Fricking Lasers

Good reporting from Adam Satariano and Peter Burrows for Businessweek:

Apple began innovating on the nitty-gritty details of supply-chain management almost immediately upon Steve Jobs’s return in 1997. At the time, most computer manufacturers transported products by sea, a far cheaper option than air freight. To ensure that the company’s new, translucent blue iMacs would be widely available at Christmas the following year, Jobs paid $50 million to buy up all the available holiday air freight space, says John Martin, a logistics executive who worked with Jobs to arrange the flights. The move handicapped rivals such as Compaq that later wanted to book air transport. Similarly, when iPod sales took off in 2001, Apple realized it could pack so many of the diminutive music players on planes that it became economical to ship them directly from Chinese factories to consumers’ doors. When an HP staffer bought one and received it a few days later, tracking its progress around the world through Apple’s website, “It was an ‘Oh shit’ moment,” recalls Fawkes.

That mentality — spend exorbitantly wherever necessary, and reap the benefits from greater volume in the long run — is institutionalized throughout Apple’s supply chain, and begins at the design stage.

Billion-dollar cash up-front deals for components. How many other companies can do that?

★ Friday, 4 November 2011