Assignment on: “A Comprehensive

Case Study on Apple’s Supply Chain Management Practices

And its Supply Chain Performance.”

Semester: Summer 2021

Course: Supply Chain Management

Course Code: MBA 659.1

Instructor: Syed. M. Tugril Esteyak, Adjunct Faculty, School of Business
Administration, East Delta University.

Submitted by: “Group B”

Md. Aouhidul Alam 212001706 MBA
Yeasir Kader 201001306 MBA
Md Mahedi Hassan 201005806 MBA
Research Barua 201001206 MBA

Date of Submission: 25.06.2021

 Table of Content
Serial No. Particulars Page no.
1 Understanding definition of Supply Chain 2
2 Concept and Understanding the Global Supply 3
Chain Management practice by this Company
3 Drafting impact of Apple’s on the global supply 5
chain
4 Analysis of Success factors of Apple’s Supply 6
Chain
5 Data Gathering and Compiling Practices of 9
Apple’s Supply Chain
6 SWOT Analysis of Apple’s Supply Chain 10
7 Key-Takeaways of Apple’s Supply Chain 14
8 Describe briefly What you Things and Topics 15
leant from Apple’s Supply Chain
9 Conclusive Comments on Apple’s Supply Chain 16
on Product Innovation Technology
 Understanding definition of Supply Chain

A supply chain involves a series of steps involved to get a product or service to the customer.
The steps include moving and transforming raw materials into finished products, transporting
those products, and distributing them to the end-user. The entities involved in the supply chain
include producers, vendors, warehouses, transportation companies, distribution centers, and
retailers.

The elements of a supply chain include all the functions that start with receiving an order to
meeting the customer's request. These functions include product development, marketing,
operations, distribution networks, finance, and customer service.

Supply chain management is a very important part of the business process. There are many
different links in this chain that require skill and expertise. When supply chain management is
effective, it can lower a company's overall costs and boost profitability. If one link breaks down,
it can affect the rest of the chain and can be costly.

A typical supply chain begins with the ecological, biological, and political regulation of natural
resources, followed by the human extraction of raw material, and includes several production
links (e.g., component construction, assembly, and merging) before moving on to several layers
of storage facilities of ever-decreasing size and increasingly remote geographical locations, and
finally reaching the consumer. At the end of the supply chain, materials and finished products
only flow there because of customer behavior at the end of the chain; academics Alan Harrison
and Janet Godsell argue that "supply chain processes should be coordinated in order to focus
on end customer buying behavior", and look for "customer responsiveness" as an indicator
confirming that materials are able to flow "through a sequence of supply chain processes in
order to meet end customer buying behavior".

Many of the exchanges encountered in the supply chain take place between different companies
that seek to maximize their revenue within their sphere of interest but may have little or no
knowledge or interest in the remaining players in the supply chain. More recently, the loosely
coupled, self-organizing network of businesses who cooperate to provide product and service
offerings has been called the extended enterprise, and the use of the term "chain" and the linear
structure it appears to represent have been criticized as "harder to relate ... to the way supply
networks really operate. A chain is actually a complex and dynamic supply and demand
network.

As part of their efforts to demonstrate ethical practices, many large companies and
global brands are integrating codes of conduct and guidelines into their corporate
cultures and management systems. Through these, corporations are making demands on
their suppliers (facilities, farms, subcontracted services such as cleaning, canteen, security etc.)
and verifying, through social audits, that they are complying with the required standard. A lack
of transparency in the supply chain can bar consumers from knowledge of where their
purchases originated and facilitate socially irresponsible practices. In 2018, the Loyola
University Chicago's Supply and Value Chain Center found in a survey that 53% of supply
chain professionals considered ethics to be "extremely" important to their organization. Supply-
chain managers are under constant scrutiny to secure the best pricing for their resources, which
becomes a difficult task when faced with the inherent lack of transparency. Cost
benchmarking is one effective method for identifying competitive pricing within the industry.
This gives negotiators a solid basis to form their strategy on and drive overall spend down.
 Concept and Understanding the Global Supply Chain Management
practice by this Company

