To any Mac owner over the past roughly five years: have you ever put much thought into that tiny green light that blinks on whenever the built-in iSight/FaceTime camera turns on? Didn't think so. I'll give you six guesses as to who has put in downright absurd amounts of time, thought, and dollars into it.
Bloomberg Businessweek provides an in-depth look at how Apple's
Physics, schmysics
The report describes how Apple's design head honcho, Jonathan Ive, came up with the green-light idea five years ago, but the pesky laws of physics threatened to hinder him, since light doesn't normally just shine through metal regardless of how nicely you ask it to. The solution was a highly specialized laser that could poke holes through the aluminum casing so fine that the human eye has trouble seeing them, but just big enough to let light get through.
In Apple's characteristic domineering ways, it found a company that made the necessary equipment -- which runs about a quarter million a pop -- and had it sign an exclusivity agreement and is now the proud owner of hundreds of such machines. The little green dots are now found in Apple's wireless keyboards, trackpads, and MacBooks.
While most PC makers like Dell
iExcellence
Businessweek quotes HP's former supply-chain head Mike Fawkes as saying, "Operations expertise is as big an asset for Apple as product innovation or marketing. They've taken operational excellence to a level never seen before." Fawkes remembers an HP colleague buying an iPod online, tracking it online directly from the manufacturing plant in China, and receiving it mere days later.
The life of an Apple supplier
With its weight, Apple is able to corner pricing and availability in key components like NAND flash memory. For example, the company entered into long-term flash-memory supply agreements in 2005, pre-paying up to $1.25 billion to lock down supply. Even now, Apple represents almost 30% of the NAND flash-memory market alone as the single largest company gobbling up the chips, and its nearly insatiable demand has helped grow the market in recent years.
The hefty prepayments that frequently top a billion dollars don't always sway potential suppliers. The life of an Apple supplier is a doubled-edged sword: The heavy volume is offset by Apple's bargaining power. The weight that Apple wields allows it to negotiate favorable pricing at the expense of the supplier's bottom line and margins. On top of that, Apple wants its component prices broken down in excruciating detail, including how much the supplier stands to profit.
Getting cozy with Apple isn't always a smooth ride, either, since suppliers end up relying on Cupertino for a healthy chunk of their revenue. Just ask tumultuous component providers like Cirrus Logic
Not the weakest link
The last link in the chain is Apple's vertically integrated retail stores, which provide insights into the action on the front lines. Store-specific demand can be tracked by the hour, which facilitates more accurate production0forecast adjustments. It's no wonder that Gartner has ranked Apple as the world's best supply chain for the past four years.
The best use of cash
This is one reason all the Apple dividend talk is so misplaced: Apple uses its $81.6 billion cash pile to invest in its superior supply chain. Plus, two-thirds of it is overseas anyway. Earlier in the year, Apple had reportedly dropped nearly $4 billion to lock up LCD-panel supply from providers like LG Display
If you ask me, this is one of the most effective uses of the company's hoard, far more useful than paying it out as a dividend. But then again, this is Tim Cook's Apple now, and although he is a supply-chain master, he's also more open to the dividend idea than the late Steve Jobs ever was.
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