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The Role of Global Operations Management in Apple and Its Role in the
Company’s Competitiveness in the Marketplace

Preprint · April 2021

DOI: 10.13140/RG.2.2.29078.88644

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 P

THE ROLE OF GLOBAL OPERATIONS MANAGEMENT IN

APPLE AND ITS ROLE IN THE COMPANY’S
COMPETITIVENESS IN THE MARKETPLACE

1
 Executive Summary

Apple was established in 1976 by Ronald Wayne, Steve Jobs, and Steve Wozniak with a vision
to make computers an affordable, accessible, and user-friendly consumer item. The Company
has produced diverse forms and models of computers including the iPod, iPad, iPhone, Mac,
MacBook, Apple Watch, AirPod, Apple TV and Home Pod among which are the trending:
iPhone 12, iPad Air and iPad Pro, Apple Watch Series 6, and AirPod Max. The Company
manages its global supply chain by sourcing from the US, China, Europe and other Asian
Countries; assembling in China, warehousing in California, US; distributing through four
channels (online stores, brick and mortar stores (iStore), Direct Sales Force, and Wholesalers,
Retailers and Phone Network Operators globally); returns which encompasses its Trade-In-
Program, Warranty Return, and its Recycle/Reuse Program. However, it also engages in
Supply Chain Planning activities which includes research and development, concept testing,
pre-launch, launch and supply chain review processes. Today, the Company is worth $2.42
trillion and is well on track to making $60 billion in profits this year despite the respiratory
disease global outbreak. The Company employs 137,000 persons while the Company
outperforms its peers and competitors by more than 2.0 – 5.5 times, inventory-wise. As a
result, the Company clearly has mastered the art of inventory management which is why it is
adjudged “the Best Supply Chain Management Company” in the world. In contrast with
Samsung, it is a high end product company while Samsung is middle range product company.
Areas the Company can improve its operational performance includes: having two other
central warehouses, improving its service and support centre network, having multiple key
suppliers and switching to a Multi-Centralised Production Approach from a Centralised
Production Approach.

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 Introduction

Apple was founded in 1976 by Ronald Gerald “Ronald” Wayne, Stephen Paul Jobs “Steve”
Jobs, and Stephen Gary Wozniak (Steve Wozniak) with a vision to make computers an
affordable, accessible, and user-friendly consumer item (Richardson and Terrell, 2015;
Aljafari, 2016; Forbes, 2020). This vision began to materialise with the launch of their first
personal computer – Apple I (1976) followed by Apple: II (1977), II Plus (1980), III (1980), IIe
(1983), III Plus (1983), Lisa (1983), IIc (1984), and IIGS (1986) – (Richardson and Terrell, 2015;
Wikipedia, 2020). They also produced Macintosh: XL (1980), Compact series (1984-1993), II
(1987-1990), IIc Plus (1990), and LC (1990) – (Wikipedia, 2020; Apple, 2020b). Between 2000
and date, the Company has produced various versions and models of iPod, iPad, iPhone, Mac,
MacBook, Apple Watch, AirPod, Apple TV and Home Pod among which are the trending:
iPhone 12, iPad Air and iPad Pro, Apple Watch Series 6, and AirPod Max (Swider, 2020; Gibbs,
2020; Apple, 2020a; CBInsights, 2020). Today, after the exit of Ronald Wayne (1977) and Steve
Wozniak (1981), the company is worth $2.42 trillion (more than twice that of 2018) and is
well on track to making $60 billion in profits this year from product and service sales inspite
of the coronavirus global outbreak based on industry calculations (Klebnikov, 2020; Popken,
2020; Dennison, 2020) and it employs 137,000 persons (Podolny and Hansen, 2020). But how
did Apple become such a success story? Read on to get the details.

Apple Global Operations

Apple manages its global operations by segmenting its operations into the following based on
geography and markets proximity: Americas, Japan, Europe, Greater China, and Rest of Asia
Pacific (Forbes, 2020; CSIMarket, 2020). The Americas segment comprises of North America
and South America while Japan takes care of Japan only (Forbes, 2020). The Europe segment
takes care of Europe, India, Middle East and Africa markets. Furthermore, Greater China takes
care of China, Hong Kong and Taiwan while the rest of Asia comprise of the remaining
countries in Asia as well as Australia (Khan, 2019; Forbes, 2020). However, these
segmentation does not reflect completely the global retail operations of the Company as due
to global trade, there has been fluidity in the Company’s service offerings (CSIMarket, 2020).

