Apple has created a closed ecosystem where it exerts control over nearly all parts of the supply chain, from design to the stores. Because of its volume and the synergies in this process Apple gets big discounts on parts, manufacturing capacity improves and saves on air cargo rates.
This operational edge is what enables Apple to cut costs and that the margin of their products is greater.
Innovating in the supply chain
Apple began innovating on the nitty-gritty details of managing the supply chain with the return of Steve Jobs in 1997. At that time, most computer manufacturers transported products by sea, a far cheaper option than air transport. But Apple, to ensure that new Macs arrived at their destination in the Christmas season of 1998, he paid $ 50 million just in air charges.
Similarly, when in 2001 the iPod was released, Apple realized that they could carry large amounts of music players on planes, making it the most economical way for direct shipping from Chinese factories doors consumers.
That mentality, paying exorbitant bills when necessary, and reaps benefits of increased long-term volume, has been institutionalized throughout Apple’s supply chain, and begins at the design stage.
When the time for production arrives, Apple has a great weapon, more than 80 billion dollars in cash and investments. The company planned to invest in in the supply chain, during 2012, 7.1 billion dollars and 2.4 billion in advances to suppliers.
The tactic ensures availability and low prices for Apple but sometimes limits the choices to others. Before the release of the iPhone 4 in June 2010, rivals such as HTC could not buy as many screens as they needed because manufacturers were busy filling orders from Apple.
Apple spares no expense to ensure the secrecy of pre-release. When the iPad 2 came out, the finished devices were packed in flat boxes and Apple employees monitored every handoff from the loading dock, airport, trucks and distribution centers to make sure they were not missing any units.
Apple’s retail stores give you a final advantage. Once a product goes on sale, the company can track demand by the store and adjust production forecasts daily. If it becomes clear that a particular product is going to end, Apple unleashes your team and high budgets are adopted to avoid the lack of stock.
Much of the enormous benefits of Apple due to this focus on operations, which will remain a priority for Cook.
“The new executive director is known to give colleagues copies of “Racing Against Time”, a book on how to use the supply chain as a strategic weapon in business.”