Gamestop VP: Wii supplies looking 'much, much better' for holidays
by Kyle Orland 
{ Sep 18th 2008 at 7:45PM }
While not directly contradicting his boss, McKenzie seemed much more hopeful about the supply of systems for the crucial months ahead. "I can't say we will be in stock every day throughout the holiday season," he said, "but I can tell you that the current flow we've seen coming from Nintendo on Wii hardware makes us very confident that we will meet the business model that we've got."
What's a potential Wii owner to do with these conflicting messages? We recommend playing it safe by taking a large tub of beef jerky and a few gallons of bottled water to your nearest GameStop and refusing to leave until you get the thin, white system you crave. It's a foolproof plan -- but when the police ask, tell them you came up with it yourself, OK?
Reader Comments (Page 1 of 2)
Dirty @ Sep 18th 2008 7:53PM
My recommendation.... buy a 360.
Mr Khan @ Sep 18th 2008 8:00PM
While i disagree with that sentiment overall, for a new buyer THIS holiday season in particular, it is probably the wiser choice
Fail holiday lineup is fail
WRE @ Sep 18th 2008 8:18PM
My recommendation? Buy all three. You have access to all of the great exclusives as well as the ability to make a choice as to which multi-platform iteration is the best for you. Although I do tend to swing 360 on the multi-platform releases...
bm @ Sep 18th 2008 8:23PM
For a new buyer? Uhh... wouldn't a new buyer most likely be someone who hasn't played a console's entire back catalogue? Wii sucks wahh wahh wahh and all, but seriously, it has a great library of games, no matter what any random internet rascal says.
why not the LS2LS7? @ Sep 18th 2008 9:44PM
Don't buy a 360. It's a trap. I finally had to replace mine (with a new Core) cause they're such crap.
Don't buy one and you won't buy any games for it and then later have to wonder what to do when you have no more working 360 and more games left to play.
Dirty @ Sep 19th 2008 1:10AM
Oh come on guys... bagging on the wii is cool these days.
t_m @ Sep 19th 2008 5:28AM
Buy the one that has the games you like best.
Its not rocket science.
Sigh.. i WISH i could afford to buy all three... but right now its looking flakey that i'll even be able to afford ONE.
Dirty @ Sep 19th 2008 10:07AM
I had all three. I sold my wii and got a psp (and some other stuff).
Mr Khan @ Sep 18th 2008 7:59PM
It does take time to ramp up production if you don't want to do it haphazardly and flood the market
If true, it should shut up all the people railing about an artificial shortage.
why not the LS2LS7? @ Sep 18th 2008 8:26PM
It's not true. I work on large-market consumer products, and given 9 months you can ramp up production to any level you want to. Yet a year after Wii came out, N still had shortages. The only explanation is they made exactly as many as they wanted to, they didn't want to make enough to go around.
Fernando Rocker @ Sep 18th 2008 8:34PM
did't want to make enough?
They outsell the competition every month and they are selling way more faster than the PS2.
They increased the production from 1.4 million to 1.8 million in 2007... and in April 2008 they increased the production to 2.4 million. You can check Joystiq stories and see that I'm telling the true.
I think that that is a lot.
Mal F4cti0n @ Sep 18th 2008 9:29PM
You can't ramp up to any production level you want unless you buy another production facility or add another line which is not always cost effective or feasible. You are limited to a 24 hour a day operation.
I don't work on large market consumer products, but am an engineer, and can easily see that. Where did you go to school, "why not the LS2LS7?"? I am not letting my future child go to that one. I would ask for my money back if I were you.
why not the LS2LS7? @ Sep 18th 2008 9:55PM
Fernando:
Read my post again. They had the choice of making enough that there wouldn't be shortages, and instead they chose to increase manufacturing only 50%. There's been two years to work on increasing production and measuring demand. If they didn't notice they aren't keeping up with demand after two years, they're idiots. But that's not the case. They don't want there to be units on shelves. It's pretty clear now.
Mal Faction:
With 9 months you can ramp up to any level you want. There's no concern about lines. Your contract manufacturer will put in as many lines as they can get parts to build from and that you will buy from them.
And due to how the contracts work, you don't have to pay more for more lines. You don't pay for more facilities. You pay for units made. If your suppliers could make more parts and you are willing to buy more units from the contract manufacturer, you indicate it to them and they will work increase the number of lines and if necessary the number of facilities. No, this cannot be done overnight, but I never said it could. I said 9 months. And it can be done in 9 months, far less. One time (this is an exception, not the rule), we doubled production in under 2 months. And with only a small loss in yield (which comes from running the lines too fast).
