By Kenneth Rapoza
There is an advertisement beside an online article by CNBC real estate reporter Diana Olick that speaks volumes to the America of the 21st Century. We want it all, but we can’t afford it. Inches away from the headline that states most homeowners in the U.S. owe more on their house than it is actually worth is a 72-year-old man, topless, ripped with an anabolic six pick and the body of Arnold Schwarzenegger at 35. He’s selling Cenegenics, an ‘anti-aging’ treatment that costs about $1,000 a month, $4,000 to start.
Meanwhile, a new Wall Street Journal/NBC poll shows that 53% of Americans believe the debt and deficits should be cut significantly, but the same percentage agrees that taxes should not be raised on anyone. Similarly, 53% of Americans think that the influence of banks and corporations should be reined in, but that regulations on businesses should be cut back. In other words, as Henry Blodget of Business Insider said Wednesday on Yahoo! Finance’s Daily Ticker program…”Americans want everything.”
We have been told that for at least three generations. But the American “think and grow rich” mentality has run its course. Oprah Winfrey famously said in the 1980s about her stunning success in broadcast television that, “I believe you can have it all, just not all at once.” Barack Obama ran on “Yes, We Can!” In reality, maybe we can’t have it all, ever. The real world isn’t one of “yes, you can.” The real world is a world of “maybe, you can.”
Anyone who wants to get up to date on what’s wrong with the U.S., read the articles about California, Courtney Love, and Elizabeth Warren in the November issue of Vanity Fair. They sum it up politically, emotionally and economically where we’re at, and have been for a long time.
During a three hour Acela train ride to New York from Massachusetts on Oct. 24, those stories had me thinking about the small town that made me, to the big cities that broke me. Those stories all asked the same question essentially: who do we think we are?
Deep down, the American family is more Beverly Hillbillies than Beverly Hills. We’re more Mayberry than Madison Avenue. That’s not a political geography of red states versus blue. It’s an apolitical socio-economic map based on income. Americans overwhelmingly live on about US$53,000 a year from Red Texas (US$48,000 median income) to Blue Massachusetts (US$64,000). That kind of income is far from the other-worldly reality of Rodeo Drive and Park Avenue. In both Massachusetts and Texas, the poverty rate has gone up since 1979. In Texas, it went from 14.7% to 17.1% in 2009. In Massachusetts it went from 9.6% to 10.3%. Those numbers are fascinating considering that the one-per cent of households have seen their incomes rise 275% since 1979.
It’s not that the Beverly Hillbillies can’t sometimes afford the luxuries of Beverly Hills, because they can. Many of them drive brand new cars, wear their Tag Heuer as a status wrist band and have all gone to the Caribbean and dished out the US$150 for a 20 minute massage with hot rocks. It’s just that they borrowed 10 times for it. It’s not that the Madison Avenue crowd can’t afford to shop there, because they can. But most of them have borrowed even more to do so. Like Donald Trump, the only ‘billionaire’ who has to do a TV show to earn a living, are we really that rich? Or can we no longer afford ourselves?
What was the state of California thinking when it decided to pay its director of psychiatric services at the state’s prison system a cool US$838,706 in annual salary? Why do Californians want state services, but don’t want to pay for them? As much as they claim to despise their government, including voting to kick one governor, Gray Davis, to the curb and elect Arnold Schwarzenegger, an A-lister with no policy experience, Californians share the state’s defining trait, writes Michael Lewis in the article “California and Bust.” The average Californian earned less than the average Texan did in 2010, at just US$43,000, but they were leveraged to US$78,000, not counting mortgage debt. Beverly Hillbillies trying to live like the one percent in Beverly Hills.
This year, California will spend US$32-billion in direct employee salaries and benefits, up 65% since 2001. Meanwhile, state spending on education is down 5%. California’s affordable state college system used to be talk of every non-Californian strapped with Sallie Mae loans. Not anymore they’re not. In 1980, a Cal State student loan would be around US$800 a year. Today, students have to borrow over $13,000, not counting housing.
As California tries getting over its Beverly Hills hangover, its public sector workers are paying the price. Down the economic ladder, middle and working class families will therefore have to dish out more financial resources to cover things the state can noo longer afford to subsidize. By 2014, Lewis writes, cities like San Jose — the 10th largest city in the U.S. — would have gone from 7,450 staffers to 1,600.
“There is no way to run a city with that level of staffing. You start to ask: What is a city? Why do we bother to live together? But that’s just the start,” San Jose Mayor Chuck Reed told Lewis. “I don’t know how far you have to go to get to one (employee), but it isn’t all that far off.” In fact, in Vallejo, Calif, they are just about there.
This is what deleveraging looks like from the state perspective. But the same process is unwinding in U.S. households, and in U.S. businesses. “Buy now, pay later” was a mantra of the 80s. Later is now.
Okay, so freedom doesn’t mean free…
Freedom Doesn’t Mean Free
I grew up in a small coastal town called Westport, about an hour west on Route 6 from the Kennedy compound in Hyannisport, and 30 minutes east from the summer playground of the Vanderbilts in Newport, Rhode Island, a state struggling to pay its employees’ retirement obligations. Some cities in the state, like Central Falls — a mostly black and Hispanic municipality — already filed for bankruptcy this year.
Not far away, Westport is a town of beaches, cows and corn, million dollar summer homes to shotgun shacks ready to collapse on the people inside. The average income, according to the Bureau of Labor Statistics in Washington, was around US$54,000 in 2010, or around US$4,500 a month gross. The mean price for a home in 2009 was US$368,000. If a person could put down 20%, and got a 4.5% mortgage, the loan with insurance would be close to US$2,000 a month, nearly half gross average income. They’re not giving these homes away yet, even with the housing crisis still ongoing.
It’s not easy. In the county where Westport sits, unemployment is over 11%, the highest in the state.
My childhood home is in a neighborhood called Greenacres, named after the popular 1966 TV show starring Eva Gabor as a New York uptown girl who goes country, and talks a lot like Arianna Huffington.
Darling, I love you, but give me Park Avenue.
That 11% unemployment in the region is mostly due to old manufacturing cities surrounding Westport. These are places an Eva Gabor would loathe to live. I live next door.
In the 2011 version of Greenacres, Courtney Love is the blonde in the penthouse suite, pining over her missing fortune as she spends the fortune she says she doesn’t have. Instead of moving down market where roosters roost, she goes hobnobbing with Lords in the English countryside, conscious enough to wonder if she belongs there. What comes through in the article is her inability to grasp reality. It smacks of emotional America in the 21st Century.
Going to jail for clocking a reporter at a 1995 Vanity Fair Oscar party? Who cares. She’d be out by now, Courtney says. It’s a mindset that says risk always brings reward. As if risk is not risky. You don’t need to invest on risk, because there is no risk; in fact there is only reward. Until there isn’t. First there’s the parties. Then there’s the hangovers. Then there’s rehab.
Nancy Jo Sales interviewed Courtney over a few days, following her to British balls where Courtney tries on the Queen’s English while flipping through Debrett’s New Guide to Etiquette & Modern Manners to make sure she gets it right. “I wasn’t brought up well,” Courtney tells Sales. This is a woman who dreamed of fame and fortune and got it. She went from Orgeon juvenile detention at 13 years old to the stereotypical route to stardom for tough girls, first you pole dance, then you write some songs, then you sing them, then you become a rock star.
We hold up the improbable and near-impossible achievements of the 1% as if they are doable just by hard work, a good attitude, and the right friends. But Courtney’s friends invite her to parties in the Hamptons and to the Goodwood Ball. Earls put her up in castles with butlers. Let’s not pretend this is normal. Like a pre-tween Disney Channel sitcom where everyone’s got their own dance show or are exceptional students (possibly even with wizard powers), this is the life we actually have come to believe we can live. The truth is, it is probably just healthier to believe we can’t.
In 1996, I worked as a tour guide at The Breakers, Arthur Vanderbilt’s summer home and the largest mansion in Newport, RI. Anderson Cooper’s mother, Gloria Vanderbilt, played around as a child in this home. It’s not too far away from the Astor’s house, where Oracle CEO Larry Ellison has a home. On nice summer days, me and a good friend of mine named Heather would walk the sprawling weed-free lawn holding hands, dressed to the nines in our JC Penny tour guide income finest, and strolled towards the Cliff Walk over looking the Atlantic. Hundreds of people would come to visit the home each day, but even more would take the free walk along the sea that started near Easton Beach off Memorial Boulevard. Heather and I liked to walk up to the hedges bordering the Cliff Walk and whenever we would get asked by foreigners, standing on their tip toes to see more of the property over the bushes, “What is that mansion over there?” (the locals already knew), we would tell them it was our house. Some of them actually believed us because their reference to America was movies and soap operas where everyone either lived in a 5,000 square foot mansion or in a Malibu beach house. To the rest of the gawkers, we told the truth. But for a brief minute or two, surveying all that green, that gorgeous view standing beside a gorgeous woman, people believed it was all mine. I knew at 22, that was success. Like that One Republic anthem, I was young and I could become a millionaire. It was going to be a good life.
’69 was mighty fine, but ’88….