In commerce, global supply-chain management is defined as the distribution of goods and

services throughout a trans-national companies' global network to maximize profit and
minimize waste.[1] Essentially, global supply chain-management is the same as supply-chain
management, but it focuses on companies and organizations that are trans-national.
Global supply-chain management has six main areas of concentration:
1. logistics management
2. competitor orientation
3. customer orientation
4. supply-chain coordination,
5. supply management
6. operations management
These six areas of concentration can be divided into four main areas: marketing, logistics,
supply management, and operations management. Successful management of a global supply
chain also requires complying with various international regulations set by a variety of non-
governmental organizations.
Global supply-chain management can be impacted by several factors who impose policies that
regulate certain aspects of supply chains. Governmental and non-governmental organizations
play a key role in the field as they create and enforce laws or regulations which companies
must abide by. These regulatory policies often regulate social issues that pertain to the
implementation and operation of a global supply chain (e.g. labor, environmental, etc.). These
regulatory policies force companies to obey the regulations set in place which often impact a
company's profit.
Operating and managing a global supply chain comes with several risks. These risks can be
divided into two main categories: supply-side risk and demand side risk. Supply-side risk is a
category that includes risks accompanied by the availability of raw materials which effects the
ability of the company to satisfy customer demands. Demand-side risk is a category that
includes risks that pertain to the availability of the finished product. Depending on the supply
chain, a manager may choose to minimize or take on these risks.
Successful global supply-chain management occurs after implementing the appropriate
framework of concentration, complying with international regulations set by governments and
non-governmental organizations, and recognizing and appropriately handling the risks
involved while maximizing profit and minimizing waste.
 Drafting impact of Apple’s on the global Supply Chain
In the supply chain sector, Apple is widely regarded as an innovative leader, providing
inspiration for other brands and forcing the competition to keep up or fall behind. Below, we
take a look at a few defining features of Apple’s supply chain that impact on global supply
chain. And these are:

Strong Supplier Relationships:

By focusing on maintaining strong relationships with its supply chain partners, Apple can
provide great flexibility in response to demand surges. This, paired with Apple’s large
production capacity, allows them to provide products when and where customers want them.

The company maintains extremely strict standards for its numerous suppliers, which are named
each year in Apple’s Supplier List. The top 200 suppliers in this list make up 98% of the
business’s procurement. Demanding a high-quality service from these partners helps ensure
the final products are reliable and long-lasting.

Because Apple is consistently innovating, its suppliers enjoy a certain degree of stability – even
if one Apple product doesn’t succeed or suffers from setbacks, suppliers can rest assured that
another request, for another product, will likely be coming down the pipeline.

To ensure these suppliers have the skills and experience they need to continue succeeding in
an ever-shifting market, Apple offers educational and upskilling opportunities. More than 3.6
million supplier employees have participated since 2008.

Although the efficacy and efficiency of outsourcing have come into sharper focus in recent
years, Apple provides proof that it can be a sound strategy, the company outsources much of
its manufacturing to China, which has provided them with the revenue needed to launch new
and updated products very quickly over the years.

Strategic Inventory Management:

Tim Cook, Apple’s CEO, is well known for his focus on inventory and the supply chain as a
whole.

It’s no wonder given that retaining a lean, streamlined inventory management system is
especially important in the tech industry, where new items can practically eliminate consumer
interest in older models.

Apple keeps as little inventory as possible, providing them with the agility they need should a
competitor release an innovative new product, thereby decreasing the value of any items in
stock at that moment. Furthermore, having fewer SKUs to keep track of allows for more
accurate forecasting.

Sustainability Focus

Apple has introduced various initiatives throughout the years to improve sustainability across
the supply chain.
The company has also invested heavily in a mix of clean energy technology, such as solar and
wind. Its online Clean Energy Portal allows suppliers across the globe to identify renewable
sources. In 2018, Apple and its suppliers’ clean energy generation equaled approximately the
amount of electricity needed to power more than 600,000 homes in the United States.

Apple ́s key advantages in how it manages its supply chain operations globally:

 Apple gain better control over its supply chain by introducing or working with new
suppliers that provide upfront capital in return for growth commitment and a lesser
overall price per unit.
 The Company was convinced adequate in its just-in-time supply chain.
 Apple’s ability to organize its supply chain on a real-time basis.
 Apple’s iPhone supply chain was global, (research and development base in the United
States with 156 suppliers and also assembling operation in China).
 Apple was highly incorporated, with centralized R&D and also accounting for the
whole company.
 Apple use expensive air-freight for an innovative way to speed up the supply chain.

