Posts Tagged ‘Apple’

Apple is apparently getting serious about cars. It came out this week that building an electric car is now a “committed project” at Apple (Apple Targets Electric-Car Shipping Date for 2019, Wall Street Journal, Sep 21). But that raises the question of who would actually build it for them. It’s not that Apple has never made stuff before, but recent years they have generally leaned on the likes of Hon Hai Precision Industry (aka Foxconn) to assemble phones and laptops and such on their behalf.

That got me thinking about a quote from Carlos Ghosn, who runs both Nissan and Renault, that appeared last week in Automotive News (Ghosn sees tough time ahead for industry disruptors, Sep 18).

Renault-Nissan CEO Carlos Ghosn said aggressive hiring of auto industry executives by software companies shows how vital it is for new players to understand manufacturing and vehicle design. …

The complexity of cars means it will be tough for new players to enter the auto industry. ..

“That is one of the reasons you are seeing the outsiders massively hiring engineers from our industry. Why? Because they need to understand the product more in order to make the transformation they think they can make,” Ghosn said at a press conference here Wednesday.

Ghosn is not the only one thinking about what it would take for a tech giant like Apple or Google to get into the auto business (Apple and Google Create a Buzz at Frankfurt Motor Show, New York Times, Sep 17).

“What is important for us is that the brain of the car, the operating system, is not iOS or Android or someone else but it’s our brain,” Dieter Zetsche, the chief executive of Daimler, the maker of Mercedes vehicles, told reporters at the car show. IOS is Apple’s operating system for mobile devices.

“We do not plan to become the Foxconn of Apple,” Mr. Zetsche said, referring to the Taiwanese-owned company that manufactures iPhones in China.


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I spent this weekend in Miami (OK, Coral Gables) teaching the core Ops class for an executive MBA section. One of the topics we usually cover in the core (especially with execs) is the cash-to-cash cycle. The cash-to-cash cycle (intuitively) measures how long it takes a firm to capture the gain on its investment in inventory. Mathematically, it consists of days of inventory plus days of accounts receivable minus days of accounts payable. Thus when a firm purchases inventory, it takes a while for those goods to sell. It may then need to wait to collect cash from its customers. However, it may get credit from its suppliers so time in inventory may be offset by the time it has to pay its suppliers. Taken together, these measures give an idea of how effectively a firm uses its working capital. It also may suggest where the firm should target improvement. For example, benchmarking might show that its accounts receivable is out of whack with industry norms so that could be a real opportunity to pursue.

As I said, I had to teach this stuff this weekend. Fortuitously for me, Supply Chain Insights just happened to publish a whole report on the cash-to-cash cycle packed with data and eye candy (Supply Chain Metrics That Matter: A Closer Look at the Cash-To-Cash Cycle (2000-2012), Nov 11). To start with, here is some data on how cash-to-cash cycles vary across industries and over time.



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Much has been written Angela Ahrendts leaving Burberry to take over Apple’s retail operations but the Guardian has something of a unique take. They argue that a pressing concern is simply managing the queue for tech support (Apple stores await Ahrendts touch as outlets struggle with growing demand, Oct 18).

It’s only a two-hour wait. An ordinary Thursday afternoon at Apple’s flagship UK store in Regent Street, London and a long line of customers snakes across the first floor. The hip technology brand is used to queues for the launch of its latest must-have product, but these people have come carrying faulty iPhones and malfunctioning laptops, desperate for help from one of Apple’s increasingly hard to reach “Genius” experts.

When it opened in Virginia in 2001, the first Apple store was hailed as a retail revolution, allowing shoppers to play with expensive technology without any sales pressure. The emphasis on service, with blue-shirted Geniuses on hand to answer queries and fix broken products, has become almost as important to the Apple brand as the aesthetic appeal of its products. But the whole experience is under pressure as a relatively small number of shops struggle to cope with rapidly growing customer numbers. …

The Regent Street outlet, for example, employs at least 120 Geniuses. Each sees up to 30 customers a day but it is impossible to book an appointment less than a week in advance. If the problem is urgent you can turn up and queue, but it could be a very long wait. This week, a gaggle of well-trained, polite and friendly staff worked their way along the line trying to answer simple queries and advise people on alternatives to queueing. But it is hard to redirect people when every nearby shop has its Geniuses fully booked for days on end.

The article goes on to note that this is not just an issue in London. It certainly can be an issue here in Chicagoland. While a quick check of my nearest Apple store shows that they currently have a number of appointments open for tomorrow, Friday morning already has no availability. There are even reports of scalpers hawking Genius Bar reservations in China.