’88 (Was) Mighty Great
Richard Abrams is probably the youngest kid in all of Westport history to ever own a brand new Corvette. One day, outside what was once the smoking section of Westport High School, Abrams pulls in with a brand new red Corvette. Not even the principal had a car that at the time cost around US$35,000. I knew Abrams. I had been to his home. He was like the rest of us riff-raff, middle class kids from unglamorous hard working families who believed in the future. Only somehow, he believed harder than the rest of us and got a Vette sooner than later, with just a few months working at Westport Tire. Not wanting to be outdone, I got myself a 1985 Camaro Berlinetta with T-Tops, the best I could do. It cost me US$6,500. My parents put US$1,000 down. I paid off the rest bagging groceries at Stop & Shop and later washing dishes in a Rhode Island restaurant. Great car. Shitty job. But I felt like a brat packer, and I drove the same car Sonny Crocket drove in the first episode of Miami Vice … until he upgraded to a Ferrari.
We have been outdone. But we insist on outdoing ourselves.
On Oct. 28, the Commerce Department said consumer spending rose nearly 1%. That’s good news. But by comparison, incomes were unchanged because they rose 0.1% in September after falling 0.1% in August. Savings dropped to their lowest levels since December 2007 to 3.6%. Once again, we are spending more than we earn. All this, with the highest unemployment in more than 20 years.
Greenacres is the cause of this mess. It’s the Mayberry rednecks trying to be like the real money on Fifth and Park. Talk to most bank executives and they’ll still place the blame for the 2008 financial crisis on “irresponsible consumers” who bought homes they couldn’t afford and on Fannie Mae and Freddie Mac who gave mortgages to people who “shouldn’t own homes”, one New York bank executive told Suzanna Andrews in the article on Elizabeth Warren in Vanity Fair.
The cause of the crisis wasn’t investors who thought all risk always meant all reward, it was caused by the boring play-by-the-rules group in the middle that defines what America is to everyone looking over the hedges and peering into the neighbor’s yard. But inch by inch, we started pulling the threads out of the regulatory fabric that keep the middle class strong, starting in the 80s, writes Andrews, and accelerating with the fall of Soviet communism in 1991. There was no other model to turn to and this is what we got to make sure that, despite the protests, despite the concerns, the status quo may take down a few people, but it will remain. Although a Gallup poll in the fall of 2010 showed that 61% of Americans supported the Dodd-Frank bill designed to curb the all risk/all reward meme that triggered the 2008 meltdown and subsequent recession, over 2,500 lobbyists and big banks spent millions making sure the Consumer Financial Protection Bureau was toothless. As for individual banks, Andrews notes, JP Morgan Chase, which received US$25-billion in bail out money, spent US$14-million on lobbying efforts. Goldman Sachs, which got US$10-billion in bailout funds from taxpayers, spent US$7.4-million during the 2009-10 election cycle. They won. And the icing on the cake was President Obama’s decision not to appoint Elizabeth Warren, seen as anti-Wall Street, to the lead the Bureau.
At a time of record corporate profits, a time when 14 million Americans are out of work, when millions have lost their homes and, according to the Census Bureau, the ranks of those living in poverty nationwide has grown to one in six — that Elizabeth Warren could be publicly kneecapped and an agency devoted to protecting American consumers could come under such intense attack is, ultimately, the story about who holds power in America today, Andrews writes.
More than that, it assures change is unlikely. K Street is entrenched in Washington. Sure the Beverly Hillbillies are cutting their spending, but not for long. It won’t last. We’re trying to keep up with the Kardashians.
As is Courtney Love, who is still complaining to Sales about being broke right around the time I pull into New York. In the end, Courtney, like the rest of us, is angry about things that might not matter — the right way to hold a tea cup, where her next million will come from — and sad about the things that should — like getting along with an estranged child and “trying to love myself” as she tells Sales.
A month ago, I had met Abrams in Westport. We joked about his Corvette and reminisced about our high school years. He’s holding onto the same job he’s had for more 20 years at a building supply company nearby. I’m impressed by the longevity. But he’s not all that flattered by it. I’m a world travelling reporter who lived in one of the richest hoods in São Paulo; red carpet treatment, heated swimming pool, palm trees and parrots. That’s gone for me. For Abrams, the good life didn’t turn out exactly as good as he had thought in 1988. Ironically, or not, he is living with his parents in Westport again. He returned to the place he first parked his Corvette. Only now, the Corvette is gone and he’s back at start, getting over his over-levered self.
Monday, 14 November 2011
Sunday, 13 November 2011
Apple's Supply Chain Secrets
About five years ago, Apple (AAPL) design guru Jony Ive decided he wanted a new feature for the next MacBook: a small dot of green light above the screen, shining through the computer’s aluminum casing to indicate when its camera was on. The problem? It’s physically impossible to shine light through metal.
Ive called in a team of manufacturing and materials experts to figure out how to make the impossible possible, according to a former employee familiar with the development who requested anonymity to avoid irking Apple. The team discovered it could use a customized laser to poke holes in the aluminum small enough to be nearly invisible to the human eye but big enough to let light through.
Applying that solution at massive volume was a different matter. Apple needed lasers, and lots of them. The team of experts found a U.S. company that made laser equipment for microchip manufacturing which, after some tweaking, could do the job. Each machine typically goes for about $250,000. Apple convinced the seller to sign an exclusivity agreement and has since bought hundreds of them to make holes for the green lights that now shine on the company’s MacBook Airs, Trackpads, and wireless keyboards.
Most of Apple’s customers have probably never given that green light a second thought, but its creation speaks to a massive competitive advantage for Apple: Operations. This is the world of manufacturing, procurement, and logistics in which the new chief executive officer, Tim Cook, excelled, earning him the trust of Steve Jobs. According to more than a dozen interviews with former employees, executives at suppliers, and management experts familiar with the company’s operations, Apple has built a closed ecosystem where it exerts control over nearly every piece of the supply chain, from design to retail store. Because of its volume—and its occasional ruthlessness—Apple gets big discounts on parts, manufacturing capacity, and air freight. “Operations expertise is as big an asset for Apple as product innovation or marketing,” says Mike Fawkes, the former supply-chain chief at Hewlett-Packard (HPQ) and now a venture capitalist with VantagePoint Capital Partners. “They’ve taken operational excellence to a level never seen before.”
This operational edge is what enables Apple to handle massive product launches without having to maintain large, profit-sapping inventories. It’s allowed a company often criticized for high prices to sell its iPad at a price that very few rivals can beat, while still earning a 25 percent margin on the device, according to the estimates of Piper Jaffray analyst Gene Munster. And if the latest rumors are to be believed, Apple’s operational expertise is likely part of what gives the company enough confidence to enter the notoriously cutthroat television market by 2013 with a TV set that would tightly integrate with existing Apple software like iTunes. The widespread skepticism over Apple’s ability to compete in such a price-sensitive market, where margins are often in the single digits, is “exactly what people said when Apple got into cell phones,” says Munster.
Apple began innovating on the nitty-gritty details of supply-chain management almost immediately upon Steve Jobs’s return in 1997. At the time, most computer manufacturers transported products by sea, a far cheaper option than air freight. To ensure that the company’s new, translucent blue iMacs would be widely available at Christmas the following year, Jobs paid $50 million to buy up all the available holiday air freight space, says John Martin, a logistics executive who worked with Jobs to arrange the flights. The move handicapped rivals such as Compaq that later wanted to book air transport. Similarly, when iPod sales took off in 2001, Apple realized it could pack so many of the diminutive music players on planes that it became economical to ship them directly from Chinese factories to consumers’ doors. When an HP staffer bought one and received it a few days later, tracking its progress around the world through Apple’s website, “It was an ‘Oh s—’ moment,” recalls Fawkes
That mentality—spend exorbitantly wherever necessary, and reap the benefits from greater volume in the long run—is institutionalized throughout Apple’s supply chain, and begins at the design stage. Ive and his engineers sometimes spend months living out of hotel rooms in order to be close to suppliers and manufacturers, helping to tweak the industrial processes that translate prototypes into mass-produced devices. For new designs such as the MacBook’s unibody shell, cut from a single piece of aluminum, Apple’s designers work with suppliers to create new tooling equipment. The decision to focus on a few product lines, and to do little in the way of customization, is a huge advantage. “They have a very unified strategy, and every part of their business is aligned around that strategy,” says Matthew Davis, a supply-chain analyst with Gartner (IT) who has ranked Apple as the world’s best supply chain for the last four years.
When it’s time to go into production, Apple wields a big weapon: More than $80 billion in cash and investments. The company says it plans to nearly double capital expenditures on its supply chain in the next year, to $7.1 billion, while committing another $2.4 billion in prepayments to key suppliers. The tactic ensures availability and low prices for Apple—and sometimes limits the options for everyone else. Before the release of the iPhone 4 in June 2010, rivals such as HTC couldn’t buy as many screens as they needed because manufacturers were busy filling Apple orders, according to a former manager at HTC. To manufacture the iPad 2, Apple bought so many high-end drills to make the device’s internal casing that other companies’ wait time for the machines stretched from six weeks to six months, according to a manager at the drillmaker.
