Apple: Visualizing Its Display Supply and Commodity Management Strategy to Block the Competition

Like many of you out there, I'm a frequent purchaser of Apple products, including a recently ordered Verizon iPhone (AT&T will never see a penny our business again, I can promise you that). Because of the consumer and increasingly commercial thirst for Apple products -- our office, like many small businesses, has gone "Mac" -- it's no surprise to many that the innovative creator of a new generation of smartphones, notebooks and tablet devices is scrambling to manage continuity of supply in key categories. Consider the example of how Apple is frantically attempting to shore-up future supply of smartphone and tablet displays. According to Wirelessweek, "Apple is apparently tapping some of its seemingly bottomless cash reserves to secure display technologies for the iPad and iPhone...IHS iSuppli extrapolates that Apple has committed $3.9 billion to secure production of the company's retina displays" over a two-year contract term.

Specifically, "IHS iSuppli believes the companies tapped to fulfill orders for advanced LCD displays over a two-year period may be LG Display, Sharp Corp. and Toshiba Mobile Display...[and] Apple laying claim to a major share of global output of IPS LCD and LTPS LCD panels could have implications for all competitors in the smartphone and tablet market. Apple's recent move to invest in suppliers and tie-up capacity, along with Samsung, which has pursued a similar strategy, "has left other OEMs to resort to other technologies when it comes to advanced displays, giving Apple...a huge edge in product differentiation in a highly competitive market," according to one analyst quoted in the article.

Over the years, a range of high-tech manufacturers have successfully created and deployed competitive strategies based in large part on overall supply chain design and related supply management models. Yet Apple, no doubt, has taken competitive supply chain moves a step further -- despite continued CSR challenges, as the recent headlines attest -- boxing in the competition by thwarting them from gaining capacity to the latest technology. Will others follow-up Apple's lead in industrial manufacturing and other sectors by attempting to shore-up supply and partner with suppliers in ways that can drive true competitive advantage? As they say where the cheese heads and packers fans roam unchecked: ubetcha. In fact, it's happening already. And we'll be sharing some of these commodity management and supply market strategies in more detail on Spend Matters in the coming months.

- Jason Busch