Supply Chain Management of Apple - Essay Example

Running Head: APPLE SUPPLY CHAIN Apple Supply Chain [The of the will appear here] [The of the will appear here] [The name of the Professor] [Course] INTRODUCTION Supply Chain Management is fast gaining the position as one of the most important aspects of the business in the growing competition and globalization. Particularly, with the increase on globalization, supply chain has taken a new direction as organizations all over the world are seeking to outsource to developing countries where the cost of production is low. Fortune’s Best companies such as Wal-Mart, Porsche, Dell and also Apple have outsourced their supply chain management to Asian countries including China. Apple Inc has able to develop a supply chain management that has been studied by most companies. With the recent earthquake in Japan, Apple is expected to face considerable supply issues but so far Apple has been able to survive the recent challenge. APPLE SUPPLY CHAIN MANAGEMENT Apple supply chain management is unique in the sense that they manufacture the parts of their products in Asian countries, especially China, and assemble and market its product in California. Apple Supply Chain management is successful because of their successful outsourcing and the make-buy decision. ‘Outsourcing is defined as the contracting of one or more of the company’s business processes to an outside service provider to help increase shareholder value, by primarily reducing operating costs and focusing on core competencies’ (Kulkarni and Sharma, 2004). Apple has made great use of the outsourcing alternative by keepings its core competency, that is, its design and user interface within the company while outsourcing the production. In this way, Apple has considerably reduced its operating costs through this process without compromising on its positioning as the best technology. Before proceeding further, we need to understand the typical movement of Apple products from the origin to the end users. Products such as the Apple iPod, iMac, iPhone etc are first designed in the Apple headquarters located in California. Once the team of designers develops the unique look and design for the product, the supply chain team in collaboration with the engineers and designers decides the suppliers for the particular product. Most of Apple’s products are manufactured at Foxxcon, a Taiwanese electronic company. This company is responsible for the products of the parts of iPhone while Apple keeps the original blue print of the product with itself to prevent any copyright issues (Xu, Tjoa and Chaudhry, 2007). Once the products are developed, they are shipped to Apple Inc. headquarters located in California. Thus, California assumes the responsibility of marketing and distributing the product. With the increase in demand of Apple products internationally, the products are distributed almost everywhere in the world including China, which is turning out to be the most developing market for Apple products. Thus, ‘Apple serves as the supply chain coordinator, integrator, and provider of operations best-practices, innovations, and strategies for all its partners’ (Simchi-Levi, 2010) THE MAKE-BUY DECISION For a supply chain to succeed in the best possible manner, the make-buy decision is the primary and most crucial decisions for the supply chain manager. The supply chain manager needs to be aware of the products that the company would be making and the products that the company would buy from other suppliers. This decision is based on the knowledge of the core competencies. Core competencies are those factors where the organization excels at and the key areas where the organization has able to develop a unique selling proposition (Monczka, Handfield,  Guinipero, Patterson and Walters , 2010). . In the case of Apple, the core competency is its design and the user interface it has developed for the consumers. The technology comes in part and parcel of the design while the actual production is secondary. When consumers buy Apple products, they buy it because of its design, user interface and cutting edge technology. Thus, these constitute to be Apple’s core competency. The parts for Apple products are quite similar to those of its competitors including Dell, Hp or even Toshiba. What differs is the user interface that Apple has developed and it gives Apple the edge over competition. By outsourcing on the production, Apple has easily focused on designing the products and on the research and development of its products. In this way, suppliers can benefit from the research and development at Apple to produce one of the leading technologies such as the LCD for iPhone that took a long time for the competitors to copy. SOURCING STRATEGIES AND SUPPLY CHAIN CONFIGURATIONS The sourcing strategies for Apple are based on its own strategy. Apple has been successful in developing a strategy where it has gotten ahead of the competition by developing the latest technology and once the competition catches on to Apple’s latest technology, Apple goes ahead and comes up with another consumer product or an extension of the previous one. Thus, for Apple the technology is the main focus and the suppliers are rendered secondary in the whole picture. The suppliers of Apple are diverse and do not enjoy high bargaining power over Apple. Apple cannot allow its products to be made public as competition is exceedingly high in the technology industry. Thus Apple demands strict security controls over the privacy of its products. Recently, there have been cases of suicide at the factory of Foxxcon which has raised concern about the extent of the power Apple has over its suppliers. Even though the main supplier for Apple is the Taiwanese factory, Foxxcon, Apple has various other suppliers all over Asian countries including China and Hong Kong. These suppliers further decrease the power of the suppliers. But more than