Behold the genius of Tim Cook: Apple turns over its inventory once every 5 days

“Apple turns over its inventory once every five days,” Alexis Madrigal reports for The Atlantic.

“That’s part of why a new report from the technology research firm, Gartner, ranked Apple’s supply chain the best in the world,” Madrigal reports. “And it’s pretty amazing when you think about it. This is a company that sells hundreds of millions of hardware gadgets all over the world and yet it doesn’t actually need to stockpile its goods.”

Madrigal reports, “The only company on Gartner’s list of 25 companies that turns over its product faster is McDonald’s, which is not exactly in the electronics business. Dell and Samsung rank two and three in Apple’s category, turning over their inventory roughly once every 10 and 21 days respectively.”

Read more in the full article here.

MacDailyNews Take: It’s not exactly unveiling the Macintosh, the iMac, Mac OS X, the iPod, the iPhone, or the iPad to shock and awe, but it’s genius nonetheless.

Revolutionary and magical in an operationsy way.

[Thanks to MacDailyNews Reader “Arline M.” for the heads up.]

29 Comments

  1. Tim Cook is genius.
    not as creatively juicy as Jobs,
    but creative as can be in his specific field: business operations.

    1st, show me another firm that has such unbelievable turn over rates

    2nd, who me another firm that turned not only from bankruptcy in 1996 to the world’s most valuable in history,
    but within 15 years!! this is phoenix rising, it’s unheard of stratospheric success…

    1. I disagree with the level of praise heaped on Tim Cook.

      I disagree because at the least, an equal level of praise should be heaped on all the other leaders, individually, at Apple.

      Inventory Days is an extremely important accounting KPI (key performance indicator) and in an ideal World, (barring the ultimate objective of not holding any inventory at all) it should be as close to zero as possible.

      To achieve this, many things have to be done right in a business, not just supply chain/logistics management and operations.

      The market offering has to be right from concept to well beyond post-sale user experience. (e.g., Macs, iPods, iPhones, iPads, cost, user experience, look and feel etc)
      New products have to be developed and old ones taken out consistently (even floppy drives, USB ports and other sacred cows have to be killed!)
      Marketing has to be right. (“Think Different”, “I’m a Mac…” through to creating a tribe or cult following)
      The IP and brand have to be grown and protected (hence all the litigation)
      Point of sale has to be perfect (Distraction-less and dedicated Apple Stores, Apple Online Store and some, not all, resellers)
      After sales support has to be great (The Genius Bar, no-quibble replacements, the helpline, Apple Care etc)
      The price point as to be right (it was sheer genius in getting the costs right and setting the price-points for the iPad as it knee-capped competitors from the get go! Drained the swamp and boiled the ocean in one!)

      Failure in any one or more of the above would blow out inventory levels, inventory days and the cash tied up across the business. A severe and expensive case of corporate constipation!

      See RIM, Palm, HP et al for real case studies of companies that got one or more of the above wrong and learnt hard lessons on the destruction of shareholder value and employee livelihoods… I am thinking particularly those who lost jobs in these hard times because the so called ‘leaders’ in these companies messed up.

      Coming back to Apple, in my view, the whole team should be applauded. Not just Tim Cook…

      Steve Jobs built and left behind a ‘purple-cow company’! Tim Cook’s challenge is to not just keep it that way but to grow it further.

            1. Get a grip. It’s not all about talent. It’s a lot easier to get your supply chain optimized when you ship huge numbers of widgets with a small number of product lines. In fact, anyone competent could do a pretty good job with Apple’s product mix and sales patterns. The genius here is Apple doesn’t have lots of models, and they don’t update their models very often. I don’t know that this was Cook’s idea.

            2. If it was so simple why isn’t everyone turning their inventory every
              5 days? You obviously don’t think that delivering a MBP from China to Boston in two days is anything special. Sorry I think you underestimate that complexity.

            3. Other people don’t turn over their inventory as quick because they have too many product lines. Another reason is that apple has a bit more fat in their price margins and can pay fed-ex to ship their stuff directly from the factory to your front door. There are a whole host of reasons why Apple can do such amazing stock control. The competence of Tim Cook is one of them, but it’s hardly the only one.

            4. Who is responsible for good margins? Steve jobs, Johnny Ives, Phil Schiller, Peter Oppenheimer, and a cast of thousands? They get good margins because they make unique products.

            5. Not wishing to get into a massive debate about the relative merits of inventory management over product development or marketing, but it is worth remembering – if you’re sufficiently old – how incompetent Apple used to be at supply-chain/inventory management.

              I can’t remember who the COO was at the times in question, but – when Apple introduced the Macintosh 9500 and 9600 – I have memories of people waiting 9-13 weeks to receive their order.

              Of course, this was in the days of PowerPC and before Apple had a direct sales model via the Web and its own ‘bricks and mortar’ stores: but, even so, 1995 Apple (under Spindler as CEO) was so unbelievably incompetent that it couldn’t supply as many Mac systems in a year (4.5 million) that the operations developed by Cook nearly deliver in a single quarter.

              Whilst writing this post, I came across the following quote at apple-history.com: Apple’s worst problem wasn’t selling computers–it was building them. By June 1995 Apple had $1 billion dollars in backorders–and did not have the parts to build them.

  2. Supply Chain Management used to be Dell’s strength, and their biggest competitive advantage.

    It’s now clear why Apple has so soundly defeated them: putting out unique and revolutionary products while beating Dell at their own game.

    Genius.
    Astounding.

    1. Dell’s strength was everything made to order.

      Something McDonalds hasn’t mastered.

      The competition copied Dell, and Dell lost their advantage.

  3. But we already knew he was a genius in this area.

    What remains to be seen is if the “machine” that created the iPhone and iPad and iPod, and OS X, is still running in the right direction. I do not believe that you will be able to tell for a few years. Apple is still running on momentum right now.

    I say a few years because in all these cases, Apple has led the industry. They’ve revolutionized other industries. Everyone attributes much of the revolutionary thinking (though I find this hard to believe) to Steve Jobs. If this was the case, where does that spark come from now?

    1. It could be argued that if this operational skill did not exist that Apple would not even be close to the company that exists today. Dispite all of the hand wringing regarding new products the basic blocking and tackling is essential.

    2. I’m tired of this bogus argument. Steve Jobs was a marketing expert with superb taste. Every one of this management team has participated in the product matrix for many years. Quit playing the rookie card.

  4. “The only company on Gartner’s list of 25 companies that turns over its product faster is McDonald’s, which is not exactly in the electronics business.”

    Not exactly in the food business either.

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