Analysis of Success factors of Apple’s Supply Chain

Apple’s complex supply chain is attributed to the fact that the company has multiple suppliers
located in different parts of the world - primarily in United States, China, Japan and Taiwan.
Apple’s manufacturing facilities are predominantly located in China, where their products are
assembled and shipped in bulk to various parts of the world for sale. Since Apple’s
manufacturing happens overseas in low-cost countries, it has a complex logistical network
because their upstream suppliers are distributed all over the world, the assembly of their
product happens in the Asia Pacific region and their largest downstream consumer base is in
the United States. In the case of product distribution in the United States, this network includes
both intermediary warehouses in collaboration with UPS and FedEx, as well as warehouses in
California that keep final bulk products shipped in from China's production facilities. Because
the majority of Apple's final assembly takes place in Asia Pacific, the company spends a lot of
money on logistics, import/export fees, and warehousing for bulk shipments of products. Apple
distributes its products to end users through three main channels: online sales, in-person Apple
retail shops, and partnerships with retailers such as Amazon, Best Buy, Target, and cell phone
providers such as AT&T, among others. Apple has expanded significantly in size since its
founding by Steve Jobs, staying true to its objective of being a "high-cost, low-supply"
company that delivers innovative products to consumers. As a result, Apple's procurement
department has a particular brand name advantage that boosts its bargaining power during
supplier negotiations. As a response, Apple can purchase the resources it needs for mass
manufacturing of its many product lines at a lower cost and with the most up-to-date
technology.
Here we can take a look at some of the factors that make Apple have such a successful supply
chain,
Suppliers and logistics system
Apple has a massive supply chain, and it has a number of options when it comes to procuring
raw materials. Its top 200 suppliers include component suppliers and others who accounted for
at least 97 percent of its materials, manufacturing, and assembly. A very large number of its
major suppliers are located in Asia in China and Japan. Procurement at Apple is well managed
and a key focus. The brand has managed excellent relationships with its suppliers, however,
also a set of very tight rules. The suppliers must provide the workers with safe working
conditions and products and services as per the standards. All these factors are important to
remaining an Apple supplier. However, Apple is also a major buyer for most of its suppliers
and so it is a mutually beneficial relationship for both sides. Due to its financial strength and
brand reputation, Apple has strong bargaining leverage with its suppliers. It has established
quality criteria for its suppliers to ensure that their goods and services meet the highest quality
requirements. Those who are unable to follow are removed from the supply chain. Apart from
these things Apple has adopted smarter methods to reduce its storage requirements and speed
up the procurement process.
Apple has managed a very large distribution channel consisting of both direct and indirect
channels. From retail stores to online retail and its own branded stores, Apple has managed a
wide range channel for the distribution of its products to the customers. Over time it has focused
on improving its distribution channel and added to its number of brand stores. Apart from these
things the focus has also remained on green packaging and eliminating wastage.
When Steve Jobs returned to Apple in 1997, the company began to improve upon established
concepts. Previously, things were distributed by sea between factories, and the manufacturers
would ensure that the products arrived in perfect condition and on schedule. After sales began
to rise, Apple decided to take to the air and distribute its Macs to clients in a safe manner. When
the iPod was released, the company realized there is a wonderful way to distribute huge
numbers of the product fast and efficiently, therefore air freight became the most cost-effective
option for Apple to carry the goods directly from the manufacturer to the customers.
Some of the major advantages Apple’s supply chain achieved from this factors include,
 High quality inputs to offer high quality finished product
  Effective incoming input handling to reduce damage
 Flexible manufacturing system
 Wide product range
 Improved product appearance
 Prevention of product pre-mature failure
 Quick response to unique specifications
 Improved customer satisfaction through lower defect rate
 Improved product performance due to conformance to technical specifications
 Effective handling and better shipping to reduce product damage
 Timely product delivery
 Flexible delivery capabilities
 Effective order processing procedure
 Reliable transportation to ensure quick delivery
 High quality raw material and replacement parts.

Efficient inventory management system

Thus by reducing inventory holding costs and moving product more quickly from suppliers to
consumers, Apple has been able to manage its inventory efficiently, all of which has
contributed directly in keeping costs low and margins high. Cook limited Apple's supply chain
from 100 to 24 component suppliers and closed ten of Apple's 19 warehouses to eliminate
overstocking. Apple retains as little inventory as possible to provide them the flexibility they
require in the event that a competitor releases an innovative new product, lowering the value
of any things in stock at the time.
Research and development
Apple is known for its technological advancements and spends a significant amount of money
on research and development. It spent more than 10 billion dollars on research and development
in 2016, and 11.6 billion dollars in 2017. Apple has boosted its R&D investment by more than
$5 billion since 2014. Growing product range, extending scope of services, and increased focus
on in-house technological development are three main reasons driving R&D growth.
Strong supply chain strategy
Apple implemented a strong strategic supply chain system that,
 Focus on non-seasonal products with life-cycles that exceed 12 months.
  Cut down the number of storage locations, leaving only one central warehouse in
California.
 Efficient synchronization of data between the central warehouse and Apple’s stores and
customers.
 Cut down the number of key suppliers that are involved in manufacturing, shipping and
storage.
 Maintain long-term and strategic relationships with suppliers.
 Outsource the manufacturing to China, thus reducing the manufacturing cycle time
from 4 months to 2 months.
 Cut down the number of SKUs to predict the demand more accurately and ensure
lightning-fast Apple inventory turnover.
 Implement renewable energy sources, making up to 87% of their energy used
worldwide.
 Bring in extraordinary Apple inventory management practices, which allow the
company to cut down on inventory costs, reduce waste and avoid overstocking.