Life as an Apple supplier is lucrative because of the high volumes but painful because of the strings attached. When Apple asks for a price quote for parts such as touchscreens, it demands a detailed accounting of how the manufacturer arrived at the quote, including its estimates for material and labor costs, and its own projected profit. Apple requires many key suppliers to keep two weeks of inventory within a mile of Apple’s assembly plants in Asia, and sometimes doesn’t pay until as long as 90 days after it uses a part, according to an executive who has consulted for Apple and would not speak on the record for fear of compromising the relationship.
Not every supplier gives in. An executive who works with a major parts manufacturer says that Apple’s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins. After months of negotiations, the company declined a $1 billion payment from Apple that would have required the supplier to commit much of its manufacturing capacity to Cupertino’s products. The executive familiar with these talks, who asked not to be named because the discussions were not public, says that while deals featuring $1 billion in cash up front are basically unheard of, his company didn’t want to be too dependent on Apple—and didn’t want to help it deflate prices.
Apple’s control reaches its crescendo in the leadup to one of its famed product unveilings, a tightly orchestrated process that has been refined over years of Mac, iPod, iPhone, and iPad debuts. For weeks in advance of the announcement, factories work overtime to build hundreds of thousands of devices. To track efficiency and ensure pre-launch secrecy, Apple places electronic monitors in some boxes of parts that allow observers in Cupertino to track them through Chinese factories, an effort meant to discourage leaks. At least once, the company shipped products in tomato boxes to avoid detection, says the consultant who has worked with Apple. When the iPad 2 debuted, the finished devices were packed in plain boxes and Apple employees monitored every handoff point—loading dock, airport, truck depot, and distribution center—to make sure each unit was accounted for.
Apple’s retail stores give it a final operational advantage. Once a product goes on sale, the company can track demand by the store and by the hour, and adjust production forecasts daily. If it becomes clear a given part will run out, teams are deployed and given approval to spend millions of dollars on extra equipment to get around the bottleneck.
Apple’s enormous profits—its gross margins were 40 percent last quarter, compared with 10 to 20 percent for most other hardware companies—are in large part due to this focus on operations, which is sure to remain a priority under Cook. The new CEO is known to give colleagues copies of Competing Against Time, a book about using supply chains as a strategic weapon in business. According to Martin, the logistics executive, Cook uses a catchphrase to hammer home the need for efficiency: “Nobody wants to buy sour milk.”
The bottom line: Apple plans to double spending on its supply chain, to $7.1 billion, continuing its focus on streamlining and controlling manufacturing.
Ive called in a team of manufacturing and materials experts to figure out how to make the impossible possible, according to a former employee familiar with the development who requested anonymity to avoid irking Apple. The team discovered it could use a customized laser to poke holes in the aluminum small enough to be nearly invisible to the human eye but big enough to let light through.
Applying that solution at massive volume was a different matter. Apple needed lasers, and lots of them. The team of experts found a U.S. company that made laser equipment for microchip manufacturing which, after some tweaking, could do the job. Each machine typically goes for about $250,000. Apple convinced the seller to sign an exclusivity agreement and has since bought hundreds of them to make holes for the green lights that now shine on the company’s MacBook Airs, Trackpads, and wireless keyboards.
Most of Apple’s customers have probably never given that green light a second thought, but its creation speaks to a massive competitive advantage for Apple: Operations. This is the world of manufacturing, procurement, and logistics in which the new chief executive officer, Tim Cook, excelled, earning him the trust of Steve Jobs. According to more than a dozen interviews with former employees, executives at suppliers, and management experts familiar with the company’s operations, Apple has built a closed ecosystem where it exerts control over nearly every piece of the supply chain, from design to retail store. Because of its volume—and its occasional ruthlessness—Apple gets big discounts on parts, manufacturing capacity, and air freight. “Operations expertise is as big an asset for Apple as product innovation or marketing,” says Mike Fawkes, the former supply-chain chief at Hewlett-Packard (HPQ) and now a venture capitalist with VantagePoint Capital Partners. “They’ve taken operational excellence to a level never seen before.”
This operational edge is what enables Apple to handle massive product launches without having to maintain large, profit-sapping inventories. It’s allowed a company often criticized for high prices to sell its iPad at a price that very few rivals can beat, while still earning a 25 percent margin on the device, according to the estimates of Piper Jaffray analyst Gene Munster. And if the latest rumors are to be believed, Apple’s operational expertise is likely part of what gives the company enough confidence to enter the notoriously cutthroat television market by 2013 with a TV set that would tightly integrate with existing Apple software like iTunes. The widespread skepticism over Apple’s ability to compete in such a price-sensitive market, where margins are often in the single digits, is “exactly what people said when Apple got into cell phones,” says Munster.
Apple began innovating on the nitty-gritty details of supply-chain management almost immediately upon Steve Jobs’s return in 1997. At the time, most computer manufacturers transported products by sea, a far cheaper option than air freight. To ensure that the company’s new, translucent blue iMacs would be widely available at Christmas the following year, Jobs paid $50 million to buy up all the available holiday air freight space, says John Martin, a logistics executive who worked with Jobs to arrange the flights. The move handicapped rivals such as Compaq that later wanted to book air transport. Similarly, when iPod sales took off in 2001, Apple realized it could pack so many of the diminutive music players on planes that it became economical to ship them directly from Chinese factories to consumers’ doors. When an HP staffer bought one and received it a few days later, tracking its progress around the world through Apple’s website, “It was an ‘Oh s—’ moment,” recalls Fawkes
That mentality—spend exorbitantly wherever necessary, and reap the benefits from greater volume in the long run—is institutionalized throughout Apple’s supply chain, and begins at the design stage. Ive and his engineers sometimes spend months living out of hotel rooms in order to be close to suppliers and manufacturers, helping to tweak the industrial processes that translate prototypes into mass-produced devices. For new designs such as the MacBook’s unibody shell, cut from a single piece of aluminum, Apple’s designers work with suppliers to create new tooling equipment. The decision to focus on a few product lines, and to do little in the way of customization, is a huge advantage. “They have a very unified strategy, and every part of their business is aligned around that strategy,” says Matthew Davis, a supply-chain analyst with Gartner (IT) who has ranked Apple as the world’s best supply chain for the last four years.
When it’s time to go into production, Apple wields a big weapon: More than $80 billion in cash and investments. The company says it plans to nearly double capital expenditures on its supply chain in the next year, to $7.1 billion, while committing another $2.4 billion in prepayments to key suppliers. The tactic ensures availability and low prices for Apple—and sometimes limits the options for everyone else. Before the release of the iPhone 4 in June 2010, rivals such as HTC couldn’t buy as many screens as they needed because manufacturers were busy filling Apple orders, according to a former manager at HTC. To manufacture the iPad 2, Apple bought so many high-end drills to make the device’s internal casing that other companies’ wait time for the machines stretched from six weeks to six months, according to a manager at the drillmaker.
Life as an Apple supplier is lucrative because of the high volumes but painful because of the strings attached. When Apple asks for a price quote for parts such as touchscreens, it demands a detailed accounting of how the manufacturer arrived at the quote, including its estimates for material and labor costs, and its own projected profit. Apple requires many key suppliers to keep two weeks of inventory within a mile of Apple’s assembly plants in Asia, and sometimes doesn’t pay until as long as 90 days after it uses a part, according to an executive who has consulted for Apple and would not speak on the record for fear of compromising the relationship.
Not every supplier gives in. An executive who works with a major parts manufacturer says that Apple’s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins. After months of negotiations, the company declined a $1 billion payment from Apple that would have required the supplier to commit much of its manufacturing capacity to Cupertino’s products. The executive familiar with these talks, who asked not to be named because the discussions were not public, says that while deals featuring $1 billion in cash up front are basically unheard of, his company didn’t want to be too dependent on Apple—and didn’t want to help it deflate prices.
Apple’s control reaches its crescendo in the leadup to one of its famed product unveilings, a tightly orchestrated process that has been refined over years of Mac, iPod, iPhone, and iPad debuts. For weeks in advance of the announcement, factories work overtime to build hundreds of thousands of devices. To track efficiency and ensure pre-launch secrecy, Apple places electronic monitors in some boxes of parts that allow observers in Cupertino to track them through Chinese factories, an effort meant to discourage leaks. At least once, the company shipped products in tomato boxes to avoid detection, says the consultant who has worked with Apple. When the iPad 2 debuted, the finished devices were packed in plain boxes and Apple employees monitored every handoff point—loading dock, airport, truck depot, and distribution center—to make sure each unit was accounted for.
Apple’s retail stores give it a final operational advantage. Once a product goes on sale, the company can track demand by the store and by the hour, and adjust production forecasts daily. If it becomes clear a given part will run out, teams are deployed and given approval to spend millions of dollars on extra equipment to get around the bottleneck.
Apple’s enormous profits—its gross margins were 40 percent last quarter, compared with 10 to 20 percent for most other hardware companies—are in large part due to this focus on operations, which is sure to remain a priority under Cook. The new CEO is known to give colleagues copies of Competing Against Time, a book about using supply chains as a strategic weapon in business. According to Martin, the logistics executive, Cook uses a catchphrase to hammer home the need for efficiency: “Nobody wants to buy sour milk.”
