One of the things that most consumers do not know about Apple is their supply chain and manufacturing is one of the best in the world. Tim Cook, when he was in charge of the chain, created one of the most efficient supply and manufacturing systems in the market. Cook managed this side of Apple’s business for over 10 years before he was elevated to the role of CEO. Even today he has an eagle eye on this part of their business and understands the supply chain better than any other CEO in the tech world today.
But what really makes Cook and Apple stand out is that, when they design hardware, they only marginally look at what type of equipment they will use to make this product. Creating a product that is great, easy to use, and extremely well designed is the first priority.
Once that is in place, they get serious about how they can manufacture the product in mass quantities and in the most cost-effective way. However, Apple stands above most in this area because, if they can’t find the right equipment to make a product, they actually invent and/or create the equipment, either with the help of a partner or they do it themselves.
This extension of their technical prowess is critical to Apple’s success. In 2013, Apple worked with a key supplier to customize robots to manufacture new iPhones and iPads and spent about $10.5 billion to create these special tools.
Over the years, I have talked with various ODM and manufacturing equipment makers and many have told me Apple’s real secret to success is how deep they go into the overall manufacturing process.
Very few companies go to that level of detail when it comes to their supply chain. Besides Intel, Apple is one of the only other major tech companies I know of that will actually invent the manufacturing equipment needed to bring a new product to market. Most others accept the limitations of the equipment and instead design the product around the things these machines can do with as little customization as possible.
Horace Deidu of Asymco has created a great chart that looks at Apple’s equipment spending from 2011-2016.
As you can see from this chart, Apple constantly pours investment dollars into their machine and equipment spending and sees this area as an important differentiator that helps make them one of the most profitable companies in the world.
But this type of thinking also underscores Apple’s overall attention to detail when it comes to creating a product critical to their ecosystem. Apple’s designers are at the heart of their products but I see their counterparts who manage the supply chain and the manufacturing of their products as equal stars in Apple’s success. No matter what tiny design adjustment Jony Ive and his team ask the supply chain and manufacturing teams to give them, they somehow are able to accommodate the design teams.
In many other companies, it is the other way around. A design team will come up with a product idea and, most of the time, they are forced to create that product around what existing materials and equipment are available. These types of limitations impact innovation. That is one of the reasons we have so many me-too products on the market today.
We all know Apple marches to the beat of their own drums. This is just another example of Apple’s formula for success.