How, exactly, have Apple and Google managed to become device-making powerhouses, and two of the biggest companies in the world?
Two obvious answers to this question might be "good branding", and "consumer demand that allows for high margins". But beyond that, there are specific business strategies involving data and technology that these companies have pioneered, and those strategies have the potential to be transformative for commodity companies that adopt them.
Manage Your Relationships Directly
In the case of Apple, its decidedly un-sexy supply chain is one of the reasons for its success. People think “technology” when they think of Apple, but one business secret lies in is its expert supply chain team. There is an army of people managing every detail of the supply chain for Apple products, and they bring and build deep relationships with partners and suppliers. If Apple teams don’t receive the exact shade of white plastic, for example, the supply chain team reaches out directly to the resin manufacturer and tells them about the problem. They don’t outsource their relationships. This is key, because when a third party is responsible for taking care of the supply chain, that broker may have a thousand other customers to handle as well. You might be the hundredth in line to have an issue resolved. It doesn’t matter how many people you call...if your message isn’t reaching the right person, your problem will remain unsolved.
Managing relationships directly is of great importance for commodity industry, because the greatest margin for commodity companies often lies in their logistics operation. Hence, it’s imperative for the members of the commodity industry to carefully manage all supply chain relationships, and to have full control over their freight movement network. Despite the importance of transportation on commodity margins, a lot of commodity companies outsource their logistics management to 3rd-party logistics providers. At the tech companies, this doesn't happen. They own their relationships. Do you?
In addition to maintaining relationships, Apple and Google place a huge degree of importance on developing their people, so that they feel confident relying on the knowledge of their own internal experts. At a massive company, knowing what to outsource, and what to keep in-house is a key business decision. Apple, for example, develops their own processors, so they have unprecedented control over their hardware. Not only does it save them on costs when producing the iPhone, but developing their own chips allowed Apple to make the most powerful mobile chips in the world. Similarly, their logistics expertise resides in-house: Apple supply chain executives have seen it all.
Commodity producers are generally able to rely on internal expertise when it comes to producing and refining their product. However, most rely on 3rd-party logistics services to transport the finished product. When you outsource that expertise, all you’re getting in exchange is convenience. What you are losing in this trade is control, savings, and expertise. You’ll find yourself relying on people who don’t share the same vision or priorities as you. If your relationship with your primary transportation provider goes south, do you know all of the details of how your transportation services were managed over the last year, or would you have to look back over emails and invoices to try to piece it together?
Having a bench of internal experts matters. With the passage of time, they’ll understand the specifics of your business. They’ll remember past mistakes, learn lessons, and know exactly the places where improvements will increase your margins and make your logistics management better. When you rely on expertise outside your organization, you are just a customer.
Data is everything for modern businesses, and no one knows that better than Apple and Google. A business’ success relies heavily on the understanding of its customers, and that’s exactly what data helps them achieve. Apple and Google know absolutely everything about every component in their products. This means that when an issue comes up, they know exactly where the issue has occurred and what solution will lead to the fastest resolution.
Commodity industry companies also need to be collecting and leveraging data to optimize their processes...especially in logistics. In a high-volume, low-margin business, optimization matters. The problem with working with 3rd-party logistics service providers is that any data regarding issues in your transportation processes remains largely invisible to you. If profits dip, the finance department may mistakenly attribute this to issues with production...but what if it’s your freight forwarder choosing an unnecessarily expensive transportation service? And if that is happening, what could you do to change it if you’re not managing the transportation directly? While it’s ideal to have direct relationships with carriers, at a minimum you need a solution that lets you quantify and measure your freight forwarder performance and have visibility into those costs.
Apple and Google have achieved success by prioritizing relationship management, developing deep in-house supply chain expertise, and leveraging data. They have complete visibility into their key business processes, and it’s delivered incredible success...and now you can have that visibility, too. Given the ease of use and accessibility of technological solutions, it makes sense for commodity companies to leverage in-house technological solutions to manage their freight movement from origin to destination. With a fast, easy-to-implement cloud platform like Haven, commodity companies can integrate the best practices of tech companies into their existing workflows, allowing them to keep more hard-earned margin in their pockets.
By Jeff Wehner