Without a comparison to the supply chain model used by others like Sony and Microsoft, I think saying Nintendo is "incompetant" or "diabolical" is a bit bullshit, and Polygon's suggestion that there's no 3rd option is yet another example of their caliber of "garme jurnalizm". There is a 3rd option, as pointed out in this thread: "conservative to the point of being willing to sacrifice an immediate sale". There's also "announced too late from release to change their production pipeline for a product they did not expect mass popularity for", but I think I said I need to say there. Back to looking at other hardware makers and their supply chain strategy...
Sony and Microsoft could very simply have the converse strategy of consistently over-shipping product, expecting everything they make to sell through regardless. There's actually some evidence to suggest this very possibility when you look at it.
For Sony, over-shipping would historically not been an issue for them. PS1 was popular, PS2 was super-popular... it's when you look at their less-popular product that you see the issue with the inverse of the Nintendo distribution model.
PlayStation Vita. Clearly, Sony believed this would be bigger than it actually was. Retailers were simply unable to off-load inventory. By the time the Vita slim came along in 2014, retailers weren't ordering any in any decent volume, which is why the models sold out, and most retailers you went to probably still had their stock from 2012 or 2013, at best. Sony stopped publishing 1st-party games for it after the first year, clearly showed no faith in the device very shortly after launch, yet it stayed on shelves in the west for years, and are still on some shelves now. In Japan, it turned into an exclusively visual novel device almost overnight, where it took PSP at least decent amount of years to get to that point. But the key point I'm making here is this: years after Sony gave up on Vita (even if not officially) stock for Vita was still sitting on shelves. And it's pretty clear that they produced more than they sold. By a wide margin.
To a lesser degree, the earliest PS3 models were on shelves a LOT longer than they needed to be.
"But Terrell", you say, "that's supposition, albeit relatively probable. Where are the hard facts?"
The silver bullet is their worst failure, the PSP Go. Price slashes, product "relaunches", giving away games... all in an effort to get the thing off of store shelves, in every region. Sony has been quoted as wanting it to boost PSP sales with the PSP Go. As I'm sure you're aware, they never got close to that, and even had to slash their forecast for PSP as a whole for the fiscal year it launched in, partly attributed to its miserable failure. In my experience, you don't "re-launch" a product unless you have inventory that you desperately need to move. And PSP Go never did. I could still see them eating up space on retail shelves all the way up until the Vita launch, in the desperate hope someone would buy them.
But naturally, no one says anything about that being a sign of "incompetence" or whatever word we're throwing around now, because over-stocking is a retailer-facing problem, not a consumer-facing problem, and has thankfully paid off for Sony in the past. I'd bet money that retailers were PISSED about the PSP Go, the Vita and even the early days of the PS3.
It seems pretty clear to me that Sony likes to ship product in volumes that would assume they believe they'll succeed, regardless of market data or product viability. Vita is a clear indication of Sony's reaction when they don't succeed: retreat from the market and blame it, not their own assumptions that they are ordained to succeed. So if the day ever comes where their flagship Playstation consoles have a sales crater that they can't crawl their way out of.... oh, the fallout.
So we have a conservative supply chain with Nintendo and an overly-optimistic supply chain with Sony. Neither one is good, but one gets the bulk of the shit-talk because one of those more directly impacts the consumer. But both business practices have downsides, and there is no such thing as striking a perfect stock balance, unless it's by accident.