How Apple Uses its Supply Chain as a Strategic Weapon

223730 apple logoBusinessweek provides a very interesting look behind Apple's supply chain and how they have managed to fine tune their operations into a competitive advantage.

According to more than a dozen interviews with former employees, executives at suppliers, and management experts familiar with the company’s operations, Apple has built a closed ecosystem where it exerts control over nearly every piece of the supply chain, from design to retail store.

Apple's well known to be a master at operations with much of that credit going to now CEO Tim Cook. Businessweek's profile gives many examples of how Apple has managed to stay ahead of the competition, with much of it being the ability to predict needs and also secure the necessary pieces by exercising their enormous $81 billion cash hoard.

Even as far back as the launch of the Bondi blue iMac in the late 90s, Apple's Steve Jobs paid $50 million to buy up all available holiday air freight space at a time when most of its competitors were shipping by sea. This reportedly handicapped rivals such as Compaq who later wanted to book air transport.

Similarly for both the iPhone 4 and iPad 2 launch, Apple bought up so many suppliers and machines needed for assembly, they squeezed out the competition who needed the same resources.

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, according to a former manager at HTC.

Apple's level of efficiency and control extends into launch day where factories work for weeks building hundreds of thousands of devices. Electronic monitors are placed in part boxes to discourage leaks and completed products shipped in non-descript boxes to avoid detection. Even in their retail stores, they can monitor demand by the hour and make supply chain adjustments as necessary.

Top Rated Comments

starvingartist8 Avatar
142 months ago
Wow Apple way to stifle innovation for everyone else.

rofl android fan of course
Score: 18 Votes (Like | Disagree)
ownamac Avatar
142 months ago
Now you know why Tim Cook is in charge

Tim is the man when it comes to supply chain mastery.
Score: 15 Votes (Like | Disagree)
FlameofAnor Avatar
142 months ago
To be fair, Apple's competitors have to see what they are competing against, before they can place orders for their "innovative" products. ;)
Score: 14 Votes (Like | Disagree)
nagromme Avatar
142 months ago
Being first has its advantages! Companies that follow along later could theoretically match Apple’s manufacturing capacity, if they had the cash; new plants could be built, after all. It’s not just not cost-effective to be that late to the game.

Being a follower has other advantages though: the game-changing concepts have already been done for you—and they’re the hard part. Just copy the big stuff, and innovate (or at least differ) in smaller ways :)

Wow Apple way to stifle innovation for everyone else.
:D Imagine what Android would look like without Apple moving first and fast :D As an Android fan, you should thank Apple for 90% of your (positive) Android experience, and be glad you don’t have to find out what might have been!

(But I do hate when companies succeed on their own merits. Unfair! Apple should give money and opportunities away to companies that are less well-run.)
Score: 14 Votes (Like | Disagree)
koobcamuk Avatar
142 months ago
There is no denying that Apple run a very tight ship. From manufacturing to sales, I don't know of a more complete company.
Score: 14 Votes (Like | Disagree)
MetalMoon Avatar
142 months ago
So Apple is buying all the stuff needed for their new ipads before their rivals even know what they need. I guess its a first come first serve kinda thing. gotta make the first move or be left in the dust.
Score: 14 Votes (Like | Disagree)

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