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Its global supply chain is divided into sourcing which comprise four specific regions: the US,
China, Europe and other Asian Countries; manufacturing which is done specifically in China
(due to lower labour costs and a well-developed infrastructure), central warehousing which
is sited in the US (California) as well as during shipment/postage to its customers through
warehouses belonging to UPS and FedEx (its delivery partners); distribution which are
basically done through four channels: its online stores, its brick and mortar stores (iStore), its
Direct Sales Force, and through Wholesalers, Retailers and Phone Network Operators across
the world. And finally, returns which encompasses its Trade-In-Program, Warranty Return,
and its Recycle/Reuse Program (Black, 2015). However, it also engages in Supply Chain
Planning activities which includes research and development, concept testing, pre-launch,
launch and supply chain review processes (Black, 2015). Thus, this model fits Slack’s model of
operational management elucidated by Brymer, et al. (2020). As Kaponda (2020) puts it, the
Company’s supply chain management process includes: planning, strategisation and
collection of information on the inventory management process; supplier services
securement; management of risks; logistics and deliveries network design, planning and
implementation; warehousing and distributions; returns management; and pricing as well as
price control of all supply chain processes and activities.

On the other hand, the company is organised structurally into sixteen (16) units: Design,
Hardware Engineering, Hardware Technologies, Software, Services, Machine Learning and
Artificial Intelligence; Worldwide Marketing, Marketing Communications, Operations, Sales,
People; Finance, Legal, Corporate Communication, Environment, Policy and Social, and
Corporate Development – all of which are functional units rather than multi-divisional ones
like those in use in General Motors and Du Pont; and they are hierarchical in nature
(Dudovskiy, 2019; Apple, 2020c; Podolny and Hansen, 2020). This structure has helped it focus
on what matters: the company’s vision which is the product and services they produce/render
rather than on profits or losses by fostering duty delegation, effective resource allocation,
collaboration, teamwork, innovation and creativity which enhances economies of scale and
scope (Awa, 2016; Li, 2019; Podolny and Hansen, 2020).

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The company is a success because it has gained mastery in the following areas:

1. Quality
Apple remains known for high quality products basically due to its emphasis on high quality
at all levels of production, assembly/manufacturing, sales and to returns; although it has also
been criticised for poor display, blind screens amongst others immediately after new product
releases (Campbell, 2020); however, as soon as complaints are made the Company has always
released/launched fixes, updates, recall/replacement programs which means the Company is
still staying true to its vision most especially as its products are in most cases highly premium
priced (Black, 2015; Kaponda, 2020). In achieving this, the Company’s quality management
functions are housed under its Senior VP (SVP), Operations who coordinates activities with
eight other SVPs among which are the SVPs for Product Design and Development, Human
Resource Management, Industrial Design, Marketing, Retail, and Online Sales (Rowland,
2019). Furthermore, following Shields (2012) kickstarted petition, it has instituted a Supplier
Code of Conduct for all its suppliers and conducts annual rigorous assessments of all its
suppliers. For instance, in 2019 it conducted at least an audits at 1,145 manufacturing and
logistics, repair, and contact centre facilities as well as smelting and refining facilities globally,
out of which majority passed (99%) – (Apple, 2020e).

2. Inventory management
Apple had 1,142 suppliers as at 2019, eighteen percent (204) of which were key suppliers (161
in 2015) – (Black, 2015; Apple, 2020d). By operating a complex but simple supply chain model,
Apple has been able to successfully outperform its peers and competitors by more than 2.0 –
5.5 times (Lu, 2020). This was the product of Tim Cook’s strategic changes immediately after
he took over from Jobs two months before Jobs’ death in October 2011 (Everything Supply
Chain, 2020). He moved the Company away from decentralised warehousing, high inventory
levels and costly level of inefficiencies among its suppliers to centralised warehousing, lean
inventory and fostering competition between its suppliers. Due to this, the Company’s lowest
inventory turnover level was 37.2 in Q3 2018 and 41.5 in Q3 2020 while based on the
calculations elucidated in Brymer, et al. (2020), the Company had 1.42 weeks of stock supplies
as at Q3 2020 which translates to almost 10 days of inventory (Finbox, 2020; Lu, 2020; Wall
Street Journal, 2020). Furthermore, the Company had only 250 brick and mortar stores (more

