Evolution Of The Xbox Supply Chain

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Microsoft had made some changes in the supply chain in production of the original Xbox and Xbox 360. These changes were as followed: • Microsoft used Flextronics and Wistron as its EMS suppliers for the original Xbox. For the Xbox 360, Microsoft added Celestica, a third EMS supplier, to help with production of the consoles. Microsoft planned to sell 2.75 – 3.0 million Xbox 360 consoles within 90 days of launch. By expanding the number of EMS suppliers, Microsoft wanted to meet production volume requirements and help support the Xbox 360 rollout globally. • For the original Xbox, Flextronics recommended Microsoft to manufacture the Xboxes in China to minimize labor costs. But Microsoft wanted to build the plants close to customers due to shipping concerns and replenish the Xboxes more quickly once they released the Xbox consoles in the market. Flextronics manufactured its Xboxes in industrial parks in Mexico (for sale in North America) and Hungary (for sale in Europe). The co-location of Flextronics at an industrial park minimized shipping costs and improved information flow between Flextronics and its vendors. Shortly after Microsoft launched its original Xbox in 2001, in 2002 the company had to reduce its Xbox price from $299 to $199 to match Sony’s price of the PS2 console. Therefore, Flextronics moved the production from Hungary to China, where labor costs were low in this country. For the Xbox 360, Microsoft would use three EMS suppliers to produce the Xbox consoles in China to minimize the labor costs and to take advantage of the location of these firms proximity to one another. • Microsoft used an in-house designed for the original Xbox which the Japanese users had criticized the original Xbox for its unattractive appearance and large controller size. For the Xbox 360, Microsoft outsourced the design to Astro Studio in San

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