Apple, a company that holds power, and diligence in the business world, is considered to have a top line supply chain management system. The success of this powerhouse company is mainly due to the innovative thinking and approach when it comes to supply chain management. However, why is their stock falling like a sack of bricks, and how come sales have slowed down?

Apple has created a “closed ecosystem” where they control every aspect of the supply chain, and in turn this enables Apple to launch large product lines avoiding high costs. For example, when designing the green light that lets you know the camera is on in all their laptops, they designed special tools to create this “at the time impossible idea.” They concluded that they needed to create lazar beams to cut a perfect whole in to the aluminum, which saved money and shows how they have total control over their product supply. Another example of innovative thinking that complements Apple’s productivity in their supply chain is when they bought 50 million dollars worth of holiday airfreight space. This in turn limited competitors to get their product to retailers, and also gave a huge supply of Apple products in stores limiting consumer options. “They have a very unified strategy, and every part of their business is aligned around that strategy,” says Matthew Davis, a supply-chain analyst with Gartner. He has ranked Apple as the world’s best supply chain for the last four years.

Clearly they are doing something right, right? Well with the decline of the stock a lot of question has been raised. For example, if Tim Cook is such a supply chain specialist, then why does he only have one supplier for all it displays? Even worse, why is that sole supplier Samsung, one of Apple’s biggest competitors? Because of business related tension between the two, and lawsuits, Samsung is not supplying displays to Apple for the new iPad Mini which is a problem. Tim Cook is clearly forced with a rough decision, and now basically has to choose between two Suppliers, LGD, and AUO, who is a very new inexperienced supplier. AUO cannot meet the volume demands for Apple so that really only leaves one supplier, LGD.

Overall, if there is such a fantastic supply chain in the company, and Tim Cook, who was COO under Steve Jobs, is considered to be the specialist in that, why would he but sole supplying responsibility on Samsung, one of their biggest competitor? It seems to be a huge gamble, and almost idiotic. Do you think that this sole supplier Apple uses is their flaw? Do you think this is going to hurt them in the long run? Could Apple be giving away their “closed eco system” by doing this? Could it be the small size of the supplier market that is hurting Apple? How can they avoid this problem?

Sources:   http://www.businessweek.com/magazine/apples-supplychain-secret-hoard-lasers-11032011.html

http://www.forbes.com/sites/petercohan/2012/10/26/apple-cant-innovate-or-manage-supply-chain/