Apple Inc.’s Supply Chain and Recommendations

Introduction

A supply chain refers to a system by which an organization moves its products and services through the suppliers to the end consumers. The chain refers to the people, technology, as well as activities and resources involved in the movement (Koster 2007). The activities involved in a supply chain include the manufacture of goods from raw materials, exploitation of natural resources and delivery of the goods to the end consumers. It is important to note that there are sophisticated supply chains whereby used products can re-enter the supply chain at a given point. These are products which can be recycled after use and then redistributed (David 2010).

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Supply chain can be a source of competitive advantage in a business environment. For a company to compete effectively in the market, it has to be concerned about the supply chains of the competitors. In fact, marketplace has of late been shifting from individual company performance towards the supply chain performance (Koster 2007). The success of a business organization in the market today will highly depend on the effectiveness of the supply chain. This can be achieved through product availability as well as timely delivery of the products which are satisfactory to the consumers. The performance of a supply chain highly depends on the functional groups such as the engineers, as well as the manufacturers and marketers (Jonsson 2008). It also crosses the companies’ boundaries. The functional groups are involved in designing the products to meet the consumer needs and then distribution and sale of products to the final consumer. On the other hand, the company boundaries are now changing as the companies try to look for better ways to supply their goods and services. They are discovering the need to work together so as to achieve their ultimate supply chain objective, to speedily and efficiently fill the consumer orders (Sehgal 2009).

This essay focuses on the supply chain of Apple Inc. The supply chain will be analyzed and compared to those of related companies and then recommendations will be given on how the supply chain can be improved.

Supply chain of Apple Company

Analysis

Apple is one of the world’s fastest growing as well as the most profitable companies. The company, which has its headquarters in the United States, is said to have one of the best supply chains in the world. This has been associated with its growth rate. One of the reasons that make its supply chain one of the best is the fact that the company is very innovative (O’Grady 2009). It focuses on software as well as hardware development and other associated digital services hence satisfying most of the consumer needs. It does not focus on one dimension in its production and, therefore, it has the ability to meet most of the consumer requirements. One of the characteristics of the successful Apple supply chain is its ability to meet the consumer needs which the company achieves through innovativeness (Pantaleo 2008).

The supply chain of Apple Company is very different from the traditional supply chains. Its supply chain gives it a competitive advantage over its competitors. This enhances profitability and growth. Among the advantages that the supply chain has topped the company is the ability to easily manage consumer demand (Apple Inc. 2012). Apple consumers are always willing to wait in case the company underestimates the demand for a new product. This makes it easy for the company since it does not have to necessarily get demand forecast for a new product correct. In fact, the company has loyal customers who would want to buy the new product and will, therefore, wait in case the supply is low. They even line up at apples stores for hours before the stores open so as to buy the new product. This could, however, be a disadvantage to the company as well, and therefore the company should have a very effective forecast system as well as an efficient information system. The company should be able to efficiently and consistently manage total quality to keep the supply chain competitive (Apple Inc. 2012).

The ability of apple to supply new products and meet the consumer demand is a factor that has given the company a competitive advantage over its competitors. For instance, Apple has the capability of producing many types of products in a given line of products. For iPod alone, the company produced five types of iPods. The other companies only produce one type hence Apple carries the day when it comes to meeting the consumers demand (Apple Inc. 2012). The company is constantly improving its products to satisfy its customers. They always listen to the demands of customers, and also observe what the competitors are producing (Wittkower 2008).

The supply chain of Apples Inc. has the capability to quickly respond to any change in the products demand. In addition, it has the capability of delivering quality goods at a competitive price. Despite the fact that the company has a problem, in that it always experience a shortage every time it is introducing a new product in the market, it is able to deliver enough products before its competitors develop a similar product (Williams 2011). Therefore, it is able to meet the consumer demand before the competitors take over and hence is able to maintain loyalty from consumers. For instance, when Apple first produced the iPad, no other company had similar product in the market. Apple was the first company to distribute iPads in the market. By the time competitors developed and released a similar product, Apple had already taken over the market and customer loyalty (Williams 2011). Therefore, the supply chain of Apple is very efficient and effective since it is able to introduce new products, which are satisfying to consumers and sell them at premium prices (Jürgens 2000).

