Nobody wants to buy sour milk

26 September 2013. Published by Christopher Whitehouse, Senior Associate

This folksy catchphrase is at the heart of the business model of the last decade's most wildly successful company: Apple Inc.

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In case anyone missed its meteoric rise, in only 13 years Apple has been taken from the verge of bankruptcy to holding the accolade of being (briefly, in August 2011) the world's most valuable company. For most outsiders this was the work of one visionary man, Steve Jobs: a prodigal son who had returned in 1997 to resurrect the company he had co-founded with a vision of a firm dedicated to designing products combining both exquisite software and hardware.

Following the death of Steve Jobs on 5 October 2011, many were surprised by the announcement that Tim Cook, relatively unknown outside Apple and formerly the company's Head of Operations and in charge of its worldwide supply chain, would be his successor as CEO. Yet, his elevation points to the traditional core of Apple's success.

A brief history of competing against time

According to Bloomberg Businessweek, when Tim meets new colleagues he passes on the catchphrase with which this article started and gives them a copy of Competing Against Time, a book about using supply chains as a strategic weapon in business.

Competing Against Time was published in 1990 when author George Stalk could still hold up Japanese companies and Ford as leading examples of corporate efficiency. Fortunately, Stalk's core message has fared better than his protagonists: time matters in business.

Cook's choice of gift shows that despite its cutting-edge technology, he believes Apple's success is built on the age-old foundation of a good supply chain. Underlining this, reports from Bloomberg Businessweek that Apple intends to double spending on its supply chain to $7.1 billion suggest Tim is investing in his mantra.

Even from its earliest days, the company has been willing to spend enormous sums in order to ensure that its products reach consumers quickly and in such numbers that it can break sales records with each product launch.

In 1997 Apple faced a problem. It had recently developed a personal computer with a revolutionary blue plastic design. But to make it an attention-grabbing success it had to sell in numbers. And suddenly. To solve the problem Apple gambled $50 million buying all the available air freight space travelling into the US in the lead up to Christmas. It bought so much capacity that rivals found it difficult to counter Apple's sales drive. They simply couldn't get their own computers to market fast enough to be available for holiday shoppers.

The success of this crucial re-launch of the Apple brand sowed the seeds of the company's future profitability.

Don't be a tool: suppliers throw a spanner in the works

However, all firms have their specialisms. Apple may be famous for its manufactured products, but it's not a manufacturer. Instead it relies on Foxconn, a huge Taiwanese conglomerate, and 30,000 Chinese workers to do the job for it.

Laptops are pieced together, often by hand, using components flown in from all over Asia by suppliers of chips and ultra-thin electronic displays. The ceiling above the workers' heads is a metallic racetrack of completed laptops, screens on, slowly installing Apple's latest feline operating system. They are then packaged up and loaded onto planes to be flown by commercial shippers direct from China to consumers' front doors. This warehouse-less, 'just-in-time' supply system works beautifully, clinically, and, most importantly, profitably. Except when it doesn't.

On 20 May 2011 an explosion at a Foxconn plant killed three employees, wounded 15 and led the company to shut all its plants. For Apple this was not only a public-relations disaster, placing a huge ethical question mark over every Apple device, it also shut down a supply chain that relied upon the speed with which products could be manufactured and posted to consumers.

Apple was taught a valuable lesson: that the reliability of any production process is integral to its speed. Any problem, at any point, on whatever scale, can threaten the whole chain of supply, and suppliers, especially external suppliers, have a role to play in keeping the chain moving. If it stops, nothing gets to market. And nobody wants to buy sour milk.

For you, me and RPC

The manufacturing heartlands of southern China are a world away from corporate law in the City of London. However, although the role may be different, City law firms and their workers are still suppliers of legal services to their clients' chains of supply, in the same way Foxconn supplies manufacturing services to Apple.

Just as Apple places speed at the centre of its business, so do legal clients. They need to meet project deadlines; to be ready for product launch dates; to close deals on time; and to resolve disputes and litigation quickly to prevent business disruption, the absorption of time, and, most importantly, the tying up of capital.

Law firms also have their own supply chains, made up of lawyers that who have their own specific expertise or role on a matter. From trainees up, if any individual fails to fulfil their role on time, this will cause the chain to break.

Lawyers must provide their firm and their firm's clients with the advice they need; not with their research or time-consuming and unnecessarily lengthy reports and emails. They must be concise; they must commit to and meet deadlines; and they must be reliable. In business, speed really does equal success.

Making the point: a punchy conclusion

Clients will pay a significant premium for fast delivery; therefore firms and individuals that can reliably guarantee a speedy service will triumph in the marketplace.

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