The bottom line: Apple plans to double spending on its supply chain, to $7.1 billion, continuing its focus on streamlining and controlling manufacturing.
Saturday, 12 November 2011
How To Stand Out & Impress
How To Stand Out & Impress The Hell Out of Hiring Managers With A Powerful & Compelling HR Resume!
By Alan CollinsIf you’ve been sending out resumes and you’re getting no responses, chances are your resume is the problem.
As you know, most folks screening HR resumes are squeezed for time and typically only spend 15-20 seconds per applicant.
This means your resume must immediately grab them by the throat and sell you as a powerful and compelling candidate…and illustrate that you’re worth contacting for further interviews. Sadly, most HR resumes don’t.
Even if you aren’t currently in the job market, failing to know how to best highlight your achievements is a weakness that can absolutely destroy your HR career.
When it comes to performance appraisals, promotion consideration, even day-to-day work assignments, being a master at how to influence the perception of you as a performer is key to ensuring that your career in HR reaches the heights you desire. And that’s what a powerful and compelling resume can do.
With that in mind, here are 12 suggestions that will make your resume stand out from the rest of the bunch.
1. Forget the gimmicks.
Using quirky font sizes, strange layouts, or clever graphics are no-no’s. While a bizarre resume format may get you a few more seconds of eyeball time during the screening process, it may also prevent your resume from making it through electronic sorting and filtering tools used by the bigger corporations.
So focus on more of your “selling points” and less on “curb appeal.” Compelling “selling” points include your results, your impact on the organization, your skills and your ability to manage and lead…at the very minimum.
2. Juice up your accomplishments by quantifying or monetizing your results.
Hiring managers are NOT looking for job descriptions or activities on your resume. Job descriptions are simply boring descriptions of the responsibilities of the HR positions you have held in the past. Today, that simply won’t cut it.
The language of business is dollars and numbers. Everyone wants HR folks who deliver impact and produce results. So you need to find a way to energize and pack your resume with quantifiable results and the dollars that you MADE, SAVED, and ACHIEVED in every position you’ve held in HR. Then, include those totals in your resume and put them up front, where they can’t be missed.
EXAMPLES:
- Saved company $50,000 in recruiting manufacturing supervisors by utilizing a “quick strike” Twitter and LinkedIn recruiting strategy.
- Reduced by 14% the number of complaints filed per employee which resulted in $30,000 savings.
- Did supervisory training utilizing in-house managers as trainers saving $125,000 in outside consulting fees.
- Collaborated on an action plan that reduced turnover rate by18% of the top performers.
- Won 2 union organizing campaigns saving the organization potentially $1.5MM in increased costs if the group had successfully unionized.
3. Lead, follow or get the hell out of the way.
HR folks who can lead are always in demand. If you haven’t led and you’re seeking a role that calls for leadership skills ask yourself how many times you were a leader of a project, a subproject, a team, or even a meeting/event.
It doesn’t matter if you were never formally appointed a leader or given a leadership title. If you’ve successfully led others, you should reference leadership as one of your attributes.
Feature leadership terms throughout your resume, including sections covering your experience, education, and extracurricular activities.
EXAMPLE:
- Assembled and led a team responsible for developing a plan to expand scope of HR services provided by 25%, overcoming resource limitations, personality conflicts, and communication breakdowns and successfully presented the case to the Executive Committee.
Crafting your resume is not the time for modesty. Stick your chest out and mention all recognitions received for outstanding work. Don’t forget shared and team awards, or informal awards created by local managers. Include awards received both in school and on the job.
EXAMPLE:
- Received the Chairman’s Award for HR Excellence three times.
HR pros who have the opportunity to work with key people and executives are assumed to be among the best. So name names. If you worked for or with a famous individual, highlight them. Also include enough information so that the reader will know their importance.
EXAMPLE:
- Was selected by PepsiCo’s CEO, Indra Nooyi (#2 on the Fortune’s List of the World’s Most Powerful Women) to serve on a committee that successfully streamlined our talent and succession planning process by two weeks.
EXAMPLE:
- Worked with McKinsey & Co. on a strategy for employee redeployment during the 2008 recession working with Google, Kraft, and Pfizer which saved $1.2 million in severance costs.
In a volatile, changing global world, few things are more important than innovation and coming up with new ideas. List new ideas or innovations you developed, even if the innovation was not implemented. Show that you are an innovator, an outside-the-box thinker and often among the first to try new things.
EXAMPLE:
- Suggested adoption of three new innovative HR approaches to improve employee engagement, two of which were immediately adopted, yielding a 23% improvement in our organization-wide survey results.
Business people love functional/general business buzzwords, and merely using them reveals that you are current and up-to-date. Buzzwords should be included in descriptions of both your experience and education. However, just don’t over-do this.
EXAMPLE:
- Participated in a Six-Sigma evaluation of our new employee onboarding & orientation process.
If you can pinpoint problems before they become severe, you are quite valuable. List situations where you identified a problem that no one else saw and show them that you thrive in situations where there are lots of problems, issues or dilemmas.
EXAMPLE:
- Led the HR team which uncovered $300K in employee theft, previously unknown to the Company, which potentially could have led to a $6.2 million total loss if not for early detection and attention to detail.
Demonstrating that you were given financial responsibility shows that management trusted you. List any time, even if it was brief, where you managed a budget, were responsible for cash or other major spending decisions
EXAMPLE:
- Charged with evaluation and selection of $3.2M worth of new enterprise software for the company-wide HRIS upgrade. .
No matter what your HR job, the ability to sell your ideas and influence others is extremely valuable. Demonstrate that you effectively sold executives, vendors, or owners on new ideas.
EXAMPLE:
Influenced our top HR vendor to alter their long-standing service level agreement and reduce costs of their annual employee benefit administration fees by 17% saving the company $2.6M.
11. Showcase your global perspective.
You enhance your perception if you can demonstrate that you have a global perspective these days. Even if you don’t have formal international responsibilities, show that you have the capability of working with those from other countries…especially BRIC countries (Brazil, Russia, India, China).
EXAMPLES:
- Partnered with colleagues in China and India to standardize our performance evaluation and career development processes developed there and slated for global rollout.
- Used my knowledge of Spanish and Russian to assist our global HR executives in translating HR policies for implementation in Europe and Asia.
In many companies, access to advanced training means that you are a top performer. Highlight training courses, seminars, workshops and any advanced training on emerging issues that you participated in. If you have taught training classes, even if they were informal, include that also.
EXAMPLE:
- As a Diversity & Inclusion trainer, trained 300+ managers, with course evaluations averaging 9.2 on a 10 scale. Built training capability at 3 others locations, certifying 52 people as trainers with 1300 people trained by these trainers saving $500K in costs.
Your resume is a comprehensive marketing document that sells your your capabilities, skills, and accomplishments. It should be kept current and used not only when you’re job hunting, but also as a memory jogger when applying for an internal transfer, promotion, or completing a performance self-assessment.
If you find, as most HR folks do, that over half of these suggestions are not present in your resume, you have my permission to kick yourself in the butt for underselling yourself for all these years!
Got comments or additional HR resume suggestions, post them HERE.
About the author: Alan Collins was Vice President – Human Resources at PepsiCo where he led HR initiatives for their Quaker Oats, Gatorade and Tropicana businesses. He is now President of Success in HR, Inc. and the author of the HR best seller, UNWRITTEN HR RULES . His new book, BEST KEPT HR SECRETSnow available on Amazon.Feed your network: If you like this article, feel free to share it with your FACEBOOK friends by clicking the “share” and “like” buttons below…or share this with your TWITTER followers by clicking the “tweet” button below.
Thursday, 10 November 2011
Supply chains need ‘reliability quotient’
As recent production disruptions in the Far East have illustrated, a supply chain is only as strong as its weakest link. John McPherson, Senior Advisor of Trade Advisory Services at Export Development Canada, spoke to the Financial Post’s Smart Shift Editor, Cody Gault, about how companies are rethinking the way they do business.Q: From the earthquake and tsunami in Japan to the flooding in Thailand, this has been a bad year for supply chains, correct?
A: The natural disasters that have occurred in the past number of months are yet another straw on the camel’s back. For decades, the supply chain focus within corporations has been all about reducing and removing costs. It’s with that singular focus that we’ve seen companies who’ve moved to ‘just-in-time’ inventory, to reducing inventory, to sole-sourcing and outsourcing in some instances. And that all started to fall apart, going back to 2008 and 2009, when some of our key suppliers started just disappearing and being wiped from the face of our supply chain.
Q: Literally “disappearing”? As in: Disappearing in earthquakes and floods?
A: It dates even before the earthquake, back to the financial crisis of ’08. That’s where the singular focus on reducing costs lead to some weaknesses.
Q: In their single-minded pursuit of extraordinary profits, companies undermined their own long-term viability?
A: There’s no question that supply chain professionals within corporations, over the past decade, have been generally about reducing … input costs — simply removing as much cost as [they] could. And that has been done, generally speaking, without a real good view to what our resiliency is….
