In previous articles of this series, IHS touched on selecting the right reference platform for specific design requirements and then how to use that reference platform to maximize the number of addressable markets through localization features. Now that the reference platform has been optimally utilized to design products and get them commercially viable in multiple markets, the next challenge for the OEM or ODM is how to best efficiently deliver those products into the markets that were successfully penetrated. On the surface, it might appear that this is a straight forward task. Simply respond to the orders placed by manufacturing the number of phones that were ordered, testing them, provisioning them and finally delivering them. While this is an accurate depiction of order acceptance and fulfillment, it is also an oversimplified one. When the practicalities of reality such as inventory management, forward and reverse logistics and customer support are layered on top of this theoretical scenario, unique challenges arise that have material impact on the profitability of the products and ultimately the OEM or ODM that designed them. In this last and final issue in the series, IHS will explore what added capabilities a reference platform supplier might bring to bear to help address these challenges.
Provisioning: Not Only Last Mile But Last Centimeter
Provisioning does not only entail allowing the device to access a given network. It also includes the loading of settings, applications, services and user interfaces specific to a particular mobile network operator. Perhaps the most important feature a reference platform can contribute to minimize channel and delivery costs/risks is in helping to push out provisioning of the device as close to the customer as possible up to and including at the point of sale.
Most devices require a provisioning entity (sometimes it is an internal function of the mobile network operator or the OEM/ODM but usually this role is played by third party logistics companies) using specialized software and hardware tools to load provisioning parameters prior to a device getting shipped to the end market. Once provisioned, the device becomes a unique stock item and remains so unless shipped back to the provisioning entity to be re-configured. This creates a system which requires the management of multiple inventory items and reduces flexibility in meeting rapidly fluctuating customer demand. This reduction of flexibility further results in having to also maintain relatively high levels of inventory of an expensive item such as a smartphone – none of which are ideal situations for optimizing channel efficiency and supply chain profitability. In fact, regardless of how the provisioning is performed (internally or externally) channel costs have been estimated to be as much as 15-20% higher due to this step in the process towards delivering product to the end customer. Not only does it increase costs, it also introduces multiple additional steps in the supply chain consequently increasing the risk of failure at any of the steps.
As such, the ideal solution is when a reference platform can enable provisioning as close to or at the very last instant at the point of sale. An example of a reference platform that claims to enable such a capability is Qualcomm’s Global Pass with their SIM based provisioning capability. In that type of a solution, Qualcomm indicates that a device based on the Global Pass reference platform can accept all provisioning parameters for various potential operators and networks from a preloaded SIM. Once the SIM is inserted and the mobile network operator is selected, the appropriate provisioning configuration is then downloaded to the device at that time. If it functions as advertised, the device, by taking advantage of such a solution or any other reference platform that is able to provide a similar capability, will no longer require a provisioning entity. Aside from addressing the aforementioned challenges, other benefits that optimize design and supply chain flexibility and viability could be derived including but not limited to the following:
- Enable more rapid resolution of customer issues by reducing cost and complexity of replacing devices for any reason.
- Direct shipment of products from OEM to retail channel without the need for intermediate provisioning steps
- Increased inventory flexibility by delaying the point at which a unique stock unit is defined
- Also enables those responsible for inventory management to move products around to meet spurious high demand or short lead time requirements
- This flexibility enables distributors and retailers to commit to higher volumes
This last point is attractive to retailers as it allows them to aggregate purchasing power to a smaller number of devices while mostly keeping SIMs as the inventory item at most risk instead of the higher priced devices themselves.
Figure 1. Handset Value Chain
Design One, Sell Many
As dynamic and rapidly evolving as the smartphone market is, there are and will continue to be many options when it comes to reference platform suppliers. Over the last 3 articles in this series, IHS has explored various facets of reference design solutions with the express intention of providing insight into the many nuances that must be considered when assessing potential partners and suppliers. This becomes even more important as the design cycles continue to shorten having progressed from a typical 12-18 months to a more dynamic 3-6 months with life cycles also experiencing a similar contraction. That being said, the exciting part of reference platform solutions is that as networks and consumers both continue to mature, built in capabilities will only continue to expand allowing reference design suppliers to not only provide time to market advamtages but also address the many challenges that will need to be overcome to help put smartphones into the hands of the next billion or 3 of subscribers globally.