Production and budget

Apple has always followed successful strategies, one of which is not being afraid to spend
significant quantities of money as long as they can ensure timely delivery of their items to
retailers and customers. This is feasible as a result of Apple's significant investment in their
supply chain over the years and reaping the rewards of those solid practices, which can be seen
in the company's apparent success. Dedication and perseverance have made it possible for
Apple to become one of the companies that best manages their logistics. Apple’s control over
every aspect of the supply chain has made it so the company has an operational edge that is
unrivaled by its competitors. Apple’s large amount of money in cash and investment allows it
to leverage spending when dealing with manufactures to ensure low prices and availability of
parts before any of the competition. Some examples can be seen if we take a look at the time
when the iPhone 4 came out in 2010 and competitors like HTC were simply unable to procure
enough screens for their products because most manufacturers were too busy filling Apple’s
orders at the time

Data Gathering and Compiling Practices of Apple’s Supply Chain

Apple’s supply chain and some of the challenges it has faced in agilely managing its offshore
manufacturing in facing demand. Secondly, the paper also explores the manoeuvering, shift of
power and change of roles within the supply chain as it moves into the arena of digital content
delivery. As a result of our study, we reach the conclusion that the traditional suppliers in the
media content industry are yet to make the transition in mind to becoming pure digital players.
We find that while managing the supply chain in the traditional ‘non-e’ market provides
challenges related to cost-effectiveness and physical barriers, in the ‘e’ marketplace managing
the supply chain encounters barriers not physical but rather strategic that is entrenchedin more
traditional operating mode.
Agility, or the ability to respond quickly and effectively to market demands has become an
important competitive tool in the manufacturing industry. Firms deploying global sourcing
strategies have to balance the benefits of cost-effectiveness against the limitations of off shore
productions. Improving supply chain performance is a key to achieving cost effectiveness, and
the improvement largely depends upon the degree to which uncertainty can be reduced in the
supply chain. This paper conducts a case study of Apple as it moves into the arena of digital
content delivery and initiates hardware innovations in an industry that is characterized by
increasing product variety, new technologies, price erosion, and fast inventory turn-overs. The
purpose of this paper is to explore Apple’s supply chain and some of the challenges it has faced
in agilely managing its offshore manufacturing in facing demand. Secondly, the paper also
explores the manoeuvering, shift of power and change of roles within the supply chain as it
moves into the arena of digital content delivery. As a result of our study, we reach the
conclusion that the traditional suppliers in the media content industry are yet to make the
transition in mind to becoming pure digital players. As more and more consumers make a
complete switch to digital media and become used to not owning physical media, the suppliers
who retain control through copyrights fall back on strategies that reflect the workings of the
non-digital era. Successful companies stand to face the dual task of changing the mindset of its
suppliers on one hand, and meeting and setting up an uncharted path for its customers in digital
content in a pioneering role for the industry on the other. We find that while managing the
supply chain in the traditional ‘non-e’ market provides challenges related to cost-effectiveness
and physical barriers, in the ‘e’ marketplace managing the supply chain encounters barriers not
physical but rather strategic that is entrenchedin more traditional operating modes.

SWOT Analysis of Apple’s Supply Chain

The four key elements of SWOT analysis are - Strengths, Weaknesses, Opportunities &
Threats. Apple’s Supply Chain can use strengths to create niche positioning in the market,
can strive to reduce & remove weaknesses so that it can better compete with competitors, look
out to leverage opportunities provided by industry structure, regulations and other development
in external environment, and finally make provisions and develop strategies to mitigate threats
that can undermine the business model of Apple Supply Chain.

Strengths:

Strengths are the Apple Supply Chain capabilities and resources that it can leverage to build a
sustainable competitive advantage in the marketplace. Strengths come from positive aspects of
five key resources & capabilities - physical resources such as land, building, past experiences
and successes, activities & processes, financial resources, and human resources .

Diverse Product Portfolio:

The products and brand portfolio of Apple Supply is enabling it to target various segments in
the domestic market at the same time. This has enabled Apple Supply to build diverse revenue
source and profit mix.

Managing Regulations and Business Environment:

Apple Supply operates in an environment where it faces numerous regulations and government
diktats. In Organizational culture, Strategy, Supply chain, Technology areas, the firm needs to
navigate environment by building strong relationship with lobby groups and political network.

