Apple Inc.

: Global Supply Chain Management 1

APPLE INC.: GLOBAL SUPPLY CHAIN MANAGEMENT

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Apple Inc.: Global Supply Chain Management has been chosen for this
assignment with aim of exploring both its strategies to improve customer value
together with competitive advantage and chain strategy using Fisher’s model.
Understanding these will provide a basis for studying both challenges Apple faced
during and after the pandemic as well as its competitive priorities influenced the
logistic choices. Overall, Apple is considered a success its marketing and
distribution channels. Forbes acknowledges that the company primarily known for
production of iPhone phone series is renowned for its world’s best supply chain (SC)
that it won the Award for Marketing Excellence in the 2017 CMO Survey in ten
consecutive years (Moorman 2018). This success is attributed to the articulate
strategies that range from efficient logistics to creating depending supplies thereby
maintaining the inventory effectively. Yet, all these is dependable on the customers
who Apple value and are key to the continued prosperity in the market thereby
improving their competitiveness. With the idea that customers and their satisfaction
is crucial, Apple create a better experience ecosystem for customers by integrating
their products and extending their products’ lifecycle to complete their SC
efficiently. Exploring these will provide and understanding of the scope of Apple’s
SC and its successes.
Apple’s House of Quality
The popularity of Apple’s success in the market is attributed to its ability to
use its supply chain to its benefits by increasing the customer value. One way the
company does this is by creating an experience ecosystem where customers want
more of Apple products. Through this strategy, it ensures that any customer
interaction with a certain product results to more demand for related products. Tim
Cook— the company’s CEO— supposes that the customer gets tighter into the
ecosystem at the purchase of each Apple product (Ivey Business School Foundation
2020). This implies that one gets the urge to make another purchase of the product
after their first buying. One of the main reasons for this is because of the value
customers get from the purchases they make. This strategy ensures that Apple
engages the customer in voluntary buying making the gains mutual for both
parties. Hattingh (2018) observes that the customers would not spend their hard-
earned money on something they perceive to have less value making this a cycle.
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From this assertion, Apple has created a reputation to the customers about their
products. This is presumably because of not just the value but also simplicity. The
company uses the approach of minimalism by reducing the complexities while
ensuring that customers achieve maximum utility. Reduction of the complexities is
evident in aspects such as brand logos, product aesthetics, support functions, user
interfaces, and advertising (Moorman 2018) with a case study recording that Apple
products banked on “the beauty of simplicity” (Ivey Business School Foundation,
2020, p. 6). It has simpler names with clean lines hence making the products more
attractive to customers. For instance, Mac computers are popular for being user-
friendly with ease of use. Because it is synced with other Apple products, Mac and
other items in the portfolio create an ecosystem that attracts customers because of
the increased value.
Also, Apple uses control pricing as the major strategy in the market that
increases the customer value. This is evident because there are barely no new
Apple products with deep discounts in promotions such as Cyber Monday or Black
Friday. The company’s marketers realize that the strategy is a way of conveying to
the retailers that the brand is a luxury. They do this by leveraging the prices as
they offer little or no discounts in any of their distribution stores. Scholars notice
that Apple only uses the Minimum Advertised Price strategy even to their dealers,
resellers, and retailers in order to keep their prices relatively in comparison to their
own stores (Moorman 2018). The effect of this approach is reducing their retailers
and other distributors from offering discounts to their customers. This is to say that
the company does not depend on their prices to acquire new customers or enter
new markets. Contrarily, though, Apple’s competitors depend on discounts to
attract new customers and increase their demand. In return, this makes customers
loyal to Apple products because they perceive the experience they get from their
purchase. Even so, customers consider purchasing these products as it gives them
a greater value than that of the competitors and the amount they pay, say, $1000
in the case of iPhone X— the latest Apple flagship mobile phone— yet the
customers agree (Hattingh 2018). This approach ensures that customers highly
value Apple products and due to its quality, they remain competitive while
increasing profitability. Through this approach, sustainability of the supply chain is
 Apple Inc.: Global Supply Chain Management 4

maintained while controlling the price successfully even to the suppliers. Studies
observe that the company reduced its number of suppliers significantly to 154 in
2013 making its procurement effective as they handpicked where it acquired
materials (Lu 2020). This approach creates competition even to the suppliers who
value the opportunity to partner with Apple. However, this strategy exhibited one
weakness during the 1990s when the company’s products lifecycle were shortened
as they became increasingly obsolete. Even with this shortcoming, price control in
the recent years using Minimum Advertised Price strategy creates an even more
effective SC and customer value because of the value appended to Apple’s products
just like it enhances competition to the suppliers.
From the discussion, the aesthetic and durability needs by customers
prompts Apple to use operations such as integrating products through syncing and
create effective reverse logistics. To begin with, durability is a key concern for the
customers who are often faced with the need to upgrade their older Apple products.
Apple introduces one product each year from 2007 and 2012 before launching two
iPhones 5S and C with launching of three models starting 2019 such as iPhone 11,
11 Pro, and 11 Pro Max (Ivey Business School Foundation 2020). Creation of newer
models prompts the need for customers to acquire the newer version as a way of
keeping up to date with the series. For this reason, banks on the supply chain and
reverse logistics. The typical supply chain profile for Apple involves sourcing
materials and other components from suppliers and shipped different assembling
plants such as Wistron and Petragon Corporations in Zhengzhou, China. With the
ease to clear exports, Apple ships products especially iPhone mobiles using
airfreight from Zhengzhou Airport with over 150,000 iPhones able to be boarded in
a Boeing 747 to its distributors (Ivey Business School Foundation 2020). The
company also uses direct channels with retailers and customers through distribution
companies such as United Parcel Service Logistics Company (UPS), FedEx
Corporation. These channels and distribution network is crucial in not just making
deliveries to enabling customers to return products. They can do this through trade-
ins, warrantees, and repairs. Other than that, Apple works towards integrating all
their products into one through syncing in order to improve aesthetics. These
products include iPhone, iPad tablets, Mac PCs, home, wearables, and accessories.
 Apple Inc.: Global Supply Chain Management 5

