iPhone 4 Supply Chain, Operational Efficiency, and China

Do you know the value of the parts in your iPhone and what it took to put them all together?

The way to calculate the various costs of the components plus the labor that is needed to manufacturer and assemble them so that consumers can acquire the latest hot product from Apple is to deconstruct the iPhone supply chain.

At a cost of about $600, the iPhone 4, can be deconstructed by tracking its components from the dozen integrated chips and flash memory to the casings to the embedded GPS system. The hardware we can all see and these physical components contribute just under $200 to the price of the iPhone 4.

According to an article in The New York Times, the smallest part of Apple’s costs are those in manufacturing and assembly, which takes place in China, right now in Shenzhen. The Chinese assembly-line workers put together the microchips, which come from Germany and Korea, a touch-screen module from Taiwan, even American-made chips that pull in Wi-Fi or cellphone signals, and more than 100 other components! This is truly a global supply chain with the greatest value to the product coming at the front-end and the back-end. In the iPhone 4, more than a dozen integrated circuit chips account for about two-thirds of the cost of producing a single device, according to iSuppli.

However, soaring labor costs caused by worker shortages and unrest, a strengthening Chinese currency that makes exports more expensive, and other issues such as inflation and rising housing costs are all threatening to sharply increase the cost of making devices such as notebook computers, digital cameras and smartphones.

Desperate factory owners in China are already shifting production away from this country’s dominant electronics manufacturing center in Shenzhen toward lower-cost regions, even in China’s mountainous interior.

The world of contract manufacturers is invisible to consumers. According to The New York Times, it is a $250 billion industry, with only a few companies like Foxconn (which has been much in the news lately because of the worker strikes), Flextronics, and Jabil Circuit manufacturing and assembling for all the global electronics brands.

These companies compete on price to earn small profit margins, analysts say. As we who work and conduct research in operations and supply chains know, such firms try to benefit from even minute operational changes to attain competitive advantage. For example, the Chinese companies have very low profit margins and increasingly the Chinese are not favoring low-end assembly work. At the same time, Foxconn is spending heavily on manufacturing many of the parts, molds and metals that are used in computers and handsets, even trying to find larger and cheaper sources of raw material and locating plants closer to mines with sources of necessary raw materials.

So when you look at your smartphone, think about what went into your latest hightech gadget and favorite product, from the knowledge resources that helped to create its design, from the natural resources that enabled the construction of its components to the human resources that put the components together to the transportation services that delivered it to the stores.

And remember, as you hold the product in your hands, which was made possible by the complex global supply chain that enabled its design, its manufacture, assembly, and distribution, the long journey that the product took to you.

2010 Computational Management Science Conference in Vienna, Austria

I am preparing my talks for the 2010 International Conference in Computational Management Science, which will take place in glorious Vienna, Austria, July 28-30, at the University of Vienna. I am very much looking forward to this conference.

Besides giving the invited keynote talk, "Supply Chain Networks: Challenges and Opportunities from Analysis to Design," I will also be presenting, "Supply Chain Network Design for Critical Needs with Outsourcing," which is based on the paper forthcoming in the journal, Papers in Regional Science, with my doctoral student, Min Yu, and Professor Qiang "Patrick" Qiang of Pennsylvania State University in Malvern.

The latter presentation will be given in the invited session: Supply Chains, Transportation and Networks that I organized. Other presenters in this session and their papers are:

Mr. Thomas Seyffertitiz of the Vienna University of Economics and Business (the largest business school in Europe) will be speaking on "Vulnerability and Disruption Analysis in Supply Chain Networks: A Layered Network Perspective;"

Professor Tina Wakolbinger of the Fogelman College of Business and Economics at the University of Memphis in Tennessee, will deliver the talk, "An Analysis of Impacts Associated with Earmarked Private Donations for Disaster Relief," which is based on joint work with Professor Fuminori Toyasaki of York University in Canada, and

Professor Patrizia Daniele of the Department of Mathematics and Computer Science at the University of Catania in Italy will present: "Supply Chain Networks and Infinite Dimensional Duality Theory."

The list of invited keynote speakers can be found here.

The program with accepted talks and schedule can be downloaded here.

Happy July 4th and a Small Town Parade

There is nothing like a small town parade and today we enjoyed the 4th of July parade in Amherst, Massachusetts. The photos above were taken in downtown Amherst, where as the residents always say, only the "h" is silent.

Tonight we are looking forward to the extravagant fireworks display which takes place annually.

The Final Four in the 2010 World Cup

Rather than having 3 South American teams in the final four of the 2010 World Cup in South Africa, as many were predicting, we have 1 team from South America left, from Uruguay (who beat Ghana yesterday with penalty kicks), and three European teams: The Netherlands (who beat Brazil 2-1), Germany (who beat Argentina 4-0 today), and Spain (who beat Paraguay today 1-0).

