Apple CEO Tim Cook: The ‘operations genius’ who never has enough products to sell at launch

“Apple Inc. has lost its supply chain mojo,” Tim Culpan writes for Bloomberg Gadfly. “First under Tim Cook, and now Jeff Williams, the current chief operating officer, Apple has shone as a beacon of how to discover and develop unique materials, coerce and cajole suppliers, and churn out millions of units all without owning any factories.”

“By now, everyone has heard about delays in the [iPhone] supply chain,” Culpan writes. “Analysts and investors seem to believe this is all just one minor hiccup and things will be fine. But the delayed production, caused by multiple component bottlenecks, has shown a gap in the armor.”

“I am concerned that it’s not a momentary lapse. The multiple failures in this year’s output make me wonder whether Apple has decision-making problems at its most senior levels,” Culpan writes. “When Cupertino decided to go with OLED [for iPhone X], it must have known that supply would be tight and the company would be relying on nemesis Samsung. Perhaps Cook and Williams were OK with this and figured Samsung would ramp up fast enough to ensure OLEDs for all, or maybe they thought alternative suppliers would come on stream. Clearly they were wrong.”

“If this truly is a single-cycle mistake, then it’s possible Apple will return to its former glory,” Culpan writes. “If the problems are a result of hubris then it indicates to me that Apple has lost its mojo.”

Read more in the full article here.

MacDailyNews Take: Apple CEO Tim Cook is heralded as an “operations genius” because he pulled Apple out of manufacturing and moved the company to contract manufacturers, mainly in China where labor is cheap, reducing Apple’s inventory from months to days.

Cook hates inventory. In fact he’s called it “fundamentally evil.”

The problem with just-in-time operations – the cows eat the grass, get milked, the milk gets packaged and delivered to the store – is that everything has to go perfectly (the grass had better grow, the milkers had better milk, the bottles, cartons and delivery trucks had better be there) or you’re shit out of luck, especially on launch day.

Further, relying on a cow that hates you and steals from you in serial fashion is just plain masochistic.

If we were Samsung, we’d make it a point to screw with iPhone X OLED production until the cows come home. 😉

With the iPhone X launch — as with new iPads, iMacs (AWOL for Christmas 2012), the original Apple Watch (a woeful launch supply disaster which killed enthusiasm about the product itself for a considerable period of time), AirPods, Apple Pencils, Apple Smart Keyboards, etc. (we won’t get into the current desktop Mac miasma in which we’re currently mired) — Apple, and Apple customers, are about to be shit out of luck yet again.

Cook’s brand of “operations genius” works wonderfully and profitably when the product is established, post launch, and he can see the demand and meticulously pump out the proper unit levels. He’s definitely not a “genius” when it comes to amassing inventory for new product launches. In fact, it’s routinely proven that he’s absolutely horrible at it.

Now, to be clear, this is because Apple pushes the envelope. 3D facial recognition is difficult and the components Apple requires are new. The iMacs in 2012 missed Christmas that year because friction stir welding was new to the fabricators. AirPods, Apple Pencils, etc. – all new products. So, Cook & Co. cannot be blamed for wanting to push technology forward. It’s very difficult (read: pretty much impossible) to get cutting-edge technology in established technology volume. This is the reason for Apple’s horrible supple-demand imbalances at new product launches.

If we want Apple to push the envelope, we have to bear waiting, sometimes for protracted periods of time, for new products to ship in quantities that begin to satisfy demand.

Good luck with your iPhone X preorders, everyone! We’re all going to need it.

61 Comments

  1. People who complain about Apple product availability on launch day never suggest a practical alternative. I can only think of two.

    Should all new products be delayed for months to build up inventory while sales of the current models drop to zero in anticipation? See “Osborne Effect.”

    Should Apple pay its fabricators a huge surcharge to build enough capacity to meet initial demand, knowing that the extra capacity will be surplus after a month or so? Imagine the squalling about the additional “Apple Tax,” to cover the additional costs.

    1. it’s the world’s most difficult juggling act on nearly impossible deadlines. IMHO they perform technological miracles, and with such cynicals ready to pounce constantly

    2. Agreed, TxUser. This is exactly the argument that I have posted multiple times on this forum in response to the same mindless bashing of Apple’s inability to satisfy early demand.

      Tim Culpan has written a Chicken Little scare piece on Apple, and MDN is once again assisting in perpetuating and spreading the flawed logic. First, my understanding is that it is the 3-D lidar camera for Face ID that is the primary source of the iPhone X production delays, not Samsung’s OLED displays. Second, you do not negate a long and successful history of supply chain excellence with one fairly minor event. It as if Michael Jordan missed two free throws in a row and everyone in the NBA started questioning if he had lost his ability to shoot. Ridiculous.

      MDN, you are wrong in your Take, plain and simple. Please take a little time to reevaluate your position.