The 9 months includes repeating this process with your suppliers, because they will need to also line up more parts and lines for themselves in order to make more parts for you. And with their suppliers, etc.
The company I work for makes a LOT more products than Nintendo. We make reasonably complex products (about as complex as a Wii) and we make more than 10M a year.
Nintendo could have ramped up to meet demand in 9 months, they have failed to do it in 24. It's no mistake or failure to deliver, it is clearly on purpose.
Where did I go to school? Same place your girlfriend did. If I didn't learn everything I should have in school, maybe it's because I was too distracted giving out mustache rides.
Mal F4cti0n @ Sep 18th 2008 11:12PM
Ah, good one, mustache rides! Super Troopers Rocks!
The old engineering firm I used to work for, at one point, couldn't keep up with demand for cutting post-tension tendons in the plant, even though they were running three-eight hour shifts (that is 24 hours of operation in a day). We had to ship tendons from plants in Texas to Northern Virginia and we still couldn't keep up with demand. This was for two years. The company did not want to invest in another tendon cutter ($250K) for the current demand when they did not know how long it was going to last.
Nintendo is a smart company. I think that they realize if they can make more units, they will make more money, on the units themselves and on more software sales.
Say there are two facilities making Wiis. Now lets say there are two lines in each facility. If each facility line can make 200 Wiis a day, Nintendo is limited to ordering 800 Wiis a day. Regardless if they pay per unit produced or not, there is a limit to everything. You don't just say, I want more, make me more but I don't want to invest in more production capacity. Without an increase in production capacity, you cannot increase production, regardless of what you are manufacturing, complex or not.
why not the LS2LS7? @ Sep 19th 2008 2:05AM
You actually do just say "make me more", assuming you can get the parts. Let's address these two parts separately.
First, the "make me more" part. A Chinese plant will have about 8 lines per floor of final assembly. It will also have maybe 2-6 (it really depends on the complexity of the board, the number of pick and place machines needed and whether you also need large parts like connectors or CPUs hand-soldered on) of SMA (making motherboards) per SMA floor. I can pretty much guarantee there are at least 8 lines building Wiis, probably 16 (two floors). They are likely full time meaning the same lines do not build anything else but Wiis. They likely do not run 3 shifts except during the holiday season.
Now, the way the contract works, you just pay for parts, and for "transformation". Transformation is what you are paying to get the unit built, tested and boxed. Transformation covers all the contract manufacturer's costs. You don't pay extra for lines, for floor space, for anything. The contract manufacturer calculates all that into the cost of transformation. If you want more made, you may have to renegotiate the price a bit, depending. But the key is that if you buy twice as many and you are paying the same price per unit for transformation, you are paying the contract manufacturer twice as much. If they could set up one floor for that price per unit, they surely can set up a second, assuming they will produce twice the units.
Now, you negotiate the contracts on a quarter per quarter basis, you give estimates as to how many you will buy (and they will build) in the quarter. There are various penalty clauses if you don't buy as many units as you said you would, although against a company as large as Nintendo, they are all but unenforceable. Unless N fell very short, the contract manufacturer would realize that penalizing Nintendo would just lead Nintendo to go elsewhere in future quarters and rob the contract manufacturer of those revenues. Unless Nintendo were to fall very short or their design lead to poor yields (due to how the contracts work, the contract manufacturer suffers if yields are low, since any unit built unsuccessfully is money out of their pockets as they cannot sell it to Nintendo but still have paid for the parts, note that many contract manufacturers prefer joint-design manufacturing to prevent this), they would not face any resistance from their contract manufacturer at increasing capacity. The contract manufacturer would make room in their plant by moving other customers or building new buildings (they are built constantly in China) to satisfy Nintendo.
Now let's get to the getting parts portion. It is largely the same process, only with the customer being the contract manufacturer above and the contract manufacturer in this case being another contract manufacturer. This contract manufacturer has suppliers themselves and factory concerns of their own. The numbers of units bought do affect prices in both directions. Sometimes buying more subassemblies (like displays or optical drives) means you get them cheaper, sometimes it means they have to open new plants and might raise their prices somewhat. The suppliers like to play the "put you in our newest plant" card as a justification for prices and a promise of high quality. They'd like to charge you extra to be in their newest plant, but realistically, a company like Nintendo buys enough volumes that financially it doesn't make sense for the suppliers to make their products in anything but their newest, most efficient plants. Some their suppliers may get more than 10% of their total revenue for the year from Nintendo or Nintendo's suppliers.