Next week, Uruguay will play against The Netherlands, and Spain will play against Germany.

The New York Times had a wonderful article on Diego Maradona, the coach of the Argentinian team, which, I suspect, he may even have time now to read. I heard that his top player, Lionel Messi, was not feeling well on Thursday and missed practice (perhaps that affected his team's performance today).

Congratulations to all the teams who played their hearts out at this World Cup. From my perspective as a spectator and a huge World Cup fan, they all deserve standing ovations.

Brazil Knocked out of the World Cup by the Netherlands

I caught the last half hour or so of the Brazil vs. The Netherlands World Cup soccer game and my heart is still beating fast. The goal scored by the Dutch team using three players' heads as though they were playing a volleyball game with their heads was breathtaking.

For Holland to have beaten the number 1 ranked team, Brazil, at the 2010 World Cup speaks to the continuing drama and surprises taking place at this fascinating World Cup in South Africa.

Thanks to Brazil and to its players, coaches, and fans for bringing their special skills in soccer to the world stage, despite the loss today.

I hear from my academic colleagues in The Netherlands that the country is experiencing a very serious case of soccer frenzy, and justifiably so. I send my condolences to my colleagues in Brazil for their team's loss today which must be very painful since it was so unexpected.

Perelman Rejects Million Dollar Math Prize

In an earlier blog post, I wrote about the speculation as to whether (or not) Grigoriy Perelman would accept the $1,000,000 math prize from the Clay Institute. According to the Clay Institute of Cambridge, Massachusetts (and this news was even reported in our local paper), Dr. Perelman, of St. Petersburg, Russia, has decided to decline the Millennium Prize for his contribution to solving the Poincare conjecture.

The Institute President, Jim Carlson, was quoted as saying that Perelman's decision was not a complete surprise, since he had declined some previous math prizes.

Dr. Perelman told Interfax that he considered his contribution to solving the Poincare conjecture no greater than that of the Columbia University mathematician, Richard Hamilton.

"To put it short, the main reason is my disagreement with the organized mathematical community," Perelman, 43, told Interfax. "I don't like their decisions, I consider them unjust."

In our local paper, the Daily Hampshire Gazette, it is stated that the Clay Institute officials will meet this Fall to decide what to do with the million dollars with Carlson saying,"We have some ideas in mind." "We want to consider that carefully and make the best use possible of the money for the benefit of mathematics."

May I suggest that the money be used for scholarships and fellowships for deserving students and researchers in mathematics and associated technical subjects?

Life-Long Learning, Analytics, and Being Members of a Club

The Pew Research Center has released another study through its Global Attitudes Project in conjunction with The International Herald Tribune, which is reported on in The New York Times, and which will surely generate provocative discussions.

According to the study, which surveyed people in 22 different countries, people say that they firmly support equal rights for men and women, but many still believe that men should get preference when it comes to good jobs, higher education or even in some cases the simple right to work outside the home.

The poll, conducted in April and May, suggests that in both developing countries and wealthy ones, there is a pronounced gap between a belief in the equality of the sexes and how that translates into reality. In nations where equal rights are already mandated, women seem stymied by a lack of real progress, the poll found.

Several quotes in The New York Times article, by female professors, especially resonated with me. Professor Herminia Ibarra, who teaches organizational behavior at INSEAD, the international business school based in Fontainebleau, France, is quoted as saying: There are still very few women running large organizations, and business culture remains resolutely a boys’ club. And a quote by Professor Jacqui True, who teaches at the University of Auckland in New Zealand, stated: When you’re left out of the club, you know it. When you’re in the club, you don’t see what the problem is.

Clearly, women, as professionals, may belong to several "clubs," in which they can be valued members (or not) -- from their immediate departments in their academic or employer organizations to different professional organizations or societies and communities.

What is essential is that professionals understand and take part in activities of organizations that are broader in scope than simply their local ones. In this sense, they can obtain not only sustenance in being part of larger communities but they can also engage in life long learning opportunities and build relationships that they can rely upon when the "going gets tough."

Women's professional voices are being increasingly heard -- through podcasts and even through blogs and social networking sites.

I would like to single out, as an example, the learning resources of INFORMS, one of the professional societies that I belong to, which through the extraordinary efforts of Barry List, has put together a series of podcasts of wide interest and relevance. You will see that several podcasts are interviews with female experts. If you would like to see the full list in digital format, just click here.

Students and future generations need to see many different role models in terms of gender and race since the myriad problems that the world is facing from the environment to inequality to wars and strife cannot be addressed through the eye of a needle.