Robust Domestic Market that Apple Supply Chain Operates in:

The domestic market in which Apple Supply is operating is both a source of strength and
roadblock to the growth and innovation of the company. Based on details provided in the Apple
Inc.: Managing a Global Supply Chain case study – Apple Supply can easily grow in its
domestic market without much innovation but will require further investment into research and
development to enter international market. The temptation so far for the managers at Apple
Supply Chain is to focus on the domestic market only.

First Mover Advantage:

Apple Supply Chain has first mover advantage in number of segments. It has experimented in
various areas Organizational culture, Strategy, Supply chain, Technology. The Leadership &
Managing People solutions & strategies has helped Apple Supply in coming up with unique
solution to tap the un-catered markets.

Superior product and services quality:

It helps Apple Supply Chain to further increase its market share as the current customer are
extremely loyal to it. According to Fraser P. Johnson, Ken Mark in Apple Inc. There are enough
evidences that with such a high quality of products and services, Apple Supply Chain can
compete with other global players in international market.

High Margins:

Apple Supply Chain charges a premium compare to its competitors. According to Fraser P.
Johnson, Ken Mark of Apple Inc. Managing a Global Supply Chain case study, this has
provided Apple Supply resources to not only thwart competitive pressures but also to invest
into research and development.

Strong Brand Equity and Brand Awareness:

Apple Supply Chain has some of the most recognized brands in the domestic market it operates
in. According to Fraser P. Johnson, Ken Mark , brand recognition plays a significant role in
attracting new customers looking for solutions in Organizational culture, Strategy, Supply
chain, Technology adjacent industries.

Weakness:

Weaknesses are the areas, capabilities or skills in which Apple Supply Chain’s lacks. It limits
the ability of the firm to build a sustainable competitive advantage. Weaknesses come from
lack or absence of five key resources & capabilities - physical resources such as land, building,
activities & processes, past experiences and successes, human resources, and financial
resources .
Track record on environment consideration is not very encouraging:

Apple Supply track record on environmental issues is not very encouraging. According to
Fraser P. Johnson, Ken Mark , this can lead to consumer backlash as customers are now
considering environmental protections as integral to part of doing business. Project
Management is too focused on internal delivery rather than considering all the interests of
external stakeholders. This approach can lead to poor public relation and customer backlash.

Implementation of Technology in Processes:

Even though Apple Supply has integrated technology in the backend processes it has still not
able to harness the power of technology in the front end processes.

Organization Culture:

It seems that organization culture of Apple Supply is still dominated by turf wars within various
divisions, leading to managers keeping information close to their chests. According to Fraser
P. Johnson, Ken Mark of Apple Inc.: Managing a Global Supply Chain case study, this can
lead to serious road blocks in future growth as information in silos can result can lead to missed
opportunities in market place.

Low Return on Investment:

Even though Apple Supply is having a stable balance sheet, one metrics that needs reflection
is “Return on Invested Capital”. According to Fraser P. Johnson, Ken Mark in areas
Organizational culture, Strategy, Supply chain, Technology that Apple Supply operates in the
most reliable measure of profitability is Return on Invested Capital rather than one favored by
financial analysts such as – Return on Equity & Return on Assets.

Lack of critical talent:

I believe that Apple Supply is suffering from lack of critical talent especially in the field of
technology & digital transformation. Apple Supply is struggling to restructure processes in
light of developments in the field of Artificial Intelligence (AI) and machine learning.

Opportunities:

Opportunities are macro environment factors and developments that Apple Supply can leverage
either to consolidate existing market position or use them for further expansion. Opportunities
can emerge from various factors such as - economic growth, political developments & policy
changes, technological innovations, changes in consumer preferences, and increase in
consumer disposable income .

Access to International Talent in Global Market:

One of the challenges Apple Supply facing right now is limited access to high level talent
market because of limited budget. Expansion into international market can help Apple Supply
to tap into international talent market. According to Fraser P. Johnson, Ken Mark , it can also
help in bringing the talent into domestic market and expanding into new areas Organizational
culture, Strategy, Supply chain, Technology.

E-Commerce and Social Media Oriented Business Models:

E-commerce business model can help Apple Supply to tie up with local suppliers and logistics
provider in international market. Social media growth can help Apple Supply to reduce the cost
of entering new market and reaching to customers at a significantly lower marketing budget. It
can also lead to crowd sourcing various services and consumer oriented marketing based on
the data and purchase behavior.

Reducing Cost of Market Entry and Marketing into International Markets:

According to Fraser P. Johnson, Ken Mark, globalization along with boom in digital marketing
and social media has considerably reduced the risks of market entry and marketing in
international market.

Developments in Artificial Intelligence:

Apple Supply can use developments in artificial intelligence to better predict consumer
demand, cater to niche segments, and make better recommendation engines.

