The following is a guest blog commentary appearing on the Supply Chain Expert Community web site.
Being named the most valuable company in terms of market capitalization, with the ability to rack-up almost $33 billion in annual profit, and being cited by Barclays Capital as “the most disruptive force in tech”, comes with a lot of expectations and visibility to any misstep. However, behind the headlines lies one supply chain savvy company.
Last week, financial news headlines were buzzing with all sorts of potential negatives pertaining to Apple. Five consecutive days of stock declines has Wall Street scribes speculating as to whether the constant successes of the Steve Jobs era of Apple might have peaked. Stories continue to permeate regarding ongoing intellectual property lawsuits, potential price collusion in e-books, and yes, significant hiccups involving Apple’s supply chain.
Where should we begin.
Many social media and traditional reporters have been reflecting on the implications of the ongoing labor practices audits occurring at contract manufacturer, Foxconn, which began in February. Last week came news that environmental conformance audits would be conducted at one or many China based major suppliers. In our point-of-view, the company is becoming much more proactive in demonstrating to customers that Apple takes social and environmental responsibility very seriously. The remainder of the industry will in-turn, have to deal with the same realities.
Also in February, Japan based mobile DRAM chip provider Elpida, which is a supplier for both Apple iPad and iPhone products, filed for bankruptcy protection. That opened the door for what Bloomberg Businessweek describes last week as “the hottest takeover plays in tech” potentially involving takeover from another DRAM competitor which could leverage volume contracts with Apple. Eipida’s DRAM chip plant in Hiroshima Japan has over 40 percent of output dedicated to Apple. Whomever ends up with Elpida could well change some of the dynamics of competing with LCD industry leader Samsung Electronics.
Last week brought another major development from a supply chain lens. Communications chip provider Qualcomm warned that current supply of wireless chips cannot accommodate existing demand related to 4G network support. Specifically, Qualcomm has been shifting to a 28 nanometer chip design family to accommodate performance needs of 4G chips for device makers. In its warning, Qualcomm executives specifically cited the supply shortfall to Apple’s transition from predominate 45nm chips in favor of the 28nm design. That is a rather telling indicator that Apple’s plans for its next release of the iPhone will include 4G network support. Qualcomm has increased its overall unit output requirements by 5 million for the current year, and rest assured, Apple will be a beneficiary.
Media and analysts will continue to speculate and make checks across many tiers of the Apple value-chain regarding added bad news or potential setbacks but perhaps that same media should exercise a reality check-in with the greater supply chain community.
For this describes today’s current state of dynamic supply chain management, especially when it involves a firm with the significant high volumes of Apple, the great Kahuna of SCM.
Problems and/or setbacks will arise with current or planned future volumes, and a high volume supply chain requires lots of contingency and back-up plans. New product plans will shift because of highly changing market requirements, and those shifts will be accommodated by strategic suppliers because of the volume clout that Apple represents. Suppliers can encounter financial difficulties, and sourcing and procurement teams will respond with contingency plans and safeguards. Unplanned natural disasters such as the floods that occurred in Thailand impacted available capacity with companies such as Dell, HP suffering consequences, but Apple’s large supply contracts were leveraged at the potential expense of other industry OEM’s.
News concerning Apple’s supply chain should not be of concern since they together involve what we in the supply chain community would term “resiliency”, the ability to overcome any setback to support business needs and business outcomes. In the specific case of Apple, the primary competitive differences are in the overall strategy, planning, execution and analytical capabilities directed at having world class resiliency and supply chain clout.