5
than 510 as at 2020), 26,000 Stock Keeping Units (SKUs) globally and 24 instead of 100
component suppliers as at 2013 (Black, 2015; Steeber, 2019; Lu, 2020; MacRumors, 2020);
although, Statista (2020) says there were 416 stores in 2013 worldwide. Furthermore, as Black
(2015) observed, demand and sales are forecasted and reviewed on a regular basis, thus
helping the Company hold assets in cash rather than a very high inventory level. Moreover,
most of its suppliers are located close to its manufacturing centre in China which reduces time
wastage, minimises the impact of supply chain disruption and increases logistical efficiency
while guaranteeing a swift and rapid response to sudden demand increases. In addition, it
also utilises the First In First Out (FIFO) principle of inventory control in managing its product
introduction and sales into the market by ensuring all its previous inventory of its current
products are sold before announcing a new one (Rowland, 2019) which prevents unnecessary
product price discounting and retenance of old model stocks (Martins, 2020).

3. Product Development
Although Apple operates a functional organisation structure, it also combines the advantages
of a matrix organisation at the product development level which helps new ideas, products
and services to be generated/developed (Li, 2019; Meyer, 2019) and this is one of Apple’s
strength. Due to this, new products that create/meets consumers’ demand have been
produced which has helped the Company to sustainably continue to maintain its premium
pricing model (Meyer, 2019; Smithson, 2019). The process towards accomplishing this
involves the SVP, Operation working with the SVP or VP of the constituent units needed for
the manufacture or warranteed guarantee of the product/services they produce/render e.g.
the SVP Operations work with the SVP Mac Hardware Engineering and the VP Mac Software
Engineering during the production of Macs who in turn work/coordinate the activities of the
respective units under them (Rowland, 2019). This has helped the Company consistently serve
the niche market it created while also using the niche market as a barrier of entry for its
competitor as it continues creating and meeting its niche demand (Hettiarachchi, 2016).
Moreover, this capability has prevented its customers from using their collective bargaining
power against the company. To do this, the Company makes upgrading and switching to
newer models easy by engaging cloud technologies (Canada, 2012; Haselton, 2017; Stern,
2018).

6
Other areas Apple has gained mastery includes: location strategy (urban areas with high leg
traffic and capacity for brand exposure and the income level fitting to the kind of products
and services it renders which complies with the Differentiation Focus Strategy of Porter’s
Competitive or Generic Strategy Framework), capacity design (always aiming to get the best
from its employees while helping them achieve their personal goals), scheduling (hybrid
model), product design (working with its Suppliers in ensuring that all aspect of the
manufacturing/development processes are synced, monitored, and adherent to the
Company’s Supplier Code of Conduct as well as coordinating an effective and holistic product
design process with its staff), maintenance (by bringing everything in-house), and layout
design (incorporating space and minimum decoration and nature friendly colours in its
stores), work design and human resources (hiring, training and focusing on corporate
directional needs) and a whole new approach in productivity measurement including:
revenue per square foot (Store Productivity), product units per time (Supplier and Supply
Chain Productivity), and milestone per time (Product Development Department Productivity)
– (Hettiarachchi, 2016; Rowland, 2019).

Apple versus Samsung

Samsung unlike Apple operates a product-type divisional organization structure united at the
centre by a centralised decision making body located in Seoul (Awa, 2016; Evans, 2019). The
company is divided into four (4) divisions which are: Consumer Electronics, Device Solutions,
Information Technology and Mobile Communications, and Automotive Electronics (Evans,
2019; Pratap, 2020; Samsung, 2020a). This structure characterised by a hierarchical model at
the centre has enabled it to remain innovative, specialised and competitive (Joseph, 2019).
Also, it has enabled each of the divisions to be able to meet the individual demands of their
respective markets by each of them attuning to the trends of their market as appropriate
(Evans, 2019). However, this same structure also prevents it from expanding regionally as
each of its divisions must remain committed to pursuing the vision set for them by the central
decision making body in Seoul and a lot of waste arises as a result of the duplication of work
and reduces across the Company (Evans, 2019; Joseph, 2019). Furthermore, as each division
is a separate but integral unit of the Company, each unit under each division will see each
other as competitors since they both compete in the market for the same consumer’s purse

7
or wallet (Sherman, 2020). This model conforms to the Top-Down Approach of Management
elucidated in Brymer, et al. (2020).

