Apple: 3 Facts About The World’s Best Supply Chain

Daniel Martins

There is one thing that we can bet on: Apple’s supply chain will be considered one of the best in the world this year. At least this has been the case throughout the past decade at least.

According to Gartner, Apple is a long-term supply chain leader. The Cupertino company has snatched the number one spot in the “Masters category” of the Top 25 global supply chain list since 2015. This is quite an accomplishment, considering some of the other names cited in the reports: Procter & Gamble, McDonald’s and Amazon.

Today, I present three facts about Apple’s supply chain that readers may find intriguing.

Apple simplified value chain diagram
Simplified diagram of Apple’s value chainApple

#1: Nearly half of top suppliers are Chinese

Apple’s production relies quite a bit on China. As of 2019, the top 200 suppliers accounted for 98% of the Cupertino company’s procurement spending. Within this group, nearly half of the manufacturing facilities were in China. All of Asia added up to almost 90% of the total.

The pie chart below may start to shift a bit, especially in the case of an escalation in the trade war between the US and China. India is one country that seems willing to absorb production capacity away from its neighbor. Still, meaningful changes to the landscape are unlikely to happen overnight.

Apple supplier facility split by key global region
Supplier facilities by regionDM Martins Research

#2: Apple’s inventory management is world class

The Cupertino company seems to be the best within its industry and peer group at managing inventory. See graph below, compliments of Stock Rover. It compares Apple’s days in inventory over the past decade (purple line) against the same metric for Microsoft, Amazon, Sony, Panasonic and LG. The lower the number, the more efficient the company is at handling inventory.

Apple is, by far, the king of shipping devices as if they were hot cakes. The company's turnover remained below 10 days for most of the past 10 years. While Microsoft (green line) has proven increasingly competent at managing inventory, Apple’s Asia-based peers can not come even close.

CEO Tim Cook is known to be highly averse to holding inventory for long. He claims that tech devices depreciate in the warehouse at a rate of 1% to 2% per week. Here is his quote:

#3: Supplier performance has spiked

Suppliers that performed well against Apple’s code of conduct has increased from a mere 36% of the total in 2015 to 82% in 2019. The supplier assessment checklist includes 500 different criteria within the broad categories of labor rights, health and safety, environment, ethics and management systems.

Of course, there is the argument that the improvement in supplier quality reflects Apple’s own concerns for operational excellence and corporate responsibility. But it also points at something more nuanced: Apple’s bargaining power and influence down the chain. It looks like suppliers need to adapt to Apple’s rules and standards, or they risk being quickly replaced for others that are willing to do so.

Apple Code of Conduct compliance by suppliers since 2015
Code of Conduct compliance ratesApple

(Note: this article contains affiliate links. Thanks for supporting The Apple Maven.)

Comments (2)
No. 1-1
RedMarkR
RedMarkR

With regards to #1, how fast would Apple respond to higher tarrifs?


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