So is there an easy fix to this problem? It seems like there are two issues here. First, to what extent should Apple accommodate walk-in customers? Second, is there any easy fix to expanding Genius capacity? These are related. If capacity is expanded then the ease of getting a reservation should take care of the walk-in issue. On the other hand, if capacity cannot be easily expanded, then there is a question of how to allocate it between walk-ins and appointments.


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Apple products have a tendency to generate buzz with fanboys eager to line and wait and wait to get whatever new product on its launch date. This routinely happens in the US and other countries. But not in China — as least not for the iPad mini (Scalpers Lay Siege to iPad Mini in Beijing, Wall Street Journal, Dec 7).

The release of Apple Inc.’s iPad Mini on Friday at its flagship store in Beijing was missing the massive and unruly crowds reminiscent of some the company’s previous product launches in China, but scalpers were still out in force despite rules making it tougher for them to buy most of the stock.

Apple is requiring Chinese customers to participate in an online lottery one day in advance to buy the wifi-version of the iPad Mini at its seven retail stores in China. Those selected, however, are limited to two iPad Minis each and must bring photo identification.

The Cupertino, Calif. company instituted the iReserve system in China after a near-riot occurred during the release of the iPhone 4S in January, leading police to seal off part of the flagship store in Beijing’s high-end Sanlitun Village mall. The state-run Xinhua news agency later blamed the chaos on a clashes between rival groups of scalpers vying to buy up as much of the stores limited supplies of the device as possible.

So is a lottery a better than a queue to ration limited supply?


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In case you have been living under a rock, Apple is releasing a new iPhone and if you stop by an Apple store this Friday you can get one. That is, of course, if you get there early enough. For most releases of new Apple gadgets people line up early and often in order to have the newest device a week before their neighbor. But waiting is a hassle. Or, perhaps, a market opportunity (TaskRabbit: We’ll sell ya a spot in the iPhone 5 line, CNET, Sep 13):

San Francisco-based TaskRabbit has rolled out a new program that lets people in the San Francisco Bay Area, as well as New York, purchase four hours worth of wait time in line at an Apple retail store for $55. That’s more than a quarter of the price of Apple’s entry-level iPhone 5, and $55 more than it costs to pre-order the phone from Apple’s Web site and carrier partners.

Surrogate waiting is by no means a new thing. What kind of neat here is that it is being intermediated on (potentially) a large-scale by a “distributed workforce” company. (more…)

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Many smartphones and tablets come in a limited set of variants. Take the iPad. It comes in two colors and can be had with or without a cellular data capability (itself available from two different providers). And there is the issue of storage. (I keep wanting to say “disk space” but that doesn’t quite describe the technology correctly.)

Apple offers the iPad with three different levels of storage — 16GB, 32GB, and 64GB — and picking the right amount is one of the harder choices for tablet buyers. Now the tech columnist of Slate argues that most people are being taken for a ride when they consider buying more than the minimum storage capacity (Storage Suckers, Jul 12).

 Ever since the days of the iPod, Apple has boosted its bottom line through upgrades. The company offers the entry-level versions of its devices at a price that seems reasonable to many people. This entry-level price functions as a marketing come-on—a way to get you in the store. Once you’re there, your eye wanders to the next level. Is 16GB really enough space on my beautiful new iPad—won’t I feel cramped on a year or two? Shouldn’t I spring for more? It’s only $100 … .

That’s exactly what Apple wants you think. Once you decide to move beyond the entry-level iPad, the company’s profits soar. According to iSuppli, it costs Apple about $316 to make the low-end 16GB iPad, which the company sells for $499—a margin of about 37 percent, not including non-manufacturing costs. Doubling the storage space to 32GB costs Apple $17 more, but it charges you $599 for that model, boosting its margin to 45 percent. On the high-end Wi-Fi model, which offers you 64GB of space for $699, Apple’s non-manufacturing profit margin shoots up to 48 percent. But that’s not all! If you get an iPad with 4G cellular connectivity, you’re really in for it. The very top-end iPad, a 64GB model with 4G, will set you back $829 for a device that costs Apple $408 to make—a margin of 51 percent, or twice what Apple makes on the cheapest iPad. There may be other popular products that carry such a breathtaking markup, but I bet most of them are monitored by the DEA.

These enormous profit margins prompt two questions. First, why do tech companies charge so much for just a few dollars of extra stuff? Second, are they ripping you off? The answers are pretty simple: They gouge you because they can. And of course you’re getting ripped off! Try to remember this when you find yourself giving in to upgrade temptation. These days, for most people, upgrading to get extra space is usually overkill.

