World's Best Supply Chain? Apple Turns Over Its Entire Inventory Every Five Days

Ruthless efficiency.

If you are searching for a definition of that term, a graphic of Apple's supply chain may appear.

What this means is that Apple, with its world-beating sales volume, is able to reduce costs and increase profits by manufacturing, transporting, storing and then selling so quickly and efficiently that it basically keeps the stuff just long enough for customers to buy it.

So, not only is Apple designing products that people want, it has also figured out how to get it to them quicker than anyone else in the world. Which means its costs are lower, profits higher. It's stock price reflects this capability, which means the company therefore has more money to invent new stuff that it can then sell even faster.

The business world - and the mainstream media - tend to focus on The Big Story: the impending Facebook IPO. The disappointment of the Facebook IPO. Who's to blame for the disappointment. The banking scandal-du-jour. But for those interested in how money gets made day-to-day and year-to-year, the real action is in seemingly boring and routine process improvements and management capability. The intangibles that drive business growth but are not captured on a balance sheet or income statement. They may not be audited, but they sure do count. And Apple has the numbers to prove it. JL

Alex Madrigal reports in The Atlantic:

Apple turns over its inventory once every five days.

That's part of why a new report from the technology research firm, Gartner, ranked Apple's supply chain the best in the world. And it's pretty amazing when you think about it

This is a company that sells hundreds of millions of hardware gadgets all over the world and yet it doesn't actually need to stockpile its goods.

The only company on Gartner's list of 25 companies that turns over its product faster is McDonald's, which is not exactly in the electronics business. Dell and Samsung rank two and three in Apple's category, turning over their inventory roughly once every 10 and 21 days respectively.

We calculated these times from the report's "Inventory Turn" metric, which estimates the number of times a company's inventory is sold in a given time period.

Apple's number is 74, according to Gartner (or 76, according to Forbes). From there, it's a common practice to divide by 365 to "estimate the number of days [of] sales sitting in inventory."

Fascinatingly, if you read about that inventory turn metric, you will find things like this: "Although results vary by industry, typical manufacturing companies may have 6-8 inventory turns per year. High volume/low margin companies (like grocery stores) may have 12 or more inventory turns per year or more."

So a typical company in manufacturing might do 8 inventory turns. Samsung does 17. Dell, which practically invented hardcore electronics supply chain management, does 36. Apple is doing 74!