Apple Inc. (NASDAQ:AAPL) changed its supply chain strategy wherein its manufacturing partners are no longer responsible in procuring components, and will only focus on production. Before, the tech giant’s OEM partners were in charge of both production and procurement of components needed for its products.
OEM partners now strictly production-based
DigiTimes obtained the information regarding the new supply chain strategy implemented by Apple Inc. (NASDAQ:AAPL) from its OEM partners based in Taiwan. According to them, their responsibility is now “purely production,” which is expected to affect their profitability over the long-term. Sources explained that OEMs generate most of their profits from their partnership with upstream suppliers.
The report also indicated that Apple Inc. (NASDAQ:AAPL) allowed its manufacturing partners to raise their quotes to maintain their profit margins. The tech giant agreed to increase the profits of its OEM partners by 3% to 5%.
Apple revised its supply chain strategy
In addition, the tech giant is also easing the pressure on its manufacturing partners by removing the responsibility of maintaining the inventories of components for its products.
Apple Inc. (NASDAQ:AAPL) revised its supply chain strategy to save more profits from its products given the fact that an increasing number of suppliers are now capable of providing the necessary components for its devices.
Last year, Apple CEO Tim Cook implemented a stricter approach to the company’s supply chain as part of its quality control and cost management. The tech giant imposed frequent inspections, and allocated more time to perform the job. The company also renewed its focus on the quality of its products and managing costs.
Many considered Cook’s management on the company’s supply chain exceptional because it allows Apple Inc. (NASDAQ:AAPL) to ship and make its products available in a reasonable amount of time. The company managed to sell as many as nine million iPhone 5Cs and iPhone 5Ss during the first three days of its availability in the market.
Earlier this year, Cook stated that it is difficult to evaluate the specific data points regarding the supply chain of Apple Inc. (NASDAQ:AAPL) and its impact on the overall business of the company. He said, “The supply chain is very complex, and we obviously have multiple sources for things. Yields might vary, supplier performance might vary.”