2010

OperA

[APPLE SCM]
Submitted By : Akshay G Jadhao Roll no. 257 & Gaurav Patil Roll no. 272
 Apple i-Phone SCM

In 2007, AMR research performed a survey in which Apple secured second

rank in the supply cahin management (SCM) ranking. The improvement in the
supply chain management of Apple was highlighted when in the AMR research
consistently positioned Apple at no. 1 position in worldwide SCM ranking for
consistently three years. How Apple a company implementing the closed
system approach has achieved this remarkable milestone? What are the reasons
behind it? How does Apple manage the supplier, manufacturer, demand
forecasting, logistic network, JIT, shipping to customers, etc. components of
managing strategies of supply chain? In this report we have covered:

1) Basic Overview of Apple’s Supplier Network

2) SCM of Apple i-Phone
3) Apple’s i-Tune Supply Chain
4) Challenges to Apple supply Chain superiority
5) Main Features of Apple’s SCM

Apple Supply Chain (Supplier Network):

Apple’s every product is made up of hundreds of small components which are

supplied by the various suppliers. Thus Apple has a very complex supply chain
when it comes to the suppler network following fig. 1.1. shows the basic SCM
of the Apple which considers the different product of the Apple which may or
may not use the same technology or the same component needed for other
product of same or different category.
 Fig.1.1.Apple’s basic supply chain management
For the better understanding let us consider the supply chain management of the
i-Phone & i-Tune as below.
Apple i-Phone Supply Chain Management:
Apple I-Phone supply chain
Singapore Taiwan U.S. China
Samsung CPU &
Video Processing

Infineon Baseband
Communication

Primax Electronics
Digital Camera
Modules

Foxconn International
Circuitry

Entery Industrial Southern China

Connectors Apple Manufacturing
Assembly &
Fulfilment Plant

Cambridge Silicon
Bluetooth Chipset

Umicron Technology
Printed Circuit Boards

Catcher Technology
Stainless Metal Cases
 Broadcomm Touch
Screen Controllers

Mavel 802.11

From a high-level, we speculate that the following are the material suppliers of
the Apple iPhone:
1. Samsung: The Singapore facility manufactures CPU and Video
processing chips.
2. Infineon: The Singapore facility manufactures Baseband
Communications hardware.
3. Primax Electronics: The Taiwan facility manufactures Digital Camera
Modules.
4. Foxconn International: The Taiwan facility manufactures internal
circuitry.
5. Entery Industrial: The Taiwan facility manufactures connectors.
6. Cambridge Silicon: The Taiwan facility manufactures bluetooth chipsets.
7. Umicron Technology: The Taiwan facility manufactures printed circuit
boards.
8. Catcher Technology: The Taiwan facility manufactures stainless metal
casings.
9. Broadcomm: The U.S. based facility builds touch screen controllers.
10.Marvell: The U.S. based facility builds 802.11 specific parts.
11.The Apple Shenzhen, China facility assembles the hardware, holds
inventory, and handles the pick, pack, and ship steps of the fulfilment
process.

Apple’s iTunes supply chain: transforming an industry:

Apple’s traditional supply chain and services underwent a much needed
transformation. To start on its journey, the company’s innovators identified a
new product that required significant effort and investment—and did it ever pay
off.

While it took approximately three years to sell one billion songs, Apple sales
from $4B to $5B took only five months, with substantial hardware sales of its
premier mobile products, the iPod and iPhone. iTunes, while shifting supply
chain investments to technology and infrastructure, provides a platform for
higher margin hardware sales, increased agility through higher cashflows,
accelerated turnaround times with on-demand content, and speed to market
through a recognized web-based store front.

As a result, Apple built a supply chain that transformed an industry. iTunes is

considered the No. 1 retail store for music, providing the company with
significant information on demand patterns. In turn, it’s using its supply chain to
develop new products and services.

Apple’s inevitable competition and digital supply chain growth:

The digital supply chain moves more than music, though. It can also include
videos, television, games, and publications. For this reason, channel
management shifts from classic distribution to retailers, to broadband providers,
to online, to direct to consumer. Device manufacturers will be challenged to
integrate within this market, as digital content will shape their hardware
demand. In fact, more money has been spent on creating content than products
for its capture, storage, and distribution. The challenge to supply chain leaders
will be less on managing plants, trucks, and assembly lines, and more on
understanding the quality, cost, and speed of the infrastructures to support the
digital supply chain.

The supply chain challenge for Apple going forward is to enable the digital
content to be distributed across all channels on a single, easy-to-use device.
Much like the Mac versus PC battle, a collaboration of multiple parties in the
digital market can serve as the most significant risk to the company’s lead.

Main Features of Apple’s SCM:

When it comes to innovation we can see that any product of Apple is the output
of the sophisticated R&D. Apple products are popular for their quality &
innovative ideas. Apple is more inclined towards innovative product. Quite
astonishingly Apple has high growth of 38%.It should be noted that Apple has
high inventory turnovers around 50 and it has brought in products like i-tunes
which have high sales and require minimum management. Also Apple has good
supplier relations for innovative product. These features make Apple’s supply
chain more superior than others.

Reference:

1) David Simchi-Levi, designing & managing the Supply Chain, The

McGraw Hill Companies 3e, pg. 1-7
2) www.scmr.com Supply Chain management Review, Pg. 16-22
3) Lee, Hau, Billington Corey, Managing supply chain inventory, pg.
65-73
4) http://www.shmula.com/304/the-apple-iphone-supply-chain
5) http://www.apple.com