The Beer Game -or- Why Apple Can’t Build iPads in the US

You can make anything work given enough money. It will cost them substantially more to manufacture the devices in Brazil, but this may be more than offset by lack of import duties and the tax deal.

There would be positive effects from Amazon being closer to their suppliers, but there would be a huge negative being further from their customers. The main reason I order from Amazon is that everything gets to my door in 2 days, if they are shipping to me from China that value proposition is a lot harder to offer.

> The American auto bailout was a purely political play to save the unions who supported the Democrats.

Are you kidding?

http://www.politico.com/news/stories/1208/16740.html

I think there's another aspect to this, which is the fact that Apple is not primarily concerned with the US market. 80% of Apple's most profitable product, the iPhone, are sold outside the USA.

Even if you could get cost parity in production, there's no real reason why Apple should move manufacturing back to the US, just because they started off as an American company.

From a practical perspective, it seems to me that the Beer Game rests in three parts: in imperfect information, time delays, and most importantly, independence of agents. If each member of the supply chain knew consumer demand perfectly far enough in the future, they could compensate. Likewise, if each member of the supply chain could instantly scale their process, they could compensate. The key, though, is that even if you perfectly forecast, or can instantaneously process and ship your stock, everyone down the line from you must do so as well.

From what I gather, having the supply chain in China or Brazil addresses the second two problems. The advantage of China isn't just cheap labor, it's cheap, readily available labor. A change in demand (like switching the screens on the iPhone) can be met relatively easily, which partially solves the time delay problem. And the more of the supply chain you hold in one geographic location makes shipping time faster. The independence of agents issue gets addressed when Apple can coordinate the actions of each member of the supply chain better. I imagine this is, for the moment, easier in China than the US.

Where I part ways with the article is the bail-out. The US labor pool doesn't seem elastic enough to address the time-delay part of the bullwhip effect. If Foxconn suddenly had a temporary drop in demand and had to lay off thousands of laborers, it would not be a huge issue. If they need to hire them again, zip, pretty quick. Likewise if they need to request huge overtime commitments because they can't train new workers fast enough, no problem. US workers are particularly averse to uncertain job prospects, perhaps with good reason, but with the effect that scaling work (and wages) up and down is less tenable. And perhaps this is where the unions come in - the overtime payments from forcing workers to work more hours to meet demand is much more costly in a union than a non-union environment, for better or worse.

Edit: I've just now recalled that one summer, I worked for a large bread factory. They loved hiring college students in the summer because they knew that they didn't really care about staying in the union. Summer demand for baked goods skyrockets. A plant manager showed me how they were lagging behind demand by something like 2 million dollars / week (I've forgotten the exact number, but it was staggering to me). In his words "you can imagine what that does for business." But they couldn't just start hiring more workers, or scaling up the plant, because then they'd have more workers than the knew what to do with once the winter hit, when people were working 20-30 hrs/week. And this is one case where almost the entire supply process was in the US, minus wheat they might have gotten elsewhere.