Apple Inc. (NASDAQ:AAPL) is well-known for its design innovation, the quality of its products, and the fan-like devotion of its customers. Another less celebrated, though key factor to the company's success is its strict management of its supply chain, which is among the finest in the world. 

Apple has used its substantial warchest, massive financial resources, and industry clout to secure key components from suppliers in the past. Now it looks like Apple is going back to the well -- or in this case, the mine -- to ensure it has sufficient cobalt for its needs.

A woman walking on the beach looking at her iPhone.

Apple has a history of acting to lock down key components. Image source: Apple.

A key element

Apple is seeking to negotiate exclusive contracts with cobalt miners to ensure it can lock down a sufficient supply of the metal used in its iPhone batteries. This is the first time Apple has dealt directly with the miners, according to a report by Bloomberg.

The price of the element, which is a key ingredient in lithium-ion batteries, has seen its price triple over the last 18 months alone. Demand for batteries that use the mineral have spiked in recent years, as they are used in both smartphones and electric cars.

The increasing popularity of electric vehicles has prompted fears of a brewing shortage of the raw material, as electric car batteries consume more than a thousand times the amount of cobalt used for cell phone batteries.

Apple isn't the only company looking to ensure its supply. A number of other companies were cited, including electronics manufacturer Samsung, as well as car makers BMW and Volkswagen AG, according to the report.

This comes on the heels of a deal reached between Australian Mines and SK Innovation, which produces electric vehicle batteries. Under the terms of an exclusive agreement, SK will buy the all of the output produced by Australian's Sconi mine for the next 13 years -- guaranteed at today's prices.

Not the first time -- or the last

This isn't the first time Apple has gone directly to suppliers to ensure the company has control of vital components necessary for its products. Reports indicate that Apple worked out an exclusive deal with Taiwan Semiconductor Manufacturing Company to supply the custom A10 Fusion and A11 Bionic chips that are used in the company's iPhones.

Apple also made a strategic $390 million investment in Finisar (NASDAQ:FNSR), which supplies the vertical-cavity surface-emitting lasers (VCSELs) used in the 3D sensing technology in iPhones. These components enable the FaceID and TrueDepth camera system that are key features in the iPhone 8 and X models. This way, Apple was able to ensure sufficient output while likely denying competitors access to the emerging technology. It should be noted, though, that the exact terms of the deal were not disclosed.

There were also reports that Lumentum Holdings (NASDAQ:LITE), the only other notable supplier of VCSELs, may have reached an exclusive supply deal with Apple, at least according to analyst Jun Zhang of Rosenblatt Securities. If true, this would leave limited supply of the hardware necessary for Apple competitors, while providing a guaranteed revenue stream for Lumentum. 

The importance of inventory and the supply chain

It is important to remember that prior to becoming Apple's CEO, Tim Cook spent more than a decade developing Apple's supply chain and making it one of the best in the world, a key factor to the company's continuing success.

Market research company Gartner publishes an annual report of the top 25 supply chains worldwide. After Apple spent more than a decade at the top of the list, Gartner created a special "Masters" category in 2015 "to recognize sustained leadership over the last 10 years." Apple and Procter & Gamble were the inaugural members of the category, which has since seen the addition of Amazon

The move to ensure Apple has a sufficient supply of cobalt going forward has Cook's fingerprints all over it. Deals like this one are just one more reason Apple investors will likely continue to prosper for years to come.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon and Apple. The Motley Fool owns shares of and recommends Amazon and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends BMW and Gartner. The Motley Fool has a disclosure policy.