Apple Inc. He world’s largest company, which had introduces a serious of consumer products during the past years. Apple managed a global supply chain with creative development in the United Stated. The outsourced manufacturing of Apple Inc. Is in Asia and components sourced from suppliers around the world. With its development, the stock of Apple was increasing continually. This situation was clear to Jessica that Apple’s product range would get more complex in the next few years. Therefore, she wanted to take a look at the company’s supply chain (Mark, 2014).
The content of this paper includes the description of Apple Inc. The new product development, how the company manages the global supply chain and its supply chain security. This paper will focus the analysis on the compliance in supply chain management and some issues about security of Apply Inc. Supply Chain Planning —New Product Development Company reviewable is a brand that we are familiar with. It is an American multinational corporation that designs and manufactures consumer electronics and computer software products. The company’s best-known hardware products include computers, the pod and the phone.
Apple software includes the Mac SO X operating system and the tunes media browser. Besides, Apple provides customers who are professional musician that a suite of professional audio and a suite of audio tools (Mark, 2014). According to the news of Apple, for the full-year results, Apple generated a massive $171 billion in revenue and $37 billion in profit. Why Apple has been widely successful? Firstly, its distinctive advertising campaigns. Apple’s advertising always full of creative ideas and inspirational. Secondly, its philosophy of comprehensive aesthetic gives us a deep impression.
Furthermore, Apple has established a unique reputation in the consumer electronics industry (Mark, 2014). New Product Developmentally chain planning at Apple is the classic example of new product development. It’s the integration of R;D, Marketing and various functions under supply chain management. As we know, the high technology products always have a short product development cycle. Apple’s phone lifestyle was closer to one year. The time period between phone 4, phone’s, phone and phone’s launched almost one year. So the innovation and creativity play a significant role in Apple Inc.
The researchers in Apple should come up the new ideas continually to catch up customers’ steps. From the case, the new product development department in Apple coordinated a wide variety of stakeholders, including internal groups such as hardware, software and production. Apple preferred the entire supply chain internally to control instead of outsourcing its manufacturing to third- party supplier (Mark, 2014). The distance between designers and suppliers in Apple is closely. Unlike other electronics manufacturers, they might use the outsourcing for the entire production, management and their supply chain to a third-party service provider.
On the contrast, the designers in Apple even spent months living out of tool rooms in order to be close to suppliers and manufacturers. They intended to help to adjust the process of industrial. During this process, when the designers came up the new ideas and need to change, the manufacturers can get the information at the same time, and then complete the final products. The creative designing department of Apple is in California, where Apple developed the new technologies. At meantime, Apple put forward the idea that makes full use of acquired technology firms, whose products could be used in Apple’s development of products and services.
Besides of that, Apple conducted improve the market research ND product testing to refine the upgrade being considered. Apple put the cost data together includes a list of parts and names of suppliers. In this condition, the potential quality defects were identified and decrease the risk (Mark, 2014). Apple ‘s technology competitors typically have separate R;D departments and separate profit and loss accountability for each product segment. For this management, the manager cannot focus on one thing. In contrast, Apple was highly integrated. It has the centralized R;D and accounting for the entire company.
The centralized organization makes the entire company become a whole part. This can be easy to control and managers could find and solve the problems timely. If one department has requirements, another organization will follow up new methods. It was an effective strategy for Apple Inc. After the supply chain planning, Apple Inc. Needs to manage its supply chain and improve its security supply chain to solve some risk issues. Apply Inc. Global Supply Chain Management and Security Supply Chain According to the textbook, “A supply chain is Just that.
It is a chain of interconnected links that facilitates the movement of supplies, or in other words, cargo, goods, material, products, etc. ” (Airway, 2010). An effective supply chain management is an important step that needs to be taken by companies to increase the profits and avoid making mistakes. Apply Inc. Is the technology company belongs to the U. S. However, the supply chain of Apple is global. Apple gathers the research and development base in the United States. Besides, it has 156 suppliers, assembly operations in China and retail stores in its supply chain.
