Evolution of the Xbox Supply Chain

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Evolution of the Xbox Supply Chain

In July 1999, Microsoft announced its expansion to invade the gaming hardware market aiming to provide a console that would enable the gamers to push their skills and competency to new limits. This new console, Xbox, is much beyond what was then offered by fearsome competitors like Sony and Nintendo. Two years later, Microsoft had to work its supply chain to line up and deliver large volumes of high quality products to the consumer market in time for the 2001 holiday season. Gaining in popularity since its launch in 2001, the Home and Entertainment Division (HED) of Microsoft set its sights on developing the next-generation gaming system, naming it the Xbox 360. This time, Microsoft had strategically scheduled the launch of its new generation gaming system a year prior to Sony’s Playstation 3, which meant that the Xbox would have to be ready to hit shelves in the fall of 2005. As Microsoft began the Xbox 360 project in late 2002, it started putting together a worldwide team consisting of well-known computer technology corporations like IBM and ATI technologies. In order to reduce costs, both ATI and IBM agreed to let Microsoft own the designs of the chips which allows them to produce the chips anywhere.

EMS companies like Flextronics and Wistron were partners ever since the first Xbox. A new relationship between Celestica and Microsoft was formed later in the Xbox 360 to assist production and handle the incremental volume and supply to other untapped markets. All three plants are located and concentrated in China in order to minimize costs. The disadvantage of having plants located in China is that it wouldn’t be ideal shipping wise since Microsoft wanted to be able to replenish supply quickly in order to meet its consumer demand. Microsoft saw this issue when “Sony had experienced delays in replenishing U.S. supply, which had to be shipped from Asia.” Together in the three big factories of Flextronics, Wistron and...
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