Intro/Outro (00:01):
Welcome to Dial P for procurement. A show focused on today’s biggest spin supplier and contract management related business opportunities. Dial P investigates the nuanced and constantly evolving boundary of the procurement supply chain divide with a broadcast of engaged executives, providers, and thought leaders. Give us an hour and we’ll provide you with a new perspective on supply chain value. And now it’s time to dial P for procurement.
Kelly Barner (00:31):
Procurement never makes news headlines. Unlike our cousins in supply chain, we’re a little more buried in the organization. Obviously, no one wants to promote something when a mistake has been made, but even when procurement does a good job, the company doesn’t want anyone to know because it could change customer pricing expectations. And so as a result, procurement is the most impactful corporate function that no one has ever heard of. So when I caught the word procurement in a news headline last month, I was pleasantly surprised. And then I read the article, a short, colorful piece about apple’s. Now, former vice president of procurement, Tony Blevins, who had gone viral for all the wrong reasons, I had to find out more, but it wasn’t an easy task. As I’ve said, no one ever writes about procurement and historical revision was already underway. As I started researching this episode, I noticed that a lot of the articles about Blevins predated the incident had been pulled down.
Kelly Barner (01:40):
I would find an article and click the link only to get a 4 0 4 error. This page is no longer available. Time and time again, let’s just say too many times for it to be a coincidence, which made me more determined than ever to tell the whole story. Oh, and for the record, I have PDFs of all of my source material. So even if people pull down more stories, I still have them. Nice try universe. You gotta get up earlier in the morning than that to get one on me. So in this episode of Dial P for procurement, I’ll review what did Tony Blevins do to raise eyebrows and make headlines leading to his very sudden departure from Apple? What do we know about his career and do we think his approach to procurement may have precipitated his fall? And if not, at least does it cast a different light on the successes reported during his tenure?
Kelly Barner (02:39):
Now, before I go any further, let me pause and introduce myself. I’m Kelly Barner. I’m the co-founder and managing Director of Buyers Meeting Point. I’m a partner at Art of Procurement and I’m your host for Dial P here on Supply Chain. Now, I’m constantly scanning the news for complex articles to discuss things that are interesting but may escape notice. I also follow these stories beyond the headlines, and I stay on top of a story until it goes cold or reaches a resolution. Dial P releases a new episode or interview every single Thursday. So be on the lookout for future episodes and don’t forget to go back and check out some past episodes as well. Now, before I get back to Mr. Blevins, I have a quick favor to ask. I genuinely hope you find value in the time we’re about to spend together. If you do find a way to let me know, we have listeners on all kinds of platforms.
Kelly Barner (03:40):
So you can reach out to me directly on LinkedIn. You can give us a review on iTunes or offer up some stars. You can also share or like a posting where you found this episode on LinkedIn or Twitter. I am grateful for your interest in attention, and as always, consider my door open if you have an idea for a future episode of Dial P. Now, let’s start with the juicy details of what happened to Mr. Blevins. In August, he was at a car show in California sitting in his Mercedes-Benz Sr McLaren. He was approached by Daniel Mac, a talker, known for approaching people driving fancy cars and asking them what they do for a living. So he approached Tony Blevins and asked him the question. I’m not going to tell you how he answered it. First of all, this is a family show, and second of all the answers very easy to find.
Kelly Barner (04:38):
It’s a quick Google search away, but I will tell you he did not say, I am the Vice President of procurement at Apple. Instead, he quoted the 1981 movie Arthur featuring Dudley Moore. Now, I should also add that movie was rated pg, meaning some parental guidance suggested, but still just one step above a G movie. Once the video went viral, multiple Apple employees contacted human resources. And according to Bloomberg, Apple, Chief Operating Officer, Jeff Williams relieved blevins of managing his six direct reports, hundreds of employees, and terminated him. Blevins did apologize publicly, but the damage had been done, as my dad would’ve said, The clear message was J G O just get out. Most of the stories about the incident included details about how Mr. Blevins ran Apple’s procurement organization, and they’re enlightening for multiple reasons. We learn a lot about how he worked, but also about Apple procurement.
