Company: Apple Inc
Industry: Technology/Computer Hardware & Software
CEO: Tim Cook
Overview of Apple Inc.
Apple Inc., formerly Apple Computer, Inc. was founded by Steve Jobs, Steve Wozniak and Ronald Wayne on April 1, 1976. By the summer of 1976 Ronald Wayne had left the company but the two Steve’s persevered and launched the Apple 1 Computer. This was the first of many trend setting products to be developed and released by Apple over it’s now near 40 year history.
While under the leadership of John Sculley, Jobs and Wozniak left Apple in 1985. Steve Jobs returned to his roots in 1997 and eventually became CEO, taking control of the company and bringing Apple back from near bankruptcy to profitability by 1998. Under the legendary leadership of the late Steve Jobs, the Apple brand was successfully re-established, and is arguably the most innovative company in the world today with a loyal customer base devoted to the brand.
Tim Cook, joined Apple in 1998 just after Steve Jobs re-entered the company, and helped transform Apple’s messy operations into a global supply chain success. He become Chief Operations Officer in 2005 and was handed picked by Jobs to take over as CEO in 2011. Cook is a world-renowned supply chain expert who is credited with streamlining Apple’s supply chain, helping create the most powerful supply chain in the world.
Today Apple Inc. is a world leader in innovation, product design and development, branding, marketing and software ecosystems. Its products and services include: iPhone, iPad, iPod, Mac, Apple TV, Apple Watch, a portfolio of software applications, operating systems, iCloud, accessories, service and support offerings. They sell Apple products through their retail stores, online stores, direct sales force, third-party cellular network carriers, wholesalers, and retailers. They also sell digital content and apps through the iTunes Store, iBooks Store, and Mac App Store.
Apple Inc. has evolved over the years, from its humble beginnings of products being assembled in Steve Jobs garage to the “World’s Most Valuable Brand“, worth $741.8 billion today. Last year alone Apple reached 170.9 billion in revenues under Cook’s leadership. Much of Apple’s recent success is attributed to Cook streamlining its supply chain by outsourcing manufacturing and helping the company to reduce inventory levels.
A Glimpse into Apple’s Ever Evolving Supply Chain
When it comes to Apple’s supply chain management (SCM) practices, there are conflicting views on their success but many people believe that its supply chain model, extraordinary inventory control and sophisticated software systems are the secret weapons that keep them on top of the global leader board.
Apple’s Supply Chain has ranked #1 in the world each year from 2010 to 2013 by research firm Gartner. In 2014 Gartner placed Apple in a new masters category for demonstrating sustained leadership in their supply chain and defining the very notion of a “solution” supply chain, blazing new trails with its demand creation capabilities.
Information about Apple’s complete supply chain is secretive, for the most part, and highly complex, but I was able to find a great example from financesonline.com, breaking down the global relationship between Apple, its suppliers and manufacturers and the people whose livelihood depends on the iPhone’s success, to give some perspective.
Simplicity seems to be effective for Apple in more ways than one. From their sleek logo, to their clean product designs, to their slogan “think different”, right down to these simplified supply chain planning and management models.
Supply Chain Planning at Apple Inc – Sourced from supplychain247.com
“Apple purchases components and materials from various suppliers and ships them via air, to save time and money, to the assembling plants in China. From there, products are shipped (via FedEx or UPS) directly to consumers who purchased Apple products from their on-line store.” – Sourced from supplychain247.com
Supply Chain Map of Apple Inc. – Sourced from supplychain247.com
“Other distribution channels (retail stores and distributors), Apple stores products at their central warehouse/call centre in Elk Grove, California and ships products from there. At the end of product’s life, customer can send products back to nearest Apple Stores or dedicated recycling facilities.” – Sourced from supplychain247.com
Key Factors Contributing to the Success of Apple’s Supply Chain
When Tim Cook came onboard he realized Apple’s supply chain was too complex. He made drastic changes over the years to streamline the process, generating huge cost savings and improving service by:
- focusing on making great products using ground breaking innovation
- supplying products that are not seasonal and have a life cycle of more than 12 months
- reducing the number of warehouses to one centralized location in California
- synchronizing data between the central warehouse and its own stores and customers, making operations more efficient and cost-effective
- outsourcing manufacturing and as a result reducing the manufacturing cycle time
- reducing the number of key suppliers involved in manufacturing, shipping and storing
- requesting price reductions and asking suppliers to relocate closer to Apple’s factories
- reducing the number of sku’s to approximately 26,000, to simplify and help develop more accurate demand forecasts
- extraordinary inventory management
“Tim Cook believes that when it comes to technology such as smartphones, tablets and laptops, inventory deprecates very, very quickly, losing 1-2% of value each week – “inventory is fundamentally evil” he says. “You kind of want to manage it like you’re in the dairy business. If it gets past its freshness date, you have a problem.”
