Over on Supply Chain Matters, Bob Ferrari recently penned a somewhat high-level column (compared to his usual in-the-supply-chain-weeds-analysis) titled Impressions of Apple's Latest Product Launch and New Supply Chain Challenge. In the post, he observes that:
The next significant challenge for Apple's supply chain will indeed be the consequences of the deteriorating relationship with Samsung, and specifically whether Apple's product management and sourcing teams can both successfully transition among other high-volume memory and component device suppliers as well as foster the required new innovations required in CPU and display technologies beyond what Samsung can provide to other OEM's and itself. The reality is that not many suppliers have the financial resources and capabilities to scale to the tremendous component supply volumes that Apple requires.
In this commentary, Bob strikes at a broader chord: Apple is massive. It's truly massive on a scale that is hard to fathom, in fact. Let's put the numbers in perspective. As we observe in a recent research brief on Spend Matters PRO titled Apple, the Global Market Monster: Supply Chain Voodoo, "with Apple's market cap now reaching $656 billion ... [the company] makes up at least ¼% of the world's total financial markets (well, technically Apple's shareholders own ¼% of all the financial assets in the world)."
How this giant market presence ties to suppliers is fascinating, especially considering the degree of supplier rationalization that Apple practices. As we observe on Spend Matters PRO, "a mere 156 suppliers made up 97% of its procurement spend ... Like Walmart, Apple pulls an enormous wake. Suppliers engaging with this company have tremendous capacity and performance liabilities. As Apple races away from other firms, it's sheer spend and contract sizes will make contracting more and more difficult as there are not many suppliers who can meet even a fraction of the needs of Apple."
Can a company be too big to effectively be served by strategic suppliers? Apple may very well test the limit.