Growing Market Size and Evolving Preferences of Consumers:

Over the last decade and half the market size has grown at brisk pace. The influx of new
customers has also led to evolution of consumer preferences and tastes. This presents Apple
Supply two big challenges – how to maintain loyal customers and how to cater to the new
customers. Apple Supply has tried to diversify first using different brands and then by adding
various features based on customer preferences.

Opportunities in Adjacent Markets:

Apple Supply can explore adjacent industries Organizational culture, Strategy, Supply chain,
Technology to further market growth especially by extending the features of present products
and services.

Threats:

Threats are macro environment factors and developments that can derail business model of
Apple Supply. Threats can emerge from various factors such as - changes in consumer
preferences, technological innovations, increase in consumer disposable income, political
developments & policy changes, and economic growth .

Credit Binge post 2008 Recession:

Easy access to credit can be over any time, so Apple Supply should focus on reducing its
dependence on debt to expand. The party has lasted for more than a decade and rollback from
Fed can result in huge interest costs for Apple Supply.
Squeezing Middle Class in Developed and Developing World:

The growing inequality is one of the biggest threat to not only globalization but also to
capitalism. Apple Supply first hand witnessed the impact of it where it has seen lower demand
of its products from middle class customers in US and EU market.

Increasing bargaining power of buyers:

Over the years the bargaining power of customers of Apple Supply has increased significantly
that is putting downward pressure on prices. The company can pursue horizontal integration to
consolidate and bring efficiencies but I believe it will be a short term relief. According to Fraser
P. Johnson, Ken Mark , Apple Supply needs fundamental changes to business model rather
than cosmetic changes.

Increasing costs component for working in developed market because of environmental

regulations: Apple Supply has to deal with these costs as governments are trying to levy higher
environmental taxes to promote cleaner options. For Apple Supply it may result into higher
logistics costs and higher packaging costs.

Culture of sticky prices in the industry:

Apple Supply operates in an industry where there is a culture of sticky prices. According to
Fraser P. Johnson, Ken Mark of Apple Inc. Managing a Global Supply Chain case study, this
can lead to inability on part of the organization to increase prices that its premium prices
deserve.

Government Regulations and Bureaucracy:

Apple Supply should keep a close eye on the fast changing government regulations under the
growing pressure from protest groups and non government organization especially regarding
to environmental and labor safety aspects.

Key-Takeaways of Apple’s Supply Chain

1.) Plan the plan, work the plan. Apple’s supply chain success can be attributed to a variety
of actions, but it all starts with planning. Metal manufacturers should keep close watch on
market forces and raw material costs and develop sound forecasting models to predict supply
chain flow. A supply chain plan can always evolve as customers and marketplaces evolve. But
without a plan, your company might be dead in the proverbial supply chain water.

2.) Communication is key. Communication is the foundation of a healthy relationship between

a company and its suppliers. As we discussed in a recent post, communication is a fluid process
that should be ongoing. Communication plays a major role in the success of any supply chain
management. even more so for high volume production.
3.) Measure, test and learn. Apple has measurement down to a science, and is still perfecting
that science. Its audit process continues to hold distributors and supply chain partners to
measurable standards. In order to understand how your supply chain is performing and what
improvements need to be made, it’s important for manufacturers to be able to measure.

Describe briefly what Things and Topics learnt from Apple’s Supply Chain

Apple’s supply chain is one of the finest and leading supply chain in the world. There are many
things we can learn from this supply chain and make ourselves knowledgeable to participate in
the future supply chain challenges. In the following section we discussed the major things and
topics we learnt from Apple’s supply chain:

Strategic inventory management

If we start from the Apple’s beginning time Tim Cook's goal from the start was to reduce
inventory, decrease warehouses, and make suppliers compete with one another. Cook limited
Apple's supply chain from 100 to 24 component suppliers when he first took charge, requiring
companies to compete for Apple's business. He also closed ten of Apple's 19 warehouses to
eliminate overstocking, and by September of 1998, inventory had dropped from a month to
barely six days.
It's helpful to keep as little inventory on hand as possible. Because of the price of warehousing
and the possibility for competitors to strike. Technology companies can't afford to keep too
many products on hand because a competitor's announcement or a new innovation might
change everything overnight, lowering the value of inventory.
Having a small number of SKUs also enhances forecasting accuracy. Apple had 26000 SKUs
in 2013, far fewer than comparable technological companies. A longer product life cycle is also
beneficial, and Apple's major products have a life cycle of more than 12 months. Apple retains
as little inventory as possible to provide them the flexibility they require in the event that a
competitor releases an innovative new product, lowering the value of any things in stock at the
time. Additionally, having fewer SKUs to track means allowing for more precise forecasting.
Cook's inventory-tracking systems have also given the company a competitive advantage,
lowering the number of suppliers and warehouses while also allowing partners to be held
accountable for their quotes.
Strong supplier relationships
By focusing on maintaining strong relationships with its supply chain partners, Apple is
providing great flexibility in response to demand waves. This, combined with Apple's massive
manufacturing capacity, enables the company to provide items when and where customers
want them. The company maintains extremely strict standards for its numerous suppliers.
Because Apple is consistently innovating, its suppliers enjoy a certain degree of stability. Even
if one of Apple's products fails or has difficulties, suppliers can be assured that another request,
for a different product, will be coming down the pipeline soon.

