In my last two recaps I talked about how “false scarcity” is an economic myth, and how retailers influence the production of Amiibos. In short, a company must always try to match demand to get the most out of their product. When a company supplies less than demand, it is not because of any sinister motives, but because of lower expectations and faulty market research.
OK then, says the Nintendo fan, now that they know there is enough demand, why don’t they increase supply?
Here, I am going to answer just that question. Due to the complex nature of global supply chain management, few companies are able to alter the supply chain once it is in place. In the case of Amiibos, the supply chain goes something like this: Corporate (Nintendo), Manufacturing (China), Transport (From China), and Transport again (within each country), and Retail. As you can see, Nintendo is only one part of the global Amiibo Supply Chain. All the rest are contracted by Nintendo.
A lot of work goes into making these plastic figures
Here is a brief idea on each of these:
This is the decision making body and the central stakeholder in the entire operation. Nintendo is responsible for setting up the Amiibo caravan, getting all the contracts done, and locking down the supply number.
Often, Nintendo is also responsible for the artistic design of the Amiibos themselves, and their functionality.
These are the guys in China making all 50+ Amiibos. They design the assembly line, switch-overs (change from one character to the next), and general quality of the product. Of course, they are contracted by Nintendo to achieve certain quality thresholds and to produce a certain number of Amiibos.
Note that these guys are also contracted with other companies, and are only obligated to follow the initial contract. Any change that Nintendo would want to suggest is subject to a “change order” form, which I will explain later.
This is where the Amiibos are transported from one place to another. Basically, Nintendo is usually responsible for finding a contractor to transport the Amiibos from China to the rest of the world. After that, it is usually retailer’s responsibility to transport the Amiibos from each harbor to stores in the country.
As with Manufacturing, Nintendo contracts transportation companies with delivery dates and numbers of Amiibo. Usually, transportation companies are the ones responsible for storage issues as well (which can be expensive).
Contrary to their position in the Supply Chain, Retail are usually the first to be contacted by corporate. It is their input that usually has the most on the number of supply being manufactured.
I already detailed that in the last recap.
Everythin in the supply chain depends on each other
Even though this is a somewhat straightforward supply chain, there is a limited ability to change it once it is in place. That is because how contracting works:
Contracting and Change Orders:
Contracts work on two phases, the initial contract, and during the contract.
In the initial contract phase, the contractors usually agree on relatively low terms. That is because of two reasons: because they would want a repeat customer, and because they might compensate when corporate asks for a change in the contract.
When a company asks for a “change order”, they are at the mercy of the contractor, who usually make it really expensive. Because at this moment, corporate exposes their “need” for that change, and they negotiate at a position of weakness.
The world of real buisness
Because of the nature of both contracting and the supply chain, Nintendo is not able to adjust only one contract, but the entirety of the supply chain. Hence, any change they suggest, is going to be too expensive for them to implement.
*- Did you save the earth from being dominated by an alien being older than time before reaching middle school? Bigboss0110 pays tribute to the Earthbound 4 who did do just that in the first Bloggers Wanted Response of this month.
The US had the most supply, and yet were the only place to experience a shortage
Imagine these containers being filled with Amiibos, and then imagine Somali pirates taking those Amiibos from you
As a Project Manager, Contracters are my bitches, until I need a Change Ordet in which case the roles are reversed
T- Why can't we all play in the same console? Asks visule. Preferrably on PC, he adds.
?- I am not entirely sure what The Travisionist is talking about, but I think its a videogame called Fran Bow or something.
F- I didn't initially want to "award" Sylveria Shini yet another failblog, but she obviouslt doesn't care. This fail is so that other learn what not to do when making a "conterversy" blog. 1- Stick around in the comments and add to the conversation, 2- Add more about your thoughts rather than just pointing at something an yelling "haah I got you", 3- Tell us why we should care about this. As it is now, this blog is a fail.
That's it for my eploration of the Nintendo Amiibo situation. As a mechancial engineer and project manager, I found it facinating dissecting the Amiibo supply chain. Howver, I find it even more facinating how people in the internet continue to spread around bonkers economical theories such as "false scarcity" and "investor attention".
Fact it, the US go more than 50% of all Amiibo shipments (meaning Nintendo recognized the US as prime consumer), and that still didn't cover demand while being enough for everywhere else in the world. It wasn't grand conspiracy; it was simply misjudgment of demand, and mostly for select figures.
In the future, I suspect Nintendo will produce similar numbers of Amiibo figures as demand starts to decrease. As I see it, a lot of the current demand ins simply unsustainable, and Nintendo lost money by not having enough to ride it. More people would buy less Amiibos in the future, instead of the collectors that are buying up all of the rare figures now.