Essentially, [corporations stripped] away a lot of that safety net that existed for [them] by having that singular focus on squeezing costs.
Q: Do you see a parallel mindset here with Wall Street, where safety nets were similarly stripped away (through deregulation) for the purpose of turning a short-term profit (via sub-prime lending)?
A: Those are your words. I’ll add that we’ve seen the same thing in the expanded supply chain of most corporations — in that it was [the result of] a singular focus on reducing costs….
What’s happened — as a result of everything from the financial crisis to the tsunami and so on in Japan — has been a real re-think about that balance in our supply chain [to] where reliability once again is an important component of planning.
Q: So you predict a shift in supply-chain management back toward prudence and reliability?
A: At the end of the day, reliability at all cost is always too expensive. And so it becomes a balancing act. That’s the table setting that we have today; companies have realized that there are risks within their supply chain that affect their ability to do what it is that they do. And, recognizing those risks, the next step is: “What action should we take?”
Q: Do you think the economic losses associated with the Thai flood and Japanese earthquake increased awareness about supply-chain vulnerabilities, leading once-complacent companies to ask “What action should we take?”?
A: I think awareness occurs at different levels. I think the first level of awareness began five or six years ago when demand started dropping off, in some instances. And so the focus was then: “How do I begin making my supply chain more agile so that I can adjust to changes in my customer demand?” That was the first revelation as it pertains to supply-chain agility.
[That said,] certainly today we’re seeing companies now recognizing that there is another component to that “agility equation” which deals with [the] supply base and — in an integrated world where my ability to deliver is predicated on my health as well as the health of my suppliers and my value chain — [the] need to have a more holistic view of [a] supply chain.
So, regardless of what the event is — regardless of what socioeconomic situation it has caused — the reality is: Corporations today are looking more holistically at their supply chain and trying to develop that balance between agility — or reliability, whatever word you want to use — and bottom-line profit.
Q: You mentioned that demand started dropping off five or six years ago. Do you think that that drop in demand is connected to an erosion of the middle class caused by corporations moving manufacturing overseas?
A: “Erosion of the middle class” — Again, those are your words.
Q: Are there any companies that, in your mind, are taking the kind of “holistic” approach that you’re prescribing?
A: Without relaying anything that might be private to companies … companies tend to see these “best practices” as being what may very well set them apart from their competition. And so, although it’s often referred to, some of the leaders within the retail sector often refer to their supply-chain agility as being what they see as their strategic advantage.
Q: The price of oil, which is the lifeblood global supply chains, is projected to rise as “easy oil” runs dry. Perhaps unrelated — and perhaps not — is the fact that instances of “extreme weather” (like the flooding in Thailand) are projected to increase as our climate shifts. With these factors and others in play, do you think companies will consider a prodigal return to manufacturing in North America?
A: I think that what we see right now, what companies are taking into view as they are planning evolutions within their supply chain, is an uncertain future — as it pertains to many different things. And so, that means many things to many different companies — be it increasing reserve stock, or reserve inventory, through to rethinking sole-sourcing and outsourcing strategies.
So there’s a whole myriad of thought processes occurring relative to corporations’ supply chains as they begin to incorporate a “reliability quotient” in their design of those extended systems.
Posted in: Moves, Smart Shift Tags: Japanese earthquake, Japanese tsunami, Moves, Smart Shift, Supply Chain, supply chain disruption, Supply Chain Management
Wednesday, 9 November 2011
Ruthlessness and lasers: Apple’s supply chain revealed
By Adam Satariano and Peter Burrows
About five years ago, Apple Inc. design guru Jony Ive decided he wanted a new feature for the next MacBook: a small dot of green light above the screen, shining through the computer’s aluminum casing to indicate when its camera was on. The problem? It’s physically impossible to shine light through metal.
Ive called in a team of manufacturing and materials experts to figure out how to make the impossible possible, according to a former employee familiar with the development who requested anonymity to avoid irking Apple. The team discovered it could use a customized laser to poke holes in the aluminum small enough to be almost invisible to the human eye but big enough to let light through.
Applying that solution at massive volume was a different matter, Bloomberg Businessweek reported in its Nov. 7 issue. Apple needed lasers, and lots of them. The team found a U.S. company that made laser equipment for microchip manufacturing which, after some tweaking, could do the job. Each machine typically goes for about $250,000. Apple convinced the seller to sign an exclusivity agreement and has since bought hundreds of them to make holes for the green lights that now shine on the company’s MacBook Airs, Trackpads and wireless keyboards.
Most of Apple’s customers have probably never given that green light a second thought, but its creation speaks to a massive competitive advantage for Apple: operations.
This is the world of manufacturing, procurement and logistics in which the new chief executive officer, Tim Cook, excelled, earning him the trust of Steve Jobs. According to more than a dozen interviews with former employees, executives at suppliers and management experts familiar with the company’s operations, Apple has built a closed ecosystem where it exerts control over almost every piece of the supply chain, from design to retail store. Because of its volume — and its occasional ruthlessness — Apple gets big discounts on parts, manufacturing capacity, and air freight.
“Operations expertise is as big an asset for Apple as product innovation or marketing,” says Mike Fawkes, a former supply-chain chief at Hewlett-Packard Co. and now a venture capitalist with VantagePoint Capital Partners. “They’ve taken operational excellence to a level never seen before.”
This operational edge is what enables Cupertino, California-based Apple to handle massive product launches without having to maintain large, profit-sapping inventories. It’s allowed a company often criticized for high prices to sell its iPad at a price that very few rivals can beat, while still earning a 25 percent margin on the device, according to the estimates of Gene Munster, an analyst at Piper Jaffray Cos.
Apple began innovating on the nitty-gritty details of supply-chain management almost immediately upon Jobs’s return in 1997. At the time, most computer manufacturers transported products by sea, a far cheaper option than air freight. To ensure that the company’s new, translucent blue iMacs would be widely available at Christmas the following year, Jobs paid $50 million to buy up all the available holiday air freight space, says John Martin, a logistics executive who worked with Jobs to arrange the flights.
The move handicapped rivals such as Compaq Computer Corp. that later wanted to book air transport. Similarly, when iPod sales took off in 2001, Apple realized it could pack so many of the diminutive music players on planes that it became economical to ship them directly from Chinese factories to consumers’ doors. When a Hewlett-Packard staffer bought one and received it a few days later, tracking its progress around the world through Apple’s website, “It was an ‘Oh shit’ moment,” recalls Fawkes.
That mentality — spend exorbitantly wherever necessary, and reap the benefits from greater volume in the long run — is institutionalized throughout Apple’s supply chain, and begins at the design stage. Ive and his engineers sometimes spend months living out of hotel rooms in order to be close to suppliers and manufacturers, helping to tweak the industrial processes that translate prototypes into mass-produced devices. For designs such as the MacBook’s unibody shell, cut from a single piece of aluminum, Apple’s designers work with suppliers to create new tooling equipment.
The decision to focus on a few product lines, and to do little in the way of customization, is a huge advantage.
“They have a very unified strategy, and every part of their business is aligned around that strategy,” says Matthew Davis, a supply-chain analyst with Gartner Inc. who has ranked Apple as the world’s best supply chain for the past four years.
When it’s time to go into production, Apple wields a big weapon: More than $80 billion in cash and investments. The company says it plans to almost double capital expenditures on its supply chain in the next year, to $7.1 billion, while committing another $2.4 billion in prepayments to key suppliers. The tactic ensures availability and low prices for Apple — and sometimes limits the options for everyone else.
Before the release of the iPhone 4 in June 2010, rivals such as HTC Corp. couldn’t buy as many screens as they needed because manufacturers were busy filling Apple orders, according to a former manager at HTC. To manufacture the iPad 2, Apple bought so many high-end drills to make the device’s internal casing that other companies’ wait time for the machines stretched from six weeks to six months, according to a manager at the drillmaker.
Life as an Apple supplier is lucrative because of the high volumes, though painful because of the strings attached. When Apple asks for a price quote for parts such as touch screens, it demands a detailed accounting of how the manufacturer arrived at the quote, including its estimates for material and labor costs, and its own projected profit.
Apple requires many key suppliers to keep two weeks of inventory within a mile of Apple’s assembly plants in Asia, and sometimes doesn’t pay until as long as 90 days after it uses a part, according to an executive who has consulted for Apple and wouldn’t speak on the record for fear of compromising the relationship.
Not every supplier gives in. An executive who works with a major parts manufacturer says that Apple’s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins. After months of negotiations, the company declined a $1 billion payment from Apple that would have required the supplier to commit much of its manufacturing capacity to Apple’s products. The executive familiar with these talks, who asked not to be named because the discussions weren’t public, says that while deals featuring $1 billion in cash up front are basically unheard of, his company didn’t want to be too dependent on Apple — and didn’t want to help it deflate prices.
Apple’s control reaches its crescendo in the leadup to one of its famed product unveilings, a tightly orchestrated process that has been refined over years of Mac, iPod, iPhone and iPad debuts. For weeks in advance of the announcement, factories work overtime to build hundreds of thousands of devices.
