A Build-to-Order Production Strategy

Because of the different Treo customer base, after some learning the hard way, Handspring found it necessary to make a major change in its production strategy. The original Visor product line was sold to customers from Handsprings web site. This was measurable and consistent, making it very predictable. Then Handspring started selling to retailers who sold the Visor to consumers. This turned out to be much less predictable. Handspring would build the Visor product line to a sales forecast that sometimes turned out to be quite different from the actual sales.

Because of several inaccurate sales forecasts, Handspring wound up building inventory on some of the wrong products. This turned out to be a costly mistake, teaching Handspring that building inventory on a product that very few people buy can be very expensive. To lower this inventory risk on the Treo, the company moved to a build-to-order mode. This was feasible because most Treo customers were wireless phone carriers that bought products in bulk with a contractual commitment that stated exactly how many units they were going to buy. This move reduced Handsprings inventory risk significantly.