Apples Manufacturing Strategy

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Strategos, Inc. 3916 Wyandotte Kansas City MO 64111 USA 816-931-1414

Apple, Foxconn & Manufacturing Strategy

By Quarterman Lee, P.E. Strategos, Inc. 23 June 2012

C O N S U L T A N TS • E N GI N E E R S • S T R A TE G I S T S

www.strategosinc.com

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© 2012 Strategos, Inc.

Apple, Foxconn & Manufacturing Strategy
Steve Jobs and Apple Computer once built a "factory of the future" in Fremont, California. They spent $20,000,000 and then closed it after just two years. Today, Apple's net worth is more than Poland. So, what went wrong in 1984? And, what is going right today? What went wrong was not cheap overseas labor. It was their failure to integrate Marketing Strategy with Manufacturing Strategy. Or, more likely, Apple failed to even consider the issues of Manufacturing Strategy. Later, when Apple partnered with Foxconn, Apple and Foxconn did not repeat the earlier mistakes. What follows is a review of what is publicly known about Apple and Foxconn in the context of Manufacturing Strategy.

Manufacturing & Marketing Strategy
Apple, Inc. has been in the news a lot lately. Partly because of their profitability and stock value; partly because of labor controversy. At Strategos we take no position on the labor controversy or stock price. We can comment on what little is known publicly about Apple's manufacturing operations—both current operations in China and past operations in the United States. When Steve Jobs told Obama "Those jobs aren't coming back" he was probably correct. But, maybe, they didn't have to leave in the first place.

Steve Jobs
"Those jobs aren't coming back."

Manufacturing Strategy addresses the question "How to go about fulfilling our manufacturing tasks?" The answer is at a policy level and addresses a range of issues such as equipment characteristics, plant layout, workflow and people. As the design of a factory progresses, engineers, managers, contractors and suppliers make thousands of decisions. A Manufacturing Strategy guides them as they make decisions such as: • • Machine A costs more than machine B but it may be more adaptable to future products. Which to choose? Should we design the floor slab in this area for the light assembly operations originally planned? Alternatively, should we design it for machining and warehouse operations that might be in this area several years from now? Equipment in this area will be sensitive to vibration. The manufacturer says we can set it on a six-inch slab but should we make the slab thicker to absolutely guarantee the machine will be capable? Should we use conduit wiring (cheaper) or bus duct (more flexible)? How much space should we allow for purchased parts storage?



• •

Such issues may seem technical, low-level and almost trivial—hardly the domain of top management. However, the wrong decisions can have far-reaching effects. In addition, an accumulation of wrong decisions can saddle a company with a factory or multiple factories that do not meet current market needs yet is too expensive to replace. It affects long-term competitiveness and, eventually, stock price. These are top management's domain.

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© 2012 Strategos, Inc.

Apple's Key Manufacturing Task
Apple, from the very beginning has had a marketing and business strategy based on these characteristics: • • • • • Highly Innovative Products Fast Product Life-cycles Spectacular Promotions & Introductions High Quality Premium Pricing

They have, generally, executed this marketing strategy well over many years—but that is another story. Our concern here is with the demands this marketing and business strategy place on a manufacturing system. The most important one or two of these demands become the "Key Manufacturing Tasks." So what are Apple's key manufacturing tasks and what are their relative priorities?" This question leads back to marketing and product design.

Flexibility
More than anything else, Apple's marketing strategy requires flexibility in...
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