Apple Inc.’s Supply Chain Sustainability

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Introduction

Nowadays, no business can scale and acquire the global market without demonstrating a commitment to environmental conservation and social responsibility. There is increasing pressure on businesses to integrate sustainability strategies into their operations. Furthermore, sustainability became synonymous with efficient resource management, allowing companies to save money by eliminating unnecessary waste and coordinating supply chain processes. A supply chain is a network of activities and resources needed to develop, design, manufacture, and distribute the final product. Thus, supply chain management refers to the coordinated set of efforts focused on maximizing the efficiency of such processes as sourcing, logistics, inventory management, and so on. It is apparent that making improvements in supply chain management results in lower operational costs, which then leads to higher profitability of a business.

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There are two perspectives a firm might consider in regards to supplying chain management. On the one hand, executives might focus solely on speed and cost. On the other hand, they might take into consideration certain societal attitudes and environmental issues such as global warming, pollution, marine ecosystems destruction, deforestation, and many others. The second alternative is the foundation of supply chain sustainability, which can be defined as the efforts of an organization to make the impact of its sourcing, manufacturing, storage, and transportation activities positive or at least neutral. This stands in opposition to the conventional notion of supply chain management focused primarily on speed and reliability.

The scope of this essay is the discussion of sustainable supply chain management. However, the paper specifically centers on the technological sector and one enterprise in particular, which is Apple Inc. Thus, the content of the essay is going to target Apple Inc. specifically in regard to its challenge to scale its billion-dollar company in an environmentally friendly and socially responsible way.

As for the themes, the primary ones include sustainability, supply chain management, scalability, technology, and organizational efficiency. However, another important theme to take into consideration is innovation. Apple Inc. is one of the most innovative companies in the world, which has gained success primarily because of the executives’ courage to offer the market something new and exciting instead of recycling old ideas and products. Therefore, the paper will make a correlation between the strive for innovation and sustainability initiatives. After all, in the 21st century, sustainability is the path leading to the future, and innovation is the only method of moving forward on that path. If Apple Inc. wants to keep up its image of an innovation hub, it has to consider societal needs and invest more in sustainability projects, especially the ones related to the company’s own supply chain management and resource management.

The purpose of this essay is to examine the existing challenge of supply chain sustainability Apple Inc. faces and demonstrate the possible implications of integrating environmentally friendly policies into the supply chain. It is evident that sustainable supply chain management lowers the likelihood of a company dealing with financial risks and negative media attention. For stakeholders, it is exceptionally important that an enterprise acknowledges environmental problems and societal values. This way, the company reflects modern attitudes and continues to thrive and receive support from consumers.

Methodology

The primary method used for this paper was a literature review. The sources should have included only scholarly articles initially. However, the search soon demonstrated that in order to gather the most recent data and statistics, the pool of literature allowed had to be expanded. In regards to the criteria, only relevant sources from respectable publications, organizations, websites, and academic journals published within the past five years were utilized.

The Organization and the Sector It Operates in

Apple Inc. is a global technology corporation specializing in information technology (IT), consumer electronics, and software. As the biggest technology company worldwide, Apple Inc. has never left the radars of financial experts, business analysts, and the general public. As of 2021, Apple Inc. is considered the world’s most valuable company (Dailey, 2021). In addition, it is worth noting that, along with Amazon, Facebook, Google, and Microsoft, Apple Inc. is a member of the Big Five, the most powerful technology enterprises in the United States (Langlois, 2019). According to Reuters (2021), Apple Inc. excels at designing and manufacturing such devices as smartphones, tablets, and personal computers. They include the iPhone, the MacBook, the Mac Computer, the iPad, and many others.

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Furthermore, the company has proven to be a leader in creating and marketing wearables and various accessories. They include the AirPods, the Apple Watch, the HomePod, and a number of other Apple-branded accessories. In addition to the products themselves, Apple offers numerous related services such as “Advertising, AppleCare, Cloud Services, Digital Content and Payment Services” (Reuters, 2021, para. 1). Thus, it is evident that Apple Inc. is much more than a smartphone manufacturer, holding a great amount of power in the electronics and IT industries.

