When Steve Jobs returned to Apple in 1996/7, one of the first things he did was completely shake up its supply chain and logistics: he drove down inventory and got supply to match demand. For years, he would boast about how Apple had hours of inventory – less than Dell, the sine qua non of low-latency manufacturing.
Turns out he did it too well. Or else Apple got too used to being small sometime in the recession. For it’s a company now held back by its suppliers from doing far, far better.
There’s an interesting point in Forbes.com: Apple Processor Seen As Issue For IBM where an analyst suggests that IBM’s delays in making 90-nanometre G5 chip cost IBM 2c per share. Now, IBM made profits of $1.99bn, or $1.16 per share. So 2c is $34m.
That’s the profits IBM would have made on selling the chips. Apple makes a lot more money putting the chips into machines. As it was, with constrained supply, Apple’s net profits for the quarter were $61m.
Now imagine it could have had $34m more worth of chips to repackage at a good markup. The profits could surely have been at least one-third greater – easily topping $100m. That’s something it hasn’t done since the fourth quarter of 2000. But before then, it used to do that amount, and more, all the time – see the roll of results.
Add to that the constraints on the tiny disk drives for the iPod Mini, plus its problems making enough of the cheap but showy Airport Express doodad (whose distribution has been delayed in the UK), and you realise that this is company which is in thrall to its suppliers. Who aren’t serving it so well. But being at the (b)leading edge, getting the smallest chips and drives, Apple is bound to get hit by this sort of act of God.
Good thing some people are buying iPods. Should I order the Powerbook G5 (surely a January announcement… but delivery when) now, do you think.?
Update (Saturday): great minds.. clearly someone at the Guardian was having much the same idea on Friday afternoon (I had it Friday night, without knowing). The business section editorial is here. I agree with its main point, which is that it’s not too smart to leave would-be buyers frustrated; they’re not used to *waiting* in this right-away world. Difference is, I crunched the numbers. And thinking more about it, consider that Apple could have done $150m profit if it had sold in line with demand. That’s one and a half times more profit than it did.