WSJ Profiles 'The Blevinator,' Apple's VP of Procurement Who Handles Supplier Negotiations

DogHouseDub

macrumors 6502
Sep 19, 2007
315
646
SF
BTW, when he calls one of his suppliers does he say "Hi, it's The Blevinator..."? or instead of a direct threat, does he say "don't make me get The Blevinator!"
“**** is about to get Blevinatious!”

“Forecast today; overcast with a 100% chance of Blevination”

“His negotiating skills are down right Blevalicious”
 

mschmalenbach

macrumors regular
Jul 22, 2008
134
68
Could be, but acquiring business from a customer like Apple can also work to one’s favor. The volume required with an Apple supply contract should allow a manufacturer to drive down production costs, allowing for more profitable business with other customers.

That said, companies often pass on business they don’t think they’ll be able to make any money on, or because they’d rather not deal with a difficult customer.
Here's the problem with volume driving down costs - it often doesn't, overall. Especially where chips are concerned.

Let's say I'm a semiconductor manufacturer. I'm running at say 80% capacity, a nice place to be. A couple of customers offer volume opportunities. My sales force takes those orders. Now I'm at 99% capacity. My cost per chip has gone down, so my margins have improved in that sense, but I've taken this volume business at a lower price and lower margin. So in terms of cash flow, I'm not much better off. I may even be worse off. Similarly with margins even though I might be making more actual profit dollars. But my investors are perhaps not so impressed with their returns.

Now I have another problem. To grow I'm going to need capacity. I can't go to 101% capacity - I can't just add 1% extra capacity above my 100% - I need to build a new fab, and add potentially another 50% capacity or more. Sure, I don't fully facilitate my fab all at once, I can grow in to it. But I still have to build the fab infrastructure etc - takes time and money. A lot of money.

How do I pay for this? My margins aren't so good, nor perhaps is my cash flow. Perhaps I need a loan, or to have a rights issue & issue more stock... but on what terms... I'm not looking quite so financially excellent as I did before I took all that high volume, lower margin business.

OK - I can not build a new fab, or have any fab, and just use a foundry like TSMC, Global and so on. This is just what almost 90% of semiconductor companies do - they're fabless. But for the TSMCs and Globals of this world they face the same fundamentals.

The notion of higher volumes, especially at lower margins, being always or almost always a good opportunity is not so clear-cut.

Throw in the fickle hand of fast moving consumer goods markets like smart phones for example, and laptops etc, where today's preferred supplier is tomorrow's pariah because they wouldn't give the customer a crazy discount, and you can see why high volume business with aggressive customers is risky - not just for suppliers, but in time, for buyers too - one day, far too often, the buyer wakes up to a situation where the current supplier has end-of-lifed a part that is not quickly sourced from elsewhere, certainly not at the crazy low prices of yesterday. And one day there just aren't enough suppliers around, or certainly willing, to supply under the old terms and conditions. So now the buyer has to get in to a costly, risky perhaps, product redesign cycle just to stay where they were... the costs of this are usually 20x-100x the money saved by squeezing suppliers on price.

It's been a phenomenon for a good many years that in many cases buyers of semiconductors for high volume FMCG and similar markets and employing aggressive supply chain management approaches are the primary cause of their own supply longevity/stability challenges and associated loss of revenue & profit $.
 

PickUrPoison

macrumors 603
Sep 12, 2017
5,996
7,303
Sunnyvale, CA
Here's the problem with volume driving down costs - it often doesn't, overall. Especially where chips are concerned.

Let's say I'm a semiconductor manufacturer. I'm running at say 80% capacity, a nice place to be. A couple of customers offer volume opportunities. My sales force takes those orders. Now I'm at 99% capacity. My cost per chip has gone down, so my margins have improved in that sense, but I've taken this volume business at a lower price and lower margin. So in terms of cash flow, I'm not much better off. I may even be worse off. Similarly with margins even though I might be making more actual profit dollars. But my investors are perhaps not so impressed with their returns.

Now I have another problem. To grow I'm going to need capacity. I can't go to 101% capacity - I can't just add 1% extra capacity above my 100% - I need to build a new fab, and add potentially another 50% capacity or more. Sure, I don't fully facilitate my fab all at once, I can grow in to it. But I still have to build the fab infrastructure etc - takes time and money. A lot of money.

How do I pay for this? My margins aren't so good, nor perhaps is my cash flow. Perhaps I need a loan, or to have a rights issue & issue more stock... but on what terms... I'm not looking quite so financially excellent as I did before I took all that high volume, lower margin business.

OK - I can not build a new fab, or have any fab, and just use a foundry like TSMC, Global and so on. This is just what almost 90% of semiconductor companies do - they're fabless. But for the TSMCs and Globals of this world they face the same fundamentals.

The notion of higher volumes, especially at lower margins, being always or almost always a good opportunity is not so clear-cut.

Throw in the fickle hand of fast moving consumer goods markets like smart phones for example, and laptops etc, where today's preferred supplier is tomorrow's pariah because they wouldn't give the customer a crazy discount, and you can see why high volume business with aggressive customers is risky - not just for suppliers, but in time, for buyers too - one day, far too often, the buyer wakes up to a situation where the current supplier has end-of-lifed a part that is not quickly sourced from elsewhere, certainly not at the crazy low prices of yesterday. And one day there just aren't enough suppliers around, or certainly willing, to supply under the old terms and conditions. So now the buyer has to get in to a costly, risky perhaps, product redesign cycle just to stay where they were... the costs of this are usually 20x-100x the money saved by squeezing suppliers on price.

It's been a phenomenon for a good many years that in many cases buyers of semiconductors for high volume FMCG and similar markets and employing aggressive supply chain management approaches are the primary cause of their own supply longevity/stability challenges and associated loss of revenue & profit $.
Having Apple as a customer has its good and bad points. You are going to be producing a ton of product, and that brings its own challenges of course. For both supplier and customer, it’s not easy to manage. You make some good points.

Sure Apple’s tough, but they’re not trying to put you out of business. (But watch out if they might want to vertically integrate your offering.) They don’t want—and don’t have—a reputation for stomping through an industry and serially burning through suppliers left and right.

They prefer long term relationships, but they also expect you to stay at the top of your game. Companies with unique offerings are going to fare better; Corning and TSMC come to mind.
 

I7guy

macrumors Core
Nov 30, 2013
21,288
9,214
Gotta be in it to win it
So he's just a sociopath.

Why is this praiseworthy? Oh because Tim's Apple values stock prices over humanity.
Because Apple is obligated to pay the highest prices to their suppliers, unlike other companies who strive to pay the lowest prices to their supplies. And unlike the general buying population who would like to pay the highest possible prices for consumer goods?