    3. The quantities of any new device Apple requires at launch, due to its huge customer base and the desirability of its products, is humungous. It makes absolutely no sense to be able to satisfy all of initial demand on any given launch date. Better to start selling as soon as reasonable quantities are ready and continue to sell while production ramps up.

  2. I think that’s fair. Too many critics unthinkingly expect fantastic bleeding edge products to appear en masse globally on launch day without understanding what’s involved. That said apples attitude to pro users and the products that serve them has been very difficult and misjudged.

      1. Don’t they mostly live up to it though? Nobody’s perfect but I have very little trouble with any of the Apple stuff I own. We’re still using an iPhone 4S, it’s slow but it works fine.

          1. Does Apple really have a lot of difficulty? According to who, and by what measure? If you want the latest and greatest you often have to wait a while, but isn’t that true of any new product with new features? What rhetoric are you countering? Did anyone say Apple always has plenty of inventory on hand with every new product launch? I’ve never read that anywhere.

            The rhetoric I see is the same clickbait stories about product delays every time Apple releases a product. Is that what you are countering?

            1. The problem is entirely on Apple. Apple sets expectations. Apple has the money to deliver on it. It could do the rigorous testing and stockpile enough inventory to ease the initial demand. But Apple cares less about pleasing the real or inflated expectations of their customers than saving money. This is Cook’s Apple now.

              You can pretend that Apple has an impossible task, but you would be wrong. Other companies manage higher volumes and equal or greater complexity, with even larger distribution networks. Apple has the money, it just chooses to be “lean” to a fault. Apple posts the sale date at most of its product introduction keynote presentations with the vague “available on” date broadcast as if they will have stocks in stores on that date. Apple then chooses to keep retail store inventories low, perhaps an intentional push to get buyers to purchase online so Apple Stores can focus on being clean empty architectural statements without annoying people ruining the pure clean environment.

              If we assume Cook and Schiller keynotes are accurate, that is. If they trot out a sale date publicly but then find a flaw and have to scramble to meet demand, then we have three additional problems: poor development planning, poor development quality assurance, and a failure of Apple executives to inform their customers of the delay. For several years Apple has done a very poor job of predicting and meeting demand, not just at launch either. On the Watch, it appeared to be a definite rollout strategy to make buyers wait. For the 2013 Mac Pro, buyers received their obsolete trash cans multiple months after ordering. For vaporware like the Alexa wannabe speaker, nobody knows the situation, it seems Apple made an early announcement in an attempt to freeze Amazon sales almost a year before anyone can buy the Apple Siri home spy. Somehow, Sonos looks like they may deliver their speaker as soon as Apple while Amazon & Google will be on their 2nd generation products.

              Apple makes a big deal out of special finishes like Red or the iPhone 7 finally offering proper black options, but then it looks like Apple just makes a limited run and stops regardless of what customers buy. Apple could never keep up with demand and has appears to be abandoning anodized black finishes even though it still sells tons of aluminum products.

              I think at the end of the day Apple knows that no matter how much people whine, everyone already locked into the iOS walled garden isn’t bothering to look outside the wall.

              exceptions to the lock-in may be the Apple TV, where shortcomings are blatantly obvious, and the Mac, where Apple still suffers from a huge deficit of 3rd party software to be capture enough market share to have the scale volume needed to be cost competitive; and the lack of leadership to even try to keep its products fresh.

            2. Name the company you have in mind with “higher volumes of a product with equal or greater complexity” that provides same-day availability on launch date for every customer who wants one that day. I’m guessing we’ll be waiting awhile for an answer.

            3. Toyota introduced the Corolla in 1966. By the summer of 2013, they had sold 40 million of them. Apple could easily have that many iPhone X orders in less than a week.

            4. The total number of parts in Toyota’s supply chain dwarfs Apple. Look how many parts there are in an automobile. If you are only looking at unit sales, you are missing the picture and should hire a sugar water salesman as your next ceo.

  3. There’s another factor: everyone else coming out with a new product only has to MAYBE make a few million to satisfy demand. Apple, on the other hand, needed 40 (FORTY!!) million iPhone Xs out the door. Those kinds of numbers just aren’t possible (especially when such new tech is involved). We need to cut Apple a little slack. Supply will eventually catch up with demand. Maybe the 2018 iPhone will be in greater supply because most of its technology will be better established. Here’s hoping…

  4. “If we were Samsung, we’d make it a point to screw with iPhone X OLED production until the cows come home.”

    That’s what I would do too. But I’m not a fan of anyone and I realize Samsun is not going to give up $120 or so per unit. Though it would make for an entertaining pissing contest.

    1. The attitude that MDN espouses is both self-defeating and puerile. It exemplifies a grade school mentality. Plus, it disregards the fact that Samsung is contractually obligated to deliver on its component contracts, subject to whatever penalty is included in the contract. Furthermore, as you point out, Samsung will make a lot of money supplying OLED displays to Apple for the iPhone X.