During the management, there are many security issues will occur. The following content will introduce some key parts of Apple’s global supply chain, including procurement, manufacturing, logistics and detail experience to explain how Apple Inc. Solves security issues combine the supply chain management. Prestidigitation’s to the case, the key components of Apple products contained were often sourced from single and stable manufacturers. The reason is that the different mobile phone firms often used the same components. Due to the huge volume of products, the materials form popular suppliers were out of stock sometimes.
To counteract this potential risk of supply chain issue, Apple was required to make sure the steady supply of key parts by procuring parts from suppliers’ production capacity in advance of need. Furthermore, in order to achieve cost targets and supply assurance, Apple had a program that allowed it to buy capital equipment for suppliers (Mark, 2014). It is an effective method to make double insurance for Apple and its suppliers. Apple purchases the sourcing of materials and normal components are from various suppliers in different countries.
The main countries are United States, China, Other Asian countries and Europe. All main components for the Apple products are manufacture in the United States and exported to other countries for assemble final products. The United States is not only he world’s largest electronics consumer base country, but also the main market of Apple products. It has too many opportunity and customer demand. Europe is the best development mainland in the world. This country has advanced transportation such as railway and waterway. It is very convenient for Apple to purchase material and components.
Apple want to make sure of its security supply chain. So Apple considered the country that has the high technology company—Japan. The components from Japan always have high quality. It makes sure the quality of material. Overtime, Apple established a formalized list of expectations for suppliers ND developed relationships with suppliers. It helps Apple expand the scale operations to increasing the customer demand for existing and new products. Moreover, Apple makes full use of its deep pockets to place high volume pre-orders with suppliers in order to ensure the profitable production capacity.
This strategy can prevent competitors from get the same manufacturing resources. The sourcing is so important for the supply chain, so Apple Inc. Make sure the sourcing is never shortage. The author’s analysis report shows that the motivation behind the addition of a new supplier is to diversify supply chain risks. The advantage of additional new supplier will provide a greater flexibility to Apple. In addition, Apple can make faster react to supply chain disruptions. However, there might be a potential security issue will be appeared.
The new supplier maybe has safe and ethical manufacturing practices. For example, the new supplier provides the materials that have toxic element or it maybe damage the environment. Apple needs to be in a position to sever ties with any supplier that does not comply with its Code of Conduct. If the new supplier does not obey the ethical rules, it may lead to some potential problems, such s pose a threat to the quality of sourcing. Therefore, a good procurement is a base of supply chain management. ManufacturingAccording to the textbook, “Many clients have or own their own plants, mills, etc. And ship to their own places of manufacture or assembly, or ship to their customers who utilize that material” (Airway, 2010). After Apple Inc. Purchases raw materials from various sources then get them shipped to an assembling plant in China. Foxing is an original design manufacture for clients such as Apple, Sony and Black Berry. Foxhound’s headquarter is in Taiwan, it was the rod’s largest electronics manufacture with too many employees in 2012. In addition, Foxing has factories in Asia, Europe, Mexico and South America (Mark, 2014). Why Apple Inc. Has sent the components and materials assembled in China?
The common reason is China has cheaper labor cost and the environment relax. Besides that, Apple’s executives think the foreign workers’ flexibility; diligence and industrial skills have outpaced the American workers. The labor cost in China is lower than America. Although Apple has put the labors environment and benefit in the first place, this many occurred a security problem about the materials during the assembly process. Labor is an important element during the supply chain security. They provide the service and benefit for company. It is the responsibility for company to treat them well.
The personal safety concerns the security issues of supply chain. There was news before 2009 that it claims that Apple used the materials that include toxic chemicals from its supply chain. Both poisonous are still in use at Chinese factories. According the case, almost 137 workers at an Apple supplier in China were exposed to the toxic chemicals. When they assembled the product, they inhaled the toxic substance into their lung. As time passes, after two years later, some workers felt their health getting worse and worse. They wanted Apple to help pay for treatment.
When this situation happened, the process of manufacturing will be delay and the company’s reputation will be ruined. In addition, the company will lose much money to compensation. To solve this problem, Apple bans two chemicals from product assembly and concluded the more safety alternatives will be excised. Moreover, the two chemicals also ban use as cleaning agents in the final assembly recess. Apple Inc. Pays more attention to recover this security issues. In June 2014, Green America with some organizations wrote a letter to Apple, and let Apple know the chemicals must be more transparent at its manufactures.
