Introduction
Apple Inc. Company is one of the most thriving enterprises manufacturing technological products. The organization designs, manufactures, and sells software and hardware products around the world. Some of the products developed by Apple include iPhone, iPad, Apple smartwatch, computers, and other hardware products. Also, the company provides online services and applications used by individuals in day-to-day activities. Of course, in line with the increased demand for digital goods, Apple has several online applications where people buy its products including the iTunes and iBook. Furthermore, the company uses business strategies that promote its brand and focus on consumers and revenue (Christopher, 2016). Even though other factors contribute to the overall success of Apple Inc., the most significant reason for its success is the proper management of the company’s supply chain.
Apple’s Business Model and Supply Chain Strategy
Economists argue that Apple has the best supply chain globally and is the leader in supply chain management. Although many details regarding the company’s supply chain are secretive, the available information suggests that Apple uses a simple strategy to succeed (Marshall et al., 2016). Consequently, the organization outsources materials for production from different countries, mainly Asia, China, and the USA. Since many suppliers increase the price of resources as demand increases, Apple invites different suppliers to present their materials and costs. As a result, competition is increased, which forces suppliers to lower their price, hence acquiring materials at a lower price. Also, the competition gives the management an opportunity to sample supplies and purchase high-quality materials. Similarly, the assembly of its products takes place in China leading to reduced production cost. After production, the company supplies its products directly to retailers and final consumers using shipment companies such as UPS and FedEx. Thus, the chain remains short, and consumers receive their orders within a short time. In addition, Apple supplies its products around the world in stores where any individual can access and purchase.
Competitor’s Strategies
Although Apple has a grand supply chain strategy, there are competitors in the industry. Nevertheless, Apple’s strategy offers it a competitive advantage over the competitors. Outsourcing materials from various countries assist in the mitigation of late delivery and disruptions in the supply chain. Apple’s biggest competitor is Samsung. Previously, Samsung assembled Apple’s components for new products. As a result, the supply chain of Samsung grew in efficiency. Due to the skilled employees, assembling processes, and equipped assembly plants attained during their partnership with Apple, Samsung developed an efficient supply chain strategy. However, while Apple outsources most of its services and components from other suppliers, Samsung assembles its products in their in-house plants. The supply strategy used by Samsung to source for materials is also different from that of Apple because they use a single supplier while Apple sources one element from multiple suppliers (Marshall et al., 2016). While there are differences in the supply chain management strategies of the two companies, there are also some similarities. Taking into account that Samsung uses a distribution channel that moves its products to retailers, which is similar to Apple’s distribution model.
Global Challenges in Apple’s Supply Chain
Subsequently, Apple’s success in supply chain management does not come without challenges. Notably, the global economy and political atmosphere could affect outsourcing and distribution of Apple products. In situations where there is inflation or recession, purchasing materials may become expensive, thus increasing production cost and reducing the profit margins. Also, if there is political instability in countries where the company buys gadget components or distributes end products, then the supply chain is affected. Another challenge faced by Apple is the dependence of third-party partners for logistical services (Christopher, 2016). In case, an outsourcing partner fails to deliver, the production or distribution of products is delayed, hence, affecting revenue. Since Apple does not restrict its retailers to distributing its products, competition is fierce across the globe as these re-sellers distribute similar products from other companies.
Importance of Aggregate Planning in the Supply Chain
Moreover, Apple’s aggregate planning is significant to the supply chain of the company. Aggregate planning involves laying down operation plans for a medium-range period of 6-18 months. The firm makes plans about the raw material acquisition, labor, and working capital. Such plans are significant in the supply chain of Apple Inc. as it enables it to satisfy its customers’ amusement by meeting demand and decreasing wait time. Besides, aggregate planning enables the company to meet set objectives by creating a satisfied and happy workforce (Wisner, 2016). As a result, there is the maintenance of steady workforce and production. Due to the uninterrupted supply chain, the suppliers and distribution partners are assured of constant revenue, thus enabling them to meet their set goals. Another significance of aggregate planning to Apple’s supply chain is the reduction of investments used in inventory storage. Hence, aggregate planning is the most crucial stage in the supply chain management of the organization and its associates.
