The suppliers don't need that much of a warehouse, either. Let's assume that Apple is forecasting that 100,000 iPods per week will meet demand. They go to the

The suppliers don't need that much of a warehouse, either. Let's assume that Apple is forecasting that 100,000 iPods per week will meet demand. They go to the supplier, and tell them that they need the screens delivered at 100,100 per week(assuming that a very high .1% of all screens are defective, after the supplier's QA). The supplier gets their factories producing around that number per week, and ships them out immediately. Apple takes them in, and immediately produces iPods with them, where they the go out to retail. This way, neither Apple nor the supplier need to keep more than a week's worth of stock. The reason that Apple keeps a similar deal with another supplier is if anything goes wrong with the other company. So in the previous example, if in week 5, Fukushima happened, and the first company was unable to keep production up, Apple could go to the other supplier and keep up production, with a very short(maybe a couple of weeks) delay. This is vital, since Apple doesn't maintain that much inventory of new parts. The other benefit to this setup is that it allows Apple to almost instantly double their supply inputs for new product releases or for the holiday season. If necessary, Apple can use both suppliers to get 200,000 screens per week, then just rent a few warehouses for the temporary storage of new products or the holiday rush inventory.