Multiple suppliers for the same component

Apple’s strategy of using multiple suppliers for the same component provides it with key
advantages over its competitors. Consider the use of alternative suppliers can reduce single
supplier risks or provide an avenue for improving performance.

Focused supply chain

One thing that differentiates Apple’s supply chain from other technology producers is the fact
that Apple offers only a small variety of products. When Steve Jobs returned to Apple in 1998,
one of the first things he did was drastically cut the number of gadgets the company produced.
Jobs kept only ten of the 350 products they supplied until 1998. Making such a bold decision
requires a tremendous deal of courage, but Apple is renowned for it. Apple now produces only
five different products, each with 15 different variations. The small number of products with
many common parts allows them for high precision and supply chain optimization.

Strategic suppliers
Previously, Apple's supplier list was a closely guarded strategic secret. Apple, on the other
hand, made their supplier list public in 2012 in order to make its supply chain more transparent.
Apple currently publishes an updated list on their official website once a year. According to
Apple, the list's around 200 suppliers account for at least 97 percent of procurement costs for
materials, product assembly, and production. Apple collaborates with only a small number of
strategic suppliers, which offers both benefits and drawbacks. One of the dangers is that Apple's
reputation is inextricably linked to its suppliers. Using a small number of suppliers and
manufacturers has its own set of advantages. Apple is able to form deeper and more meaningful
exclusive relationships. It also gives Apple negotiating power because the company can
guarantee large volumes of production and materials.
Close control
Controlling is another crucial part of good and efficient supply chain management. The
company's image might be seriously harmed without it. Apple has chosen to perform more
factory audits and tighten its control over its suppliers. Apple conducted 451 audits at all levels
of their supply chain in 2013, up from 298 audits the previous year. In 2013, there were also
31 surprise supplier audits. In addition, these audits included 1.5 million workers in 16 nations
in total. Apple also established a Supplier Code of Conduct, which, in conjunction with their
supplier responsibility standards, aims to ensure that suppliers follow the same principles and
values as Apple. The latter document is more than 100 pages long, and it lays out the conditions
that suppliers must meet in order to do business with Apple. The fact that demand in Apple
stores is monitored by the hour and the supply chain may be changed when necessary is further
proof of Apple's strong supply chain control. It only takes 15 days to increase the work force
capacity in the Chinese factories where the Apple products are assembled.

The cherry on top – the hogging tactics

Apple is securing their market position through exclusivity agreements and hogging tactics. To
deliver the iPhone 6 and iPhone 6 plus to customers, Apple reserved the majority of shipment
capacity with UPS and DHL. Other businesses were having difficulty getting their products
delivered due to the massive amount of deliveries from Apple. Apple is able to negotiate better
agreements and prices than its competitors due to its market power. As a result, even though
Apple uses a lot of custom-made parts to make its goods, it has a higher profit margin.

