I Want my HDTV ...
"Now that ain't workin' that's the way you do it.
You play the guitar on that MTV.
That ain't workin' that's the way you do it.
Money for nothin' and your chicks for free."
Quick, name the song and the band responsible for the above lyrics. Like many of you, I miss the eighties. Life seemed so simple then. As long as the cable box worked and MTV was just a click of the switch away, all the troubles in the world seemed to fade into obscurity. But now, life is more complex. And that cable box is not coming from a domestic manufacturer anymore, which means it might not be there when you need a new one.
Courtesy of Spend Matters reader Tim Fairchild, who lives in North Carolina, I learned about a recent supply shortage of HDTV converter boxes. According to
this article that Tim forwarded to me, "An estimated 300 cable customers in the Triangle have HDTV sets, but can’t watch high-definition programming. For the second year in a row, Time Warner Cable has run out of converter boxes because of high holiday demand." All I can say to that is: I want my, I want my, I want my HDTV ...
- Jason Busch
Tweet
TweetBacks
Not bad for a Colt's Fan ...
"We didn't anticipate the high demand....." Translation: Lets roll this crap out and see if anyone wants it......
www.newsobserver.com/104/story/535606.html
It sounds like Time Warner is making heroic efforts to meet demand. Good for them...but think about how much frustration they've caused their customers, how much money they will spend on expediting, how much they'll spend on overtime for sending installation techs on after-hours and weekend calls, and of course the top-line revenue loss. This is a great illustraton of the impact of a supply disruption.
So where is the problem? Is it at Scientific Atlanta? In SA's first tier of suppliers? SA's second tier?
Or maybe the problem is not with the vendor at all. Perhaps Time Warner's set top box forecast failed to comprehend an explosion of retail sales of HDTVs, a consumer spending event in December called Christmas, and a sporting event in February called Super Bowl LXI.
1) The cost of a set-top box has ballooned with the advent of digital cable, DVR, HDTV, and so on. This drives up inventory carrying charges, write-offs due to non-returns, and so on. For some cable companies, the dollar value of missing inventory is substantial.
2) Many set-top boxes are full-fledged computers, with operating systems, software, hard drives, and so on. These units tend to have higher failure rates than traditional set-top boxes. And, they are much more complex to operate from a user perspective, resulting in higher numbers of spurious service calls. This increases truck rolls and drives up service costs; and it creates a pool of boxes whose status is unclear, adding to inventory costs.
3) Cable service personnel are not, historically, trained to service computers. Add to this the uncertainty around computer repair in general. When a modern set-top box "failure" is reported, is it user brain damage? A software flaw? A transient hardware flaw that only occurs after the box heats up? A bad spot on a hard disk? An operating system crash?
Knowing what I do about this industry, which is enough to make me well aware of how much I do NOT know, I would be cautious about drawing supplier management conclusions. Furthermore, it is not as though there are a lot of suppliers to choose from; the complexity of the set-top boxes certainly limits to a certain extent the ability to switch horses, in that new service procedures and so on are likely to be disruptive to existing processes.
I pay TW over $1200 per year for cable TV and high speed internet (I don't have digital cable or HDTV) and all I want is reliable and consistent service. I admit that I'm interested in the details of how they provide my service (probably because of my own internal wiring and the field I work in) but really I shouldn't care. It should be like flipping a wall switch. The lamp comes on and I don't have to think about the status of the fuel rods in Progress Energy's Shearon Harris nuclear reactor.
This issue intrigues me because both Scientific Atlanta and Cisco have extensive experience managing supply chains for products that are far more complex than set top boxes. Was this an issue of failing to properly forecast demand? Is there a component in the upstream supply chain in short supply? Is Scientific Atlanta giving priority to another cable provider? Has Apple locked up capacity of some critical part in preparation for the iPhone?
Digital media convergence puts Time Warner into a similar situation as suppliers of PCs (as per your point 2). Perhaps they should be looking for lessons learned from the remaining PC pioneers such as Dell and HP.