Samsung’s supply chain process are as follows: research and development at its eleven (11)
wholly owned R&D centres, sourcing (through about 2,200 suppliers, most of which are key
suppliers and located in Asia), inbound and outbound logistics/distribution (through its in-
house logistics companies predominantly Samsung Electronics Logitech (SELC) and Samsung
SDS), marketing (centrally, divisionally, and unitarily controlled), sales (through a global
network of distributors and retailers), and aftersales supports (through a global network of
service centres and through online channels) while their supply chain management strategies
are hinged on five overarching principles: cost competitiveness, human resource capacity, on-
the-point delivery, effective risk mitigation, and inter-supplier competitiveness (Dudovskiy,
2017; Pratap, 2020a; Pratap, 2020b; Samsung, 2020b; Samsung SDS, 2020). The Company has
7 regional offices from where operational activities are controlled and it is worth $278.7
billion and is projected to have $ billion in profits by the end of 2020 (Pratap, 2020b; Statista,
2020). As at year ending 2019, the Company employed 287,439 staff worldwide (Tankovska,
2020; Samsung, 2020c).

Similarities between Apple and Samsung

Both Apple and Samsung pursue the wallets of the same consumers although with different
offerings (products and services). Apple pursues its consumers with high end products while
Samsung offers consumers with affordable options (Kong and Yazdanifard, 2013). The both
of them also have the same human resource strategy in that they both recruit the best of the
best regardless of location and nationality (Ivypanda, 2019). Furthermore, they are both
innovative companies to the point that they both compete on a lot of levels which is why they
are both called “the two leading marketplace competitors in … the market” – (Kong and
Yazdanifard, 2013).” In addition, both companies source for the raw materials they use in
their products themselves although initially Apple operated a procurement and production
supplier model but in 2013, it switched from the procurement and production supplier model
to a production supplier model. This model has ensured the increased profitability of both
companies as they have been able to control the quality and prices of the raw materials used
in their respective products (Benzinga, 2013).

8
Also, both Companies have supply chain control tower(s) which facilitates real-time supply
chain data sharing and crosschecking, cost reduction, process and scope efficiency, pro-
activeness, transparency and optimisation (Gonzalez, 2018; Peters and Wieggers, 2019; Lyall,
Mercier and Gstettner, 2020). Furthermore, both companies produce various models and
versions of their products e.g. iPad Air and iPad Pro (Apple); and Galaxy Tab A and Galaxy Tab
S (Samsung) – (Hunter, 2019; Kaponda, 2020). This therefore indicates that both companies
have sophisticated and highly specialised production processes and operations management.
Moreso, both Companies do not ship their products to their customers by themselves rather
they engage third party logistics suppliers for this (Black, 2015; Kaponda, 2020). Lastly, both
companies still have quality control and quality management problems which is evidence in
some of their new product releases (Caseism, 2020).

Differences between Apple and Samsung

Compared with Samsung, Apple stacks real well because it always releases well thought,
planned and qualitative products while Samsung, on the other hand, releases new products
in a hurry as a result making costly mistakes from time to time and it also releases new
innovations too early e.g. Galaxy Tabs first release in 2010 (Hunter, 2019; Ivypanda, 2019).
Furthermore, Apple commands a very high level of brand loyalty compared to Samsung which
commands less. Apple also commands premium pricing strategies while Samsung does not
(Azzawi and Ezeh, 2012); although, Ivypanda (2019) suggests that the Company (Samsung) has
also began its foray into the premium pricing segment of the consumer market. Moreover,
Apple has mastered the art of inventory management through controlling the unknown while
Samsung has not been able to (Kaponda, 2020). Furthermore, the Company spends less on
recurrent expenditures while it invest more in capital items (Sullivan, 2015). This has ensured
that it has more cash to spend on expanding the company as well as mitigating against
competitive activities by producing new products as appropriate. In addition, the Company is
not really focused on the volume or number of units it produces in order to maintain its
premium pricing structure while Samsung focuses on volume/unit of production in order to
maintain its discount pricing model (Rasheed, Nawaz and Abbas, 2015; IvyPanda, 2019). This
has made Apple to have more demand than it supplies and as a result a predictable demand
structure and the sustenance of its lean inventory model while Samsung operates in the

9
reverse and as a result cannot fully control its inventory since its demand cannot be predicted
(Rasheed, Nawaz and Abbas, 2015). Finally, although it is hard to tell which among the two
Company stacks up high in terms of visibility with regards to preventing the flow of conflict
minerals, expectedly Apple can be expected to perform better as it is the industry leader and
it conducts rigorous assessment of its suppliers.

