Apple Elevates Supply Chain Under Cook

Tam Harbert

As Apple Inc. (Nasdaq: AAPL) holds its 23rd annual WorldWide Developers Conference this week, the iFaithful may be watching for signs of change under CEO Tim Cook. While I haven't seen or heard any big surprises from WWDC so far (although the week is young), even before the big event some observers were already noting subtle but important differences since Cook took over the CEO role in August 2011.

It seems inevitable that Apple will change under Cook's leadership. Indeed, he has said publicly that Jobs did not want the company always wondering, "What would Steve do?" Rather, he says, Jobs told him, "Just do what's right."

But Cook is a supply chain guy. (He served as Apple's chief operating officer, managing Apple's worldwide supply chain, since 2005. Before that, he was vice president of materials for Compaq.) His idea of "what's right" is bound to be different than that of Jobs, who was a design guy.

In a recent article in Fortune, "How Tim Cook is changing Apple," Adam Lashinsky points to several signs that supply chain issues have moved up in importance. "Tim Cook's stewardship of Apple is beginning to come into focus," he writes. While Cook is maintaining much of Apple's culture, "shifts of behavior and tone are absolutely apparent." Among them:

· Cook has tackled public criticism regarding working conditions and possible environmental problems at Chinese suppliers. Rather than trying to dismiss them, as Jobs did, Cook is working to address the problems. He personally visited the Foxconn Electronics Inc. factory. And Apple has finally joined the Fair Labor Association, which monitors the factories.

· Cook appears to be beefing up Apple's supply chain dramatically, perhaps in preparation for an Apple TV. The company has disclosed the value of its Chinese assets ($2.6 billion), and Lashinsky speculates that most of that is material and equipment Apple bought for its contract manufacturers. The company is "financing massive upgrades in its manufacturing capabilities in Asia," he writes. The article quotes David Eiswert, a portfolio manager at T. Rowe Price, noting Apple's deep pockets and manufacturing prowess. "The Apple supply chain is doing things no one else can," says Eiswert.

· Cook is making sure supply chain management is involved at the highest levels of corporate strategy. The article quotes a former Apple engineering vice president. "I've been told that any meeting of significance is now always populated by project management and global-supply management... When I was there, engineering decided what we wanted, and it was the job of product management and supply management to go get it. It shows a shift in priority."

Meanwhile, one of Apple's chief competitors -- Google -- may be getting supply-chain religion. A recent article in Business Insider notes that Google recently hired Mark Randall, a supply chain expert who developed and managed procurement for the Amazon Kindle and Kindle Fire. As Google moves into building hardware, such as phones, its supply chain will be critical to its strategy.