Nintendo would know when making the unit that they cannot afford to be beholden to single suppliers. Yes, they can't avoid this for their CPU, which comes from IBM. Although they likely have a license to produce it themselves by contacting a fab like TSMC. This is done as insurance in case the supplier were to go under or no longer wanted to make the chip. But for other things, like all the plastics, the optical disk drives, the RAM, the connectors, etc, they have multiple suppliers, and if one doesn't want to ramp up, they either replace them or just use both. Yes, this puts the suppliers in a tough spot, but honestly it's right were Nintendo wants them, and Nintendo represents so many sales that the suppliers can't afford not to work with them.
So knowing all this, what went on? Well, it's clear Nintendo felt that they would maximize their profit by not making enough Wiis to go around. First, they keep their sales prices high. They also keep buzz up. Additionally, running more units per month might increase their cost of the units (although nothing like what you speak of), and why spend a bit more to sell a unit today when you'll still sell it in a few months when the customer does finally find one to buy.
The problem with this is it all falls down if there is a product customers see as a substitute for your product. And with the 360 now costing less than the Wii, it's likely Nintendo now is less sure that a delayed sale is just that and not a lost sale. They will turn up the taps for this Xmas, almost certainly. And all because they finally decided they wanted to, not because they couldn't have done it before.
DEEZNUTZ @ Sep 19th 2008 11:54AM
The US was facing shortages because of the weak dollar, not because of production. They were making more money shifting more product to Europe than sending it to the US.
I am seeing the Wii on shelves now in piles so I think the worst of the shortages is over.
Mal F4cti0n @ Sep 19th 2008 5:51PM
I hear what you are saying, but I don't think you are hearing me. I totally agree with you that given time and money Nintendo can ramp up to any level they want. But they have a limit without expanding their production capabilities if they are currently running 24 hours in them.
There is a limit to everything. Without increasing some production capability somewhere, you are still limited to a maximum output. Nintendo probably did not plan on the Wii being so successful and have decided not to spend all their money on increasing production, wherever they need to (either on chips, boards, or final assembly).
Again, I totally agree with you that they very easily could increase, but for whatever reason (probably because they are worried about losing some of their HUGE pile of cash) they have chosen not to.
Thanks for the intelligent discussion. Sorry I made fun of you earlier.
343 Guilty Fart @ Sep 18th 2008 8:02PM
To this day I still have never seen a Wii on a store shelf. I've just given up (and bought a PS3 instead).
Spiza @ Sep 18th 2008 8:07PM
As soon as Wii's start staying on shelves, Nintendo can lower the price. They could probably go down to $150 by now and still make a profit on the hardware.
Alvin @ Sep 18th 2008 8:15PM
who doesnt have a Wii yet?
WRE @ Sep 18th 2008 8:20PM
Curmeo, Jack of no Trades and el serpiente, for three.
Fernando Rocker @ Sep 18th 2008 8:24PM
Yeah, only those three.
tmacjordan and Killjebus just bought one and they are playing right now... that's why we haven't seen them all this day.
Immortal Technique PSN: johnnynumber5 @ Sep 18th 2008 9:33PM
Tmac has bought many Wii's.
tmacairjordan87 @ Sep 18th 2008 10:27PM
And made quite a lot of money off them.
I can't be on Joystiq ALL the time Fernando :P
t_m @ Sep 19th 2008 5:32AM
if fernando would stop buying them all the the rest of us could get a chance!!!
blueberry @ Sep 18th 2008 8:23PM
It hurts my Nintendo fanboy brain that there are still possibly more people out there who want to buy a Wii just to play Wii Sports.
My head will explode when Wii Music is released and is a success.
why not the LS2LS7? @ Sep 18th 2008 8:21PM
Now that they are no longer the cheapest cur-gen unit, I'm sure N will finally have to make a proper number of units or start to lose sales.
Mal F4cti0n @ Sep 19th 2008 5:52PM
I hear what you are saying, but I don't think you are hearing me. I totally agree with you that given time and money Nintendo can ramp up to any level they want. But they have a limit without expanding their production capabilities if they are currently running 24 hours in them.
