For the fourth year in a row, market analyst Gartner has rated Apple as having the world’s best supply chain. In their annual breakdown, Gartner examine the discipline, execution and value-added capacities of each of the 25 largest global corporations to produce the list which is now in its seventh year.
So how did Apple attain this latest accolade? The Cupertino-based computer giant is well known for its cut-throat pricing negotiations and obsessive supplier secrecy, which allows them to exert a high degree of control over the entire manufacturing process. Although they sell their own hardware, Apple manufacture very little themselves, choosing instead to outsource as much as possible.
One of the major tools used by Apple to ensure supply chain success is a willingness to invest heavily in every aspect of it; reports from Apple suggest that supply chain expenditure will almost double this year to $7.1 billion. Apple has found that massive expenditure on supply chain management is not only good for their business, but provides a significant advantage over their competitors too.
Back in 1997 when the original coloured iMac was released, Apple took the unusual step of buying up all of the available air freight around the Christmas period to ensure stores would be able to stock the computer. The move cost $50 million dollars, but it also hamstrung the opposition including Compaq, who were unable to secure any air transportation for their goods over the crucial holiday period. So successful was the move that Apple moved into ‘drop-shipping’ when the iPod was released, delivering goods to the customer directly from the factory and reducing lead times (and costs) yet further.
Since that time, Apple have managed to stay ahead of the opposition by taking a similar approach to every aspect of their supply chain. If a new manufacturing technique is identified, Apple sign exclusive supply contracts and invest further with the supplier to keep competitors playing catch up. Similarly Apple have the reserves to offer significant pre-payments to suppliers, obligating them to fulfil Apple’s product orders first. Because of this the lead time on certain parts increases, again delaying production and release of competitor’s offerings.
This attention to supply chain efficiency, ruthless negotiation and an awareness of the effects of their business actions on the competition are a significant part of what has allowed Apple to become the world’s most successful company. Apple invest heavily ensuring that their supply chain does exactly what they need, how they want it and in time to fulfil their customers’ orders proving that obsessive control does pay off.
The Gartner Supply Chain Top 25 for 2011 is the seventh year of their annual Supply Chain Top 25 Report. You can download a copy of the report from the Gartner website.