“A great amount of Apple’s supply chain success can be attributed to them continuing to design their products in California, while leveraging the lower cost of outsourcing manufacturing to China.” – Original quote from Jonathan Hamilton (IT Consultant)
– Source Econlife
Apple’s Supply Chain Challenges
According to this case study Is Apple Supply Chain Really # 1?, their supply chain is very risky and they have many challenges to overcome, for example:
- Global economy could affect the Company
- Some re-sellers may also distribute products from the competing manufacturers
- Inventories can become obsolete or exceed the anticipated demand
- Some components are currently obtained from the single or limited sources
- Some custom components are not common to the rest of the industries
- Ability to obtain components in sufficient quantities is important
- Supply chain disruption such as the natural and man-made disasters can be serious
- Company depends on logistical services provided by outsourcing partners
- Company also relies on its partners to adhere to supplier code of conduct
Although Apple is recognized as a global leader in supply chain management, the company has received criticism for its suppliers unethical labor practices; including child labor, workers being seriously injured from repetitive motions during long shifts, and stress-related worker suicides.
The Impact of Social Media on Apple’s Supply Chain
There is no evidence suggesting Apple uses social media to streamline its supply chain, however social media has played a role in the evolution of its supply chain.
It’s no surprise that Apple’s supply chain has faced challenges. A blog written in 2012 by former student, Cory Kingsbury, drew my attention to allegations of labour abuses at an Apple supplier factory in China including child labor, serious physical injuries of workers from repetitive motions during long shifts, and stress-related worker suicides.
Apple was called out by one of their fans, using social media to launch a protest on Change.org over the allegations of suppliers violating labour laws. The message spread like wildfire through various social media channels and “In less than 48 hours, the petition grew from a few hundred supporters to more than 140,000, many of whom identified themselves as Apple fans.” – Cory Kingsbury
These allegations caused many to question the strength and ethics of Apple’s supply chain and demanded Apple “think different” and use their power to improve worker conditions.
Apple’s Response to Outcry on Social Media
Apple responded by implementing a Supplier Code of Conduct and pledged to fight worker abuses, committing to the highest standards of social and environmental responsibility and ethical practices.
“Around the globe, Apple employees are united in bringing equality, human rights, and respect for the environment to the deepest layers of our supply chain.” – Jeff Williams, Senior VP of Operations
They also vowed to conduct internal audits to ensure suppliers are compliant, and any violations of the Code could jeopardize their business relationship with Apple, up to and including termination. Apple committed to providing updates and reports on their findings. Here is Apple’s most current report: 2015 Apple Supplier Responsibility Report.
In an effort to make themselves even more transparent and gain back the trust of their customers. Apple being notorious for keeping secrets, also shocked everyone when they unveiled 97% of their overall supply chain, revealing names of 156 of their key suppliers.
This is a great example of how Apple took a negative situation, spread quickly through social media, and used it to strengthen their supply chain further.
While challenges with supply chain responsibility are not unique to Apple, the company’s record profits and tremendous brand value make it an easy and highly visible target. Despite the fact that Apple’s supply chain has faced challenges, they continue to be a global leader in SCM. Key factors attributing to their success include: putting their customers first, streamlining processes to create exceptional inventory management, outsourcing manufacturing, and by continuing to evolve their supply chain to adapt to customer demands.
Submitted By: Kelly Black, SMBP Student, University of Waterloo
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