So I have one of those iPad with gobs of storage. Does that make me a sucker? (more…)

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So what does a company owe its workers? I mean all of its workers. Specifically, how should the spoils of the firm be shared with workers when it is hiring employees across several distinct labor markets? Some of those markets might be tightly constrained with a limited supply of top workers while in another the firm might be the employer of choice — forced to beat off applicants with a stick.

These essentially are the questions that make a New York Times story on the Apple Store so intriguing (Apple’s Retail Army, Long on Loyalty but Short on Pay, Jun 24). The point of the story is that while the corporation as a whole has been on a tear, the workers in the company’s stores haven’t necessarily benefitted.

Within this world, the Apple Store is the undisputed king, a retail phenomenon renowned for impeccable design, deft service and spectacular revenues. Last year, the company’s 327 global stores took in more money per square foot than any other United States retailer — wireless or otherwise — and almost double that of Tiffany, which was No. 2 on the list, according to the research firm RetailSails.

Worldwide, its stores sold $16 billion in merchandise.

But most of Apple’s employees enjoyed little of that wealth. While consumers tend to think of Apple’s headquarters in Cupertino, Calif., as the company’s heart and soul, a majority of its workers in the United States are not engineers or executives with hefty salaries and bonuses but rather hourly wage earners selling iPhones and MacBooks.

About 30,000 of the 43,000 Apple employees in this country work in Apple Stores, as members of the service economy, and many of them earn about $25,000 a year. They work inside the world’s fastest growing industry, for the most valuable company, run by one of the country’s most richly compensated chief executives, Tim Cook. Last year, he received stock grants, which vest over a 10-year period, that at today’s share price would be worth more than $570 million.

I know what you are thinking: Didn’t Apple just announce significant raises for its store employees. Yes, they did. Of course, the cynics over at the LA Times are suggesting this was just an pre-emptive damage control ahead of the NY Times article. Even with the impending raises, Apple Store employees will capture relatively little of the sales they generate in comparison to other retailers. Check this out:

So is any of this surprising or even per se bad for employees? (more…)

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We have posted in the past about Apple’s impressive operational expertise  (see here) but now there is a report that puts are hard number to that. Business Insider reports that Apple’s turns are frankly absurd (Wow! Apple Turns Over Its Entire Inventory Once Every 5 *Days*, May 31, see also here)

Apple turns over its inventory once every five days. …

The only company on Gartner’s list of 25 companies that turns over its product faster is McDonald’s, which is not exactly in the electronics business. Dell and Samsung rank two and three in Apple’s category, turning over their inventory roughly once every 10 and 21 days respectively.


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Today we’ve got a few short comments on things we have touched on over the past few months.

We have had several posts in recent months on the travails of Apple and its manufacturing partner Foxconn. Now public radio’s Marketplace has a pair of stories on Foxconn’s factories — produced with a little more cooperation on the company’s part than similar stories (The people behind your iPad: The workers, Apr 11, and The people behind your iPad: The bosses, Apr 12). They also have this video of actually making iPads.

Vodpod videos no longer available.

One of the more interesting observations from these articles relates to the kind of workers Foxconn is hiring (from “The Bosses” article):

But that hasn’t stopped hundreds of migrant workers from turning up every morning at Foxconn’s doorstep in the coastal city of Shenzhen. On this day, 500 people line up to apply for jobs. …

I ask Louis Woo what Foxconn’s looking for in these applicants.

Woo: To make sure that they can articulate themselves and they can understand instructions

OK. That doesn’t seem too hard. Still, Foxconn’s HR manager tells me that 200 of these 500 people won’t make it through the application process. Louis cuts in and gives some context on the labor pool they’re dealing with here.

Woo: I was told that there are young kids coming over here that have never flushed a toilet before. They’ve never taken an elevator. So if you don’t tell them what to do, they would just wait there until the next elevator comes along. Even going inside, they don’t know which floor to go up to.

Next up a service story. (more…)

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Last fall we posted about how Apple relies on operational strength to compete.  One of the examples given was their willingness to spend heavily on airfreight — locking up capacity to make sure their product launch or holiday sales go forward. Now Business Insider reports they are up to it again (Air Freight Rates From China Skyrocket As Apple Buys Up Space For iPad Shipments, Mar 5).

Apple has bought up a ton of air freight space over the next few weeks to make sure the next iPad is available in the United States soon, according to reports.

This is placing a squeeze on other companies who want to ship material from China.

MacRumors reports one shipper says freight rates from China have risen 20% in the last week. Another says his company has been scrambling to find space for shipments.

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