Wednesday, September 11, 2013

Supply chain management under Apple's CEO Tim Cook

For the first time ever, Apple launched their product in China simultaneously for their new product line: iPhone 5c and iPhone 5s with the US market.
Before that, it usually took several weeks or even half a year for Chinese consumers to be able to buy iPhone products. Ever since Apple's change of CEO from Steve Jobs to Tim Cook, Chinese customers enjoyed more ease of getting Apple product.
Different from Steve Jobs who is a genius for product design and marketing, Tim Cook climbed all all the way up with a solid background in Operations[4]. He made the Apple product available to more countries in a surprising speed then the Steve era[5].
Tim worked on the supply chain management. He reduced the order process time from 10 days to 5 days. By introducing better inventory management system, the company would have better estimation for future demand. And the future forecast is only about next week, not next month or next quarter.
He cut down Apple's supplier from 100 to 24, forcing companies to compete Apple's business[6].
This operational edge is what enables Apple to handle massive product launches without having to maintain large, profit-sapping inventories. It’s allowed a company often criticized for high prices to sell its iPad at a price that very few rivals can beat, while still earning a 25 percent margin on the device, according to the estimates of Piper Jaffray analyst Gene Munster[7].
Let's look at the Chinese market again.
The surprising fact is that every iPhone is manufactured in China. And another interesting fact is that smartphone penetration rate is 61% in US while the smartphone penetration rate in China is 22%[1][2]. The 2013 second quarter revenue in China dropped 43%[3].
So to maintain high profit margin while not losing market share to Android, Tim Cook is under great pressure. If he does not respond quickly to the Chinese market, he'll probably lose the war started long time ago with tens of Android manufacturers.
It makes a lot of sense for Apple to highly focus on developing countries to win the smartphone war.


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