Conclusive Comments on Apple’s Supply Chain on Product Innovation

Technology

Apple is the world's greatest at developing innovative products. Rather of focusing on one
dimension, the company develops hardware, software and linked digital services, allowing it
to provide an unrivaled user experience. This enables Apple to profit significantly from its
products and services.
When new component technologies such as touchscreens, processors, and LED displays are
first introduced, they are extremely expensive to manufacture, and constructing a facility that
can create them in large quantities is much more costly. What Apple does is utilize its financial
reserves to pay for the factory's building costs, or a large portion of them, in exchange for
exclusive rights to the factory's output production for a defined period of time, followed by a
reduced rate. This has two benefits, Apple stands months or years ahead of its competitors in
terms of component technology. This enables it to develop game-changing items that are very
impossible to replicate in a short period of time. Apple's competitors eventually catch up in
component production technology, but by that time, they've arranged for a discounted rate with
the most experienced and skilled producer of those parts, allowing them to get those parts at a
lower cost.
Apple's primary goal is to make products that improve people's lives. This involves not only
creating whole new product categories, such as the iPhone and Apple Watch, but also
constantly innovating within existing ones. The iPhone camera, perhaps more than any other
feature, reflects Apple's commitment to constant innovation. Since then, iPhone camera
technology has brought plenty of innovative capabilities to the photography world: High
dynamic range imaging (2010), panorama photos (2012), True Tone flash (2013), optical image
stabilization (2015), the dual-lens camera (2016), portrait mode (2016), portrait lighting (2017),
and night mode (2019) are but a few of the improvements.
Apple has a structure that focuses on functional knowledge in order to produce such product
innovations. Its general concept is that people with the most expertise and experience in a
certain task should have decision-making authority over that task. Apple competes in markets
with fast rates of technological change and disruption, therefore it must rely on the judgment
and intuition of people who have a strong understanding of the disruptive technologies. Long
before it can acquire accurate market input and forecasts, the company must make educated
guesses about which technology and designs will thrive in smartphones, laptops, and other
devices. Using technical experts instead of general managers raises the chances of those
investments paying off.
Apple's objective is to run all of its operations on renewable energy, and it's now 93 percent
there. Apple's Chinese offices and retail locations are already carbon-neutral, by a 40-megawatt
solar farm the company established in the nation. The solar farm produces enough electricity
to offset Apple's local carbon footprint. Apple claims that all of its data centers are fueled
entirely by renewable energy. About 99 percent of its packaging is made from recycled or
ecologically managed forest paper.
Apple conducts all of its research and development efforts at its headquarters, the Apple
Campus. Apple's R&D department has been centralized in California to increase R&D
efficiency, as the company emphasizes the value of innovation. Apple's assembly line is located
in China to take advantage of the plentiful human resources and low labor costs. Apple was
highly integrated, with centralized R&D and accounting for the entire firm, allowing the R&D
department's unique technology and design to be shared and used on a variety of products.
Apple's supply chain procedures can be streamlined as a result of this.
In comparison to a traditional product lifecycle, Apple maintains a comparatively shorter new
product development period. The lifecycle of a traditional product is 4-5 years, whereas the
lifecycle of an iPhone is only about a year. It can help Apple maintain its brand name fresh in
the minds of its customers. Furthermore, Apple invests extensively in research and
development to ensure that it has innovative products in the works.
Apple has a unique marketing strategy that is unusual in the consumer electronics business.
Even if there are substantial inventories, it offers limited supply on its new product at first. The
strategy is comparable to "velvet rope" marketing, which attracts customers through
exclusivity. It has the potential to create a halo effect, making people crave new Apple products
while also allowing Apple to generate marketing buzz without losing loyal customers.
Apple uses air freight as a transportation alternative to speed up the supply chain, despite the
fact that it is more expensive. Apple even pre-purchased all available holiday air freight to
ensure that new products arrive in time for any holiday shopping frenzy. Apple, on the other
hand, chooses to ship directly to customers from its Chinese supplier assembly plants in order
to cut costs on transportation.
Market trends are always shifting, and demand is on the rise. Other companies may respond by
developing new items in reaction to these shifts. Apple's goal is to improve its existing goods.
This explains why Apple releases product refreshes and updates on a regular schedule. As a
result, the adjusted or updated versions keep the best elements of the previous versions while
correcting or improving the problematic features. This clearly indicates that the latest iPhone,
the iPhone 6 Plus, is a vastly upgraded version of the old iPhone or even the previously released
iPhone 6. These modifications strengthen the image of the Apple product development team,
especially in the eyes of Apple users, because they imply a commitment on their part to seek
ongoing improvement for their product offerings. It also effectively draws new users, resulting
in an increase in Apple's market share. With ultimate control, Apple consumers are guaranteed
to receive the most recent version of the operating system, with updates being made accessible
to them quickly.
We can come up with a long list of mid-cycle modifications that Apple has made these years
if we look at the number of them. The enhancements to the Air and the new processors in the
Retina MacBook Pro would be on the list. Apple has been doing internal specifications on the
Mac line for many years. The new 16 GB iPod touch, iMac with VESA mount, and 128 GB
fourth generation iPad are just some of the massive modifications that have been made to the
operation of their product cycles.
Tim Cook used to be Apple's COO. His main responsibility was to assist Apple in developing
one of the most efficient and effective supply chains in the world's history. This simply meant
that Apple rarely had product hanging about in the warehouse, costing the company money. It
also means a significant reduction in the number of errors in the entire manufacturing
process. He was also tasked with ensuring that changes and improvements were made on a
regular basis in order to maintain strong profit margins. When we look at the iPod touch, we
can see how it fills a gap in the company's range, simplifies the supply chain, and makes it
easier for developers to create optimized designs for future screen sizes.