The encyclopedia · Engineering & Operations · Operational decision · 1998–2000
Apple cut inventory from 31 days to 6 days in one year under Tim Cook
Cook joined in 1998, cut suppliers from 100 to 24, closed 10 of 19 warehouses, and Apple's inventory dropped from 31 days to 6 days.
Apple Inc.
the move
When Tim Cook joined Apple in 1998, the company was months from collapse. Apple held about a month of inventory, roughly $437 million at the end of fiscal 1997, and its product line had ballooned to about 15 separate products. Cook's first job was the supply chain, and he treated inventory as the disease rather than a symptom.
He cut the number of component suppliers from 100 to 24, closed 10 of the company's 19 warehouses, and pushed manufacturing out to contract partners with supplier hubs. The FY1998 10-K records the result: inventory fell from $437 million to $78 million and days of supply from 31 to 6, while gross margin climbed from 19% to 25%.
The filing credits "actions which improved overall inventory management": a simplified product line (about 15 products down to three families), industry-standard parts, outsourced circuit-board and systems assembly, and fewer locations where finished goods were staged. By September 1998 Apple was running on six days of inventory instead of a month.
why it works
- Inventory had been eating cash and risking obsolescence in a fast-moving PC market.
- Fewer suppliers meant each had to compete on price, quality and responsiveness for Apple's business.
- Closing warehouses cut the places where capital sat as finished goods.
- Outsourcing shifted component and assembly risk to partners while Apple kept design and brand.
what transfers
When a company is bleeding, inventory is the fastest cash to recover: fewer suppliers and warehouses plus outsourcing shrink the gap between paying for parts and selling goods.
what came after
The six-day inventory position became Apple's operating norm and the foundation of its later iPod and iPhone supply chain; Cook's supply-chain record made him the natural successor to Steve Jobs, becoming CEO in 2011. Apple's inventory discipline remains part of how the company funds its product launches.
references
- Apple Computer, Inc. Form 10-K, Fiscal Year 1998
- Steve Jobs trusted Tim Cook to "know exactly what to do"
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