Risky Apple iPad Business: Putting all of its Supply Chain LCD Displays in One Vendor Basket

This week, Procurement Leaders reported on a story that's garnering headlines, suggesting that LG, a key supplier in Apple's iPad supply chain, might not be able to assure supply for the components in this hot, new tablet device. According to the story, "LG Display has warned that it may be unable to keep up with demand for Apple's iPad tablet computer, leading to potential supply shortages of the popular device ... Apple may have to delay launches of the iPad for some countries due to tight component supplies and strong demand." While Apple has been hit by supply shortages in the past when demand outstripped supply for new products, it appears they are still focusing their supply bets rather than developing alternative or redundant supply options.

Apple, like many high tech manufacturers, has historically concentrated its supplier and supply chain bets in one basket (or at least one geographic basket). In Apple's defense, this type of behavior is fairly common in certain industries, especially where buying organizations rely on suppliers for key areas of product innovation. Yet I can't help but wonder that if Apple wants to live up to their reputation with AMR and others as a supply chain leader and pioneer, if there might not be a better way not just of forecasting demand, but of creating assurance of supply in situations like this.

Why not, for example, work with LG or another key components supplier, requiring key vendors to grant limited -- royalty included -- licenses to suppliers who could scale up as required to meet demand, creating a virtual split-of-business effect (e.g., starting out at 100% with the prime supplier, but flexing to 70/20/10 or 60/20/20 at certain stages of a product lifecycle)? "Under normal circumstances, suppliers would probably shrug off such requirements. However, as the leader in a category, and given the volume that they bring to suppliers, Apple could easily get away with rocking the high-tech manufacturing boat, so to speak.

Jason Busch

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