Apple Inc., originally under the name of Apple Computers, was founded by Steve Jobs and Steve Wozniak in 1976. Both of them being college dropouts, assembling computers in Jobs’ garage was far from the picture one might have when questioned about the start of the technology empire that is Apple today (Weinberger and Hartmans, 2020). The primary strengths of this new venture were its innovation and the vision of consumers interacting with computers, both of which became the foundation for one of the world’s biggest enterprises (Library of Congress, 2020). The first product presented by the company was the Apple I, a motherboard that included a processor with very little memory and no minor keyboard. According to the article published by the Library of Congress (2020), the Apple II “revolutionized the computer industry with the introduction of the first-ever color graphics” (para. 2). Macintosh was another product worth mentioning as it was rightfully considered the most user-friendly computer.

Despite the company’s impressive growth rate and considerable profits, internal tensions, external obstacles, and a variety of business strategy issues threatened to destroy the enterprise. After Jobs left Apple Inc. in 1980 due to the conflict rising within the company, the public was shocked to witness his triumphant return just a couple of years later (Beattie, 2021). Apple Inc. is truly a business that makes history every single day. In 2018, it became the first publicly traded company in the United States to reach a market capitalization of $1 trillion (Richter, 2020). Just two years later, in 2020, it was valued at $2 trillion (Bursztynsky, 2020). These figures demonstrate the sheer importance of taking a closer look at Apple Inc.

Firstly, it is crucial to examine the company’s key players. Some of the most prominent members of the leadership team at Apple include the Chief Executive Officer (CEO) Tim Cook, Senior Vice President Katherine Abrams, Chief Financial Officer Luca Maestri, as well as Chief Operating Officer (COO) Jeff Williams (Apple Inc., 2021). In regards to the revenue, it is important to take a look back at the last three years. According to the data accessible online, the company’s revenue in 2020 amounted to $274.52 billion (Sujay Vailshery, 2021). It was a 5.5% increase from the 2019 revenue of $260.1 billion (Sujay Vailshery, 2021). In 2018, the global revenue reached $265.6 billion, making the 2019 revenue a decline of almost 2 percent (Sujay Vailshery, 2021). It is apparent that billion-dollar revenue figures are the reason for Apple’s rise to become the first trillion-dollar enterprise in terms of market capitalization. The main cause for such high net sales amounts is brand recognition and continuous innovation. The issue is the threat of Apple Inc. not being able to keep up with high shareholder expectations in terms of revenue.

As for the operating profits, the data demonstrates the same trend. The amount drops slightly in 2019 compared to 2018. In 2018, the net income was $59.5 billion, while it decreased to $55.2 billion a year after that (Statista, 2021). In 2020, the profits were at $57.4 billion, which meant that the operating costs that year were slightly bigger than in 2018, as demonstrated by the correlation between revenue and profits (Statista, 2021). In regards to Apple’s operational activities, the company’s focus has primarily been on ensuring the efficiency of the design process. Apart from that, there has been a shift towards investing more into quality management, job design, supply chain strategizing, maintenance, etc. Operations management at Apple Inc. aims to minimize production costs while maintaining quality and a competitive advantage in the market. Due to effective operational activities, the company has been able to control costs by coordinating the supply of raw materials and labor from Asia (Carr and Gurman, 2019). This continues to allow Apple Inc. to capitalize on its ability to turn raw materials into easily marketable devices attractive to consumers, utilizing existing market relevance (Choi et al., 2021). Thus, it is evident that one of the most prominent factors of the company’s success is well-coordinated operations management.

Although Apple Inc. has achieved a lot throughout the decades, the fact that it is one of the largest and most valuable enterprises does not automatically eliminate any potential challenges. In fact, AAPL’s growth and establishment of itself on the global market is a threat in itself. Scalability is now an issue for the business as it occupies more locations and produces more products. This paper, in particular, focuses on the sustainability of the existing supply chain Apple Inc. functions nowadays. The basic supply chain theory might claim that the company must continue to diversify its manufacturing base in order to decrease the likelihood of disruption and cater to consumer demands (Bals and Tate, 2018). However, this strategy no longer satisfies the needs of Apple Inc.

