Wednesday, September 11, 2013
Can New iPhones Sustain Old Inventory Model?
After reading about the article on Dell and knowing it had the best inventory control, I wondered if it would be easier for Apple because of its small product line. Apple, the mobile giant, does give a high priority to Inventory Management, which is still not easy with a small product line. Apple did face trouble with inventory. Steve Jobs, who himself was a product guy, still has not appointed a techie successor, but a diligent inventory manager, Tim Cook. Tim has revolutionized inventory management in Apple. Apple now has contract manufacturers and does not it do it by itself, investing efforts in marketing its devices. Apple beat Dell and has become the market-leader in inventory management. This can be concluded from two main factors. First, Inventory Turnover, which indicates how many times a company inventory depletes and is refilled for a period of time. Higher the number, the better is the inventory control of the company. Second, Days of Inventory is the number of days a company holds a brought in inventory. Lower the number, the better it is. Apple has an inventory turnover of 69.4 while Dell has 35.71. Apple has a Days of Inventory value of 5.3 while Dell has 10.21. Thus, no iPhone in a store stays longer than 5 days!
According to Tim, inventory depreciates 1%-2% every week under standard conditions. To mitigate this, Apple reduced its component suppliers from 100 to 24, creating competition among suppliers. It also closed down 10 warehouses from 19 to reduce overstocking. Smaller pipeline helps manage its pipeline and ensure coordination from suppliers. Apple’s merchandise comes from China and is distributed all across without inventory issues so far. However, with the two new Apple products iPhone 5S and 5C and with Apple’s intention of venturing out to new markets, can it still maintain its inventory model?
"Apple Lesson of the Day: Inventory Is Evil - DailyFinance." DailyFinance - News and Advice for a Lifetime of Financial Decisions. N.p., n.d. Web. 11 Sept. 2013. <http://www.dailyfinance.com/2012/03/23/apple-lesson-of-the-day-inventory-is-evil/>.1