Hacker News Reader

Comment by snitzr | Hacker News Reader

The high speed of manufacture and distribution means that if demand goes up or down, Apple could throttle the manufacture of goods to keep the same high inventory turnover regardless of demand flux. Low inventory is desirable financially and JIT (just-in-time manufacturing) can make it possible.

The 5 day inventory turnover would not be sustainable without good supply chain management. This is a strategic advantage for Apple.

View on HN

No, that's wrong. Apple can't throttle the manufacture of flat panels or batteries or chips because they don't make them. Semiconductor components especially have a month-long trip through the fab (from where the wafer is started until it comes out ready for packing); it's quite literally not possible to get 5-day scale bandwidth out of that process. Likewise cross-ocean transits make that 5-day number impossible to tune for in real time.

I'm not dinging Apple's supply chain management (they are, after all, competing very well on price vs. competing products -- that's the ultimate goal). I'm saying that this number alone isn't very good evidence for or against it. It's a complicated issue not well served by "OMG! Apple sells its inventory every 5 days!!!!"

"Mr. Cook closed Apple’s factories and outsourced all manufacturing to a far-flung network of suppliers in Asia. Inventories decreased to 60 days, then to 30 days, then to the just-in-time model. Mr. Cook virtually lived in airplanes, traveling the world to meet with suppliers and browbeat them into meeting his demands." http://www.nytimes.com/2011/01/24/technology/24cook.html?pag...

I can't say how long it takes to make every part, but it seems like Apple has leverage with its suppliers. I do agree that looking at the 5 day metric is only part of a picture.

Not sure about the individual component scale lag, but in terms of cross-ocean transit, Apple flies pretty much all of its inventory. Minimal packaging isn't just good for the economy, it's good for the bottom line as well.

Comparing 5 days with the time Apple would need to change its production orders is like comparing bandwidth with latency.

I was using "bandwidth" technically, in the signal processing sense. The 5 days is a wavelength, as is (say) the month it takes a chip to get through Samsung's fab. Apple has a knob to control the latter signal, but it's too coarse (by literally an order of magnitude) to modulate the former. Ergo snitzr's supposition that it was Apple's agility and control over the supply chain that is responsible for the 5 day inventory size cannot be right.

Agree. Another way of looking at it is that It's five days from the time product enters Apple's system until it leaves Apple's system. If the product enters Apple essentially complete (direct from Foxconn?) then they really could turn over that quickly. In my experience, contract manufacturers are quite happy buy everything with their own money then send a single bill when the goods are delivered.

Another example: some online computer shops operate by accepting the customer’s payment then placing and fulfilling the order direct. Do these businesses display a negative number for inventory turnover, in that the sale has been made before the money has been spent on the goods?

Reply on news.ycombinator.com