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Post-Graduate Programme in Management

(PGPM: 2013-2015)
Term: IV (Jun- Sep, 2014)
Management Development Institute - Gurgaon
Supply Chain Management
Case 07
Apple Inc.
ID Name
1 13P017 Buddhadeb Chakraborty
2 13P041 Samarth Kagdiyal
3 13P048 ShubhamGajendragadkar
4 13P062 Amber Dubey
5 13P070 Deepak Joshi
6 13P071 Deepak Murali
Presentation Date: 29
th
July 2014
Innovation
Design
Profit margins > 40%
Supply Chain?
Example
New tooling equipment required
to manufacture the unibody
aluminiummacbook
Control over every piece of supply chain
from Product Design to Retail Stores
Huge volumes enable big discounts from suppliers
Apple designers work with suppliers to come up
with new solutions to problems
Supply Chain Model of Apple Inc.
US US
China China
Asian
countries
Asian
countries
Europe Europe
Sourcing
US US
China China
Asian
countries
Asian
countries
Europe Europe
Assembly
in China
Assembly
in China
Sourcing
Manufacturing
US US
China China
Asian
countries
Asian
countries
Europe Europe
Assembly
in China
Assembly
in China
Intermediate
warehouses via
UPS/Fedex
Intermediate
warehouses via
UPS/Fedex
Warehouse
facility in
California
Warehouse
facility in
California
Online Store Online Store
Retail Store Retail Store
Direct Sales Direct Sales
Wholesalers,
Retailers,
Carriers
Wholesalers,
Retailers,
Carriers
Sourcing
Manufacturing Warehousing Distribution
With global sales of $16 billion in merchandise in 2011, Apple
leads the US retail market in sales per unit area
As of June 2014, Apple has 425 retail stores in 16 countries
and an online store available in 43 countries
US US
China China
Asian
countries
Asian
countries
Europe Europe
Assembly
in China
Assembly
in China
Intermediate
warehouses via
UPS/Fedex
Intermediate
warehouses via
UPS/Fedex
Warehouse
facility in
California
Warehouse
facility in
California
Online Store Online Store
Warranty
return,
Trade In,
Recycle/Reuse
Warranty
return,
Trade In,
Recycle/Reuse
Retail Store Retail Store
Direct Sales Direct Sales
Wholesalers,
Retailers,
Carriers
Wholesalers,
Retailers,
Carriers
Sourcing
Manufacturing Warehousing Distribution Return
Cross Functional Drivers for
Apples Supply Chain structure
Competitive Strategy
Supply Chain Strategy
Efficiency Efficiency
Responsiveness Responsiveness
Facilities Inventory Transportation Information Sourcing Pricing
Cross functional drivers
Main assembly plant in China = Foxconn
Central Warehouse at California
Facilities
(Efficient)
High Cycle Inventory turnover
No of SKU is 26000 which is low and
reduces the supply chain complexity
Inventory
(Efficient)
Fastest and most expensive mode of
transport i.e. Air
Realized economic benefits by transporting
directly from Chinese factories to
consumers doors (for online orders)
Transportation
(Responsive)
Electronic monitors ensure prelaunch secrecy
and discourage leaks
Tracking of demand by each retail store, by the
hour to adjust production forecasts
Information
(Pull)
Supplier evaluation & selection process
Detailed accounting of the suppliers quote
Key suppliers to keep 2 weeks of inventory
within a mile of assembly plants in Asia
Sourcing
High price and skimming strategy
Mass volume and supply chain efficiency
allowed them to sell iPads at competitive
prices while still earning a 25% margin
Pricing
Apples Supply Chain Risks
Short PLC in Techology industry
Inventories can become obsolete or exceed the anticipated demand
Custom components
Some components are not common to the rest of the players
Limited sources
Components sourced from single or limited resources
Outsourcing partners
Depends on logisitical services by outsourcing partners
Supplier Code of Conduct
Relies on partners to adhere to SCC
Complexity of Apples Supply Chain
Apple vs Amazon
Inventory Turnover
COGS /Average Inventory
Apple has no manufacturing
facility
Amazon has to keep more
stocks
Amazon
scores
10
Apple
scores
59
Number of Key Suppliers
Apple has about 160 key vendors
Amazon has about 3 million
Apple is able to work closely with suppliers
Helps in designing new processes
Brings costs down
Number of Warehouse facilities
High Transportation Cost in US
Apple has 1 central warehouse in California
Activities can be easily automated
Amazon has around 30 warehouses in US
Much more complex to manage
Product Life Cycle
Amazon has many seasonal
products
Demand forecast of seasonal,
short life cycle products is
difficult
Amazons supply chain is more
complicated
Apples supply chain operations are a
success because of excellent SRM
Early supplier involvement in new product
development
Close communication
Supplier performance evaluation
Designed by Apple in California. Assembled in China.