In order to understand the complexities of the environment Apple Inc. has to function, it is important to examine the technology sector. While offering a wide range of services and goods, the technology sector amasses a variety of technologically based products from numerous enterprises (Deloitte, 2021). Furthermore, it is exceptionally important to the economy as it helps businesses from other sectors to manage their logistics, make strategic decisions, and protect sensitive personal data (Henry-Nickie et al., 2019). In the United States, some of the key players in the technology sector include Amazon, IBM, Microsoft, Google, Facebook, and Apple.

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It is crucial to mention that the sector is ever-growing and constantly changing. The latest additions to the list of disruptive innovations include Artificial Intelligence (AI), Augmented Reality (AR), the Internet of Things (IoT), and robots (Frankenfield, 2021). The technology sector has a great performance and even overperforms during the early and mid-growth stages while failing to keep up in the late and recession stages (Alonso, 2021). In terms of market capitalization, Alonso (2021) notes that the tech sector has the highest market capitalization of almost $11.5 trillion. According to Evans (2020), the COVID-19 pandemic has had a profound impact on the sector. It has presented companies with the challenge of addressing “accelerated digital transformation, increased importance of technology in the economy and society, and prevalence of inequalities in access to and the use of technology” (Evans, 2020, p. 253). It is clear the sector will grow and continue to overperform the market. As a leader in the industry, Apple Inc. has to be a role model to small and mid-size businesses.

The Strategic Business Issue

One of the most prominent challenges Apple Inc. faces today is supply chain sustainability. Supply chains are “business entities which coordinate with each other to achieve competitiveness as well as their own interests” (Lockamy, 2017, p. 177). According to the experts’ calculations, “the incremental cost to make a net-zero [product] would add less than 2% to the final price” (Lesser, 2021, para. 2). Thus, making zero supply-chain emissions, a goal will not result in extremely high prices. In fact, when it comes to conscious decarbonization, the added cost remains relatively low, which ensures that consumers will not suffer from a substantial financial toll (Keppler and Cornetto, 2019). It is apparent that the advantages of commuting to sustainability and making a change towards ending climate change far outweigh the advantages of an inflexible, decades-old supply chain. Despite such promising insights, not that many companies have started any initiatives to fully cut supplier emissions. Moreover, even an enterprise as large as Apple Inc. has still not put supply chain sustainability on its general agenda. This is a threat to the company’s long-term effectiveness as, without these steps, the firm has no sustainable competitive advantage and opportunities for maximizing profitability.

The primary issue is the fact Apple Inc. does not invest enough in coordinating functional supply chain processes and aligning them with organizational strategies. Supply chain sustainability is impossible to achieve without integrating the practices into existing structures, internal culture, core operations, and human capital. Sustainability initiatives at a firm demonstrate its commitment to building flexibility and agility while supporting innovation. Supply chains have to be reactive and susceptible to change as they face the challenge of sustainability.

Over the past decade, Apple Inc. has made many strategic decisions related to supply chain sustainability. For instance, it made its selection process for manufacturing partners dependent on the commitment to zero emissions. As a result, more than 100 partners at Apple Inc. source fully renewable electricity to produce Apple products (Coronel, 2021). Procurement and Supply Australasia (2021) reports that such a step taken by Apple Inc. would spur demand “for more than 8GW of clean energy for the manufacturers and avoid over 15 million metric tonnes of CO2 annually” (para. 2). Apple Inc. has recently announced its plan to ensure it is net-zero in its activities across business operations, including supply chain management. It has pledged to reduce emissions originating from the company by 75% by 2030 across various industries and countries (Calma, 2020).