Kelly Barner (05:48):
Now, given that so many of these articles are being pulled down, I wanna share with you all the details that I was able to find starting at the beginning of Tony Blevins story. Tony Blevins was born in 1968 and grew up in the Blue Ridge Mountains of North Carolina. His mother was a school teacher and his dad was a factory worker. One Wall Street Journal article that will talk about in a moment, quoted high school classmate Tracy GOs. He remembers Mr. Blevins as someone who could quote, knew that he was smarter than whoever he was talking to and could always control the conversation if he wanted to end. And isn’t that charming. Tony Blevins got a degree in industrial engineering from North Carolina State and worked at IBM in engineering. Then finance and then procurement, which is where he apparently met Tim Cook. Tim Cook joined Apple in 1998 and brought Blevins to Apple in 2000.
Kelly Barner (06:52):
Blevins started outsourcing in directs. In fact, more than one of the articles mentioned the fact that he had been responsible for sourcing toilet paper, but over time he was effective enough that he became responsible for direct materials as well, the components that would go into iPhones and other Apple devices. He reported to Chief Operating Officer Jeff Williams. Although I will acknowledge some of the more recent articles say he reported directly to Tim Cook, My guess the COO is a more likely scenario. Now, I just shared in that one article, which was a general media piece, it referenced the fact that he had six direct employees who had hundreds of people reporting to them. That’s a detail that Apple procurement wouldn’t typically have released. So we’re getting the opportunity to learn some additional things simply because this story isn’t being covered by procurement. Now, Tony Levin’s approach to procurement itself, I think we can describe it as take no prisoners.
Kelly Barner (07:57):
His nickname internally was the ator, and he had a reputation for loving to negotiate. His mantra was there isn’t anything you should ever pay full price for. And we have a couple of colorful stories that sort of capture his approach to spend management. One comes from a negotiation that he was doing in parallel with both UPS and FedEx. He decided to reject the UPS proposal and did it by having FedEx hand deliver the rejection letter just to make his point. He also rotated his staff every couple of years to prevent them from forming relationships with the suppliers that they managed. And he was also responsible for enforcing the non-disclosure agreements or NDAs in Apple supplier contracts. These harshly enforced terms were accompanied by penalties of up to 50 million per violation. And some of these contracts included the right to review supplier emails and the calendars of their executives.
Kelly Barner (09:07):
So why was so much pressure being placed on Apple’s supply chain? After all, Apple devices are very expensive and the company is a lifestyle brand. So you might think they would have large margins. You might think they were very concerned about their public brand image and you probably wouldn’t typically associate them with the cutthroat tactics we expect in retail and other low margin, high volume industries. But consumer electronic devices are a very competitive market, and what we can see with other phone manufacturers is that when their margins started to decline, it ultimately marked the end of their dominant era. Apple is one company that has managed to defy this trend and they have preserved some of the highest margins in the industry, and I think for that, we do have to give some credit to Tony Blevins, and yet nothing remains the same. This is a challenge that has to be overcome again and again and again.
Kelly Barner (10:13):
People continue to hold onto their iPhones longer and longer. New features feel incremental, and sales are always at risk of slowing down. So as these devices become more complex, it puts more pressure on profit margin because there’s only so much more Apple can charge for a phone. Now, if you ever worked in procurement and maybe even not by now, it’s probably dawning on you that if at any point Apple loses their dominant position, there is a real chance of retribution from these suppliers that they’ve dealt with so harshly for so many years. Now, in addition to toilet paper and iPhone components, there are a few other really interesting stories involving Tony Blevins that I came across. One involves his role in the negotiation for the contract that would allow the glass to be placed around that round building based in Cupertino, California. Some articles said he was involved directly at the request of Tim Cook and that he managed to save the company hundreds of millions of dollars on this expense.
