How Apple Uses its Supply Chain as a Strategic Weapon

Businessweek 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.