The two sides of Apple’s supply
chain
Late
last year I came across an article with the title “Apple's Supply-Chain Secret? Hoard Lasers”1. The
article discussed who Apple gains competitive advantage through its supply
chain. It gave a particular example of how when design required light to shine
through the metal casing of laptop without making holes in the casing which
could be done with the help of modified
laser equipment used in microchip manufacturing, Apple signed exclusive
agreement with the laser manufacture and bought hundreds of such laser. With
over $80 billion in cash reserves Apple can spend exuberantly whenever
necessary, investing in long term capacity commitment and then reaping the
benefits from greater volumes in the long run. With Apples approach of looking
further ahead in time for its resources, capacity and transport needs it has
been able deliver its products to millions of customers across the world with
little delays.
Close
to product launch dates Apple’s manufactures a kept busy producing the millions
of units of the product that is expected to be sold across the world. Even in the retail store the demand is
monitored by the hours and changes made in the supply chain as necessary. In
the latest quarterly report Apple stated that it shipped 37 million iPhones and
15.4 million iPads with an average volume of 402 thousand iPhones and 165
thousand iPads per day2.
Apple’s
large product launches can severely impact competitors supply chains, such as
in the case of iPhone 4 launch when manufactures such as HTC were facing
shortages of LCD screens, and glass for the touch screens of their mobiles
since Apply had already made large orders for the suppliers to fill.
With
such efficiency in procurement, manufacturing, and delivery it no wonder
Apple’s supply chain has been ranked No. 1 in the world for the last three
years by Gartner3.
Behind
this efficient and streamlined supply chain that is presented to the world is a
much darker side of Apple’s supply chain, a side which until recently got
little exposure. To gain the competitive advantage it has through its supply
chain Apple has been known to be ruthless with its suppliers, striving to get
the most out of them at the lowest cost and shortest time. Some suppliers are
so dependent on the Apple’s business that they forced into agreements which
promise minimal returns. To increase their profits suppliers cut corners and
use child labourers, inhumane working conditions, low wages, and poor safety
standards. Workers often live at the factory in overcrowded dorms, have 60 hour
work weeks, and are punished with physical labour and withholding of wages. Reports
of worker strikes, suicides, and deaths from factory accidents keep emerging
from Apple suppliers such as Foxconn. Apple has to reply on the Chinese
manufactures in order to keep the price of their products low enough to be competitive.
Moving production facilities to America will significantly increase the price
of the products, and put them out of competition against products from
companies like HTC, and Samsung.
Apple
does have a code of conduct for its supplier but to which extent it is enforced
is uncertain. On Apple’s website it mentions that Apple requires suppliers to
commit to the principles and standards of their Code of Conduct, and that it
has an auditing program in place across their entire supply chain to ensure that the
suppliers are upholding to the Code of Conduct.5
As
consumer it’s a moral dilemma for us; are we willing to ignore the inhumane
conditions of the factory workers as long as we can get our gadgets at
affordable prices, or do we take a stand and boycott such products and pay
higher prices for products that are produced in factories with better
standards.
References
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