Throughout the summer and especially in September of 2014, we featured a number of Supply Chain Matters commentaries reflecting on yet another series of Apple supply chain product introduction ramp-ups, and specifically whether the Apple supply chain ecosystem and its internal supply chain teams could yet again pull rabbits out the hat proverbial hat and deliver on business expectations for the all-important holiday fulfillment quarter.
Specifically in our mid-September commentary we noted:
“Over the coming weeks, as the marketing and sales machine cranks-up consumer motivations to buy, the supply chain will deal with the realities of limited supply, production hiccups and product allocation conflicts among various channels that invariably come up in such situations.”
We further declared:
“While some supply chains are challenged with collaborating with sales and marketing on stimulating and shaping product demand, Apple has the current challenge of meeting very high expectations involving an outsourced supply network with many moving parts. They have pulled miracles in the past, and the stakes get even higher.”
Yesterday after the stock market close, Apple announced financial results for its fiscal first quarter ending in December, and the results were staggering, along with the business headlines. The Wall Street Journal headline story today was titled: Apple Delivers Quarter for the Ages.
Apple reported net income of $18 billion for the quarter, was described as more than 435 of the companies within the S&P 500 Index each made in total profits. But the supply chain headline was fulfilling all-time record customer demand for 74.5 million new iPhones. This was up 46 percent from the same holiday fulfillment quarter a year ago, reflecting a lot of pent-up upgrade demand for the new iPhone6 models. In its reporting, the WSJ equated such volume output to more than 34,000 phones per hour, around the clock.
Gross margin was reported as 39.9 percent, nearly two percentage points higher than last year’s similar period. Once more, average sale volume for the iPhone increased to $687, nearly $50 higher than a year ago.
Apple also managed to double its iPhone sales volumes within China during the quarter despite delayed availability slipping to mid-October from the scheduled simultaneous September product launch.
Readers who followed our Apple commentaries should recall that the iPhone6 incurred its own set of production ramp-up challenges including a last-minute design change involving its larger screen displays. There was the usual production yield challenges associated with the fingerprint scanner and with the LCD displays themselves. We called attention to a TechCrunch report that cited sources in September indicating that Apple had already contracted air freight capacity anticipating to flood channels with last-minute shipments.
All was not spectacular news regarding Apple’s latest performance. Sales of the iPad were reported to be down 18 percent from the year ago period. The long-anticipated iWatch availability has now slipped to April of this year. However, these do not take away from the extraordinary performance of the Apple supplier ecosystem, and in particular, its contract manufacturers who had to successfully support the four month production and fulfillment ramp amidst the production challenges.
The Apple supply chain did indeed again pull rabbits out the hat. It performed to enable an expected business outcome, despite operational challenges.
We extend our Supply Chain Matters Tip-of-the Hat recognition for such performance. Let’s hope that the supply chain ecosystem will share in similar financial rewards.