Apple Inc. is a company that designs, develops and sells computer software, cell phones, and consumer electronics. The company has been a notable company in most of the mentioned products in the world for a while now. Apple Inc. was first established in 1976 under the leadership of Steve Jobs and two other partners. It started from a humble beginning in the US, and since its inception, it has gone through numerous challenges to be one of the leading brands in the world. Apple is known to design and produce products with cutting-edge technology in the market.
In fact, some of its products have the highest margins compared to competitors in the same category. Online services offered by Apple include iCloud, iTunes and App Stores. Subsequently, Apple has managed to be a top brand with high profitability because of innovation and design. Ability to produce products of high standards coupled with operational responsiveness allows Apple Inc. to maintain high profitability margins. Efficient management of inventory gives Apple a competitive advantage. In fact, Gartner ranked Apple as the company with the best supply chain in the world for three consecutive years from 2010 ( Gartner, 2018).
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Different companies use different supply chain management (SCM) practices and different experts have their depositions on which SCM is the best. Consequently, Apple’s SCM practice has been criticized by many, however, the company’s model which incorporates sophisticated software systems and extraordinary inventory control has managed to keep the company at the top ( Hettiarachchi n.d). The company’s SCM strategy maintains raw materials supply while at the same time making sure there are no supply interruptions.
A proper supply chain strategy is critical to any given company. Apple in its supply chain strategy includes proper supply chain strategies and competitive advantages to coming up with a strategy. Apple strikes a balance between the two because Apple products are innovative and its strategy is to be responsive to the market. Apple’s SCM strategy is to be agile enough to meet customer needs at any one time while at the same time managing to eliminate raw materials supply disruptions. The innovative market is quite dynamic, and customer needs and expectation must be monitored constantly. “Not sold products” must be kept low in every product line in Apple’s SCM strategy. Apple manages to keep not sold products low by letting the market decide the number of units to be produced in the one-year shelf life of most of its products. If expected sales of a new product were budgeted to be high but after the launch, the product does not move sales as expected, the manufacturing figures are reduced drastically. Manufacturing figures are also revised upwards for a product that has been well received in the market.
The apple’s supply’s chain process focuses largely on spending on quality items at the design stage with the aim of profit realization from the greater volumes of products sold. In this regard, the team of manufacturers, as well as the supply chain, engages closely with suppliers to help translate prototypes into the production of mass devices. For instance, the designers in Apple work together suppliers to make the new tooling equipment for the new design of MacBook’s unibody shell which is cut from a single piece of aluminum.
The Apple company aims to double its capital expenditures on the supply chain to about 1.7 billion dollars while at the same time commit 2.4 dollars as pre-payment to its main suppliers. The company’s decision to focus on few product lines with little customization promises huge profit margins. The company has a unified strategy within which the business processes are aligned to. The company spends huge amounts of money on production. This strategy promotes the availability of Apple products at low prices and limits the supply options for other companies. The releases of iPhone 4 in 2010 limited the availability of materials such as screens for other device manufacturing industries such as HTC ( Satariano, & Burrows, 2011). This is because all suppliers targeted to meet the high demand of orders from Apple. According to the drillmaker, Apple also ordered for and purchased so many high-end drills to make the iPad 2’s internal casing that many other companies had to incur a longer wait-time period to get their orders ready.
The distribution strategy used by the Apple Company plays a key role in ensuring that Apple achieves its goals. The team dealing with inventory purchase materials as well as other components from various suppliers to prevent dependency on one supplier. These components are shipped by air to the assembling plants in China. The final products are then shipped to the customers who purchased the products online. Retail stores and distributors also form other distribution channels used by Apple. The company also ships products from their warehouse in California, as well as their central call center in Elk Grove ( Satariano, & Burrows, 2011). Customers are allowed to send already used products for recycling which also ensures that the company continues to generate materials for its use.
Apple has made drastic changes with the aim of streamlining the supply chain process. This has reduced the cost of production and improved service delivery. Some of the new strategies used include their use of innovation to make great products. This strategy ensures that Apple produces products with unique features that easily attract their clients. The company has also synchronized data between the main warehouse and the retail stores to promote efficient and cost-effective operations which improve service delivery. They also outsource manufacturers with the main purpose of reducing the manufacturing cycle time. With their keen eye for promoting customer returns, the company requests reductions on the cost of materials from their suppliers. They also ask their supplier to relocate closer to their Apple factories to cut on transport costs. This helps to reduce the cost of production for the Apple products.
References
Satariano, A., & Burrows, P. (2011). Apple’s supply-chain secret? Hoard lasers. Technology , 4 , 50-54.
Hettiarachchi, H. A. H. Apple’s Supply Chain Strategy. Retrieved from https://s3.amazonaws.com/academia.edu.documents/51339113/Apple_SCM.pdf?AWSAccessKeyId=AKIAIWOWYYGZ2Y53UL3A&Expires=1524999562&Signature=uB8eSE0P%2Fejm4NR%2FpvO7%2BKQ%2B6zA%3D&response-content-disposition=inline%3B%20filename%3DApples_Supply_Chain_Strategy.pdf
Gartner(2018). Gartner Announces Rankings of Its 2015 Supply Chain Top 25 . Gartner.com . Retrieved 29 April 2018, from https://www.gartner.com/newsroom/id/305
