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

Since Tim Cook stepped into the role as Apple CEO, his operational wizardry has continued.

Jul 9, 2014 at 12:45PM

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 Oct

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.

Apple Store China

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!

Daniel Sparks owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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