Post-Graduate Programme in Management

(PGPM: 2013-2015)
Term: IV (Jun- Sep, 2014)

Management Development Institute - Gurgaon
Supply Chain Management



Case 07
Apple Inc.
ID Name
1 13P017 Buddhadeb Chakraborty
2 13P041 Samarth Kagdiyal
3 13P048 Shubham Gajendragadkar
4 13P062 Amber Dubey
5 13P070 Deepak Joshi
6 13P071 Deepak Murali
Presentation Date: 29
th
July 2014
Innovation
Design
Profit margins > 40%
Supply Chain?
Example –
New tooling equipment required
to manufacture the unibody
aluminium macbook

Control over every piece of supply chain
• from Product Design to Retail Stores
Huge volumes enable big discounts from suppliers
Apple designers work with suppliers to come up
with new solutions to problems
Supply Chain Model of Apple Inc.
US
China
Asian
countries
Europe
Sourcing
US
China
Asian
countries
Europe
Assembly
in China
Sourcing
Manufacturing
US
China
Asian
countries
Europe
Assembly
in China
Intermediate
warehouses via
UPS/Fedex
Warehouse
facility in
California
Online Store
Retail Store
Direct Sales
Wholesalers,
Retailers,
Carriers
Sourcing
Manufacturing Warehousing Distribution
• With global sales of $16 billion in merchandise in 2011, Apple
leads the US retail market in sales per unit area

• As of June 2014, Apple has 425 retail stores in 16 countries
and an online store available in 43 countries
US
China
Asian
countries
Europe
Assembly
in China
Intermediate
warehouses via
UPS/Fedex
Warehouse
facility in
California
Online Store
Warranty
return,
Trade In,
Recycle/Reuse
Retail Store
Direct Sales
Wholesalers,
Retailers,
Carriers
Sourcing
Manufacturing Warehousing Distribution Return
Cross Functional Drivers for
Apple’s Supply Chain structure
Competitive Strategy
Supply Chain Strategy
Efficiency
Responsiveness
Facilities Inventory Transportation Information Sourcing Pricing
Cross functional “drivers”
• Main assembly plant in China = Foxconn
• Central Warehouse at California
Facilities
(Efficient)
• High Cycle Inventory turnover
• No of SKU is 26000 which is low and
reduces the supply chain complexity
Inventory
(Efficient)
• Fastest and most expensive mode of
transport i.e. Air
• Realized economic benefits by transporting
directly from Chinese factories to
consumer’s doors (for online orders)
Transportation
(Responsive)
• Electronic monitors ensure prelaunch secrecy
and discourage leaks
• Tracking of demand by each retail store, by the
hour to adjust production forecasts
Information
(Pull)
• Supplier evaluation & selection process
• Detailed accounting of the supplier’s quote
• Key suppliers to keep 2 weeks of inventory
within a mile of assembly plants in Asia
Sourcing
• High price and skimming strategy
• Mass volume and supply chain efficiency
allowed them to sell iPads at competitive
prices while still earning a 25% margin
Pricing
Apple’s Supply Chain Risks
Short PLC in Techology industry
• Inventories can become obsolete or exceed the anticipated demand
Custom components
• Some components are not common to the rest of the players
Limited sources
• Components sourced from single or limited resources
Outsourcing partners
• Depends on logisitical services by outsourcing partners
Supplier Code of Conduct
• Relies on partners to adhere to SCC
Complexity of Apple’s Supply Chain
Apple vs Amazon
Inventory Turnover
COGS /Average Inventory

Apple has no manufacturing
facility

Amazon has to keep more
stocks
Amazon
scores
10
Apple
scores
59
Number of Key Suppliers
• Apple has about 160 key vendors
• Amazon has about 3 million

• Apple is able to work closely with suppliers
– Helps in designing new processes
– Brings costs down

Number of Warehouse facilities
• High Transportation Cost in US
• Apple has 1 central warehouse in California
• Activities can be easily automated

• Amazon has around 30 warehouses in US
• Much more complex to manage
Product Life Cycle
Amazon has many seasonal
products

Demand forecast of seasonal,
short life cycle products is
difficult

Amazon’s supply chain is more
complicated
Apple’s supply chain operations are a
success because of excellent SRM

–Early supplier involvement in new product
development

–Close communication

–Supplier performance evaluation
Designed by Apple in California. Assembled in China.