Apple uses massive cash reserve to tie up supply chain... and lasers

Adam Satariano and Peter Burrows of Businessweek describe how Apple chooses to invest its huge stockpile of cash in securing everything from transportation to components, often early enough and in such vast quantities that less forward-thinking rivals are left frozen out.

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 s—’ moment,” recalls Fawkes.

Ive and his design team sound like they pretty much move into the factories for a while to make sure the production is done right. Apple already spends a fortune on this, and plans to double their spending going forward.

For more on the process, and the elaborate agreements and shipping and monitoring tactics Apple uses -- and yes, the lasers -- hit the link below.

Source: Businessweek