On how not to be evil: Tim Cook has said that inventory is not only evil, but that it’s fundamentally evil

“Tim Cook is quoted as having said the inventory is not only evil but that it’s fundamentally evil,” Horace Dediu reports for Asymco.

“With just-in-time production inventory can be reduced, at least work-in-progress inventory,” Dediu reports. “Unfortunately inventory cannot be completely eliminated. The fact remains that you sometimes need to stockpile product for launch and need to have some on hand depending which way it’s sold. There is also substantial channel inventory (which is off Apple’s books but still evil) that needs to be in the hands of distributors.”

Dediu reports, “Tight inventory management has become a characteristic of Apple and that contributes to getting ranked number one in Supply Chain Management. So we can expect that Apple runs a tight ship. In fact we have evidence of this through the ability to track our purchases from when they ship out of a factory in China all the way to our homes.”

Read more in the full article – recommended – here.

20 Comments

  1. Depends on what your business is and the circumstances.

    Combine just-in-time with single source suppliers and what you get is Toyota after the earthquake- unable to build cars because of a few components only being sourced in the affected area.

    Just in time was originally conceived as a quality measure- not so much a cost control. If a production line worker spots a problem with a component under just in time you are not stuck with vast quantities of crap components or finished product made with crap components.

    Unfortunately, many companies only see it as a way to force warehousing on lower level suppliers. Translation: cost shifting to suppliers.

    BTW- Inventory is not evil when your grocery store has a supply of stuff after a major snowstorm or other event. The alternative might be to starve or eat very poorly.

    1. Love intelligent posts like these. So few people know anything about surviving in business and yet so many comment.

      Inventory in most businesses is a necessary evil as it can make or break you.

    2. Awesome post. Closer to home, think if everything you needed was just-in-time (e.g. delivery all the time) or a day’s supply at most. You’re ill-prepared for an emergency or (less likely) disaster. Best have enough canned food and water bottles to last a week or so.

  2. Where did Apple learn the lesson of Just-In-Time Inventory?

    Dateline 1996, Apple Computer, in the throws of the scourge of Marketing-As-Management. By the end of that year, incomprehensibly, the marketing department at Apple had built up an estimated $1 Billion (with a B) in inventory of Macintosh Performas that no one wanted to buy. This specific blunder caused the famous ‘Apple’s gonna die!’ downturn of the company that lasted for years. Apple had $4 Billion in liquid assets at that time. By the end of that catastrophic era they had less that $1 Billion in liquid assets remaining.

    The other lesson of that blunder: NEVER let Marketing lead a company. It’s an act of suicide. Let them schmooze and back stab and sell themselves all they like. But NEVER put them in charge or your company really is gonna die. It is the #1 sign of a company that just plowed into an iceberg and is sinking.

    Example from the past: Eastman Kodak
    Example from the present: Sony
    Example from the future: Samsung

  3. Bet they wish they had more inventory now. I’m getting pissed off being on hold for the Apple store listening to that awful music each day to be told they are completely sold out.

  4. I’ve got a weekly newspaper and we sell some products out of the office, but I keep my inventory very low because it’s such a small part of what we do and anytime I’ve more aggressively stocked something I’ve sat on it for months.

    I’m no Steve Jobs (duh) but one thing I’ve tried to learn from his leadership is that you can’t be afraid to say “no” to something. I can waste a lot of time and money trying to compete with Wal-Mart, or I can work hard at what really defines us and make a great living doing that.

    Kind of off topic, sorry.

  5. It is common knowledge in business and to any Industrial Engineer, that inventory if “bad” or inefficient to “production” business, but good and necessary for “service” businesses.

    In service business, like hospitals, when you “need” a product, it is GOOD for it to be available on shelves and not having to “put it on order to be manufactured and delivered”. It all depends on the type of business.

  6. Words without context are useless.

    UNFINISHED inventory is the mark of inefficiency.

    FINISHED inventory on the shelf of a retailer is wise business.

    So why are 3/4 of stores sold out of iPhones, Tim?

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