Have you ever wondered how Apple maintains such high profit margins on products like the iPad? The company manages to do so in an industry where other manufacturers like HP and Amazon reportedly take losses on their tablet sales.
Perhaps the biggest factor in Apple’s operational success is the recently-named CEO Tim Cook. Cook spent the last decade turning Apple into a well-oiled machine. Bloomberg reveals this and more in a recent article about Apple’s supply chain secrets…
The report contains several interesting tales about the Cupertino company’s impressive operations. At one point, Apple spent $50 million dollars to buy up all available air freight space just before the holidays to ensure its iMacs would ship on time.
There’s another story about the time that Johnny Ive came up with the idea to put a green LED light in Apple’s new line of MacBooks. But the only way to achieve this was to purchase and modify some expensive lasers. Well Apple didn’t just buy a few of them, it bought hundreds of the $250,000 machines — enough to gain exclusivity on the lasers so no other manufacturers could use them.
Here’s an excerpt from the article that summarizes Apple’s supply chain success:
“Apple has built a closed ecosystem where it exerts control over nearly every piece of the supply chain, from design to retail store. Because of its volume—and its occasional ruthlessness—Apple gets big discounts on parts, manufacturing capacity, and air freight. “Operations expertise is as big an asset for Apple as product innovation or marketing,” says Mike Fawkes, the former supply-chain chief at Hewlett-Packard (HPQ) and now a venture capitalist with VantagePoint Capital Partners. “They’ve taken operational excellence to a level never seen before.”
That’s why Apple rakes in over half of the entire mobile market’s profits. That’s why so many people think it’s possible that Apple could enter the typically-low profit margin TV market and change the game. And that’s why Apple is currently the number two company in the world by market cap. Operations.