“The Guardian has one of those lists of things you didn’t know about Apple,” Tim Worstall reports for Forbes. “There were three founders, not two, Macintosh is a type of Apple, things a lot of us have heard before.”
“But there’s one that while I’ve heard it before is worth explaining. That’s that Apple sends all of its iPhones and iPads around the world by air, not by sea transport,” Worstall reports. “The reason is that it’s cheaper for them to do it this way.”
Worstall reports, “Yes, the direct costs of sea shipping are lower but the time value of money then reverses the calculation.”
Read more in the full article here.
[Thanks to MacDailyNews Reader “JES42” for the heads up.]
Time is money, makes sense
Time is money, makes sense. On your planet, perhaps.
Where I live Time rules, not money. The difference is subtle I know, but this has been my attitude for sixty-years and I can say without equivocation, I’ve never sold out.
Today I am self-reliant and living my dream because I own all twenty-four hours of my day. Like a homeless person, I spend my whole day my way.
Why not, I have no debt. I don’t believe in money. I do however believe in Bartering.
Mouth-breathers walk the well-worn path guided by the stars. Or in this case, one star in particular. The Christmas Star, no doubt.
Merry Christmas to the MDN membership and by all means continue to repress my comments.
Perhaps we should vote for a hide button to censor that which we don’t like?
Microsoft ends their stuff by turtle, no sense getting it there before it’s needed.
This has been the case for a lonnnnng time.
Agree; nothing new. Mobile devices are high-density, high price products, they were never transferred by sea (which, by the way, would require weeks to deliver, instead of day or two).
That’s not the only reason. Shipping by air also dramatically reduces the time to market at product launch, and also drastically reduces inventory holdings: while an iPhone is in a container on the deck of a ship it belongs to Apple or the third party assembler. Multiply every day on the water by the number of units sold per day and you will see how frighteningly large these numbers are.
At product launch every day saved is another day Apple can utilise for software development and testing – multiply the days on the water by the salary and on-costs of Apple’s development team and remember every one of these dollars goes directly to the bottom line.
One other aspect is that shipping by air only works out more economical than boat if the product is greatly in demand and is sold as soon as it reaches it’s destination. If you were making products that will sit on shelves once they arrive, you might as well send them by boat and save storage costs.
Flying the goods costs a lot more than shipping by boat, but if you’re able to quickly get those products into the hands of eager customers, you benefit from a much faster cash flow and that’s where the economic benefit comes from. The moment you start making an item, you have spent money on parts, development, infrastructure and workers. The time interval between spending that money and selling the finished product to a customer is time when you’re money is doing nothing.
Fed-Ex sends everything by air too, except for the last 50-miles or so.
Apple could buy Fed-Ex, but why buy the cow when you’re getting the milk for free? I would love to know the percentage of Apple products delivered by Fed-Ex this season.
Based on historic shipping numbers Fed Ex will probably deliver over 300 million packages between Thanksgiving and Christmas. 15 million (conservative Apple products) is 5%.
Fed-Ex is a high maintenance company and would be a distraction for Apple. Not something you want as a sub company.
Anything involving planes is high maintenance.
Not mention Applegot me back as customer after many years by engraving my iPod. I haven’t forgotten that. Would not have been possible with out air shipment.
In addition, it was pretty cool to track my iMac across the pacific last year.
Shipping (with a ship) makes sense for stuff that sells slow (wok-pans, spare-parts for cars, oil).
For merchandise like iPads where Apple could literally sell them off-the-ship, it does not make much sense.
It would make sense, if the freigher was a cargo sailing ship and Apple wanted to keep the CO2 footprint low.
But I guess there are enough people with a “I want my f*cking iPad NOW, not in six weeks”-attitude who would ruin the whole concept…
😉
Nothing new here. High value items, low in bulk, are always cheaper to transport by air. The additional cost is negligible in terms of the final cost both to the retailer and the consumer. I once spoke to an importer of Seiko and Citizen watches. He said transport by containers at sea was an absolute non-starter compared to air.
I will never forget the memorable Friday in the autumn of 2007 when I received my iPod touch sent by air from China.
Last month my news iPad mini arrived in a little brown box directly from Shenzen. So cool.
A carbon tax would probably change that equation.
Just-in-time manufacturing and distribution is one of Apples most important tools; it is how they deliver progress to us. It’s called the supply-chain, and it’s so important to Apple’s business model that they put a supply-chain-guy (Tim Cook) in charge. If a carbon tax kills this business model then it is killing progress — a good reason to think twice about a carbon tax. It could shackle humanity forever to DOS 2.0 and big, ugly, hot, stupid boxes.
That’s only one of the many reasons why a carbon tax is a brain-dead idea.
-jcr
Yes it is about the time value of money, but that’s not even the main point. It’s about having the products where they are needed. Let’s say Frankfurt needs more white iPhone 5s’ and Rio needs more iPad mini’s. The required item can be assembled and, within a few days, it’s arrived at its destination. So manufacturing can respond to demand in a week, rather than five or ten weeks. With air shipment the factory can respond to demand instead of trying to guess the demand. If they were to guess the demand they would inevitably be wrong some of the time. They would have dead inventory that they would have to unload by discounting it – a very un-apple thing to do. Discounting would spoil their image and their profit margins.
Air shipment is a step in the process of just-in-time manufacturing.
Just-in-time manufacturing is very important to the way that Apple does business.
Apple is smart. They make the Air half the weight of other laptops. We pay Apple a premium for the lighter notebook. And Apple saves half on shipping. We win. And Apple wins twice.
Apple was one of the first computer company’s to dump the CTR in favor of LCD screens. I assumed shipping cost as well as storage cost was a big reason. LCD’s were also vastly better quality which fit in with Apple’s image.
Who would have thought that air cheaper than sea? Interesting article.
I wouldn’t be surprised if some of it was actually shipped. If you think about it, at some point even Apple expects that there will be a ‘sitting’ inventory even if it is only parts for the devices it currently sells. As mentioned by others it only makes sense to air ship something if it will sell in relatively short time after arrival.
For Microsoft, it’s far cheaper to ship everything via dumpster.