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Apple Inc. exerts over almost all aspects of control chain ranging from products design to distribution of those products and then their sales at the retail stores. Apple produces in large volumes and, therefore, gets big discounts from suppliers. According to Mike Fawkes, a former supply chain chief at Hewlett-Packard, “operations expertise is as big an asset for Apple as product innovation or marketing; they’ve taken operational excellence to a level never seen before” (Bloomberg 2012, p. 1). The ability of the company to manage operational expertise has made it possible for apple to handle a large product launches and it does not have to maintain a large inventory. It has also made it possible for the company to sell products at a relatively low price such that the competitors find it hard to compete effectively with Apple. The strategy has outdone some of the competitors such as Samsung who produce similar products (Bloomberg 2012).

When Apple is making an order from the supplier, it requests for the full accounting details of the way the manufacturer has reached the price quotes for the products. Therefore, the company will always get products at fair prices, which will be advantageous since it can produce at a relatively lower price as compared to its competitors. To protect the uniqueness of its products, the company works to lock up the supply of major components, especially the custom components with exclusive agreements (Banker 2012).

Apple also supplies services which are meant to increase its productivity and is essential in gaining a larger share of the market ahead of its competitors. Among the services that the company offers is the sale of movies through iTunes. The company works together with Disney where customers buy movies and watch them via some of the Apple products such as the iPods. This helps in supply of the iPods. The ability of Apple Inc. to use windows operating system in their products is another factor that makes it meet some of the consumer demands. Therefore, the Apple products can be used in offices and other areas where Microsoft windows are used (Kurtz & Boone 2009).

Further, the company has a strategy whereby they believe in spending money whenever it is necessary and reap the benefits of the spending in the long run. This idea is institutionalized in the company’s supply chain. It starts from the design stage and goes all the way along the supply chain. Apple’s designers can spend a very long time working close with the company’s suppliers and manufacturers as well as customers in order for them to be able to translate prototypes into mass produced devices (Gitman & McDaniel 2009).

For the company to meet the high demand for its products, it has outsourced its manufacturing to China. Most of its products are assembled and manufactured in China, while the design is done in America (Schneiders 2010). Among the reason given for this is the high demand for labor in the company which the United States labor market is unlikely to meet. The company employs over 230 000 workers in its iPhones assembly plants in China (AOL Inc 2012).

In China, production is faster and efficient. Thus, factories in the United States are unable to compete effectively with overseas plants. According to Apple CEO Time Cook, “The speed and flexibility is breathtaking. There’s no American plant that can match that” (iClarified 2012, p. 1). The CEO further argues that the supply chains in Asia have surpassed the supply chains in the United States and for that reason all the supply chains of Apple Inc. are based in China. In China, it is easy to access raw material, reducing the production costs. There are many factories producing the raw materials and therefore assembling Apples final products becomes easy, faster and very flexible (Rounak 2012).

Performance of Apple Inc.

Apple Inc. is one of the best performing companies in the world. It has had a high growth rate in the last one decade. The company growth had been stagnant for years before it regained its competitive advantage about ten years ago. Innovation has been the key to Apple Inc.’s success. The demand of the company’s product and services has increased dramatically. Its revenue rose from a low of $9.8 million in the year 1996 to profits of above $19.3 million in the year 2006. That was a greatly impressive increase which translated to about 96.43 percent increase in revenue (Rounak 2012). In addition, the company retail shops across the globe have increased. In fact, it currently has over 364 retail shops which are spread in over 13 countries around the world. It also has online stores where it markets Apples and iTunes. Apple Inc. has grown to become the largest technology company in the world. Its revenues are higher than both Google and Microsoft revenues combined (Rounak 2012).

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The supply chain of Apple has been vital to its performance. Its ability to meet the demand of consumers and satisfy them has helped the company gain loyal customers who will always be willing to buy new products by the company. In addition, the ability of the company to be ahead in terms of innovation has also been crucial to its performance. It has been successful in managing its supply chain by always availing products to customers at the right time and to meet all the needs of consumers (Rounak 2012).

Discussion

Multinational companies operate in an environment in which they find it difficult to predict future demand (Liu & Nagurney 2011). In addition, there are other risks that the companies have to overcome in order to be successful and maintain a healthy supply chain. Among the risks are supply disruption risk, changing exchange rates, and demand risk (Liu & Nagurney 2011). The later is, however, the most common risk which has been a big challenge to multinationals. Demand management is the effort by an organization to make estimates of what customers might require and also manage customers. The organization will use this information in managing its operations in order to meet the demands. Demand management is very important in the management of supply chain (Coyle et al. 2009). It is important to note that the supply chain normally starts at the manufacturer or assembly level and then it moves on till the product reaches the final consumer. What is manufactured reflects what will be sold. Therefore, organization needs to understand the demand in the market and know what the customers want so that the same can be manufactured and then sold to the final consumer. In demand management, the organization needs to collaborate the activities which are related to how products flow, as well as capital, services and information. Generally, demand management should aim at a common goal of consumer satisfaction and offering solutions to consumer problems (Coyle et al. 2009).