To be even more specific, another example of Apple’s efforts is a partnership between the firm and Foxconn Zhengzhou to improve waste management practices at the company’s Chinese final assembly facility (Foxconn, 2016). After making a large-scale supply chain audit, Apple Inc. also initiated the energy efficiency program, which prevented suppliers at 13 sites from producing “13,800 metric tons of carbon emissions through replacing outdated or inefficient heating, cooling, and lighting systems, repairing compressed air leaks, and recovering and redirecting waste heat” (Lyons Hardcastle, 2016, para. 6). Although the enterprise’s sustainability initiatives lack coordination, it is apparent that Apple has made a big step towards improving its suppliers’ environmental performance.

Strategic Implications

Apple Inc. is structured to nurture the spirit of innovation and all the practical implications that follow. In fact, after Jobs returned to the company as CEO, he decided to stray away from the conventional structure and made some extreme organizational changes within a couple of days (Podolny and Hansen, 2020). The quest for sustainability is simply an extension of the company’s commitment to innovation. Supply chain sustainability initiatives allow the firm’s managers to align accountability with the company’s interests to prevent congestion. Furthermore, stakeholders are calling for an approach to supply chain management that would consider various perspectives, including environmental and social implications, in particular. After all, working with unsustainable suppliers leads to a variety of financial and environmental risks, increasing the company’s likelihood of receiving negative media attention due to the practices, which are unethical and not environmentally friendly (Villena and Gioia, 2020). For instance, a recent study has found that sustainability efforts are more effective at mitigating supply chain risks than actual risk mitigation strategies adopted by companies (Kumar Gouda and Saranga, 2018).

Conclusion

In conclusion, despite the resources, influence, and human capital, it is still challenging for global enterprises to meet the needs of modern times. Apple Inc. is a company built upon the notions of innovation and progress, which is why stagnation would be a death sentence. Ignoring the shift towards sustainability and environmental conservation in societal values would go against Apple’s very own mission and central idea. The firm is a leader in terms of market capitalization and one of the leaders in terms of revenue. One might argue that these two facts should automatically mean that Apple is safe from media attacks or even the public’s unfavorable opinion. Although it is true that the company has managed to amass a loyal following consisting of millions of consumers worldwide, it can still collapse despite the resources and power of Apple Inc. I’d particularly vulnerable when it comes to the issue of supply chain sustainability.

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The main problem lies in the fact that Apple Inc. significantly limits its investments in coordinating supply chain activities and integrating them within the existent organizational structure. As a result, there are a couple of programs that are essentially disintegrated and do not fit into the overall internal flow created at Apple. Sustainability initiatives do not align with larger organizational strategies. Thus, instead of utilizing the full potential of supply chain sustainability management, such programs become yet another obstacle on the conventional path to speed, reliability, and efficiency. They are some of the most common expectations one might have from functional supply networks, while the true power and long-term success rely on agility, innovation, and flexibility. Apple’s supply chains should be more reactive, which can be achieved only through extensive sustainability initiatives integration. This would allow the enterprise to thrive for years upon years to come as it would ensure steady competitive advantage and high profitability by introducing tools for agile management.

Over the past decade, Apple’s executives have made the decision to make an effort and invest in multiple sustainability initiatives. Encouraging suppliers to use renewable sources of electricity and ensuring manufacturing plants improve their waste management procedures are just some of the examples. However, this might still not be enough to take full advantage of integrating sustainability initiatives and becoming a leader in that arena as well. It seems that companies nowadays, especially decades-old global enterprises such as Apple Inc., have an incomplete understanding of what sustainability truly is. Investing in environmental sustainability and waste management programs does not only take away from the enterprise but ensures its long-term success, profitability, and resource efficiency. As mentioned earlier, compared to risk mitigation strategies, sustainability initiatives are more effective at minimizing supply chain risks. Thus, both executives and shareholders have to take sustainability efforts into consideration when making predictions about long-term success and organizational outcomes.

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BusinessEssay. (2022) 'Apple Inc.'s Supply Chain Sustainability'. 21 September.

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BusinessEssay. 2022. "Apple Inc.'s Supply Chain Sustainability." September 21, 2022. https://business-essay.com/apple-inc-s-supply-chain-sustainability/.

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BusinessEssay. "Apple Inc.'s Supply Chain Sustainability." September 21, 2022. https://business-essay.com/apple-inc-s-supply-chain-sustainability/.