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Apple's Supply Chain Secret

businessweek.com

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Re: Apple's Supply Chain Secret

#61

Post by cousin_it »

forgottenpaswrd wrote: post #47
bravura wrote: post #40

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

Just in time: http://en.wikipedia.org/wiki/Just_in_time_%28business%29 Inventories are buffers, in an idealistic scenario(perfectly efficient) we don't need them. I order something, they make it and they give me instantly, no need to store it). In reality we need them, but Apple have very efficient logistics that make them minimal, compared with other companies, that can't control as much as the supply chain as Apple…

So to simplify even more, Apple doesn't have to maintain "large, profit-sapping inventories" because they can just force their suppliers to do that instead?

Re: Apple's Supply Chain Secret

#62

Post by padobson »

I think Apple's supply chain management is a greater competitive advantage than their product design.

There are many factors beyond the quality of product that go into a purchasing decision - things like hype, accessibility, and most importantly, price.

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.

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 ).

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.

Re: Apple's Supply Chain Secret

#63

Post by idspispopd »

nailer wrote: post #17

> Most of Apple’s customers have probably never given that green light a second thought 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).

The first time I saw it I pulled out a triplet magnifier to see what was going on. I've got a few great shots of the laser pattern if anyone is interested.

Re: Apple's Supply Chain Secret

#64

Post by bigiain »

kgermino wrote: post #26
dotBen wrote: post #23

Earlier quoted context omitted.

Same here. Once I figured it out, I wondered why they don't ever use the same technique to expose the Apple logo on the lid of the laptop - so that the lid is perfectly flush/clean when the screen is closed but the Apple logo is shown during use. ...now I know the answer: the lasers are so expensive and in such short supply it would presumably create a bottleneck in the production - esp given the surface area of the…

Not to mention that, while it would be cool and notable (and maybe worth it for that alone) making the logo invisible when the computer is turned off eliminates a marketing opportunity. The simple Apple logo against a plain backdrop provides a clean advertisement for Apple. Removing the logo removes the distinctiveness of the computer when it is turned off. Also, I'm not sure how the computer would look without a log…

"The simple Apple logo against a plain backdrop provides a clean advertisement for Apple. Removing the logo removes the distinctiveness of the computer when it is turned off."

It still took them a while to put them on the right way up. The first few laptops they sold with the Apple logo on the lid, they were oriented so they were "right way up" for the user when the lid was closed. That made them all upside down in all those tech conference shots from the stage...

Re: Apple's Supply Chain Secret

#65

Post by binarray2000 »

OK...I cheer to so many things Apple does regarding operations. But when I read

Apple [..] sometimes doesn't pay until as long as 90 days after it uses a part [...]

I think only "lame". With $80B and 40% margin, company with that reputation...

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.

No, sorry. It's lame.

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?

Re: Apple's Supply Chain Secret

#66

Post by absentbird »

nknight wrote: post #36
[deleted] wrote: post #33

Earlier quoted context omitted.

[deleted]

Pop-Tarts are a cheap, readily-accessible, easily-consumed source of calories with a long shelf life that most people will at least tolerate. They're nutritionally incomplete, but they will help keep you alive and functional in the short term. Most people don't stock up on MREs and survival bars, nor even have a clue where to start. Under such circumstances, it's both expected and reasonable that they reach for a fam…

I remember hearing an anecdote many years ago that when food supplies where being dropped over Afghanistan it was the pop-tarts and peanut-butter that were the most popular.

I just looked into it and I the only information on their popularity I could find was that they are often sold on black-markets. Source: http://www.foreignpolicy.com/articles/2011/10/10/stuff_we_do...

Re: Apple's Supply Chain Secret

#67

Post by MichaelApproved »

binarray2000 wrote: post #65

OK...I cheer to so many things Apple does regarding operations. But when I read Apple [..] sometimes doesn't pay until as long as 90 days after it uses a part [...] I think only "lame". With $80B and 40% margin, company with that reputation... 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 lo…

Weigh that with times that they pay in advance. It's a case by case bases and I'm sure they're not late with payments. If they wait as long as 90 days, I bet it's because that was part of the business agreement they made with the manufacturer.

Re: Apple's Supply Chain Secret

#68

Post by MichaelApproved »

nailer wrote: post #17

> Most of Apple’s customers have probably never given that green light a second thought 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).

"Each machine typically goes for about $250,000. Apple convinced the seller to sign an exclusivity agreement and has since bought hundreds of them[...]"

That's ~$25 million for just 100 of those lasers. If they bought hundreds of them, that means they paid tens of millions or even over $100 million just for that light effect.

Re: Apple's Supply Chain Secret

#69

Post by MichaelApproved »

wisty wrote: post #43
bravura wrote: post #40

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

Nope. Apple agrees to buy 1 to 5 million ipod screens from a supplier, at a $10 per screen (totally made-up figure). They say they want boxes of 100,000 units, delivered within 1 week of whenever they feel like asking for them. So Apple doesn't need a warehouse, they get their supplier to pay for that. They also have an identical deal with another supplier, so they can play them off against each other if they need to…

"So Apple doesn't need a warehouse, they get their supplier to pay for that."

That wouldn't make things cheaper since the cost of storage would simply be passed on to Apple by the manufacturer. The point being made is the supply chain has everything built just-in-time with minimal storage needs across the board.

Both Apple and the manufacturer wouldn't be storing much of anything. Everything is built in time to ship.

Re: Apple's Supply Chain Secret

#70

Post by AllenKids »

cousin_it wrote: post #61
forgottenpaswrd wrote: post #47

Earlier quoted context omitted.

Just in time: http://en.wikipedia.org/wiki/Just_in_time_%28business%29 Inventories are buffers, in an idealistic scenario(perfectly efficient) we don't need them. I order something, they make it and they give me instantly, no need to store it). In reality we need them, but Apple have very efficient logistics that make them minimal, compared with other companies, that can't control as much as the supply chain as Apple…

So to simplify even more, Apple doesn't have to maintain "large, profit-sapping inventories" because they can just force their suppliers to do that instead?

Yes and no.

Some of the inventories translate in to parts and bolts sat in the warehouses of Apple's suppliers.

But more of the inventory reduction comes from precise demand prediction and great control of the whole chain from production to delivery. In short, Apple works with its upstream suppliers to secure the ability to manufacture and transport then dispatch tens of millions of gadgets from scratch(read: silicon and aluminum) in weeks and maintain the quality and price point. So many things could go wrong and Apple would be left with nothing to sell. for example iPad's channel inventory is only 4-6 weeks deep, and that's for the big box retailers, for Apple's own brick and mortar store it's even less. It works for Apple instead of disastrous through unexpected manufacturing difficulties and natural disasters or accidents because of Tim Cook's ironclad control.

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