      1. MDN: “Cook hates inventory. In fact he’s called it “fundamentally evil.”

        Cook’s inventory mindset could possibly be a factor in launch after launch when products are unavailable.

        I agree with MDN’s take. This is a systemic problem for FIVE years now. None of the excuses or scolding from elitist Apple apologists will change the facts. He just can’t get it done, period.

        “The attitude that MDN espouses is both self-defeating and puerile. It exemplifies a grade school mentality.”

        Well then, what is his HIGHNESS doing here? You are always free to leave again and this time keep your promise to never return …

  5. Note to Bloomberg: Brand new, cutting-edge, complex, high quality stuff (with outsourced components) is really hard to make at enormous scale, at a prices people want to pay. This is Tim Cook’s problem for multiple products which refresh every one to 2 years. On top of that, there are also 2 main OS’s refreshing each year. Apple hasn’t lost it’s mojo, but it has certainly struggled with it’s success and growth.

  6. There is a difference between ramping up production of a new technology and managing production of things that are already being made. If you continuing to make a product you’re already selling the efficiencies come in how you manage your inventory of finished products, how and when you receive the supplies of components. That’s quite different from all of a sudden ramping up to make millions of an entirely new (and difficult to make product) which you don’t actually know the true demand for. It’d be a waste of time to put massive resources into churning out millions of iPhone X’s to meet initial demand if it then tailed off into a consistent but comparatively lower figure (you know what it being a real premium device). The people wanting to get iPhone X’s from the start are unlikely to get something else (or they would have already), so in a way they’re the most forgiving of customers. There is an argument that Apple (or any company in a similar situation) can afford to spread sales rather than spend loads of money on increasing production faster than they might need to in the longer term.

  7. “…The problem with just-in-time operations – the cows eat the grass, get milked, the milk gets packaged and delivered to the store – is that everything has to go perfectly (the grass had better grow, the milkers had better milk, the bottles, cartons and delivery trucks had better be there) or you’re shit out of luck, especially on launch day…”

    If I didn’t drink my milk on time and it spoiled, I’d swear Apple did it to make me buy new milk.

    1. lol…that sounds like modern society! Always quick to point the finger of blame and derision at others.

      Show me a (real) winner who has never lost!

      Show me a person who claims to alway win and I will undoubtedly be looking at a loser.

  8. Another approach to contracting is to have a financial penalty put into the contract which penalises the producer if production deadlines and numbers aren’t met.

  9. At some point I’ve often wondered if sitting on billions upon billions of dollars — or giving it back to shareholders in what amounts to literally pennies on the dollar in terms of investment and have what I would argue is a negligible effect on the stock price — isn’t pretty shortsighted when a few Apple owned factories couldn’t exist at some point to take the bull by the proverbial horns and really grind the screws into Samsung while ensuring more supply at crucial times. I don’t proclaim to be all that knowledgeable of technology fabrication and assembly . . . . .but I guess it’s my assumption that if companies in China and Korea can figure it out maybe North America could pull it off, too? I’d pay en extra $35 for a device if it boosted a more local economy and made the dang thing available (no offense to any other part of the world where I’m sure the same could be said).

      1. That is a very flawed way of evaluating the situation, applecynic. You need to look at the macro situation and effects. Furthermore, the cost of healthcare for workers will exist whether it is provided as an employee benefit, obtain by workers through the private or group insurance market, or provided by the government through Obamacare, TrumpNotCare, or a single-payer system.

        If you relieve companies of the obligation to provide healthcare, then salaries must (should) increase to cover the cost of private insurance. If the government provides assistance through ObamaCare or a single-payer system like Medicare, then taxes must be collected to cover the cost. Again, wages should increase to cover the cost, especially since businesses would be relieved of the obligation.

        The problem with TrumpNotCare is that it fails to come close to fulfilling any of Trump’s promises – great coverage, cover everyone, lower cost. If the GOP would just own up to the fact that “Repeal and Replace” is just a cover to accomplish three things: (1) Transition Medicare to block grants (2) Significantly reduce healthcare spending to enable massive permanent tax cuts under reconciliation procedures. And if the GOP would just own up to the fact that fewer people will have health insurance and that the coverage will be much worse, such that a serious illness could easily bankrupt a family.

        Be honest if you want my respect. I understand that there have to be compromises in terms of spending and taxes and such. But do not lie about it.

        1. I don’t disagree with you, but perhaps your neglecting Obamacare as a cost control measure. More so if there were a single payer. I am pro-ACA. The words were Perot’s, and I voted for Clinton that year.

    1. The reason it can’t happen in North America is that the supply chain has moved overseas, all the bits and pieces needed for manufacturing tech are in or near Asia now. Need a hundred thousand screws reworked to an exact specification? You can get that tomorrow in Asia. In North America, forget it, not happening.

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