Although the company faces challenges related to integration, it seeks to connect

all its devices. This creates more ease for the customers.
Apple’s Supply Chain Strategy ng Fisher’s Model
Using Fisher’s model, Apple puts in place strategies to cushion it from
variations and uncertainties in supply. One way of doing this maintaining a strong
relationship with the suppliers which ensures that it provides flexibility response in
case of demand surges. Strict standards for its suppliers as well large production
capacity coupled with constant innovation guarantees suppliers of stability (Ross
2020). This strategy ensures that even though one product does not succeed,
suppliers will get more orders for other items. Other than that, it is easier to trace
suppliers in case of surges and uncertainties as Apple maintains specifically little
number of options for sourcing. One of the coordinated strategies the company
used was reducing the suppliers significantly. Ross (2020) points out that the
company only keeps 200 suppliers who they announce every year despite their high
volume of production that would require relatively higher number of suppliers. One
benefit of this strategy is creating a competitive environment among suppliers who
want to enter the least thereby achieving reliability in the SC.
Apple also postponed production and sourcing of its materials in case of
uncertainties and variations. According to Wu (2021), Apple delayed the production
of iPhone 13 by ten million reducing their ninety-million target due to the uncertain
demand of the product. This waited until the demand of the iPhone increased later
in the year. Lastly, the company buffered its production after the Cook’s take over
in 1998 by reducing suppliers to 24 from 100 and shutting down ten out of nineteen
warehouses (Lu 2020). This reduced the inventory and stock on hand to six days
from more that one month. These strategies enable the company achieve
efficiency. For instance, by observing the law of variability, it ensures that the
performance in the production system is not degraded.
Apple’s Competitive Priorities
Competitive priority relates to a particular target and place a company
attempts to achieve for it to remain successful and profitable than its rivals. Apple
has various competitive priorities that they focus on to get an upper hand
compared to those they compete with. This attributes to the company’s profitability
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and lead in the market. Nielson (2014) specifically points that the company is not
entirely focused on the software or hardware but seeks to create an ecosystem for
their customers as its major advantage competitively. To do this, Apple constantly
increases its portfolio with a wide range of products that are assimilated into each
other as one due to their integration strategies as shown below in order to create
one unified customer experience in the ecosystem:
iPhone+ Mac PC +iPad +Wearables∧Home Accessories= Market Dominance
Yet,
Wearables∧Home Accessories= Airpods + Apple TV + Apple Watch+iPod Touch+ Home Pods+ Beats Products

The notion here is that Apple acts as a hardware company seeking to increase sales
by providing software to customers. Therefore, the hidden competitive priority for
Apple is the ability to combine its different products into one in order to complete
the ecosystem. Other than that, the company banks on making their products
attractive and exceptional to the customers thereby increasing demand. Their
control pricing strategy is effective in this endeavor by improving brand loyalty.
Challenges on Supply Chain During and After COVID-19
Primarily, Apple solely depends on many suppliers that are located in China
making them adversely affected because of the challenges related to bouncing back
from the effects of the pandemic. The pandemic slowed down the operations
especially after the lockdowns measures put in place globally resulting to longer
timelines in shipments than normal. The shipment estimates dropped significantly
through 2020’s first half as uncertainty clouded projections for the remaining period
in the year. In fact, the delay led to the disruption of the schedule for launching
iPhone 12 with reports circulating that the production was to be delayed for a few
more months as others maintained that it was still on track. This resulted to the
disruptions in the supply chain even when the company pledged to engage in
donations that related to COVID-19 as the CEO pledged to double the charity
efforts. Because of their necessity, Apple successfully distributed millions of N95
masks to frontline and healthcare workers in donations to Europe. Despite the fact
they successfully did this and also manufactured face shields for medical workers,
Apple did not revive their normal supply chain. Recent trends in post-COVID show
 Apple Inc.: Global Supply Chain Management 7

that the company is improving its supply even though its customers suffer from
inflation as a result of the pandemic.
Conclusively, Apple has remained successful in the SC management. This is
majorly attributed to the competitiveness among their suppliers as well as loyalty
from customers. Using the House of Quality, Apple customers need aesthetics and
durability and to meet this, the company entertains returns of products as well as
work towards integrating. Fisher provides reducing, postponing, and buffering
strategies which Apple applies. This ensures that they use their strategy of
integrating products as their competitive priority.
 Apple Inc.: Global Supply Chain Management 8

Bibliography
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Ivey Business School Foundation, 2020. APPLE INC.: GLOBAL SUPPLY CHAIN
MANAGEMENT [online]. Available at:
https://now.ntu.ac.uk/d2l/le/content/805638/viewContent/7295780/View.
Lu, C., Apple supply chain - the best supply chain in the world [online].
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Moorman, C., 2018. Why Apple is still A great marketer and what you can learn
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[Accessed 24 April 2022].
Nielson, S., 2014. Apple’s premium pricing strategy and product differentiation
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191247308.html [Accessed 24 April 2022].
Ross, L., 2020. How the Apple supply chain stays top ranked in the world [online].
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Wu, D., 2022. Bloomberg [online]. Available at:
https://www.bloomberg.com/news/articles/2021-12-02/apple-tells-suppliers-
iphone-demand-has-slowed-as-holidays-near [Accessed 24 April 2022].