Analysing Apple’s Supply Chain Network

Executive Summary

Apple one of the renowned names in the innovation industry is said to be the market leader of the supply chain network. The brand seeks to promote speed, efficiency, dependability, and quality in its supply network. The following report aims to assess the supply chain network of Apple to analyse the areas where it needs change to enhance its performance objectives. The analysis showed that the company has one centralized warehouse that can be used to improve a company’s supply chain efficiency using outsourcing which will, as a result, enhance its speed of delivery by trading off its dependability of internal warehouse. This report also highlights the importance of maintaining a supplier relationship to achieve a quality of products. Moreover, by incorporating emerging digital technologies like IOT and analytics, the company would be able to automate its operations and deliver the relevant products only.

Introduction

Back in 1976, Steve Jobs and CO begins with doing the dealings in computers named as Apple Inc in the future. The company is well known for its fascinating product design, modernize technology, and hostile inspired pioneer Steve Jobs who started the company as an IT organization but later it concentrated on shopper products due to the higher competition in the field of technology such as it offers computer, mobile phones, music players, TV, and laptops. Moreover, another supporter was its sufficient acceptance as a brand and what so ever they manufacture is recognized by the customers as the products were designed as per the needs of the customer (Khan et.al 2015). The company is said to be the leader of the supply chain; however, with some more recommended changes in its current supply chain, by outsourcing warehouse and retaining a robust relationship with supplier Apple can become more efficient to meet performance objectives.

Supply Chain Network of Apple

Apple has developed a new market and altered the structure of music of mobile industries. The iPad launched by Apple has served to raise the purchase of the digital albums. The company is undoubtedly competitive but has competitors like Samsung. Both the smartphone making companies are in distinct positions in the market, but Apple proves to show more effective performance concerning sales and enhancing brand loyalty. The reason behind this its preferred supply chain network. The diagram below shows the supply chain model by attaining licensing and third-party businesses. The entire model is as same as of other companies; however, the exciting part is that the company has to make payments in advance to the suppliers to safe planned raw materials (Supply Chain 24/7, 2018).

Figure 1: Supply Chain Network Map

The company buys its raw materials from multiple sources then get it imported to be assembled in the plant in China. The product is then directly exported by the assemblers to the consumers through Ups or any other delivery medium to those who purchase the Phone from its online store. For the different distribution channels, the company preserves its products at its central warehouse and sources the products from there. In the end, the customer can send back the products to any nearby store or recycling facilities. One of the main lessons that can be learned from the supply chain of Apple is that Customer always comes first and a reduction in cost stands as the second priority. According to the founder of people, product differentiation is essential as it entails higher value for the product.  Moreover, the employees at the company also make sure to give lots of time to the suppliers to make expertly designed products (Park, 2013).

Key Performance Objectives

Following are the key performance objectives of Apple’s supply chain

• Providing Quality Products and services to customers
• The Speed of delivery for goods and service

Figure 2: Current Design of Apple Supply Chain

Importance of Objectives

The objectives as mentioned above are of relative importance form the supply chain perspective as providing quality to the customers will improve the sales of the company and improve customer satisfaction of the customers. By minimizing the time between consumers and asking for goods will create a more efficient path for the customers and for the company to build customer loyalty.

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Critical Analysis of the Present Supply Chain Network

As per the fact that Apple has retail stores, it can make the demand forecast without facing any difficulty. The company can quickly raise the inventory turnover by lowering down its average inventory. If in case the brand keeps more stocks, it may get damaged. Additionally, the product lifecycle of the company is prolonging as any seasonal factors do not impact its products. Though, the demand of the products gets higher in the holidays due to which the company takes aggressive actions at the time of holidays (Park, 2013). The company usually orders the product by air rather than by sea as shipping has extra cost as the contrast to air freight. Moreover, Apple has a warehouse in California from where the company orders all its merchandise which makes its supply chain a simplified one. The retail stores at Apple are a stocking point among the upstream and downstream. Hence, the analysis can be summed up by saying that the simple process flow of the supply chain is an excellent way to reduce the unwanted product lines.

Critical Analysis of Key Suppliers

Supply chain management is all about having the fruitful relationship between the trading partners. By working with the strategic suppliers firmly brings competitive edge for the company. Apple has an average of 756 suppliers across the globe. This amount is manageable, but the company has sadly lost its Mojo which means that the suppliers integrated with Apple have noticed their margin losing (Webb 2017).  Apple is facing human rights, environmental and ethical problems that involve the millions of people employed within its supply chain, which is primarily contracted by Foxconn in China.  Apple has mentioned that in 2017, around 16 supplier including smelters and refiners left its supply chain due to third-party audits because some of them would not participate in a third-party review (Nellis 2018).

Recommended Changes in the Current Supply Chain Design

Figure 3: Recommended Change in the Supply Chain Design

Support Outsourcing Warehouse

As discussed in figure 3, Apple has a centralized warehouse from where the company orders its products. Though the supply chain process of the company is simple as per the performance objectives discussed above, the company, to improve its current supply chain network should also include outsourcing in its warehousing by including third parties as well. This will enable the company to accomplish speed of delivery by just trade-offs of having the warehouse in California (Rushton, Croucher & Baker 2017). Moreover, the company should learn from the lessons of its first warehouse and built it to with the objective to support the next generation technology. Figure 4 illustrates that Apple can improve its supply chain efficiency through outsourcing. According to Trunick (1989), the two-essential element of outsourcing is flexibility and time of delivery reliability.

Figure 4: Outsourcing Warehouse

Source: Figure 3.4 The decision logic of outsourcing (Slack, N, Brandon-Jones, A, Johnston, R & Betts, A 2012).

