De geheimpjes van Apple’s supply chain

In mei 2011 was Brian Rauschhuber, tot voor kort directeur global supply chain bij Apple, te gast in Nederland. Rauschhuber gaf 25 jaar lang leiding aan de logistieke operatie van Apple. Dat bedrijf kon in de jaren negentig het hoofd amper boven water houden, maar Apple maakte de afgelopen acht jaar een stormachtige groei door.


Beste supply chain

Dat succes had enorme consequenties voor de logistieke operatie. Zo maakte Apple een transformatie door van een B2B naar een door e-commerce gedreven B2C distributiemodel. Die transformatie is goed verlopen. De afgelopen 4 jaar heeft Apple Computers volgens AMR Research zelfs de beste supply chain ter wereld. Rauschhuber ging in zijn verhaal uitgebreid in op de kritische factoren van de logistieke operatie. Duidelijk werd dat eigenlijk op alle onderdelen van de supply chain een goede performance noodzakelijk is om de top te halen en daar te blijven.


Logistiek bericht erover:

Het gaat dan bijvoorbeeld om de toepassing van moderne technologieën en efficiënte informatiesystemen, maar ook om de juiste partners kiezen, duurzaamheid, een goed personeelsbeleid en zorgen dat de supply chain snel en flexibel op nieuwe ontwikkelingen kan inspelen. Dat zijn bijvoorbeeld de opkomende markten in China en India, die de komende jaren enorm zullen groeien. “Daarnaast is de klanttevredenheid voor Apple van enorm groot belang. Klanten zijn niet geïnteresseerd in de 97 á 98 procent van de zaken die goed gaan, maar in de 2 á 3 procent van de dingen die fout gaan. Daarom zijn wij continue bezig met het verder reduceren van het foutpercentage en blijven we daar alert op”, aldus Rauschuber in mei 2011.


De laatste nieuwtjes

Op Bloomberg Businessweek verscheen deze week het artikel ‘Apple’s Supply-Chain Secret? Hoard Lasers: the iPhone maker spends lavishly on all stages of the manufacturing process, giving it a huge operations advantage’.
De auteurs  and  schrijven op basis van vele interviews met Apple watchers, partners van Apple en supply chain experts op Bloomberg Businessweek onder meer het volgende:


Operations as competitive advantage

Apple has a ompetitive advantage in operations. Apple has built a closed ecosystem where it exerts control over nearly every piece of the supply chain, from design to retail store. 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 and now a venture capitalist with VantagePoint Capital Partners. “They’ve taken operational excellence to a level never seen before.”

This operational edge is what enables Apple to handle massive product launches without having to maintain large, profit-sapping inventories. It’s allowed a company often criticized for high prices to sell its iPad at a price that very few rivals can beat, while still earning a 25 percent margin on the device, according to the estimates of Piper Jaffray analyst Gene Munster.

And if the latest rumors are to be believed, Apple’s operational expertise is likely part of what gives the company enough confidence to enter the notoriously cutthroat television market by 2013 with a TV set that would tightly integrate with existing Apple software like iTunes. The widespread skepticism over Apple’s ability to compete in such a price-sensitive market, where margins are often in the single digits, is exactly what people said when Apple got into cell phone.


1997: iMac

Apple began innovating on the nitty-gritty details of supply-chain management almost immediately upon Steve Jobs’s return in 1997. At the time, most computer manufacturers transported products by sea, a far cheaper option than air freight. To ensure that the company’s new, translucent blue iMacs would be widely available at Christmas the following year, Jobs paid $50 million to buy up all the available holiday air freight space.


2001: iPod

Similarly, when iPod sales took off in 2001, Apple realized it could pack so many of the diminutive music players on planes that it became economical to ship them directly from Chinese factories to consumers’ doors. When an HP staffer bought one and received it a few days later, tracking its progress around the world through Apple’s website.

That mentality, spend exorbitantly wherever necessary, and reap the benefits from greater volume in the long run, is institutionalized throughout Apple’s supply chain, and begins at the design stage. Ive and his engineers sometimes spend months living out of hotel rooms in order to be close to suppliers and manufacturers, helping to tweak the industrial processes that translate prototypes into mass-produced devices. For new designs such as the MacBook’s unibody shell, cut from a single piece of aluminum, Apple’s designers work with suppliers to create new tooling equipment. The decision to focus on a few product lines, and to do little in the way of customization, is a huge advantage.


Working capital: cash-is-king

When it’s time to go into production, Apple wields a big weapon: More than $80 billion in cash and investments. The company says it plans to nearly double capital expenditures on its supply chain in the next year, to $7.1 billion, while committing another $2.4 billion in prepayments to key suppliers. The tactic ensures availability and low prices for Apple and sometimes limits the options for everyone else.

Before the release of the iPhone 4 in June 2010, rivals such as HTC couldn’t buy as many screens as they needed because manufacturers were busy filling Apple orders. To manufacture the iPad 2, Apple bought so many high-end drills to make the device’s internal casing that other companies’ wait time for the machines stretched from six weeks to six months.


The role of suppliers

Life as an Apple supplier is lucrative because of the high volumes but painful because of the strings attached. When Apple asks for a price quote for parts, it demands a detailed accounting of how the manufacturer arrived at the quote, including its estimates for material and labor costs, and its own projected profit.

Apple requires many key suppliers to keep two weeks of inventory within a mile of Apple’s assembly plants in Asia, and sometimes doesn’t pay until as long as 90 days after it uses a part.

Not every supplier gives in. An executive who works with a major parts manufacturer says that Apple’s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins. After months of negotiations, the company declined a $1 billion payment from Apple that would have required the supplier to commit much of its manufacturing capacity.


New product introductions
A tightly orchestrated process that has been refined over years of new product introductions. For weeks in advance of the announcement, factories work overtime to build hundreds of thousands of devices. To track efficiency and ensure pre-launch secrecy, Apple places electronic monitors in some boxes of parts that allow observers in Cupertino to track them through Chinese factories, an effort meant to discourage leaks. At least once, the company shipped products in tomato boxes to avoid detection, says the consultant who has worked with Apple. When the iPad 2 debuted, the finished devices were packed in plain boxes and Apple employees monitored every handoff point in the supply chain to make sure each unit was accounted for.


Apple’s retail stores

Apple’s retail stores give it a final operational advantage. Once a product goes on sale, the company can track demand by the store and by the hour, and adjust production forecasts daily. If it becomes clear a given part will run out, teams are deployed and given approval to spend millions of dollars on extra equipment to get around the bottleneck.

Apple’s big profits are in large part due to this focus on operations, which is sure to remain a priority under Cook. The new CEO is known to give colleagues copies of ‘Competing Against Time’, a book about using supply chains as a strategic weapon in business. According to Martin, the logistics executive, Cook uses a catchphrase to hammer home the need for efficiency: “Nobody wants to buy sour milk.”

The authors conclude: ‘Apple plans to double spending on its supply chain, to $7.1 billion, continuing its focus on streamlining and controlling manufacturing’.




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