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The Secrets of Apple’s Supply Chain

As the former supply chain chief of Hewlett-Packard says, Apple has “taken operational excellence to a level never seen before.” In an article for Bloomberg Business, Adam Satariano and Peter Burrows talk about what goes into such smooth operations. Can this success be mimicked?

An Apple a Day…

Essentially, Apple has created a “closed ecosystem” that allows it to control every aspect of its supply chain, making the competitively low price of the original iPad possible. The seeds of this ecosystem were planted in the late 90s, when Steve Jobs started spending exorbitantly upfront in order to reap long-term benefits. For example, Jobs spent $50 million in 1997 to buy all available holiday air freight, which ensured the availability of their new iMacs while inhibiting his competitors from the option themselves. A more recent example of this attitude in effect is when Apple got a seller of laser equipment to commit to an exclusivity agreement, so that they could add a new green light to MacBook Airs and other devices. The laser machines said company sells usually went for $250,000 at the time.

Of course, when a company has over $80 billion in cash and investments, such expenses do not seem quite as risky. But another area where Apple excels, or perhaps antagonizes, is in how it requires suppliers to keep sophisticated accounting of how they arrive at price quotes. Their success comes from what amounts to an unusually efficient combination of aggression and micromanagement, not unlike the Galactic Empire.

You can read the insightful full article here: http://www.bloomberg.com/bw/magazine/apples-supplychain-secret-hoard-lasers-11032011.html

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