To track efficiency and ensure pre-release secrecy, Apple places electronic monitors in some boxes of parts that allow observers in Cupertino to track them through Chinese factories, an effort meant to discourage leaks. At least once, the company shipped products in tomato boxes to avoid detection, says the consultant who has worked with Apple. When the iPad 2 debuted, the finished devices were packed in plain boxes and Apple employees monitored every handoff point — loading dock, airport, truck depot, and distribution center — to make sure each unit was accounted for.
Apple’s retail stores give it a final operational advantage. Once a product goes on sale, the company can track demand by the store and by the hour, and adjust production forecasts daily. If it becomes clear a given part will run out, teams are deployed and given approval to spend millions of dollars on extra equipment to get around the bottleneck.
Apple’s enormous profits — its gross margins were 40 percent last quarter, compared with 10 percent to 20 percent for most other hardware companies — are in large part due to this focus on operations, which is sure to remain a priority under Cook. The new CEO is known to give colleagues copies of Competing Against Time, a book about using supply chains as a strategic weapon in business.
According to Martin, the logistics executive, Cook uses a catchphrase to hammer home the need for efficiency: “Nobody wants to buy sour milk.”
About five years ago, Apple Inc. design guru Jony Ive decided he wanted a new feature for the next MacBook: a small dot of green light above the screen, shining through the computer’s aluminum casing to indicate when its camera was on. The problem? It’s physically impossible to shine light through metal.
Ive called in a team of manufacturing and materials experts to figure out how to make the impossible possible, according to a former employee familiar with the development who requested anonymity to avoid irking Apple. The team discovered it could use a customized laser to poke holes in the aluminum small enough to be almost invisible to the human eye but big enough to let light through.
Applying that solution at massive volume was a different matter, Bloomberg Businessweek reported in its Nov. 7 issue. Apple needed lasers, and lots of them. The team found a U.S. company that made laser equipment for microchip manufacturing which, after some tweaking, could do the job. Each machine typically goes for about $250,000. Apple convinced the seller to sign an exclusivity agreement and has since bought hundreds of them to make holes for the green lights that now shine on the company’s MacBook Airs, Trackpads and wireless keyboards.
Most of Apple’s customers have probably never given that green light a second thought, but its creation speaks to a massive competitive advantage for Apple: operations.
This is the world of manufacturing, procurement and logistics in which the new chief executive officer, Tim Cook, excelled, earning him the trust of Steve Jobs. According to more than a dozen interviews with former employees, executives at suppliers and management experts familiar with the company’s operations, Apple has built a closed ecosystem where it exerts control over almost every piece of the supply chain, from design to retail store. Because of its volume — and its occasional ruthlessness — Apple gets big discounts on parts, manufacturing capacity, and air freight.
“Operations expertise is as big an asset for Apple as product innovation or marketing,” says Mike Fawkes, a former supply-chain chief at Hewlett-Packard Co. and now a venture capitalist with VantagePoint Capital Partners. “They’ve taken operational excellence to a level never seen before.”
This operational edge is what enables Cupertino, California-based Apple to handle massive product launches without having to maintain large, profit-sapping inventories. It’s allowed a company often criticized for high prices to sell its iPad at a price that very few rivals can beat, while still earning a 25 percent margin on the device, according to the estimates of Gene Munster, an analyst at Piper Jaffray Cos.
Apple began innovating on the nitty-gritty details of supply-chain management almost immediately upon Jobs’s return in 1997. At the time, most computer manufacturers transported products by sea, a far cheaper option than air freight. To ensure that the company’s new, translucent blue iMacs would be widely available at Christmas the following year, Jobs paid $50 million to buy up all the available holiday air freight space, says John Martin, a logistics executive who worked with Jobs to arrange the flights.
The move handicapped rivals such as Compaq Computer Corp. that later wanted to book air transport. Similarly, when iPod sales took off in 2001, Apple realized it could pack so many of the diminutive music players on planes that it became economical to ship them directly from Chinese factories to consumers’ doors. When a Hewlett-Packard staffer bought one and received it a few days later, tracking its progress around the world through Apple’s website, “It was an ‘Oh shit’ moment,” recalls Fawkes.
That mentality — spend exorbitantly wherever necessary, and reap the benefits from greater volume in the long run — is institutionalized throughout Apple’s supply chain, and begins at the design stage. Ive and his engineers sometimes spend months living out of hotel rooms in order to be close to suppliers and manufacturers, helping to tweak the industrial processes that translate prototypes into mass-produced devices. For designs such as the MacBook’s unibody shell, cut from a single piece of aluminum, Apple’s designers work with suppliers to create new tooling equipment.
The decision to focus on a few product lines, and to do little in the way of customization, is a huge advantage.
“They have a very unified strategy, and every part of their business is aligned around that strategy,” says Matthew Davis, a supply-chain analyst with Gartner Inc. who has ranked Apple as the world’s best supply chain for the past four years.
When it’s time to go into production, Apple wields a big weapon: More than $80 billion in cash and investments. The company says it plans to almost double capital expenditures on its supply chain in the next year, to $7.1 billion, while committing another $2.4 billion in prepayments to key suppliers. The tactic ensures availability and low prices for Apple — and sometimes limits the options for everyone else.
Before the release of the iPhone 4 in June 2010, rivals such as HTC Corp. couldn’t buy as many screens as they needed because manufacturers were busy filling Apple orders, according to a former manager at HTC. To manufacture the iPad 2, Apple bought so many high-end drills to make the device’s internal casing that other companies’ wait time for the machines stretched from six weeks to six months, according to a manager at the drillmaker.
Life as an Apple supplier is lucrative because of the high volumes, though painful because of the strings attached. When Apple asks for a price quote for parts such as touch screens, it demands a detailed accounting of how the manufacturer arrived at the quote, including its estimates for material and labor costs, and its own projected profit.
Apple requires many key suppliers to keep two weeks of inventory within a mile of Apple’s assembly plants in Asia, and sometimes doesn’t pay until as long as 90 days after it uses a part, according to an executive who has consulted for Apple and wouldn’t speak on the record for fear of compromising the relationship.
Not every supplier gives in. An executive who works with a major parts manufacturer says that Apple’s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins. After months of negotiations, the company declined a $1 billion payment from Apple that would have required the supplier to commit much of its manufacturing capacity to Apple’s products. The executive familiar with these talks, who asked not to be named because the discussions weren’t public, says that while deals featuring $1 billion in cash up front are basically unheard of, his company didn’t want to be too dependent on Apple — and didn’t want to help it deflate prices.
Apple’s control reaches its crescendo in the leadup to one of its famed product unveilings, a tightly orchestrated process that has been refined over years of Mac, iPod, iPhone and iPad debuts. For weeks in advance of the announcement, factories work overtime to build hundreds of thousands of devices.
To track efficiency and ensure pre-release secrecy, Apple places electronic monitors in some boxes of parts that allow observers in Cupertino to track them through Chinese factories, an effort meant to discourage leaks. At least once, the company shipped products in tomato boxes to avoid detection, says the consultant who has worked with Apple. When the iPad 2 debuted, the finished devices were packed in plain boxes and Apple employees monitored every handoff point — loading dock, airport, truck depot, and distribution center — to make sure each unit was accounted for.
Apple’s retail stores give it a final operational advantage. Once a product goes on sale, the company can track demand by the store and by the hour, and adjust production forecasts daily. If it becomes clear a given part will run out, teams are deployed and given approval to spend millions of dollars on extra equipment to get around the bottleneck.
Apple’s enormous profits — its gross margins were 40 percent last quarter, compared with 10 percent to 20 percent for most other hardware companies — are in large part due to this focus on operations, which is sure to remain a priority under Cook. The new CEO is known to give colleagues copies of Competing Against Time, a book about using supply chains as a strategic weapon in business.
According to Martin, the logistics executive, Cook uses a catchphrase to hammer home the need for efficiency: “Nobody wants to buy sour milk.”
Friday, 4 November 2011
The Education Solution
WASHINGTON, DC – The world is assailed by problems that defy easy answers. Economic shocks are destabilizing countries and regions, and inflicting great social and financial hardships on families and their communities. Environmental damage threatens our food supplies, the air we breathe, and the rich biodiversity that sustains the balance of life. Wars and conflict produce millions of new refugees.
Moreover, new health risks are emerging, with diabetes, obesity, and other non-communicable diseases now stalking low- and middle-income countries – even as many of those countries are still locked in combat with tuberculosis, HIV/AIDS, malaria, and other infectious diseases. Hundreds of millions of young people around the world are searching for jobs in a very uncertain labor market. The infrastructure we use to produce our energy, transport our goods, and transact our business is under stress.
This list of worries is not meant to discourage, but to challenge. As the world’s physical resources grow scarcer, we must increasingly rely on the best and most proven renewable resource available – human ingenuity. Just as they confronted problems in the past, our scientists and entrepreneurs have brought us solutions by way of the Green Revolution, new vaccines, communications technology, and cleaner energy.
Scholars and leaders have given us the means to identify and resolve social and economic dilemmas. Rising levels of education have given people more control over their own health, household circumstances, governments, and culture.
