Apple manages to keep an edge on the competition for a variety of reasons, including innovative ideas and clever marketing practices, but according to BusinessWeek, Apple’s real secret weapon is something far less visible to the casual observer: their supply chain.
The real secret to Apple’s success is the strict control they maintain over every piece of their supply chain, from product design to manufacturing, and a tight, finely tuned retail system to top it all off. Apple has managed to create a closed system which, due to their considerable cash reserves, enables them pay in cash to get their components and manufacturing agreements in place sooner and for less per-item cost than their competition.
Back in late 90s, for instance, Steve Jobs put out over $50 million to gain control of the holiday shipping that year, monopolizing much of the available holiday air freight before their competitors could get to it, crippling rivals who needed to book air freight during the critical holiday sales season.
The iPhone 4 and iPad 2 launches saw similar tactics being used, with Apple purchasing mass quantities of displays and other components, and paying cash to book suppliers and manufacturers ahead of time, leaving their competitors out of luck as they tried to use the resources Apple already laid aside for themselves.
Apple’s strategy of using their tower of cash to gain key advantages over their suppliers, such as reduced prices for components and pre-planned component and manufacturing deals, often puts Apple’s competitors in a bind who, due to having less financial power than Apple, are forced to wait their turn while Apple gets ahead and rakes in the money.
In short, Apple’s most powerful weapon comes in two parts, like dual swords: Brilliant control over all aspects of the design, production and distribution of their products, which they can only achieve by using the second part of their weapon, namely using their enormous financial resources to gain significant supply and manufacturing advantages over their competitors.
Apple even goes so far as to place tracking devices in their component boxes, and shipping products in unmarked boxes to help ensure that things don’t fall into the wrong hands, and that product details don’t leak out before Apple is ready.
Even Apple’s highly controlled and skillfully executed product launches contribute to their strong control of the system, and as Tim Cook has long been the operations master at Apple for quite some time already, these tactics are unlikely to change. Apple’s immense ability to control the entire supply chain is among the key factors for the company’s prolonged success.