Here we go again...

http://www.vgchartz.com/forum/thread.php?id=13950

And what I said on 1/9/2008:

(sigh) All this silly talk about stockpiling.

Please keep in mind that a slow boat from China takes about 4-5 weeks to get to the U.S. So larger shipments were probably diverted in October and part of November to arrive in time for the U.S. holiday rush. (It also didn't hurt that Japan appeared to have enough consoles at that time.) As the holidays grow closer, Nintendo starts paying more to air freight the consoles into the country which takes about 7 days time. Using both methods of shipments, you can easily get a massive amount of inventory at once. But if you take all of the units that you would have shipped via ocean and instead shipped them via air, it means that you'll run into shortages until the ocean shipments start arriving again. (This is why the DS has run into problems each year after the holidays.) I wouldn't be surprised to see a similar situation for the Wii at the beginning of this year.

As MS has shown, there appears to be about a 1M unit stockpile that retailers are willing to hold onto at any one time. So Nintendo doesn't need to worry about demand until they can fill retailer stores and warehouses. So even if the Wii only sold 300K per week, it would still take Nintendo months to produce enough units to satisfy retailer demand. And once that was satisfied, I'm sure Nintendo wouldn't mind building up their own warehouses with units for the fluctuations in demand.

What I foresee happening, however, is that Nintendo will once again meet demand in Europe fairly early in the year (many have commented that the Wii wasn't very supply constrained in Europe and other territories in 2007). Japan will take a little longer since demand has actually picked back up with Wii Fit and will see another spike with SSBB at the end of this month. The U.S. will continue to be the wild card. I didn't think there would be shortages throughout 2007. And I'd like to believe that Nintendo will finally be able to make enough to satisfy demand in 2008 for at least a few short months over the summer. But with consoles still hard to come by and some big games coming down the pike, I think we could see a repeat this year as well.

The question is not: does Nintendo at times withhold some units in order to meet the increased demand during times like Christmas, or the release of a major game.

Of course it does. The real stockpiling myth that needs dispelling is the idea I've heard more than once that Nintendo manufactures or releases below its capacity in order to create a bigger "buzz" about its console. That, in fact, Nintendo could easily meet the demand if it so chose, but chooses not to as a business strategy.

I think that this version of the stockpiling myth is silly on its face, because every time Nintendo doesn't sell a console to a prospective buyer due to scarcity, that same buyer might go to Sony, or MS, and might not come back again. Nintendo wants everyone who wants a Wii to get one.

At the same time, Nintendo doesn't want to start producing a million Wiis a month, because the capital investment would be too great to get production to that level, and they'd soon be left with a huge stockpile of unsold Wiis, plus associated storage costs, etc. They have to try to figure the optimal level of production -- neither too big nor too small -- and they have to make changes to overall production levels many months in advance. Industry can be slow moving, and the current production levels are based on operational decisions made probably half a year ago. This is why there continue to be shortages, and why Nintendo must stockpile during select seasons. Too few Wiis during January is a problem, but too few during December is a riot.