Apple's Supply Chain Secret

OK...I cheer to so many things Apple does regarding operations. But when I read<p>Apple [..] sometimes doesn't pay until as long as 90 days after it uses a part [...]<p>I think only "lame". With $80B and 40% margin, company with that reputation...<p>Manufacturing is hard. And very expensive. Organize processes, buy machines and raw materials, pay the labor. And then comes Apple and gives itself a loan (basically, it's a loan) from a manufacturer.<p>No, sorry. It's lame.<p>PS - Just as a perspective: I help part time in a company my father and brother own (retail and manufacturing company). Even thou other businesses in the industry and the country do the same thing as Apple, they don't. I'm disgusted by that practice here...so, why not be disgusted by it when Apple does it?

I think Apple's supply chain management is a greater competitive advantage than their product design.<p>There are many factors beyond the quality of product that go into a purchasing decision - things like hype, accessibility, and most importantly, price.<p>Apple never had much a problem with great design or building hype, but the real reason for their success over the last 15 years has been their ability to provide customers better access to their products and to provide them at more competitive prices.<p>The iPhone is ( by most accounts ) a superior product to the Blackberry. However, no one was going to buy an iPhone for $900, and without this impressive supply chain, Apple wouldn't be able to get the profit margins they want at $600 ( or $200 subsidized, which is also supply chain management ).<p>Product is important, and as a culture that builds things, HNers tend to focus on that ( the green light conversation in these comments being proof of that ), but all the logistics of how a product is delivered are just as important as the product itself - and maybe more so - in building a successful company.

&#62; Most of Apple’s customers have probably never given that green light a second thought<p>Most, I'm sure. But personally the first time I saw light shining through my metal laptop, I was amazed, a little delighted, and slightly confused about how they were doing it (because, as the article mentions, the holes are too small to see).

&#62; When the iPad 2 debuted, the finished devices were packed in plain boxes and Apple employees monitored every handoff point—loading dock, airport, truck depot, and distribution center —to make sure each unit was accounted for.<p>When I went to WWDC10, I was struck by the small detail of the conference security wearing black polos with the Apple logo and "Security" under the logo. At most conferences, the security is wearing jackets straight out of action movie central casting (e.g. "SECURITY"). I thought that was a nice small detail - to attire the rent-a-cops in Apple gear. But, now, reading this, I think they may have been full time Apple security staff. Security is paramount.

Seems to me to be an extension of the 'People who are really serious about software should make their own hardware.'.<p>Say 'People who are really serious about making and selling a product should make their own production, supply and store chains' or 'People who are serious about their product should take ownership of all stages of that product.'

What is argued in this article was argued much earlier this year on Quora.<p><a href="http://www.quora.com/Apple-Inc-2/What-would-be-a-good-use-of-Apples-86-85+-billion-in-cash/answers/612608" rel="nofollow">http://www.quora.com/Apple-Inc-2/What-would-be-a-good-use-of...</a>

This is a great proof of the strategic advantages of totally controlling your operations. In the start you are at disadvantage, but if you manage to gain steam you end up with a competitive advantage that is almost unfair.<p>In Apples case this strong position is not only visible in the supply chain management but it is clearly present in all their stack. Another example is their supremacy in software.<p>I think that this is one of the great lessons from Steve Jobs, takin your time to control and develop everything internally it is feasible competitive approach.

I <i>very highly</i> recommend listening to a couple of episodes of Critical path if you care about Apple's supply chain strategy. I was amazed at the level of detail in which this was discussed (and going through this article I couldn't help but think that part of the information in it is due to the analysis on that podcast):<p><a href="http://5by5.tv/criticalpath/10" rel="nofollow">http://5by5.tv/criticalpath/10</a> and <a href="http://5by5.tv/criticalpath/11" rel="nofollow">http://5by5.tv/criticalpath/11</a>

Interesting parallel to walmart.

"This operational edge is what enables Apple to handle massive product launches without having to maintain large, profit-sapping inventories."<p>Could someone explain what that means more specifically? That they don't have to have a large stock?<p>Doesn't this controvert the earlier statement: "Because of its volume ... Apple gets big discounts on parts, manufacturing capacity, and air freight."

These kinds of articles were novel 10 years ago when Apple was coming back and was doing so while beating Dell at supply chain optimization and that was, justifiably, a huge story. Ironically, I read them in BusinessWeek back then, too.<p>Now, the ODM/OEMs have become brands and the folks who once were the main participants in Apple's supply chain are now directly competing with Apple. Breathless articles aside, are we really sure that Apple's supply chain is much shorter/faster than those of Lenovo, Dell, HTC, Sony or, holy hell, Samsung?<p>I also have a hard time seeing how $25M worth of lasers is a supply chain innovation; most other manufacturers would probably prefer to make the laptop for $6 (amortization) less. I have a ThinkPad T520 [with Linux] because it's rugged, comfortable (no wrist razor), has a TrackPoint (I know, I know, but I love it) and about $1200-$1500 less than a comparable Macbook Pro. Clearly, the majority of hackers disagree with me, so I'm convinced that 90% of Apple's incredibleness is their marketing (not ads, but understanding how to design and build excellent products which are very well targeted at their audiences).

Speaking as a contractor, I have a bias/tendency to eventually "fire" any client that takes too long or is too sketchy about paying me. Too much risk on my part. I work, I get paid. With all bullshit set aside, it should only take on OOM of about 1 minute to write a check, put in envelope, put stamp on it, and put in outbound mailbox. Anything longer than that is self-imposed bureaucracy, not physics.

And yet we have to wait 2 months to get MBAs here in Slovenia (due to supply shortage) ...

They also don't have to pay for storage costs which eats up money for their competitors!

<i>&#62; According to Martin, the logistics executive, Cook uses a catchphrase to hammer home the need for efficiency: “Nobody wants to buy sour milk.”</i><p>That's a bit of a floppy ending for an otherwise excellent article.

Interesting article, but this quote is absolutely sickening:<p>&#62; Because of its volume—and its occasional ruthlessness—Apple gets big discounts on parts, manufacturing capacity, and air freight. “Operations expertise is as big an asset for Apple as product innovation or marketing,” says Mike Fawkes, the former supply-chain chief at Hewlett-Packard (HPQ) and now a venture capitalist with VantagePoint Capital Partners. “They’ve taken operational excellence to a level never seen before.”<p>Crediting a company that until <i>very recently</i> employed slave labour with "occasional ruthlessness" and "taking operational excellence to a new level" is just disgusting.<p>There is still no excuse for that. They should be grovelling on the ground begging for forgiveness, not being commended for it!!<p>At least thanks to this article we know how that situation came to being... Just a little harmless "occasional ruthlessness".