Furthermore, demand forecasting plays a significant role in the company’s supply chain. Apple’s demand forecasting strategy enables them to decrease or increase production in anticipation of customer demand (Marshall et al., 2016). Since Apple has a loyal customer base, it is possible for them to use level forecasting strategy that produces items that match anticipated demand. Even though this policy may result in increased inventory and backlogs, it sustains a steady workforce.
Transportation and Warehousing Network
Transportation is a significant part of the Apple supply chain, and its management is undertaken with various objectives that must be achieved. One of the primary goals is to assemble resources in the assembling plant in China before the set deadline expires. Since the components for developing new products are sourced all over, the transportation department is responsible for ensuring that those materials get to the company factory in good time. The other objective is to meet customers’ expectations of fast delivery. When the launch of a new product is done, customers want to test their new gadgets, and a delay in the delivery may cause them to lose their loyalty to the brand. Thus, Apple strives to supply their products in their retail stores across the world before the launch date.
Consequently, the movement of products from the factory in China to customers in their local retail stores is done swiftly to avoid delay. The company invests in various modes of transport and security detail to ensure customer receive their orders when they make them. Hence, Apple uses aircrafts and trucks to transport its products to stores. The journey begins in China where the company charters planes to ship its cargo to different parts of the world. After going through custom, trucks are used to move the products to their warehouses from where supply to retail shops and direct delivery to customers is done. The transportation system of Apple is highly effective because it allows them to make deliveries without hitches. Therefore, their customers receive products when they expect them without delay.
Although Apple Inc. has many warehouses and partner companies in various places, the headquarters of the company is in Memphis, USA. Nevertheless, the assembling plant where all products are put together is in China. However, there are other facilities not involved in production such as warehouses and call centers which the central warehouse is located in Elk Grove, California. The company contracts third-party companies such as UPS and FedEx for packaging and distribution assistance. Due to the forecasting done by Apple before manufacturing new products, it does not have many in-house warehouses because inventory is not stored for long.
The main advantage of Apple’s factory in China is the cheap production cost due to cheap labor. Also, many raw materials are obtained in Asian countries; hence the plant is close to sources which enhance production since there are no delays associated with transportation of raw materials. Another advantage of the location of Apple warehouses in the USA is the ability to supply products around the world without delays related to customs. However, the locations of the company’s warehouse and factory locations have disadvantages because it incurs excessive costs related to transportation (Ivanov et al., 2017). In fact, the company must hire other companies for logistics services, which increases production and transportation costs.
Economic and political factors in China and the USA could positively or negatively affect Apple’s warehousing and transportation network. Political instability or elections in any country where Apple has operations could hinder transportation of its products. However, a stable political environment is significant to the supply chain of Apple because transportation costs are lowered, and customs simplified enabling fast delivery. In addition, a stable economic climate enhances transportation and management of warehouses. Lack of inflation and other negative economic factors reduces the cost of shipping and rent and enables the company to make prompt deliveries. On the other hand, inflation and increased fuel prices make transportation expensive.
The management of transportation and warehouses is done using technology which gives the company a competitive advantage and drives efficiency. As a result of many logistics and transportation issues involved in the supply chain, employees use devices such as mobile phones to enable easy management and fast-tracking. For instance, the mobile Transportation Management System is used to track products on transit from the warehouse to retail stores. Indeed, logistics managers. Dispatchers, truck drivers, and other personnel in the warehouses use this technology to follow up on products in the transportation process. Scanners are also used to scan products in the trucks to eliminate the possibility of delivery failures. Technology is also used to predict traffic and weather which enables the warehouse and transport managers to predict which route to use.
Recommendations
There is still much room for improvement in the management of Apple’s transportation and warehousing. Thus, automation of operations would lead to the efficient running of the warehouses and Apple stores across the globe. Therefore, Apple should synchronize data between the warehouses, stores, and customers. Additionally, the use of optimization theory to determine where the best location for warehouses and servers is will enable for easy management of transportation of products from the storage to stores and customers. An increase in warehouses would shorten the distance covered by vehicles to supply products to suppliers, hence reducing cost.
