Tuesday, September 18, 2012

Public rivalry can also hurt supply chain management.

Public rivalry can also affect supply chain management and thus, Quality.

For the past 5 years Apple has been a world leader in the smart phone industry and also the leader in emerging tablet markets. Until now, Samsung has played an inherent role in supplying memory chips and displays to the iPhones, iPads and iPods. But, Apple’s public rivalry and patent law suits against Samsung has strained their long business relationship. Apple has cut down its chip orders to Samsung, the best chip provider in the market, for the latest iPhone. Instead, Apple has ordered for supplies from other Asian providers like Toshiba, Elpida Memory and Korea’s SK  Hynix[2].

The question arises here that should Apple be compromising on its quality just because of public rivalry with a supplier? Apple’s huge success and emergence in the smart phone and tablet markets is because of the fact that it never compromises on the quality of its products. Apple could be possibly right in choosing new suppliers, but it cannot guarantee the same quality for its products. Also, there is a possibility that the three providers might not be able to supply the chips on time. Iphone 5 has received over 2 million orders in the first 24 hours[4]. There is a huge demand which has to be met.

Apple is under the impression that cutting down orders to Samsung will hurt Samsung’s revenues. But, Apple’s orders to Samsung account to only 2.5 percent of Samsung’s earnings[2].  Samsung nevertheless has  not witnessed a dip in its revenues despite the decrease in orders from Apple. The huge success of its Galaxy phones and tablets has ensured that Samsung uses up all its chip manufacturing capacity. So Samsung is not at a loss, but Apple is.

Apple should rethink it strategy. Is it really worth compromising on quality of its products? Only time shall speak.


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