How the Operational Performance of Apple Can Be Improved

Apple can improve its operational performance by incorporating at least two (2) other central
warehouses within its supply chain so that in the event of an operational shutdown in one of
the warehouses, the other two can take over and if the other warehouses gets impacted in
any way, supply chain activities can continue although at reduced capacity. This would
prevent the abrupt shutting down of its operations in the event of a terrorist attack, a
malicious arson or other sources triggered fire like the one that gutted an Amazon Supply
Partner in Los Angeles in 2020 and the one that gutted Ocado warehouse in Andover, UK as
well as Kent Food, Essex, UK (British Broadcasting Corporation – BBC, 2019; Adesilu, 2020;
Antczak, 2020). It can also ensure that its supply chain is not disrupted by ensuring that the
regions of the world where the raw materials used for making the products it makes are taken
care of such that next generation exploration and production practices are used which means
that practices that are mankind-friendly, environmentally sustainable and localised
population developing only are used (Kingsbury, 2012; Shields, 2012; Frasier, 2013; Black,
2015; Kapadia, 2018). This would prevent conflict minerals and underdevelopment from
continuing in the geographies where the Company’s raw materials come from. Furthermore,
as the COVID-19 pandemic has shown, the global supply chains of multinational corporations
like Apple can be disrupted if not totally shut down during events of global proportions;
consequently, Apple needs to change its manufacturing approach from a uni-country one to
a multi-country one which would guarantee continuous production and availability of its
products and or services so that what happened during COVID-19 does not repeat itself again
in the Company’s supply chain history (Bloomberg, 2020; Wakabayashi, 2020). Thus, the
Company needs to move from a Centralised Production Approach to a Multi-Centralised
Production Approach.

10
The Company also needs to improve on its service and support network so that repairs and
supports are closer to the consumer than it is at present, without any compromises on
security, consumer privacy and the Company’s lean inventory level model (Smithson, 2019;
Lu, 2020). Furthermore, based on Black (2015), Apple needs to have more than one or two
suppliers for key aspects of its supply activities so as to foster redundancy in its supply chain
network and in order to continue to ensure that a single supplier does not use its bargaining
power to make the Company cower to pressure (Aljafari, 2016). Moreover, the Company must
remain committed to accomplishing its vision which it began pursuing 44 years ago by
continuing to pursue it, adjusting to industry trends as it has been doing and anticipating
future trends without allowing visual creep from taking place. It also needs to switch from
traditional logistics methods to next generation ones which uses autonomous driving
systems, drones, planet-friendly fuels for thrust and artificial intelligence in all aspect of
operations. Moreover, the Company needs to switch from single- or multi-channel supply
chain to Omnichannel supply chain model in order to give its customers variety in its retail
offerings areas deliveries and returns operations (River Logic, 2020). In addition, the Company
need to move from Predictive Supply Chain Analytics to Prescriptive Analytics which
guarantees that not only will it be able to predict market trends but also, it will be able to
decide on the best course of action through the information the analytics provides
(Gunasekaran, et al., 2017; Gartner, 2020; Seyedan and Mafakheri, 2020). Finally, the
Company needs to switch from Linear Supply Chain model to a Circular one which will lead to
greater sustainability of earth’s resources and increased profiting that is not at the mercy of
charging customers premium prices but one that is intertwined with the Company’s current
resources per time (River Logic, 2020; Gartner, 2020).

Conclusion

Apple’s mastery of its global operations management has helped it effectively manage its
supply chain processes and activities during the third global pandemic in mankind’s history –
the COVID-19 Pandemic, which has helped it reduce its inventory level by 3% between 2019
and 2020 despite the global supply chain disruption witnessed worldwide. Its product sales
revenue also increased by 11% YoY during the period (Martins, 2020). With the way, it has
successful manage its supply chain over the year, if it continues doing so, improving in its area

11
of weakness and threats, it will continue to remain the World’s Best Supply Chain
Management Company. The recommendations in this research is a great way to start. Finally,
effective global operations management rests on accurate data collection, collation and
effective resource planning in addition to reliable supplier securement and risk mitigation.

12
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