Information Technology and Management systems
As the world moves from an industrial society to a more digital community, the significance of information systems is unprecedented. Organizations such as Apple which operates on a multinational basis without geographical borders require efficient communication channels. The information system of Apple Inc. helps the managers to manage the organization’s global facilities and operations. The management of the company’s internal communication showcases why it is the leader in innovation. To attain a competitive advantage, Apple uses a virtualized IT system. The company uses intranets which employees use to access any information they require form their computers. Also, the firm uses extranet that is used to communicate with suppliers and other partners. As such, the company creates a value chain that is unlimited which enables them to virtual link with their suppliers and retail stores. As a result of their IT system, the company can collect information from customers through their retail stores, which enables them to enhance service delivery. Also, the company uses cloud computing system, Software as a Service (SaaS) to cut down on the number of hardware required and only pay for the services they use.
The IT system and its management used by Apple differentiate it from other companies such as Samsung. The IT system used is structured according to the needs of the organization. Moreover, the system enables the company to collect vast information from different levels of their supply chain. As such, finding information is unchallenged since it can be accessed with the click of a mouse. Furthermore, the company encourages innovation among employees and invites them to contribute their thoughts on how to improve the company’s operations. Notably, this IT management system gives Apple a competitive advantage because its competitors do not have similar efficient communication systems. Nevertheless, the system can be improved by creating a virtual community where employees and suppliers interact. As a result, new technologies will be developed, which will advance the company’s position as an innovation leader. Also, the company should consider enhancing the security of the IT systems to ensure that individuals only access the information on their level. Similarly, it will close any loopholes that hackers may use to obtain sensitive information.
The success of Apple Inc.’s supply chain operations depends on the relationships they build with suppliers. Communication with suppliers, supplier performance evaluation and involvement of suppliers in new product development assist Apple in the processes of supply and distribution. The process involves outsourcing of raw materials and supplying finished products to retailers. Information Management System is significant in these relationships as it strengthens them and champions efficiency. IMS assists in the development and maintenance of high and positive relationships in Apple’s supply chain. The smooth and fast communication channels provided by the existing information system facilitates the connection between customers, retailers, and employees. As a result, exchange of information, requests for data, and communication of strategic plans is simplified. Since all supply chain functions must operate together, IMS closes the information loop and enables sourcing, procurement, and distribution departments to engage and solve problems jointly. In addition, the IT system provides for open communication between the company and third party logistics providers. Such communication provides partners with information regarding upcoming events, new products, strategy changes, and enable them to adjust accordingly.
Subsequently, the management of inventory is vital in the supply chain of Apple as it fosters customer satisfaction. The company uses IMS to monitor the availability of inventory to ascertain the fulfillment of orders. In fact, Apple uses IMS to analyze sales patterns and determine popular products which enable them to stock and fulfill any customer order readily. Also, IT systems help Apple to learn about the products that move fast on special occasions and have them stocked in limited amount to cut down on inventory costs (Laudon & Laudon, 2016). The fast fulfillment of orders increases customer satisfaction. What’s more, IMS assists the company to monitor the availability of particular products to facilitate returns. When customers return default products that still have a warranty, it is swapped with another quickly which keeps customers happy and satisfied.
The management of information is crucial in Apple’s supply chain, and its priority is equivalent to the movement and flow of products. The management of information enables Apple to optimize workflow, production, and supply. Information management assists in the tracking of processes in warehouses and the factory (Peppard & Ward, 2016). Communication promotes the supply of enough raw materials from suppliers because when resources are required, managers use available information about suppliers to purchase from the right source. Also, the transportation of products to customers depends on data collected to determine the level of demand. Automated data collection and management assists the company to track orders, which makes it possible to fill the right orders made by customers. Hence, just as the transportation of products is essential, so is the management of information because it facilitates the smooth running of operations.
Conclusion
In summary, Apple Inc. thrives on its ability to do aggregate planning that enables it to sustain the most successful supply chain in the business world. The company’s strategy assists in the reduction of overhead costs and increases revenue (Wisner, 2016). Also, the distribution supply chain approaches used by Apple reduces intermediaries and wait time for customers. Thus, the company has a constant supply chain of materials and distribution of its finished products. In addition, the transportation management of Apple Inc. promotes the use of technology, which facilitates the timely supply of products to customers and retail stores. Finally, information technology makes it possible for the company to collect data, and remain in constant communication with suppliers, partners, and retailers.