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Comment by Aloha | Hacker News Reader

Counting the capital cost of the inventory in transit is not a way I'd sure to determine it, as the inventory is not counted to the purchasers book in most cases until its received, not when it enters transit.

That said, there are many other reasons why apple wouldn't want to ship by sea, mostly the longer lead time to correct problems, and the potential for a large amount of defective inventory in the chain, not the mention the vagaries of market demand, and other factors.

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Apple almost certainly takes ownership of the freight at the origin--either at the airport or maybe even at the factory. The reason for this is it allows Apple to use their buying power to negotiate much lower freight rates with carriers and track incoming shipments better than their manufacturers can. Large importers generally want to exercise more control over their supply chain because it saves them a lot of money and gives them opportunities to optimize it.

Source: I work for a logistics and freight forwarding company.

First of all, I'm not totally sure a huge seller like Foxconn has less negotiating power with logistics company than Apple (actually is probably higher). Then, Apple could negotiate the logistics but still account the merchandise as FOB Destination. Source: negotiated this kind of deal for consumer electronic products.

You're right that Foxconn is a powerful company too, and they do have their own rates/contracts in place with logistics companies. And for any big company with a complex supply chain like Apple, there is probably a mix of different INCOTERMS happening. That said, in my experience the general industry trend is for the importer to try to gradually and strategically extend their control over their supply chain further toward the origin over time. When a buyer signs up a brand new vendor they may buy CIF or even DDP at first, but as the buyer/seller relationship matures they will tend to move toward FOB or even EXW terms. So I'd be really surprised if Apple weren't taking ownership of most of their products at the origin side, at this point. Also, with air freight the inventory carrying costs from transit time are not nearly as great of a factor as with ocean freight, so the impact on cashflow is minimal.

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