Wednesday, October 2, 2013

Apple's Supply Chain Management

Apple has created a new market and changed the structures of music and mobile industries. Apple's iPad contributed to increase in purchase of digital albums. Until today, Apple's business goes well although there are competitors like Samsung. Speaking of Samsung, value propositions of Apple and Samsung is not the same. Although Apple and Samsung make smartphones, their philosophies and missions are in a different position. However, it is interesting that Apple keeps showing a good performance in terms of sales and improved brand loyalty. I asked myself, "What is the secret behind Apple's products."

Figure 1. Apple Supply Chain

The above figure is the supply chain of Apple. If you look at this, there is no big difference from other companies' supply chain process. However, successful companies make a difference by making impossible ideas possible. Firstly, I did research for Steve Jobs' thoughts for supply chain. One of the supply chain lessons from Steve Jobs is Customer comes first, cost cutting comes second. Steve believed that we need to make better products. As long as a new product has a strong value proposition and differentiation, delivering products to customers is not a problem. In addition, employees at Apple spend a lot of time with suppliers to produce accurately designed products as Apple intended.

Since Apple has retail stores, the company can make demand forecast easily. Thus, Apple is able to increase the inventory turnover by decreasing average inventory. If Apple keep more stocks, these are more likely to be obsolete or damaged. In addition,, Apple's product life cycle is longer than seasonal items so that Apple is not easily affected by seasonal factors. However, Apple takes a aggressive action during holidays. Since demand of products can increase rapidly during this period, Apple orders products by air instead of sea. This is because shipping products by ship takes a lot compared to air freight. In addition, Apple has a warehouse in California so that the company orders all products from the warehouse, resulted in simplified supply chain process. In other words, Apple retail stores act as a stocking point between upstream and downstream. Lastly, simplifying product process is a good strategy to eliminate unnecessary product lines. I think this is related to lean manufacturing. When Jobs returned to Apple in 1997, he chose only 4 product category so that it was able to decrease the complexity of supply chain.



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  2. Apple organization revealed a 13% fall in its one fourth of yearly income as product sales of iPhone smartphones dropped

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