Whilst filling the shoes of a leader like Steve Jobs is no easy task, Tim Cook’s rise to the top job at Apple could be good news for CPOs everywhere. Cook’s track record was built in supplier relationships at companies including Compaq and IBM. Does the rise of a former Chief Procurement Officer to one of the biggest jobs in the world mean anything for procurement professionals in general?
The procurement department is not always regarded as the most strategically important department in a company. Many people associate it with administration and carrying out the purchasing and negotiating on behalf of people making the organisation’s strategic decisions.
What Apple thinks about procurement
Tim Cook’s rise indicates that Apple values his ability to build and maintain a complex network of manufacturers and suppliers. However, it’s also a recognition of his abilities as a value creator. It also shows that the Apple board understand that the contribution of external companies is fundamental to the success of a business like Apple.
Starting his Apple career in 1998, Cook quickly took the view that the company should dispense with its manufacturing business and establish partnerships with contract manufacturers in Asia. His early focus was on rationalising the company’s supplier base and reducing the time it took Apple to build a computer by 50%. Yes, there was a focus on reducing costs but his impact factors such as the level of inventory held in the business was much more dramatic. By 2,000, Apple only held two days worth of inventory within their business.
Strategy and the supply chain
Apple has become one of the most profitable companies in the world, generating annual profits in excess of $40bn. In additional, it tops Forbes’ list of the most valuable brands in the world. Its brand value is double that of its nearest competitor (Microsoft). It certainly hasn’t achieved that off the back of simply cost-cutting in its supply chain.
Apple has been able to deliver market-changing products by close collaboration between all parts of its operation and supply chain. And it has had to do this at remarkable speed, especially when taking the second, third, fourth versions of products to market. Innovating harder, increasing functionality, reducing size and weight and keeping ahead is a challenge for any business. Cost is, of course, a factor but availability, quality and exclusivity are paramount.
Lessons for every organisation
In many ways Apple is a unique business. However, research from Proxima Group found that in its study of public companies almost 70% of revenue is directed externally and that this figure is increasing. That alone suggests that procurement and the supply chain have to be seen as strategic.