Let's Call Apple's Supply Chain What it Really Is

What makes one supply chain superior to another? That’s a question that I’ve been mulling over since Apple Inc. announced that the launch of the Apple Watch has been delayed. Once again, Apple is missing a product release because of an alleged faulty component.

And once again, Apple tops Gartner’s Top 25 Supply Chain list.

According to the Wall Street Journal:

If you're still waiting for your Apple Watch order to arrive, the Wall Street Journal has someone for you to blame: Taptic Engine components manufactured by AAC Technologies Holdings Inc. "started to break down over time," a manufacturing defect that "people familiar with the matter" say caused Apple to throw out some watches that had already been built.

In case Apple’s rabid fan base has forgotten, Apple’s iPad Mini didn’t meet production expectations because of a shortfall in -- and performance problems with – a component (displays). There was a similar problem with the iPhone 5 rollout. And the iPhone 6. And the iPad Pro. Yet year after year Apple tops the list of best supply chains in the world.

Granted, the standard for superior supply chains continues to evolve. Years ago, best-in-class companies practiced JIT and BTO; more recently, optimum supply chains were both flexible and resilient. The latest supply chain buzzword is “customer-centric,” which simply means the supply chain is modeled to serve the needs, wants and demands of the customer. In Apple’s case, these are customers who have been known to sleep on sidewalks to be first to the Apple Store, only to walk away empty-handed. I wouldn’t call that a customer-centric supply chain.

What’s worse, Apple’s supply chain continues to be held up as a standard to other companies. One supply chain analyst, FusionOps, believes Apple has avoided a product rollout disaster with the Apple Watch:

“Apple's supply chain issues around the Apple Watch should serve as a major wake-up call for all companies," said Gary Meyers, CEO of supply chain analytics company FusionOps. "Apple has the world's best supply chain, and has incredible brand loyalty, so they'll weather this fine, but this would be catastrophic for most companies."

"With the Apple Watch launch, Apple is introducing a new product, already a big undertaking considering the volumes they are dealing with, but is also creating an entirely new category, so there's no way to forecast demand," Meyers told EBN in an interview.

Last time I checked, watches predated ENIAC and Apple has released a product or two in its lifetime. Surely, there must be some basis for forecasting?

Here’s what Gartner says about Apple in its 2015 ranking:

From 2008 through 2014, Apple sat at the pinnacle of the ranking, pulling far ahead of the pack on every component score, including all financials and opinion polls. There were a few one-word reasons for this sudden and sustained dominance: iPhone, ecosystem and solutions. The fact that many of us now begin and end our days with smartphone in hand is directly related to the sheer amount of functions they offer, and Apple has been a crucial driver behind this phenomenon. While there were mobile devices that previously provided parts of the current solution, no company, up until that time, brought it all together with beautiful hardware, intuitive software, hundreds (if not thousands) of useful applications and entertaining content.

The company has always recognized the value of the digital ecosystems it creates. This started with the iTunes and the App Store catalogs that kept consumer purchases within a walled garden. It continues with the more recent launch of its digital wallet service, Apple Pay. Tomes have been written on the good, bad and ugly aspects of the Apple story, but one thing is clear, a resurgent Apple has captured the imagination of the entertainment, communication and computing markets with the introduction of each of its devices or services. This high tech leader demonstrates the spirit of the Supply Chain Top 25 through the integration of innovation and operations excellence.

The accolades are more about Apple’s engineering prowess and its business savvy than its supply chain — in fact, “customer” isn’t even mentioned in that summary. Just to recap: Apple has picked supply chain partners – including EMS Foxconn – that have failed to deliver products or services up to par with Apple’s standards. Suppliers are invariably the “culprit” when something goes wrong (even though Apple never comments on its suppliers). Apple can beat its suppliers’ prices down because, well, it’s Apple. It can sell products for a fraction of their manufacturing cost ($349 Apple Watch Sport only costs $83.70 to manufacture ). It can even occasionally sue its suppliers.

Let’s call Apple’s supply chain what it really is: Apple-centric. Apple’s supply chain benefits Apple. That’s not a bad thing for Apple and its shareholders—Apple is the most valuable company in the world. But does that mean it's the best supply chain? Not if the standard is customer-centric.