Apple’s advantages aren’t just its marketing, shine, or anything at all fancy. Apple is top-notch at boring supply chain management. Check this article on ‘How is it that Apple is able to beat every single table vendor on price?’
Apple with its industrial manufacturing purchasing power is buying up the machine makers. In our flattening world, it’s about about scale, optimization and eyeballs. Glitz drives our eyes and hearts, but Apple’s power is driving the far-eastern supply chain. Glitz and power combined are a force to be reckoned with. The competitors have been falling like dominoes.
Today, the world’s supply chain, after the raw materials, starts in Asia and largely China. These manufacturing companies have changed the industrial marketplace in the last decade or two. But has China gotten too rich?
They been so successful and profitable that they are no longer the value provider. China’s Foxconn is now investing in Mexico as today’s NY Times article show. This flows with what I’ve been thinking lately and a buddy of mine in cell phone components tells me that they have started moving some operations to Mexico. Mexico is not cost competitive yet, but it is value competitive now. Some of their values:
- communicate within a similar time zone
- quicker and cheaper to perform site visits and checkups
- shorter turn around time, shipping delay or time to market
Basically it shouldn’t be a lowest-cost analysis, but a value proposition. Many companies have tried and bought into the off-shore fool’s gold and failed. While there are successes too, it’s fair to say that more fail to find value than succeed in lowering their overall cost and getting actual value. Some reasons for failure to out-source:
- difficulty in communication and setting priorities
- slow turn around to changes and time to market
- quality problems
As the recent and horrible crisis in Japan has shown, supply chain management needs to be a key consideration for companies. In the future with an equalizing world-wide middle class and especially looking at some of our advantages, America again will become a manufacturing power when it comes to the value equation.