Advertisement

Blog

Apple Gets Ahead of the Curve – Again

As we reported this week, {complink 379|Apple Inc.} has taken the unprecedented step of disclosing its supplier list. This raised a lot of eyebrows in the supply chain community, which considers such information a competitive weapon. There are undoubtedly a lot of reasons Apple did this — I suspect its new CEO's supply chain experience is one of them — but it may also be preparing for the inevitable. As global rules become more stringent, such disclosures may become standard operating procedure.

OEMs have long protected their supplier lists as part of their intellectual property. A company's bill-of-material (BOM) can reveal certain aspects of a product design. Suppliers, EMS partners, and even distributors are frequently prohibited from sharing the identity of suppliers for fear it could give away the OEM's “secret sauce.” I actually believe this has become less of a problem as more functionality has moved to software and away from board design. A straight list of suppliers — minus the quantity and pricing information — doesn't give away the farm the way it once did.

But it does go a long way toward disclosure. Ever since the Sarbanes-Oxley Act was enacted, OEMs have been facing increasingly stringent disclosure requirements. That law opened the door by requiring the flagging of certain business relationships. RoHS requires that the use of certain hazardous materials be disclosed (or abandoned). Dodd-Frank, the conflict minerals act, requires manufacturers essentially to prove a negative — that they do not use materials from conflict regions.

Certain export laws prohibit the use of containers and paper derived from “old growth” trees. More companies are looking at carbon footprinting as they seek to ensure an environmentally friendly supply chain. And the list goes on. Alleged human rights violations at EMS facilities are becoming a battleground. Can manufacturer boycotts be far behind?

Here's the dilemma for any OEM: It's almost impossible to guarantee the veracity of any of this information without your suppliers' consent. In a typical electronics component, the materials content is extremely complex and is measured in units too small to contemplate (for us nonscientific people). Distributors, which cull through millions of part numbers every day, can verify a BOM's RoHS compliance only to the best of their knowledge based on information the supplier provides. Even EMS companies can't say an OEM's product complies with RoHS or similar mandates. The onus falls on the OEM. As reporting requirements become more stringent and the supply chain becomes more complex, OEMs will have to provide more and more information to both governmental bodies and nongovernment organizations. There will be very few things any company can hide — and many of them shouldn't be hidden.

Apple may be getting ahead of the curve by publishing its list of suppliers without being required to do so. But it's an interesting dilemma from the supply chain standpoint. Should a supplier list be considered proprietary information? If not, what information should stay confidential? And are OEMs putting too much at risk by sharing? I'd like to hear your thoughts.

8 comments on “Apple Gets Ahead of the Curve – Again

  1. bolaji ojo
    January 19, 2012

    Barbara, I wonder too why Apple has suddenly decided to publish a list of suppliers it kept secret for so long. Was this because secrecy is no longer necessary or that the disadvantages overway the advantages?

    You also raised a valid point. Now that Apple has disclosed its suppliers, the onus for proving compliance with all environmental and social responsibility would be transferred to the suppliers too, or at least shared. Now, Apple won't have to be the only one putting pressure on the suppliers. Labor and human rights agencies will be able to threaten suppliers with reporting them to Apple.

    P)lus, Apple comes up smelling roses.

  2. Barbara Jorgensen
    January 19, 2012

    Bolaji–the more I think about it, the more I'm convinced Tim Cook has something to do with this sea change. This indicates to me that–typical for Apple–they've seen something coming and have jumped out in front of it. No question, though, it makes Apple look good, as did its report last year on its manufacturing partners. The information wasn't so pleasant, but Apple faced it head-on. If nothing else, they can demonstrate their due diligence, if, as reported, Foxconn is still having problems with employee rights

  3. jbond
    January 20, 2012

    Even though I found it very odd that Apple released such information for no apparent reason, I think they are looking ahead at some industry changes about to take place. If nothing else, this pre-emptive strike helps put Apple out front again and makes sure their suppliers are following the rules.

  4. t.alex
    January 21, 2012

    I think this is to ensure competitiveness among suppliers. Only Apple can do this at this time.

  5. Cryptoman
    January 22, 2012

     

    I think there are two key reasons why Apple has done this:

    1 – By publishing its list of suppliers, Apple surely drew the attention of the competing suppliers. Now that the information is out, many competing companies will be knocking on Apple's door to offer it attractive new deals on parts that they are already using in their products. This will save Apple a lot of legwork. This will obviously put pressure on the suppliers who are already on the list because they will have to work harder to offer at least as competitive prices to Apple and will have to fight for their positions on the list.

    2 – Although the existing suppliers will need to work harder to stay competitive in order to remain on the golden list, they have started to reap the benefits of their exposure as a supplier to Apple by means of increasing their share prices. In addition to that, many investors are probably taking a good look and putting a few tick marks on that supplier list as a pointer to where their cash is going to go next.

    It all makes sense, doesn't it?

    Regards…

  6. arenasolutions
    January 24, 2012

    I agree. Apple is too smart and calculating in their supply chain management for me to really think this was some benevolent move on their part. They know something's in it for them!

  7. arenasolutions
    January 24, 2012

    Another point to consider, is I keep seeing stories about Foxconn and Apple's connection to it all over the place – making a big move like releasing the names of suppliers sort of changes the discussion in the media. 

  8. Damilare
    January 25, 2012

    I will liken Apple to a chess grandmaster when it comes to the electronics market, most of their moves is preplanned and steps ahead of their rivals. keeping the suppliers list a secret, in the first place generates speculation (life blood of business). Publishing it at this time after much speculation sustains peoples interest..

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.