By Stacy Hylton
Picture lines of people camped out in front of sleek, modern glass-fronted stores; anxious for their first hands-on encounter with the newest Apple smartphone. From Singapore to Seattle and cities across the globe, this has become a familiar scene each time the chief wizard behind the Apple curtain releases their creations to the public. It has been nearly two months since Apple introduced their newest products: the iPhone 6, iPhone 6 Plus and the Apple Watch, and the tech giant is on track for more record-breaking sales.
Apple’s innovative technology, design and world-class marketing have created loyal customers who have made their products some of the most iconic in history. But there is another aspect to Apple’s success – outstanding supply chain management. In fact, Apple’s supply chain has been ranked #1 by Gartner, five years in a row.
Apple is a logistics success, but repeated annual success doesn’t happen by accident.
If there were an app for logistics success, Apple would prove the hottest download around. The aforementioned Gartner ranking illustrates that Apple has more to offer than great products. They have demonstrated an unprecedented ability to get their products to market quickly and efficiently.
Focusing on Doing One Thing Really Well
While Apple certainly does more than one thing, they do have a relatively small variety of products. This is a departure from how things looked in 1997 when the late Steve Jobs took over at Apple. Jobs drastically reduced the number of products offered by the company from 350 to just 10. It was a bold move, but in terms of managing the supply chain, it was very impactful.
Today’s current number of Apple products is just five with 15 variations of each (not counting memory variations). Those products share many common components which further streamlines the supply chain.
Technology at Work
It’s no surprise that a company known for innovative technology would embrace the use of technology in managing its supply chain. Apple does an outstanding job in this area. Through supply chain monitoring technology, Apple can divert products from assembly origin in China to wherever it is needed based on sales. This is a good example of the value that can be derived by utilizing available software to monitor the movement of cargo. Knowing where your inventory at all times allows for continuous adjustments based on need.
There are some 200 suppliers providing some 97 percent of the materials used in Apple’s manufacturing process. When you consider Apple’s size, this isn’t a particularly large number. By keeping the list relatively small, Apple is able to guarantee their suppliers certain production volumes in terms of materials purchased to meet their demands. This goes a long way toward building strong relationships for this list of exclusive suppliers. Stronger relationships also mean that Apple is able to maintain a close control of standards. The company has a supplier Code of Conduct and Supplier Responsibility Standards which are intended to ensure that suppliers follow Apple's principles and values. Of course, it also means that Apple has considerable leverage in negotiating contracts with their suppliers.
Securing Air Space
In 1997 when the iMac was released, just in time for the holidays, Steve Jobs cornered so much of the available air freight capacity that Compaq, a chief competitive rival, was unable to ship their own goods in time for holiday shopping. This tactic serves Apple so well that more than a year ago a spokesperson for the International Air Cargo Association said, “The new iPhone launch is going to be a massive boost to air cargo.” This proved to be accurate. When the latest iPhone 6 release took place in August, nearly all air capacity was booked for more than two weeks from China into the U.S. Final numbers are still forthcoming, but August air freight volumes increased by 20 percent. This strategy has worked for two reasons. Apple has ensured the space needed to move their product, and at the same time they effectively prevent competitors from moving their handheld devices until later in the season.
More than four million iPhone 6s were sold in pre-order within the first 24 hours alone. In the first quarter of 2014, Apple marked the sale of the 500 millionth iPhone. With Apple CEO Tim Cook’s eyes set on China as the largest market for Apple, the stat certainly leaves room for Apple aficionados to speculate how long will it take for the billionth iPhone to sell.
One bet is likely, though. In the end, Apple will still have a well-managed supply chain to boast.
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Original text appeared in the January-February 2012 issue of Breakbulk Magazine