Furthermore, the groups also asked Apple to create a fund to treat factory workers who have injured for making Apple products. There is another event that Apple should pay attention. According to Apple’s supplier responsibility progress report, the standard labor policy of company states that workers maximum working time is 60 hours per week and to get at least one day off per week. And yet, more than 50 percent of their workers of its suppliers exceeded these low limits. The employees have too much pressure when they work.
In fact, working conditions at Foxing, Apple’s partner for final assembly and some core components, have been bad enough that Apple has gotten a bit of reports of accidents, suicides, and labor strife (Mark, 2014). This condition was too bad for one Technology Company. Apple has been working to improve labor conditions throughout its supply chain, including improve workers’ salary and better oversight over the factory conditions. Apple must focus on this issue and avoid it room happening again. Apple’s Green Supply Changing the supply chain management, a significant issue cannot be ignored, which is environment protection.
Due to Apple’s manufacturing factories usually in China, where the labor cost are low and environment standards are lax. So Apple’s Supplier Code of requires that during the manufacturing processes, they should put the environmentally responsible in the first place. There is question, how does Apple really know that contract manufacturers and their suppliers meet such requirements? Apple Inc. Really adopted measures to let them meet these requirements. Apple says it audits all of its suppliers, and that this information is made public on its Web site. Then summarizes those auditing efforts to its company reports.
Here is an example from the case, Apple representatives physically inspect manufacturing facilities, talk with senior management, and even conduct confidential interviews with “randomly selected employees from the line” (Mark, 2014). As mentioned before, Apple used the environmentally sourcing instead of sourcing with toxic chemicals. That was one of the effective methods to recover this issue. This measure help Apple earned more petition and increase responsibility to employees. Logistics logistics is an integral part of supply chain for every company, especially the technology company.
Logistics includes the transportation, storage and inventory. For the transportation, air appropriate for lighter, smaller, and higher priority items. It is the fastest mode of transportation. On the contrast, water transportation is extremely slow and let the products suffer damage easily. Most of technology products have high value and cost. In addition, the customer demand increase rapidly when the new product launched, especially the holidays. Therefore, in order to satisfy customers’ demand at first time, Apple orders products by air instead of sea.
This is because shipping products by ship takes a lot compared to airfreight. Shipping by air has another advantages that it is safer than water. When the package was broken and leaking the seawater, the products will be damaged totally. In this particular case, Apple will suffer great losses. If customers have ordered the product online, Apple need to give them an account why the deliver time has been delayed. So air transportation is the best choice. In addition, Apple had a reverse logistics system, including the management of warranty claims, trade-ins and Apple’s recycle and reuse program.
The reverse logistics system contributed to Apple’s success. Not only saving the cost, but also improving the customer service experience. Traditionally, when customers intend to return a product, they should have to bring the receipt back to Apple store. The employees would take the item and issue a refund. Then hold the defective item until delivered back to the manufacturer. In order to make sure the purchase details, Apple allowed customers to enter data about the defect on the Apple website and he each product’s serial number.
After that, Apple would send email to customers within half a day to let them know if the product sill under warranty and the information about return. After these steps complete, the box with addressed and stamped would send to customers by express parcel service. Of course, the shipping label and receipt for the return were in the box. Apple would ask the UPS, Feeder or DEL to pick up the package. Through this reverse logistics system, Apple has improved the customer satisfaction and eliminated the likelihood of customer error when processing a return (Mark, 2014). The storage and inventory management are key elements to Apple’s success.
The storage for Apple is spacious and safer cause Apple products have high value that need security measures to protect. In addition, the storage of Apple has monitoring system. The manager can control the inventory through the camera. Apple has much storage distribute in different countries and cities. The inventory is another essential parts. If asked, what has made Apple an iconic brand, the answers would be its innovations and sleek design. Almost everyone would forget another important factor that has helped in catapulting Apple eight to the top, which is its properly managed inventory.
According to an article, Apple averages Just 5. 3 days worth of inventory on hand at any given time, which means that every five days, Apple needs to replenish its inventory to prevent out of stock. For Apple Inc. , why is it so important to keep as little inventory on hand as possible? The reason is that company needs spent too much money to store products in their warehouses everyday. The company need budget for inventory. In addition, with the technology always improving, high -tech manufactures can’t afford to keep o many products in stock.