Kelly Barner (11:27):
The question of course, is how did he do that? So the story goes like this. Tony Blevins brought together a number of different potential suppliers for this glass. He brought them to the Grand Hyatt in Hong Kong and he put each supplier in a different room and then he simply went room to room suggesting that he didn’t like the current number, suggesting what he wanted their number to be, and telling them what some of the other suppliers had quoted him reportedly, often bluffing as he went. And that is how he saved those hundreds of millions of dollars, and that wasn’t the only damaging story in his background. There’s also project antique. Qualcomm had apple over a barrel because they were the sole provider of apple’s modem chips, and that’s not a disadvantaged situation that Apple wanted to find themselves in. So in 2014, Blevins went to tier two of the supply chain.
Kelly Barner (12:33):
They reached out directly to Qualcomm manufacturers and told those companies they no longer needed to pay Qualcomm licensing fees anymore because Apple was planning to stop paying Qualcomm. This cost Qualcomm $8 billion in withheld payments. The company lost a quarter of their market value and it triggered both layoffs and diminished investments in r and d that continued to affect the company longer term. This all came to a head in 2019 with a court settlement. Apple was ordered to pay an undisclosed amount of money to Qualcomm estimates ranged somewhere between four and a half to 6 billion. So in the end, Qualcomm won and got the money, but their operation had been materially damaged at that point. Now the timing of that may actually be what precipitated a major article in the Wall Street Journal covering Blevins. This was actually the piece that many of the articles about the incident recently in California referred back to for their facts.
Kelly Barner (13:45):
It was published in 2020 and described him as a true negotiator. They talked about the importance of the supply chain to Apple and therefore the importance of Blevins to the company. In fact, they suggested that he might be at the same level of importance as Steve Jobs and Tim Cook themselves. Now the good news is you’re probably still going to be able to read that article because I trust the Wall Street Journal not to pull it down at the same time. What you might not take the time to do is to read the comments. And so that’s what I did. That was extremely interesting. I read all 112 comments and here are a few of the more ironic ones. Now keep in mind the comments section for this post was shut down a long time ago. So none of these were offered because of what happened at the car show in August, but here are a few I picked out to share.
Kelly Barner (14:46):
Watch out. Apple Leverage is a wonderful tool to use, but it’s amazing how fast leverage can change hands. Here’s another Once Upon a time in a kingdom far away, I worked for a mouse. The mouse loved to bully his suppliers and demanded that he always win. In the end, winning ran many of his suppliers out of business. Sometimes winning can be losing when that valuable business partner cannot sustain operations at those deeply discounted prices. Everyone loses in the end, and unlike some of the mouse movies, everyone does not live happily ever after a couple that seemed particularly poignant given what’s just happened. No king rules forever and a time will come when their behavior will be done unto them. And finally, this article does not provide a single example of Blevins helping Apple create value through their supplier relationships. Now, I don’t know if any of those commenters worked in procurement, but they all seem to be plugged into a change that has been underway in procurement for a long time.
Kelly Barner (16:00):
The transition from old school to new school. So old school procurement is about getting the lowest price at all costs. Contracts are based on leveraged volume and extreme supplier rationalization. The ultimate goal is to pull all of your demand together and sign fewer contracts with fewer suppliers. You end up having maximum negotiating leverage and also correspondingly very transactional relationships within companies. Old school procurement performance was measured through savings only. Remember Tony Blevins mantra about never paying full price. That’s exactly the line of thought. He was also, remember anti supplier relationship building. He was willing to burn a bridge because he never expected to be forced to retreat, including those situations where he was willing to pit suppliers against each other or use bluffing as a way of getting suppliers to lower their prices. New procurement strives to be very different. It’s a much more mature, well rounded approach, and it’s usually oriented around value creation.
