A Worm in the McIntosh — Is Apple's Supply Chain Letting it Down?

For years, industry pundits have lavished praise on Apple as an industry supply-chain leader that takes advantage of design and manufacturing expertise on a truly global basis. Down to the "Designed by Apple in California ... Assembled in China" fine print on the back of my iPhone 3G S -- not to mention similar language on every other piece of Apple hardware I've bought in recent years -- it's clear that Apple has attempted to optimize expertise, labor, and materials at all stages of its supply chain. But sometimes even the best planning can go awry. Consider that the WSJ reported yesterday that "Apple said it was running roughly two weeks behind in filling orders for its 27-inch iMac desktop computer," a product that was just released in October. Moreover, it's a hot item. "The machine, which originally went on sale ... for prices starting at $1,699, has been among Apple's strongest-selling devices, analysts say," the Journal notes.

As a business owner who uses a last-generation version of a large-screen iMac, I can vouch for the product's overall quality and design. But those in my shoes buying the most recent model appear to be facing a range of monitor defects, including broken and malfunctioning displays. Might these quality issues be forcing Apple to implement a supply-chain contingency plan that's causing these two-week delays at the height of the yearly retail season? Perhaps. I’m guessing that one of Apple's challenges with this model is that, given the relative size -- 27 inches is huge for a small desktop machine whose footprint is only slightly larger than a standard monitor that size -- combined with the number of component suppliers involved throughout the supply have caused both the quality and shipment delays in question.

When it comes to such an innovative product, the possibility of potential issues rises exponentially early on in large-scale production runs, especially as suppliers at all levels begin to coordinate activities more closely. The pressure for such high-tech product launches is extremely intense given the short product lifecycle that generally marks desktop-computing devices. But the challenge lies when product innovation outpaces the ability of suppliers to ramp up quickly enough in the early stages of a new-product supply chain.

Knowing a bit more about how Apple operates and the innovation it places at all levels of its products (including packaging), I suspect that another contributor to the quality issues and delays was a tradeoff Apple might have made between minimizing corrugated and protective packaging elements and delivering a bulkier box that fully protected its contents. As mundane as this sounds, don’t discount the impact such packaging-engineering decisions can have on overall defects and warranty claims. Even Apple, which analysts continue to venerate as a supply-chain leader, is not immune to such issues, especially in the rush to bring new products to market quickly during the most demanding retail season of the year.

Jason Busch

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