That because if an announcement from a competitor or a new innovation will change everything suddenly, the company have no time to deal with the inventory, so the value of their products will be decreased and the company will under much pressure. Therefore, remaining flexible is so important for companies (Clara, 2014). As we know, Apple has plenty of customers and need huge numbers of products, however, instead of keep too much inventory, Apple intend to short its inventory. Apple realized that control over their inventory is necessary. It is also the secret to Apple’s success.
They’ve discovered the best way to control costs and meet their customers’ needs that is to find the right balance of inventory in locations across the country and the world. After realized this situation, Apple build many locations to balance the inventory. Thus, Apple increased the inventory turnover by decreasing average inventory. If Apple keep more stocks, these are more likely to be obsolete or damaged. In addition, due to Apple’s product life cycle is longer than seasonal items, so that Apple is not easily affected by seasonal factors.
After the inventory management, the distribution and customer service also important for Apple supply chain management issues. We know that Apple relied on intermediate warehouses at UPS and Feeder and had its own warehouses in California. Apple had to make sure it has many sales outlets, includes online stores, retail stores, direct sales force, wholesalers and retail network. They need to manage the product stock according to the demand forecast (Mark, 2014). Forecasting is necessary tool to Apple. The forecasting method can help Apple keep inventory balance in order to reduce risk of out of stock or excess inventory.
For the customer service, the company had a reverse logistics system as well. It includes encompassing the management of warranty claims, trade-ins and Apple’s recycle and reuse program. Managing reverse logistics effectively contributed to Apple’s success, both on a cost level and on a customer service experience level (Mark, 2014). We are familiar with Apple customer service. It has 30 warranty that if the products has some problems, customer need to bring the receipt to Apple store and exchange new one. Besides, after Apple’s new product launched, customers can add a little money o trade-ins. That is a good deal for Apple fans.
Through its reverse logistics, the customer service system become integral and rapidly. Apple has improved customer satisfaction, and lowered the number of calls to its technical support services. In addition, it has eliminated the likelihood of customer error when processing a return. For example, using an incorrect address. Apple focuses on every part of its logistics system. It was monitoring “every handcuff point -? loading dock, airport, truck depot and distribution center -? to make sure each unit was accounted for (Mark, 2014). Apple has many employees in the retail store in order to make sure every customer can be serviced.
According to many former employees, executives at suppliers, and management experts familiar with the company’s operations, Apple has built a closed ecosystem where it exerts control on nearly every piece of the supply chain, from design to retail store. Above all, Apple has considered the security issue and control every part of its supply chain. Through this management, Apple ensured that every part would avoid make mistakes during supply chain process, including transportation, inventory and customer service. Retail Experience”Apple has about 424 retail stores in 16 countries around the world.
Additionally Apple stores was available in 39 countries” (Mark, 2014). The company’s retail stores were typically located at high-traffic locations in quality shopping malls. One of the Apple’s goals is make sure a high-quality buying experience and attract new customers. The stores were designed to simplify and enhance the explanation and marketing of the company’s products and related solutions. In the Apple store, the employees have rich experience and knowledgeable personnel who provided product advice, service ND use other accessories to make presentation to explain or answer customers’ question (Mark, 2014).
Every time I go to the Apple store, I always get intimacy from its employees even I return or exchange products. There is another strategy for Apple to forecast its production and inventory on a daily basis. Apple monitored product sales by store by the hour and it relied on this information to complete this task. Apple Inc. Has a wonderful supply chain management to keep away from the risk. Information Electrification leakage also plays a significant role in supply chain security.
When the information of one company is leaking, it will lead to risk issues, such as customer demand decrease; competitor will take place your position and occupy the market. Although Apple’s supply chain has tight control, the information leaking also happened to Apple Inc. Apple adopted many measures to prevent information leaking. What is different about Apple’s launch planning is the extreme secrecy attached it. To ensure the secrecy was maintained throughout the assembly process, Apple places electronic monitors in some boxes of components to track them room Apple’s headquarters in Cupertino (Mark, 2014).