The global challenges that we face today are proof that we need a world of problem solvers. We need a world of people who are productive, resilient, creative, and versatile enough with technology and culture to find solutions to the many challenges we face.
Education helps to build that world. Households with more education cope better with economic shocks and with extreme weather events. People with higher levels of education earn more, have more control over their fertility, and have healthier and better-educated children. Education gives people the skills to earn a living, to innovate, to invent, and to access culture – all of which allows them to live more fulfilling lives.
The good news is that the global community has united to help all people acquire these skills – and with real results. In 1990, a broad coalition of governments, the World Bank, United Nations agencies, and civil-society organizations committed to a strategy called “Education for All.” Twenty years later, there has been significant progress in enrolling children in school and expanding access to secondary school and universities. Globally, 88% of children now complete primary school, and 67% go on to enroll in secondary school.
But low-income countries are still far from meeting the goal of ensuring that all children complete primary school: only 63% of children in those countries achieve that milestone. Poor children, children with disabilities, girls, and ethnic minorities still face daunting barriers to education.
Many countries struggle simply to build schools quickly enough to keep up with population growth. Severely overcrowded classrooms, lacking in trained teachers and basic supplies, are not uncommon. In the rush to expand services, school systems have sometimes neglected teachers’ professional development, student assessment, and even basic building standards.
Over the years, we have learned that the real challenge is not just to enroll children in school, but to help them to acquire the skills necessary for employment, entrepreneurship, family life, and citizenship. The World Bank’s new education strategy, “Learning for All – Investing in People’s Knowledge and Skills to Promote Development,” highlights this imperative. It emphasizes the need to invest early, nurturing young children to ensure that they arrive at school healthy and ready to learn; to invest smartly, transforming schools with good teachers, good materials, and good management; and to invest for all, laying the foundation for just and equitable societies.
The strategy rightly recognizes the importance of building systems that support the development of education on a large scale. Sufficient numbers of teachers, school buildings, and textbooks are all essential, but accelerating learning requires much more. We need well-designed systems of finance, student assessment, professional development and management, quality assurance, and monitoring and evaluation. We need more robust and transparent relationships between central and local governments, state and private education providers, and households and communities. And we need stronger links between schools and employers to ensure that graduates acquire skills that are relevant to a changing job market.
We have much to learn from systems that have demonstrated continuous improvement, in contexts as varied as Singapore, Chile, Ghana, Slovenia, and England. While each of these countries had very different starting points, progress has been aided by the political will to measure outcomes and learn from results, define a sustainable path for change, and make smart, effective investments.
To foster learning about how systems improve, the World Bank is embarking on a major initiative to assess the quality of education policies around the world. Its new databases will catalogue which policies countries have adopted to promote learning in each part of the education system, in areas ranging from teacher policies to student assessment to school financing mechanisms. Our goal is to facilitate the spread of good policy and practice, allowing countries to learn from a variety of approaches and to understand which ones might work in their own context.
The case for improving education systems is urgent. Imagine our world, 20 years from now, if we could educate a new generation of young people so that they have the skills and creativity to take on the great economic and technological challenges of the day. Imagine, in particular, that all girls are educated, with all the profound benefits that this would yield in the areas of population growth, health and welfare, poverty alleviation, human rights, and politics.
Now imagine the alternative and ask yourself: Which world do I want to live in?
Moreover, new health risks are emerging, with diabetes, obesity, and other non-communicable diseases now stalking low- and middle-income countries – even as many of those countries are still locked in combat with tuberculosis, HIV/AIDS, malaria, and other infectious diseases. Hundreds of millions of young people around the world are searching for jobs in a very uncertain labor market. The infrastructure we use to produce our energy, transport our goods, and transact our business is under stress.
This list of worries is not meant to discourage, but to challenge. As the world’s physical resources grow scarcer, we must increasingly rely on the best and most proven renewable resource available – human ingenuity. Just as they confronted problems in the past, our scientists and entrepreneurs have brought us solutions by way of the Green Revolution, new vaccines, communications technology, and cleaner energy.
Scholars and leaders have given us the means to identify and resolve social and economic dilemmas. Rising levels of education have given people more control over their own health, household circumstances, governments, and culture.
The global challenges that we face today are proof that we need a world of problem solvers. We need a world of people who are productive, resilient, creative, and versatile enough with technology and culture to find solutions to the many challenges we face.
Education helps to build that world. Households with more education cope better with economic shocks and with extreme weather events. People with higher levels of education earn more, have more control over their fertility, and have healthier and better-educated children. Education gives people the skills to earn a living, to innovate, to invent, and to access culture – all of which allows them to live more fulfilling lives.
The good news is that the global community has united to help all people acquire these skills – and with real results. In 1990, a broad coalition of governments, the World Bank, United Nations agencies, and civil-society organizations committed to a strategy called “Education for All.” Twenty years later, there has been significant progress in enrolling children in school and expanding access to secondary school and universities. Globally, 88% of children now complete primary school, and 67% go on to enroll in secondary school.
But low-income countries are still far from meeting the goal of ensuring that all children complete primary school: only 63% of children in those countries achieve that milestone. Poor children, children with disabilities, girls, and ethnic minorities still face daunting barriers to education.
Many countries struggle simply to build schools quickly enough to keep up with population growth. Severely overcrowded classrooms, lacking in trained teachers and basic supplies, are not uncommon. In the rush to expand services, school systems have sometimes neglected teachers’ professional development, student assessment, and even basic building standards.
Over the years, we have learned that the real challenge is not just to enroll children in school, but to help them to acquire the skills necessary for employment, entrepreneurship, family life, and citizenship. The World Bank’s new education strategy, “Learning for All – Investing in People’s Knowledge and Skills to Promote Development,” highlights this imperative. It emphasizes the need to invest early, nurturing young children to ensure that they arrive at school healthy and ready to learn; to invest smartly, transforming schools with good teachers, good materials, and good management; and to invest for all, laying the foundation for just and equitable societies.
The strategy rightly recognizes the importance of building systems that support the development of education on a large scale. Sufficient numbers of teachers, school buildings, and textbooks are all essential, but accelerating learning requires much more. We need well-designed systems of finance, student assessment, professional development and management, quality assurance, and monitoring and evaluation. We need more robust and transparent relationships between central and local governments, state and private education providers, and households and communities. And we need stronger links between schools and employers to ensure that graduates acquire skills that are relevant to a changing job market.
We have much to learn from systems that have demonstrated continuous improvement, in contexts as varied as Singapore, Chile, Ghana, Slovenia, and England. While each of these countries had very different starting points, progress has been aided by the political will to measure outcomes and learn from results, define a sustainable path for change, and make smart, effective investments.
To foster learning about how systems improve, the World Bank is embarking on a major initiative to assess the quality of education policies around the world. Its new databases will catalogue which policies countries have adopted to promote learning in each part of the education system, in areas ranging from teacher policies to student assessment to school financing mechanisms. Our goal is to facilitate the spread of good policy and practice, allowing countries to learn from a variety of approaches and to understand which ones might work in their own context.
The case for improving education systems is urgent. Imagine our world, 20 years from now, if we could educate a new generation of young people so that they have the skills and creativity to take on the great economic and technological challenges of the day. Imagine, in particular, that all girls are educated, with all the profound benefits that this would yield in the areas of population growth, health and welfare, poverty alleviation, human rights, and politics.
Now imagine the alternative and ask yourself: Which world do I want to live in?
The fine art of shopping
It turns out consumers really do like to squeeze the Charmin, as the old advertising catch phrase says. In fact, they have sometimes resorted to poking holes in the toilet paper’s plastic-wrapper packaging to gauge its softness, according to shopper marketing guru Marcus Evans.
Getting into the nitty gritty of how consumers shop is a key focus of Mr. Evans as managing director of the new shopper marketing practice Integer Canada, part of the TBWA advertising network.
Shopper marketing is an area of fierce expansion and growing popularity at ad agencies. In August, DDB Canada launched Shopper DDB, an operation dedicated to the practice, and Toronto-based Philter recently announced a new joint venture, shopper marketing agency Mars|Philter.
“There is audience fragmentation in traditional media,” said Mr. Evans, noting the insights gleaned from shopper marketing help brands target consumers more effectively. “Consumers are getting really adept at filtering out brand messaging, and brands are investing in areas where they can have a quantifiable defined return on investment.”
A survey by management consulting firm Booz & Company found that 83% of senior consumer packaged goods [CPG] executives planned to increase their company’s investments in shopper marketing. Integer says 75% of CPG companies dedicate at least 5% of their sales and marketing budget to shopper marketing.
That brings us to Canadian Tire Corp., Shoppers Drug Mart Corp., and Loblaws Cos. Ltd., stores in which Mr. Evans spent a morning with the Financial Post offering shopper marketing insights.
At a Canadian Tire on the east side of Toronto, he analyzed a blowout sale of Charmin on a stand at the front of the store. His prior shopper marketing research outside of Canada for Procter & Gamble resulted in a significant sales increase after a small aisle display of two unwrapped Charmin toilet tissue rolls (Ultra Soft and Ultra Strong) let customers torip off a square or two and touch the product.