There is a limit to everything. Without increasing some production capability somewhere, you are still limited to a maximum output. Nintendo probably did not plan on the Wii being so successful and have decided not to spend all their money on increasing production, wherever they need to (either on chips, boards, or final assembly).
Again, I totally agree with you that they very easily could increase, but for whatever reason (probably because they are worried about losing some of their HUGE pile of cash) they have chosen not to.
Thanks for the intelligent discussion. Sorry I made fun of you earlier.
hitnrun @ Sep 18th 2008 8:27PM
When your "business model" is "sell used," then I imagine it wouldn't take much new stock to "meet your business model."
gir @ Sep 18th 2008 8:25PM
I wish I didn't have a wii.
gir @ Sep 18th 2008 8:26PM
Oh crap!! I meant to say
Where's my new Zelda.....NINTENDO?!?!
Fernando Rocker @ Sep 18th 2008 8:26PM
You can sell it... there are millions of people who really want a Wii.
Really, we will not miss you =p
gir @ Sep 18th 2008 8:33PM
Dude...I really like Nintendo's franchises...But I really hate what they did to this counsel. I thought having motion control is cool, but I was tricked. It's gimicky...arrghh...
Do you know why I'm always saying "Where's my new Zelda.....NINTENDO?!?!"
Cause I'm hoping the new one + the motionPluse control will make it a kickass game. But I know for some reason I'm going to be disappointed. Don't get me wrong though. I like Nintendo.
gir @ Sep 18th 2008 8:39PM
Oh but I will miss you Fernando Rocker );
You cut me real deep just now :(
Fernando Rocker @ Sep 18th 2008 8:41PM
Sorry =(
*What's your Wii friend code?
Fernando Rocker @ Sep 18th 2008 8:43PM
6140-3530-5783-6618
gir @ Sep 18th 2008 8:47PM
Oh no! You're asking me to turn on the wii? But I'm on a streak here :P
I'm seriously trying to stop playing video games, at least for the next month. I've got school to take care of. But I'll defiantly exchange wii codes one of these days and I'll show you the awesome pwng of my mario kart and brawl skills :D
Fernando Rocker @ Sep 18th 2008 8:50PM
lol
I played SSBB against like 80 Joystiqers (I received close to 500 requests in my personal mail from Joystiq readers) and the only one that gave me very good fights was Fatass of Kickasness =p
I challengue you! =p
gir @ Sep 18th 2008 8:56PM
Okay my wii code is 2306 7785 2918 0573
I'm way too busy to play right now. But I'll play you pretty soon. I'll send you a message when I can and we'll arrange it.
Fernando Rocker @ Sep 18th 2008 9:00PM
Done =p
gir @ Sep 18th 2008 9:05PM
I don't know if I should mention this..you'll probably hate me for it and will give you the fuel to beat me up in SSBB when the time comes, but I don't like hiding any secrets from anyone
I have a PS3
Mr Khan @ Sep 18th 2008 9:08PM
You never added me, Fernando.
Not sure how i would stack up. I did quite well against samfish and gurwurtztraminer, though i don't know what that says.
Fernando Rocker @ Sep 18th 2008 9:20PM
Oh... that's more than enough fuel!
btw... send me your code Mr Khan.
Fernando Rocker @ Sep 18th 2008 9:23PM
And this is my MSN: rock_rules20 at hotmail.
Almost every night we talk in group a lot of Joystiquers.
Roto13 @ Sep 18th 2008 10:05PM
Fernando made a friend. D'aww.
bm @ Sep 18th 2008 8:29PM
For a new buyer? Uhh... wouldn't a new buyer most likely be someone who hasn't played a console's entire back catalogue? Wii sucks wahh wahh wahh and all, but seriously, it has a great library of games, no matter what any random internet rascal says.
bm @ Sep 18th 2008 8:31PM
woo yay comment system etc
Paulmichael @ Sep 18th 2008 8:47PM
I know, this thing is SOO convoluted, amirite? I mean, hitting reply BEFORE replying to someone...The concept, it boggles the mind!
Mr Khan @ Sep 18th 2008 9:10PM
Sometimes hitting the reply button fails, then you inadvertently type it in in the false belief its going through
Hell, if you're using anything that isn't Firefox or Chrome, hitting the Reply button has a good chance of just resetting the whole page
giantenemycrab @ Sep 18th 2008 8:43PM
what a shock.