by Thomas Wailgum

A Tragedy Ripples Through Apple’s Global Supply Chain

Jul 22, 20093 mins
Enterprise Applications

Apple's celebrated financial results were clouded by a dark story that illustrates supply chain risks.

On a day when Apple executives were basking in the glow of their recession-beating quarterly results, shocking details of a tragedy began unfurling and the story includes Apple, its manufacturing partner Foxconn in China and the risks inherent to one of the world’s top supply chains.

News reports out of China said that Sun Danyong, a 25-year-old employee of Foxconn Technology Group, a Taiwanese manufacturer of numerous Apple products, had killed himself. Details of why Danyong took his life are still unconfirmed, but it was reported that he was responsible for sending iPhone 4G prototypes to Apple’s headquarters in Cupertino, and one such gadget went missing. An investigation by Foxconn’s security group—suspicious of Danyong’s purported story—is now at the center of the controversial event.

As evidenced by Apple’s recent quarterly announcement, the iPhone has been and still is a category leader for the privacy-intensive Apple. Sales of the iPhone (year-over-year for this quarter) jumped an incredible 626 percent.

“There’s tremendous pressure on employees dealing with Apple’s new products to maintain a high-level secrecy over the gadgets, traditionally launched amid great suspense and a big marketing buzz,” notes an Associated Press article. “Apple is also a constant target of prying journalists, rabidly faithful customers and competitors who make great efforts to try to steal a peek at its latest technology.”

AMR Research has recognized Apple’s supply chain (two years running) as tops in the world. AMR lauded Apple for its “extremely high inventory turns, minimal material or capacity limitations to growth and excellent margins.”

But even the best supply chain isn’t impervious to today’s global risks. Companies have to worry about: growing intellectual property theft, especially in China; the risks of a shrinking pool of suppliers; the disastrous effects of tainted goods; the challenges of constructing a green supply chain strategy; business-crippling data blindspots; and making good decisions on what data is available.

Apple, in fact, endured networking and supply chain mistakes with last summer’s iPhone 3G, App Store and MobileMe rollouts and an ill-timed iPhone software upgrade. CEO Steve Jobs eventually owned up to the problems customers encountered with iPhone 3G out-of-stocks and activation nightmares, for instance, and the company has seemingly suffered no lasting effects from the mistakes.

Yet it still is suffering from supply and demand problems: Apple planners “didn’t anticipate that it would sell seven times as many iPhones last quarter as the same period last year,” notes a article. And iPhone out-of-stocks span the globe.

As this most recent case shows, like computer security, human beings making decisions are the weakest point in any supply chain. And that’s a risk that no one—not even mighty Apple—can completely control.

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