Outsourcing has become so prevalent, and it has greatly influenced supply chains in the global industries. One of the major benefits that outsourcing offers to companies is cost saving (Liu & Nagurney 2011). Companies outsource supply chains to increase efficiency, as well. In some cases, a company can be located in a place where there is no enough labor to meet its operations as it is in the case of Apple Inc. To meet the market demands and to effectively supply its products, the company may be required to outsource manufacturing, and the supply chain (Liu & Nagurney 2011).

Recommendations

Apple Inc. has been a leading company in terms of supply chain management. It has one of the best supply chains since it has the capability of meeting most of his consumer demands. However, the company can improve on its supply chain for better performance in the future. Apple has mainly focused on product development. It has continuously produced innovative products whereby it avails them in the market before the competitors produce a similar product. However, product development is not the same as supply chain management. Therefore, on top of developing innovative products, Apple Inc. should also focus on improving its supply chain. It should not outsource the entire supply chain. Part of the supply chain activities should be at the location where the final consumer is located (Liu & Nagurney 2011). This is not the case for Apple since its entire supply chain is in Asia where the products are manufactured.

Conclusion

Supply chain management is increasingly becoming on of the major business strategies in the modern economic environment. It is critical for companies which carry out international operations. It is difficult for multinationals to predict future consumer demands. It is, therefore, important that they develop an effective supply chain which will help them in meeting the consumer demands. It is important to note that supply chain management is helpful in giving the business a competitive advantage. One of the major aspects of supply chain management is outsourcing. Once an organization is able to manage the consumer demand, it can outsource part of or the entire supply chain to increase efficiency and flexibility.

List of References

Apple Inc., 2012, Supplier Responsibility at Apple. Web.

AOL Inc 2012, Why Apple’s products are ‘Designed in California’ but ‘Assembled in China’. Web.

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Banker, S, 2012, The Apple Supply Chain: The Best in the World? Web.

Bloomberg L.P., 2012, Apple Green Light Reveals Control of Supply Chain in Cook Operations: Tech. Web.

Coyle, J, Langley, J, Gibson, B, Novack, R, & Bardi, E J, 2009, Supply chain management: A logistics perspective, South-Western Cengage Learning, Mason, OH.

David, B 2010, Supply Chain Management Best Practices, 2nd. Ed, John Wiley & Sons, Hoboken, New Jersey.

Gitman, L J & McDaniel, C D 2009, The future of business: The essentials, South-Western Cenage Learning, Mason, OH.

iClarified, 2012, Why Apple Outsources Its Manufacturing to China. Web.

Jonsson, P 2008, Logistics and supply chain management, McGraw-Hill, London.

Jürgens, U 2000, New product development and production networks: Global industrial experience: with… 29 tables, Springer, Berlin.

Kurtz, D L & Boone, L E 2009, Contemporary business, South-Western Cengage Learning, Mason, OH

Koster, M B M & Delfmann, W 2007, Managing supply chains: Challenges and opportunities, Copenhagen Business School Press, Køge.

Liu, Z & Nagurney, A 2011, Supply Chain Networks with Global Outsourcing and Quick-Response Production Under Demand and Cost Uncertainty. Web.

Pantaleo, D & Pal, N 2008, From strategy to execution: Turning accelerated global change into opportunity, Springer, Berlin.

O’Grady, J D 2009, Apple Inc, Greenwood Press, Westport, Conn.

Rounak, 2012, Why Does Apple Manufacture iPhone in Asia. Web.

Schneiders, S 2010, Globalization and Apple’s respond to the international Game, GRIN Verlag GmbH, München.

Sehgal, V 2009, Enterprise supply chain management: Integrating best-in-class processes, Wiley, Hoboken, N.J.

Wittkower, D E 2008, iPod and philosophy: ICon of an ePoch, Open Court, Chicago, Ill.

Williams, C 2011, Management, South-Western Cengage Learning, Mason, OH.

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