Kelly Barner (17:19):
Exactly what was pointed out in that last comment I shared, It’s about collaborating with suppliers instead of bullying them, building relationships. If you had a relationship with the supplier that was ethically solid but was strong, that was the kind of thing that actually would help you through the pandemic, you would never rotate your staff to break that up because new school procurement is about creating value, but it’s also about managing risk. And some of those, those old school tactics actually created risk that nobody was thinking about at the time. This is all especially true in today’s tight economy. You can’t just keep beating on your suppliers. They are under too much pressure as it is, and many of the factors affecting their costs are outside of their control. Think about chip shortages, labor shortages, inflation, and shifts in consumer demand from products to experiences. The reality is that Tony Blevins may not have been the man to lead Apple through this moment.
Kelly Barner (18:29):
So this is where I pause and think to myself, and I ask you this as well, Was Tony Blevins really fired for a viral video or was he fired for everything he did in the 22 years leading up to it? I have my opinion, but as always, I try to provide you with both sides. And I think it’s fair to discuss whether this video merited termination. I’ll start with some of the arguments in favor. Now, I don’t personally think the quote was that bad, and I feel compelled to remind you that it was a line from a PG rated movie, and yet it’s an old movie. It doesn’t align with today’s sensibilities about respect and language and gender inclusion in the workplace. And that’s especially true. I’ll note, if you work for a company based in California, clearly all of those employees com complaining to hr, oh, they had their opinions and they’re entitled to those opinions, maybe more public.
Kelly Barner (19:36):
And more importantly, his quote really doesn’t align well with some statements. Tim Cook recently made in a BBC interview. He said, There are still quote, not enough women at the table end quote at the world’s top tech firms, and that there are quote, no good excuses for the lack of women working in the sector. And those are fair comments. So clearly there’s a cultural disconnect. But in terms of arguments against, I would offer up the facts that he was on his own time and the fact that the matter is he didn’t associate himself with Apple. So this is where I start wondering about whether Apple has changed their mind about the tone of their procurement organization, and maybe this was an opportunity that they felt had landed in their lab. There’s somewhat stuck between a rock and a hard place on this. On the one hand, all companies, especially large consumer facing companies, are moving towards a more value oriented collaborative tone of working with their suppliers.
Kelly Barner (20:47):
But at the same time, today’s cost pressures and supply chain disruptions are very real. There’s also the possibility of fatigue. People may just have been tired of dealing with him, and that is absolutely a known price of old school procurement folks like myself, and I’ll include certainly Philip Eidson in this. We work very hard to have good relationships with stakeholders, executive leadership suppliers. We work to be collaborative. We work to make sure that our contributions align with what the company as a whole wants and needs. Now in the short term, the COO at Apple has decided that Tony Blevins has to go and he will personally oversee the procurement team until they can select a replacement. So I am very eagerly awaiting the information about who the replacement is. Will it be someone from inside? Will they bring in someone from outside? What will that person’s tone and philosophy about procurement signal within Apple as well as to the market?
Kelly Barner (21:59):
Now, that’s what I’m watching for, but what do you think? This is where you join the conversation. Have you ever worked with a procurement leader or a procurement team like the one Tony Blevins is associated with? Do you think it’s worth the measurable bottom line impact to take a cutthroat approach to supplier negotiations? How about as a consumer, are you willing to have a person like Tony Blevins on that wall in order to keep the price of your iPhone low? And of course, do you think he should have been fired? So I’m very much looking forward to hearing what everybody thinks about this story. I will continue to follow it as I do with all of my episodes, and I will let you know about updates. But that’s it for now. Until next time, I’m Kelly Barner, your host for Dial P for procurement here on Supply Chain now. As always, thank you for listening and have a great rest of your day.
Intro/Outro (23:04):
Thank you for joining us for this episode of Dial P for procurement and for being an active part of the supply chain Now community. Please check out all of our shows and events@supplychainnow.com. Make sure you follow Dial P four procurement on LinkedIn, Twitter, and Facebook to catch all the latest programming details. We’ll see you soon for the next episode of Dial P four, Procurement.
