As noted in our prior Supply Chain Matters posting focused on Amazon’s operational outage yesterday, businesses and their supply chain management teams can take heart that in this year of continuous non-stop disruptive incidents, even the mighty, most prepared and influential industry participants are not immune by such incidents.
Asian news outlet Nikkei just published a very well written and revealing spotlight report: Apple’s nightmare before Christmas: Supply chain crisis delays gift deliveries. (Paid subscription or metered view).
This report is the culmination of interviews with reportedly more than 20 industry executives across three continents that trace the bill-of-material components for the new Apple iPhone 13.
The report’s essence is: “a portrait of an electronics supply chain in a period of turmoil, with problems that have their origins before the COVID-19 pandemic, in the tensions between the U.S. and China over critical technology.”
We highly recommend to our Supply Chain Matters readers, especially residing in high-tech, consumer electronics and automotive supply network environments, that if they can, have a full read of this report. It is revealing, insightful, and the basis of future case study.
According to Nikkei, Apple declined comment on its now published report.
Regarding planning for current holiday demand for new iPhones the report cites the October milestone of the Golden Week holidays across China when Apple’s contract manufacturers typically ramp-up production operations to around the clock operations. But this year was reportedly different because of ongoing component shortages. A passage reads:
“For the first time in more than a decade, iPhone and iPad assembly was halted for several days due to supply chain constraints and restrictions on the use of power in China, multiple sources with knowledge of the situation told Nikkei.”
Instead of the Golden Week ramp-up, assembly workers were granted time-off or no overtime and thus it has been catch-up since with production levels in September and October reportedly falling 20 percent short of initial plans. Multi-week lockdowns among supplier facilities in Vietnam and Malaysia also contributed to component availability delays, as was the electrical power restrictions imposed across China.
Regarding our previous Supply Chain Matters posting highlighting a report of an allocation decision to channel needed semiconductor processors from planned production of new iPads or older iPhone models, this Nikkei report quantifies the impact to be 50 percent less production than planned for Apple iPads while production of older generations of iPhones have dropped around 25 percent.
Further complicating overall production planning are published indications that overall demand of the new model iPhone may not be as robust as initially planned.
The article goes on to detail of the various components that are included in the new Apple iPhone 13, with the observation that rather than the various advanced and sophisticated components, supply shortages impacting production have more to do with “peripheral” components that are essentially low cost such as power management, transceiver or connectivity chips. The report further emphasizes that among high tech and consumer electronics supply networks, Apple is not alone in encountering the complex challenges provided in Asia based supplier networks. Developments have provided a lasting impression, one that will require some rethinking of sourcing and supply network resiliency strategies.
While Apple in the end, will likely overcome the effects of some of these component challenges by the sheer dedication of its contract manufacturers, and provide many consumers with their new iPhone for the holidays, the leveraging of last-minute air cargo resources will be enormous.
As to our themes of these two postings, that even the mighty, most prepared and influential industry participants are not immune to ongoing disruptions, we cite the following insightful passage from this Nikkei report:.
“The company (Apple) may be the envy of the consumer electronics industry and the world’s top procurement power, churning out over 200 million iPhones, 20 million MacBooks, 50 million iPads, and more than 70 million pairs of AirPods annually, but even Apple has been chastened by the chaos in the supply chain this year. In the midst of its peak selling season, it is having a nightmare before Christmas. It is an acute example of the wider havoc wrought by supply chain problems on consumer goods companies worldwide. A perfect storm of pandemic factory lockdowns, logistics troubles and energy generation squeezes has battered the globalized production model that has long powered modern manufacturing.”
The above words speak for themselves.
What the year 2021 has turned out to be among industry supply chains,. It has been one of overcoming non-stop challenges, setbacks, cost inflation and outages while responding to business needs and market opportunities.
As industry supply chain teams begin to turn their attention to 2022 and beyond, a revised set of people, process and technology themes and objectives will come from the learning and insights of this year.
More of that will be provided in tomorrow’s postings.
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