In anticipation of a new product launch, production begins. Sales teams merge prior commitment from stores with historical data (combined with engineering estimates on absorbing tooling costs) to estimate number of units to be produced.
As the product launches, orders begin rolling in through all available channels. A phantom demand is created due to media hype, special pricing in stores, and poor future projection.
An actual shortage of product availability occurs, due to initial misunderstanding of market trends and demand. Channel lags, however, exhibit this shortage much later than when it actually occurs.
True customer demand is found roughly halfway between the number of orders received and the number of orders produced.
As the channel struggles to keep up, production is increased, but it is too late; orders have dropped into the negative numbers as stores return units. Over-production results in a huge excess supply and large financial loss.
