A bite is taken out of Apple

It has been an interesting January for Apple. Its recent quarterly earnings were impressive– positive profit and earnings along with further expansion into China, however the financial community expected more from the company and as a result, the stock dropped over 10% in one day. According to some financial analysts, one of the primary concerns is that competitors are catching up. It appears this may be true in Asia, where the average iPhone costs more than most consumers’ monthly salaries and less expensive smartphones are being introduced in the market.

Also, Apple has not introduced a revolutionary new product since the iPad in 2010; instead it is simply updating and changing options for its two revenue generators, the iPhone and the iPad. In fact, this week, Apple unveiled its new 9.7 inch Retina iPad with 128 gigabytes of storage.

Lastly, Apple’s supply chain has been called into question. Its annual Supplier Responsibility report was made public recently and it shows a supply chain that spans across five continents with its top 200 suppliers making up 97% of the company’s procurement expenditures. The list of suppliers ranges from a who’s who in technology such as Seagate, Sony and Western Digital to lesser known suppliers such as Cheng Uei Precision Industry, Chemei Innolux Corp. and Hama Naka Shoukin Industry Company. It also uncovered certain violations at some of its supplier locations such as cases of underage labor being used.

Apple’s obsessiveness for detail and its intense secrecy concerning product launches helped create a supply chain that has become the envy of many companies within the high tech industry as well as in other industries however, perhaps its supply chain has now become too big and unmanageable? The iPhone 5 shortage illustrates a possible need to reassess Apple’s supply chain. Foxconn, the exclusive assembler of Apple’s iPhone 5, admitted that the iPhone 5 was a very complex and time-consuming device to put together. Another incident occurred with Sharp, one of Apple’s three LCD display manufacturers, which had manufacturing issues prior to the iPhone 5’s launch, and resulted in an inability to meet Apple’s demands.

Of course, a good supply chain strategist will continuously look for ways to improve upon the supply chain and Apple’s CEO is considered one of the best. Some shifts in manufacturing are already taking place as the company announced in late 2012 plans to move some manufacturing to the US. Maybe this was a political move, but it could also be a move to prevent additional disruptions to its supply chain. The likelihood of additional changes is high as competitors not only emulate Apple’s supply chain, but introduce new high-tech products. Differentiation within the high tech industry is no longer a luxury, but a necessity.