would they really intentionally use this communist-era allocation scheme to upsell? But I wasn’t going to almost double our expenditure.
So I returned on Tuesday morning and arrived at 7:05am as the fourth person in line. Apparently an Apple store person earlier told the other three that “probably only 32MB wifi black will be available, but we aren’t sure yet.” During the next hour, almost a dozen employees entered the store but released no information. Meanwhile the queue grew to 23 by 8:00am (and it was cold and windy at 37 degrees, unlike on March 11)—yet we weren’t supposed to line-up even close to the window, let alone inside where the employees were running around in the warm space. None appeared to be concerned about the iPad queue. Finally at 8:03am, a nice employee came out: “Are you guys having fun? Only 32MB black wifi today.” And I got my golden ticket that reserved my unit for purchase during opening hours 9am-9pm.
Could they start giving tickets whenever the first (or fifth) employee gets there? Could I just buy the product right there? Why incur another travel hassle cost to return? Although this would turn out to be good for me…
Luckily, I had twittered my experience. When I got home at 8:30am, two hours after departure, Patricia Ledesma, our tech-savvy Assistant Dean of Research, tweeted back: “Did you try the university Apple store? Often they have better availability.” I called the NU bookstore immediately: “Yes, we have 7 units in but I can’t tell you what type. You can call Jonathan when he comes in, usually around 9:30am.”
On my way to the office, I went to the bookstore and aleluja: I bought a 16MB black wifi only, which saved me $100 and the trip at night with my golden ticket to buy the 32MB (thank you, Patricia!). Mission accomplished and my mom will be thrilled!
This experience just got me thinking about the various allocation strategies firms can use. Is it to upsell? Does this generate more demand? Why not sell the tickets on-line the night before like Next restaurant, or even follow the auctioning scheme proposed by my colleague and wine-lover Jeff Ely. (Admittedly, higher and dynamic pricing may not be aligned with Apple’s current tag of “amazing tablet at an amazing price, or may lead to other consumer reaction worse than waiting inefficiencies…) Is the risk of arbitrageurs that high that you couldn’t allocate tickets on-line the night before by name and credit card (and restrict one credit card per month or even year). It takes a lot of work for an arbitrageur to line up many credit cards and names… What’s the danger of releasing each night the shipment content to each store so I would know whether my model is even shipping? (Theft?)
As is often the case in operations, every detail matters because it reveals all the activities and pain points in the process. In operations we seek to improve processes and this is the beauty of a blog and social media: I’d like to know how you readers would allocate a scarce consumer product like the iPad2?