Challenges Xbox Present to Their Existing and Established Supply Chain

Challenges XBOX present to their existing and established Supply Chain

Microsoft has evolved in a market consisting of video game producing veterans like the Nintendo and Sony. Naturally, the ride from start to present was not easy, it required exemplar Supply Chain strategy to make Microsoft the leader in the market.

From the moment you are considered a competition by other players in the market that means you are doing something big and impactful.

Getting to a level where Microsoft is today, came with hardships and challenges.

Microsoft is a well-known software manufacturer and has a well set supply chain for that market, making hardware for Xbox at large volumes was totally new dynamics for them.

Microsoft had been making PC based games, which was also being threatened by PS2.

When Xbox entered the market, it had tough competition in the video gaming industry like the Nintendo and Sega in early 1990s, then essentially Nintendo and Sony where Sony had a market share of 67%.

So, during early 2000s, Microsoft did not have an established base of games and gamers which Sony had captured even though Microsoft entered with a more advanced technology.

As per Mike Webb, senior vice president of IT at Flextronics, “Time to volume for Microsoft was absolutely critical”^[1].

Microsoft’s strategy to penetrate the market was to make a hard launch. However, that required a massive line up of inbound supply chain and large volumes of delivery of the product of high quality, to be in the market in time for 2001 holiday shopping season.

This meant negotiating supply continuity agreements with a large volume of component suppliers, ensuring capacity was in place, establishing complex logistics channel, automate supply chain tasks and integrate business systems with suppliers.