“If a brand claims “ultra soft,” how real is that? In extreme cases people were making a hole in the packaging to feel how soft the Charmin was,” he said.
Shopper marketing involves everything from giving out detailed questionnaires to consumers to discover how and why they shop to accompanying them on shopping trips and quizzing them about what they are doing. It includes analysis of websites and mobile communication, flyers and loyalty promotions, packaging, store displays and in-store layout and service.
“Why does a shopper come into a store with 20 items on her list and leave with 30 items? Or 15 items?” Mr. Evans said. “That’s what we want to find out.”
Integer divides consumer shopping into three parts: “pretail,” primarily communication that consumers access at home, such as websites or flyers; “retail,” every aspect of the in-store experience; and “post-tail,” follow-up communication and brand experiences after leaving the store.
Integer’s research has revealed customers are cautious and like to plan, making “pretail” particularly important for retailers and brands; 51% of Canadian shoppers always shop with a list, compared with 43% in the United States; and 80% said coupons have an influence, in varying degrees, on their brand selection.
“If you have got information to give to consumers when they are in the ‘What am I going to buy?’ phase, it’s a good time to talk to them because they are focused on it as opposed to in a store,” he said. “If I have got two young kids and a sausage dog shopping with me, I have a limited time. I am not looking around much.”
Mr. Evans noted Canadian Tire’s flyer and store layout were focused on deals, which may encourage people to buy extra things. “Most of the shoppers are here on a mission for one or two things, but the job of Canadian Tire is to remind them to leave with as many things as possible.”
At Canadian Tire, Charlotte Curgenven-Appt, shopping with her young son in tow, came in for sale-priced candy but ended up adding cleaning products to her cart.
“I really don’t need anything else, but I’ll probably end up buying more,” she said. “I am here because I was looking in the flyer. Canadian Tire always has good sales.”
Mr. Evans’ verdict of the retailer was largely positive, though he believed it could improve its signage. “They should hang [signs] from the ceiling so people can see them from different vantage points of the store rather than on the end of each aisle,” he said.
He was also generally positive about Shoppers Drug Mart, its wide aisles and clear signage, but found its flyer of standard sale offers said too little about the experience in the store. Inside, he lamented the incongruous placement of a bin of purses in the middle of a hair product aisle.
“Is that helping at all?” he said. “Interrupting shoppers when they are sleep shopping is a good thing, but this should be here for a reason.”
Sleep shopping, he explained, is what most people do when they make a routine retail trip to a grocery store. At Shoppers Drug, that could mean putting a promotion for chocolate beside a cleaning aisle, he said. “I haven’t any interesting secondary placements like that here.”
Mr. Evans was more effusive about Loblaws, extolling its store layout, endcap sale promotions, clear signage and range of private label products. “They could also do more with the flyer, which also says little about why people should come to the store other than some deals here. Give me a story as well as giving me the prices. People are looking for inspiration.”
Getting into the nitty gritty of how consumers shop is a key focus of Mr. Evans as managing director of the new shopper marketing practice Integer Canada, part of the TBWA advertising network.
Shopper marketing is an area of fierce expansion and growing popularity at ad agencies. In August, DDB Canada launched Shopper DDB, an operation dedicated to the practice, and Toronto-based Philter recently announced a new joint venture, shopper marketing agency Mars|Philter.
“There is audience fragmentation in traditional media,” said Mr. Evans, noting the insights gleaned from shopper marketing help brands target consumers more effectively. “Consumers are getting really adept at filtering out brand messaging, and brands are investing in areas where they can have a quantifiable defined return on investment.”
A survey by management consulting firm Booz & Company found that 83% of senior consumer packaged goods [CPG] executives planned to increase their company’s investments in shopper marketing. Integer says 75% of CPG companies dedicate at least 5% of their sales and marketing budget to shopper marketing.
That brings us to Canadian Tire Corp., Shoppers Drug Mart Corp., and Loblaws Cos. Ltd., stores in which Mr. Evans spent a morning with the Financial Post offering shopper marketing insights.
At a Canadian Tire on the east side of Toronto, he analyzed a blowout sale of Charmin on a stand at the front of the store. His prior shopper marketing research outside of Canada for Procter & Gamble resulted in a significant sales increase after a small aisle display of two unwrapped Charmin toilet tissue rolls (Ultra Soft and Ultra Strong) let customers torip off a square or two and touch the product.
“If a brand claims “ultra soft,” how real is that? In extreme cases people were making a hole in the packaging to feel how soft the Charmin was,” he said.
Shopper marketing involves everything from giving out detailed questionnaires to consumers to discover how and why they shop to accompanying them on shopping trips and quizzing them about what they are doing. It includes analysis of websites and mobile communication, flyers and loyalty promotions, packaging, store displays and in-store layout and service.
“Why does a shopper come into a store with 20 items on her list and leave with 30 items? Or 15 items?” Mr. Evans said. “That’s what we want to find out.”
Integer divides consumer shopping into three parts: “pretail,” primarily communication that consumers access at home, such as websites or flyers; “retail,” every aspect of the in-store experience; and “post-tail,” follow-up communication and brand experiences after leaving the store.
Integer’s research has revealed customers are cautious and like to plan, making “pretail” particularly important for retailers and brands; 51% of Canadian shoppers always shop with a list, compared with 43% in the United States; and 80% said coupons have an influence, in varying degrees, on their brand selection.
“If you have got information to give to consumers when they are in the ‘What am I going to buy?’ phase, it’s a good time to talk to them because they are focused on it as opposed to in a store,” he said. “If I have got two young kids and a sausage dog shopping with me, I have a limited time. I am not looking around much.”
Mr. Evans noted Canadian Tire’s flyer and store layout were focused on deals, which may encourage people to buy extra things. “Most of the shoppers are here on a mission for one or two things, but the job of Canadian Tire is to remind them to leave with as many things as possible.”
At Canadian Tire, Charlotte Curgenven-Appt, shopping with her young son in tow, came in for sale-priced candy but ended up adding cleaning products to her cart.
“I really don’t need anything else, but I’ll probably end up buying more,” she said. “I am here because I was looking in the flyer. Canadian Tire always has good sales.”
Mr. Evans’ verdict of the retailer was largely positive, though he believed it could improve its signage. “They should hang [signs] from the ceiling so people can see them from different vantage points of the store rather than on the end of each aisle,” he said.
He was also generally positive about Shoppers Drug Mart, its wide aisles and clear signage, but found its flyer of standard sale offers said too little about the experience in the store. Inside, he lamented the incongruous placement of a bin of purses in the middle of a hair product aisle.
“Is that helping at all?” he said. “Interrupting shoppers when they are sleep shopping is a good thing, but this should be here for a reason.”
Sleep shopping, he explained, is what most people do when they make a routine retail trip to a grocery store. At Shoppers Drug, that could mean putting a promotion for chocolate beside a cleaning aisle, he said. “I haven’t any interesting secondary placements like that here.”
Mr. Evans was more effusive about Loblaws, extolling its store layout, endcap sale promotions, clear signage and range of private label products. “They could also do more with the flyer, which also says little about why people should come to the store other than some deals here. Give me a story as well as giving me the prices. People are looking for inspiration.”
Wednesday, 2 November 2011
More than half a million ‘baby pensioners’ in Italy: report
Nov 1, 2011 – 3:54 PM ET
As Greek Prime Minister George Papandreou called a surprise referendum Monday, hoping to curry political favour with an outraged citizenry, Italy faces its own howling protests over plans to raise the retirement age.Italian Prime Minister Silvio Berlusconi submitted a “letter of intent” to the European Union summit last week promising, among other things, to balance the country’s budget by 2013 and increase the age of retirement to 67.
This will be no small task in Italy, which has more than 530,000 pensioners who retired under the age of 50 — sometimes with just 14 and a half years of service — according to a report from independent Italian business agency Confartigianato last week.
The large majority of these pensions (78.6%) are paid by INPDAP, the country’s public sector pension administrator, the report said.
The average so-called “baby pensioner” remains retired for 40.7 years, spending 48% of their life retired, Confartigianato said.
Social security spending on baby pensions totals €9.45-billion ($13.2-billion) a year, according to the report.
Cesare Fumagalli, the secretary general of Confartigianato, called the situation an “absurd iniquity” and suggested the need for a hike in the age of retirement.
Hundreds of Italians protested a €54-billion package of tax increases and spending cuts passed in September and physical violence even broke out in parliament last week.
Deputies from the Northern League, part of the ruling coalition, fought with members from the opposition FLI party of speaker Gianfranco Fini, grabbing each other by the throat as other party members rushed to break up the fight.
The clash last Wednesday came ahead of Mr. Berlusconi’s submission to the EU summit amid reports that the Prime Minister would agree to step down in exchange for the Northern League agreeing to increase the pension age to 67 by 2026.
Italy’s bond yields have recently increased to unsustainable levels, making borrowing prohibitive and requiring intervention from the European Central Bank to prevent further rises.
Reluctant investors have concerns about the country’s sluggish growth and €1.9-trillion ($2.6-trillion) debt, which is 120% of its gross domestic product and second only to Greece in the region.
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