Apple, Inc.'s Operational Excellence Is Mind-Boggling

Before Tim Cook was Apple's (NASDAQ: AAPL  ) CEO, he served as the chief of operations. Saying he was an excellent chief operating officer is an understatement. He was almost certainly one of the world's best. Even after taking over as CEO, however, Apple hasn't lost its operational touch.

An impressive record
Cook's early days at Apple quickly established him as essential to the company's future success. When Cook took over at Apple in March of 1998, he quickly reduced the number of Apple's key suppliers from 100 to 24, negotiated better deals with them, and convinced many to relocate near Apple's locations, Steve Jobs' biographer Walter Isaacson says. Further, by September of 1998, he also reduced inventory from one month to six days. 

Tim Cook at an Apple product launch. Image source: Apple.

Operational expertise continues
More recently, Apple has managed a number or impressive operational feats. One example is in how rapidly Apple has been able to beef up the list of countries the iPhone is sold in on the first day, while simultaneously significantly increasing the total iPhone supply available.

For instance, in the most recent iPhone launch, the 5s and 5c first launched in the U.S., Australia, Canada, China, France, Germany, Hong Kong, Japan, Puerto Rico, Singapore, and the U.K. Opening weekend sales topped 9 million. For the 4s launch, just two years earlier, the phone didn't make it to China, Puerto Rico, Singapore, or Hong Kong in the initial launch. First weekend sales for the device were less than half those for the 5s and 5c, at 4 million. It wasn't until more than three months later that the important China market could get its hands on the 4s.

Another example: Apple's recent efforts to completely reinvent the supply chain for mobile device displays. By personally financing GT Advanced to build out the capacity for sapphire crystal displays to be used in future devices, Apple has arguably created (and somewhat isolated) an entirely new supply chain for displays.

Further, Apple said in its 2013 10-K that it planned to invest heavily in product tooling equipment, manufacturing process equipment, and information systems hardware, software, and services. Sure enough, major Apple iPhone supplier Foxconn is now saying it is about to deploy 10,000 robots to build mobile devices, and it's giving Apple first dibs.

But the best example of how Apple still boasts operational excellence is in its inventory management. As The Wall Street Journal's Daisuke Wakabayashi, notes, Apple still manages to somehow carry less than a week of inventory, despite its $176 billion in trailing-12-month revenue. "[E]ven as Apple's revenue has soared, Cook -- who once described inventory as 'fundamentally evil' -- is keeping the company efficient," said Wakabayashi.

How does Samsung compare? The company has nearly eight weeks of inventory.

Apple's continued attention to detail in operations puts it in a better position to always be one step ahead of competition.

An opportunity in Apple's next big move?
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Read/Post Comments (4) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 09, 2014, at 1:18 PM, never2dull4u wrote:

    It helps to be "lean" in inventory when there is a HUGE demand for your products. Everything becomes "JIT".

  • Report this Comment On July 09, 2014, at 4:45 PM, ConstableOdo wrote:

    Samsung has to keep a large inventory because of its 'flooding the market' tactics. It works great if the demand is there. If demand isn't there, they're screwed. What do they do with the old inventory when new products are introduced? I guess they eat their old inventory. Landfill, anyone?

  • Report this Comment On July 09, 2014, at 11:00 PM, cashxx wrote:

    Thats when the BOGO comes into play!!

  • Report this Comment On July 14, 2014, at 12:55 PM, JaanS wrote:

    This is consistent with Steve Jobs' philosophy - seek beauty in all things. I am sure he appreciated the the inventory engineering just as much as a sleek physical design - that is - for its beauty as well as for the bottom line.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3022015, ~/Articles/ArticleHandler.aspx, 9/2/2015 8:10:50 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Daniel Sparks

Daniel is a senior technology specialist at The Motley Fool. To get the inside scoop on his coverage of technology companies, follow him on Twitter.

Today's Market

updated Moments ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 4:00 PM
AAPL $112.34 Up +4.62 +4.29%
Apple CAPS Rating: ****
GTATQ $0.23 Down +0.00 -1.09%
GT Advanced Techno… CAPS Rating: ***