Iphone Factory ChinaSource: Apple

What you need to know

  • A report from The Verge has revealed how Tim Cook's manufacturing philosophy is being tested by the coronavirus outbreak.
  • It notes that Tim Cook believes inventory to be "fundamentally evil".
  • The piece gives fantastic insight into why Apple's supply of products has suffered as a result.

A report from The Verge has revealed how Tim Cook's manufacturing philosophy and his disdain for inventory have led to shortages of Apple products during the coronavirus outbreak.

The report states:

Before he was Apple's CEO, Tim Cook's job as COO was to implement just-in-time manufacturing. Cook was familiar with the practice because it had been part of his first job at IBM. Steve Jobs knew he needed someone to reform Apple's manufacturing, and hired Cook from Compaq to do it.

Cook "closed factories and warehouses around the world and instead established relationships with contract manufacturers," according to a 2008 article in Fortune Magazine. Cook called inventory "fundamentally evil," and so reduced the amount of time inventory was on the company balance sheet "from months to days."

The report notes how "just-in-time" manufacturing, as its known, is "highly efficient" but not resilient, and relies on having a small inventory that gets turned over very quickly. By way of example, the report states that Apple has previously been lauded for turning over its inventory "once every five days".

At the outset of the pandemic, Tim Cook noted that production problems caused by the virus were a "temporary problem" and that it might have to look at making some adjustments as a result. However, he was clear that would not be "wholesale fundamental change".

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Apple's own stores have been strangled by product shortages in recent days. This report clearly shows that one certain reason for that is Tim Cook's manufacturing philosophy and Apple's adoption of a "just-in-time" system of making products. It might be more efficient, but it's not doing Apple any favors just now.

Read the full report here.

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