Device supply channels vital link in distribution chain

Editor’s Note: This article is an excerpt from RCR Wireless News’ May Special Edition, “Enabling the Mobile Revolution: Mobile Chips, Devices and Accessories.” The 80-page special edition is available here.
The wireless devices supply chain – getting a handset design concept from the engineering vision into the hands of the consumer – is an increasingly complex production taking place across a world stage punctuated with a variety of moving parts and pieces.
Trends in the industry are pointing to last-mile customization as operators worldwide try to distinguish their products and highlight their services from the rest of the pack. Going forward, this pairing of the right packaging with the right hardware and the right colors, materials and finishes (CMF) will move beyond the hardware to include the right software that best matches the hardware to optimize things like battery life to make the best device for that market segment, according to two experts in the field.
“Cellphones are expensive devices,” said Doug Pasquale, senior VP of supply chain solutions at Brightpoint Inc. As such, operators want to manage their inventory so they have access to the right number of devices in the right locations at the right time. Indianapolis-based Brightpoint acts as a liaison between the device manufacturers and the operators to get those devices into the sales channel. The company said it handled 84 million devices in 2009, and an example of its reach can be seen from two recent news items: Brightpoint was recently named exclusive distributor for HTC Corp. devices in Portugal and for mobile satellite services provider Inmarsat in Slovakia. The distributor has facilities in the United States – in Indianapolis and Plainfield, Ind.; Louisville, Ky.; and Miami – and operates in 27 countries. “Our goal is to streamline the supply chain process from the plant in China to the consumer.”
Industry trends
Handsets contain a lot of the same core components, said Joe Cufari, VP of marketing and VP of advanced devices at Personal Communications Devices. PCD acts as a bridge between operators and handset makers, handling inventory logistics, marketing and placement. PCD was formed when UTStarcom sold the business to private-equity investors in 2008, but the company has been working with Asian handset makers for about 30 years. “We work closely with tier-one, -two and -three carriers to make sure they are buying phones that make sense.”
Because so much of the devices internal components are the same, two trends are taking place at the handset level near the end of the supply chain. First, operators are doing a lot of customization at the end of the value chain, Pasquale said. Packaging and branding take place at the end of the build cycle for the device. The other trend is that software inside the handset becomes a differentiator, Cufari noted.
Carriers and handset manufacturers are under increased pressure as the timeframes for bringing new products to market have shortened considerably, Cufari said. While many subscribers are still under two-year contracts in the United States, customers are being compelled to replace their existing handsets as new devices launch. “It wasn’t that long ago that devices weren’t intriguing enough to compel me to pay full price for a new one. But that’s changing,” he noted. For example, HTC introduced the Droid Aeris phone in November and in May introduced the HTC Incredible.
As phones become more complex, the operator needs to make sure that the right chip is being used to power the amoled display, Cufari said. Further, that powerful display now needs a powerful battery to power it. That powerful battery will be bigger, so the CMS unit will have to come up with a funky material to house the battery. And if the CMS team wants a rubberized back on the handset so it doesn’t slip when someone places it on a vehicle’s dashboard, that needs to be taken into account as well.
Electronic readers have been quick to get to market because they are less complicated than handsets, he noted. E-readers can house big batteries that can last for weeks and don’t require the same large colored displays of smartphones and netbooks, Cufari noted.
Once the devices are manufactured, branding and packaging like the plastic art cards that tout the device need to be added to the product before it is shipped, noted Brightpoint’s Pasquale. Depending on the customer, handsets can be routed via air (which is faster but more expensive) or on the ground (longer but cheaper.)
Industrywide changes
Increasingly, wireless operators and big-box retailers are demanding visibility into the entire supply chain not only to increase sales, but to manage costs. Companies – whether operators, big-box retailers, resellers or direct-to-consumer sellers – want to know what is happening with their inventory at the point of sale, Pasquale said. They want to know what product is hanging on the hook so they can trigger replenishment of that product at the right time.” Accessories being sold need to match the devices they are designed to attach to. As such, many retailers are starting to share information via electronic data interfaces, where the retailer and the distributor share files back and forth all day, Pasquale said.
Companies can save millions of dollars managing their inventory correctly, Pasquale said. “You don’t want to buy too much of a wrong SKU.”
In the supply chain business, each deal is a custom contract, Pasquale said. End users who buy their handsets online want their phone the next day. Big-box retailers like Wal-Mart Stores Inc. are using RFID chips to track inventory. National retailers want pallets of product delivered from Brightpoint’s distribution centers to their own distribution centers.
Reverse logistics is gaining increased attention as carriers realize the value of today’s mini-computing handsets. “If a phone breaks, you need to replace the part and get that handset back into the hands of the consumer,” PCD’s Cufari noted. Recycling is becoming an issue, again, especially as consumers replace their handsets faster than they ever have before. Refurbished phones are big business, too.