one supplier often results in inconsistent qualities and issues of privacy control. However, Apple has been able to control this by demanding high quality and secrecy from its suppliers against the threat of switching suppliers. Also with more than one supplier, Apple has the advantage of making adjustments in its supply chain in case of problems with a certain supplier. For example, with the earthquake that hit Japan, it is expected that supply of products from Japan would decrease to minimum quantities which can then be met through other suppliers. STRATEGIC SUPPLIER SELECTION Selection of suppliers in a supply chain management is also crucial for the success of the organization. The organization needs to be able to choose the suppliers on the basis on cost-effectiveness without compromising on the quality of the products. Since if the quality of the products deteriorates, it would then impact the sale of the products. The suppliers in this case would only be affected indirectly while the organization will have the direct impact of the poor quality. Thus organizations such as Apple Inc. are very particular about the selection of their suppliers. The core of Apple’s suppliers resides in Asian countries. One reason for choosing Asian suppliers, specifically China, is the availability of cheap labor in contrast with high technology and infrastructure of their outsourcing industry. China has also offered Apple of the possibility of one of the biggest markets in Asia as consumers in China flock Apple outlets for the latest Apple product. When choosing suppliers, Apple has also ensured that its products remain elusive and secret until the time they are launched. For this Apple demands the highest secrecy from its suppliers. Apple has also maintained secrecy by choosing more than one suppliers and distributing the production to different suppliers so that not even one supplier has the entire design of the product and thus the product comes out to be the latest in the market. ALIGNING SUPPLY WITH CORPORATE STRATEGY For any supply chain to succeed in the long run, it has to be aligned with the strategy of the organization. This is one reason that Apple has been awarded with the best supply chain by AMR for three successive years (Blanchard, 2010) and hopefully for more years as the supply chain manager completely understands the strategy of Apple Inc. The strategy for Apple Inc. is to focus on not too many products but that these products should be one of the best and latest technologies. As compared to Nokia’s myriad products and their series, Apple has only launched its revolutionary iPhone. Though Apple continuously updates its iPhone, it does so to remain ahead of the competition (Fawcett, Ellram and Ogden, 2007). With competition as fierce as this, Apple has kept to a handful of products but these products represent the best user interface and the best technology. Even as the demand for new Apple products is quite high, Steve Jobs understands that the demand may soon fall as the products have short life-cycles (Simchi-Levi, Kaminsky and Simchi-Levi, 2004).. For this reason, Jobs took the stand to decrease inventory to a minimum, thereby making more room for innovation at Apple. In a few words, Apple’s corporate strategy is to provide consumers with a fresh experience through one of the best designed products. When aligning this strategy with its supply chain, Apple’s supply chain manager has outsourced to mainly China which has the best IT and technology infrastructure. Also the supply chain manager understands that the core competency is kept at Apple which the production of the production is outsourced. In this way, Apple maintains its edge over competition while at the same time outsourcing production to the technology experts (Sehgal, 2011). CONCLUSION Apple continues to enjoy one of the best supply chains in the electronic industry because of its ability to understand their core competency and then later aligning it with their corporate strategy. Apple has successfully taken its make-buy decision by keeping making its core competency, which are design and user interface and buying the technology and manufacturing from Asian countries that have a developing technology infrastructure along with cost efficiency. In this way, Apple outsourcing its production to Asian suppliers and additionally enjoys bargaining power over the suppliers by distributing its suppliers to different Asian countries and enforcing a strict code of conduct over them. Apple has been successful in creating an efficient supply chain that allows it to develop competition differentiation through continuous product improvements (Wisner, Tan and Leong, 2008). References Blanchard, D. (2010) Supply Chain Management Best Practices. New York: John Wiley and Sons Fawcett, S. E., Ellram, L. M. andOgden, J. A. (2008) Supply Chain Management. New Delhi: Pearson Education India, 2008 Hugos, M. H. (2011) Essentials of Supply Chain Management, New Jersey: John Wiley and Sons Kulkarni, S. & Ashok. S. (2004) Supply chain management: creating linkages for faster business turnaround, New Delhi: Tata McGraw-Hill Education, 2004 Monczka, R. M., Handfield, R. B., Guinipero, L. C., Patterson, J. L. & Walters, D. (2010) Purchasing and Supply Chain Management, Ohio: Cengage Learning Sehgal, V. (2011) Supply Chain as Strategic Asset: The Key to Reaching Business Goals. New York: John Wiley and Sons Simchi-Levi, D. (2010) Operations Rules: Delivering Customer Value through Flexible Operations. Massachusetts: MIT Press Simchi-Levi, D., Kaminsky, P. and Simchi-Levi, E. (2004) Managing The Supply Chain: Definitive Guide. New York: Tata McGraw-Hill Education Wisner, J. D., Tan, K. C. and Leong, G. (2008). Principles of Supply Chain Management. Ohio: Cengage Learning, 2008 Xu, L., Tjoa, A. M and Chaudhry, S. S. (2007). Research and Practical Issues of Enterprise Information System. Springer Publications Read More