Maintaining Relations with Suppliers

Developing and maintaining strong relations with the supplier is an essential step to support consistent quality products and efficiency all over the supply chain. Apple’ supply chain his highly relying on its suppliers due to which it is essential for the company to focus on providing and developing prolong relationships that will also help the company to generate higher cost and will promote the growth and profitability of the company (PWC n.d.). Strong relations and rise in the interactions will result in a lesser chance of poor performance that as a result leads to lower cost for handling the affairs and eliminated value by failures and provide consistent quality of products (Slack, N, Brandon-Jones, A, Johnston, R & Betts, A 2012).

Role of Digital Technologies in Improving Business Performance

Digital technology alters the way in creating value for the company. The digital value creation originates from new network and in ways, the business integrates with partners and consumers providing new business mixtures. The value is increasingly grabbed by new data entrenched and incorporated in the business networks, with network effects leading to raising the cost with the expansion in the system. It implies that the business models are highly networked centric and concerned with data (Iansiti & Lakhani, 2017).

Some of the examples of the daily products going digital are Google and honey well. These companies transform the regular tasks enabling the customers in using their phones to modify the temperatures and learn from the consumer behaviour to forecast about the right temperature settings. On the other hand, capturing the value that is created by the companies also expands with the pricing technology and business composition providing entirely new ways to drive price uniqueness, effectiveness, and accurateness. Apple can also create value utilizing digitation in the supply chain network as it will lead to change the timescale and locus of the organization and will offer an innovative experience to the consumers. Heading towards the digitalization will not replace the old business assets and abilities (Iansiti & Lakhani, 2017).  It will also give newer life to the older mechanisms of the business and will effectively contribute to operating the top models of digital foundations. Apple can also improve its supply chain network by adding digital technologies such as incorporating IOT and big data analytics to manage the big data and get new insights and run the business effectively.

Conclusion

Concisely, the report talks about the supply chain network of the renowned brand Apple. Well-known for its stylish product design, modernized technology, and hostile idealistic originator Steve Jobs who started the company as a real IT organization but later it concentrated on user products due to the higher competition in the field of technology. The critical analysis of the supply chain network of Apple’s iPhone showed that Apple has an inventory turnover of 10 days which makes it efficient enough regarding its inventory turnover. Therefore, to improve its current supply chain network, Apple is suggested to outsource its activities for warehousing to enhance speed by trade-off inhouse dependability and add incorporate data analytics and IOT in order to run its business and supply chain efficiently. Also, suggested to creating the strong relationship with a supplier to maintain high-quality products and efficiency in the supply chain.

References

• Rushton Alan, Croucher Phillip, Baker Peter, 2017, The Handbook of Logistics and Distribution Management, 6th edn, Kogan Page, London.
• Trunick, P.A. (1989), “Outsourcing: a single source for many talents”, Transportation & Distribution, July, pp. 20- 23.
• Iansiti, M., & Lakhani, K. R. (2017). What the companies on the right side of the digital business divide have in common. Harvard Business Review”, January 31st.

• Slack, N, Brandon-Jones, A, Johnston, R & Betts, A 2012, Operations and process management, 3rd edn, Pearson Education Limited, Harlow.
• PWC, n.d., Supplier Relationship Management; How key suppliers drive your company’s competitive advantage, viewed 28th September 2018, https://www.pwc.nl/nl/assets/documents/pwc-supplier-relationship-management.pdf
• Khan, U. A., Alam, M. N., & Alam, S., 2015, A critical analysis of internal and external environment of Apple Inc. International Journal of Economics, Commerce and Management, 3(6), 955-961.
• Nellis, S 2018, Apple finds more serious supplier problems as its audits expand, viewed 01 October 2018, https://www.reuters.com/article/us-apple-suppliers/apple-finds-more-serious-supplier-problems-as-its-audits-expand-idUSKCN1GK04G
• Park, J.,2013, Apple's Supply Chain Management, viewed 29 September 2018,  http://cmuscm.blogspot.com/2013/10/apples-supply-chain-management.html
• Nellis, S 2018, Apple finds more serious supplier problems as its audits expand, viewed 01 October 2018, https://www.reuters.com/article/us-apple-suppliers/apple-finds-more-serious-supplier-problems-as-its-audits-expand-idUSKCN1GK04G
• Supply Chain 2013, Is Apple’s Supply Chain Really the No. 1? A Case Study, Viewed 27th September 2018, https://www.supplychain247.com/article/is_apples_supply_chain_really_the_no._1_a_case_study.
• SVBJ., 2017. Is Apple's supply chain model cracking?, viewed 28th September 2018, https://www.bizjournals.com/sanjose/news/2017/10/23/apple-iphone-x-supply-chain-issues-aapl.html
• Wang, Y., & Ma, X., 2015, An Insightful Analysis Report on APPLE,IN, 1, viewed on 28th September 2018, https://smf.business.uconn.edu/wp-content/uploads/sites/818/2015/04/Apple-Best-MBA-SMF-Report-Yiyan-Wang-Regina-Ma-040815.pdf
• Webb, J. 2017, Apple's Supply Chain Attracts Criticism For Performance But Also Praise For Sustainability., viewed 29September 2018 https://www.forbes.com/sites/jwebb/2017/10/30/apples-supply-chain-attracts-criticism-for-performance-but-also-praise-for-sustainability/#560c564b7398
• Wilson J.M, 2012, Apple –The Global Supply Chain, viewed on 27September 2018, http://www.jackmwilson.net/Entrepreneurship/Cases/Case-Apple-Supplychain.pdf

Appendix 1 – Supply Chain Model

Source - http://www.supplychainopz.com/2013/01/is-apple-supply-chain-really-no-1-case.html