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CIT & ECOMMERCE

REPORT ON SOURCING STRATEGIES

Submitted to: Prof. Rajneesh Chauhan FORE School of Management, New Delhi

Submitted by: GROUP 7: The Imperials, FMG 22 A Aditya Jain (221012) Bhavnik Mittal (221037) Divya Gandhi (221041) Divya Sharma (221043) Drashti Desai(221044) Jodhbir Singh (221059) FORE School of Management, New Delhi

December 10, 2013

ACKNOWLEDGEMENT
We would like to take this opportunity to express our sincere thanks and gratitude for the help and valuable guidance given by Prof. Rajneesh Chauhan, our faculty for CIT & Ecommerce at Fore School of Management, in completing our project successfully. We would also like to place on record the sincere efforts taken by him in giving all minor details and practical knowledge about the subject. We also wish to thank our batch mates of FMG 22 - A for their invaluable motivation and support.

Group 7: The Imperials FMG 22 - A

TABLE OF CONTENTS

TOPIC INTRODUCTION EXECUTIVE SUMMARY FRITO LAY UNITED COLORS OF BENETTON ZARA MARKS AND SPENCERS WAL-MART APPLE Inc.

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4 5 7 10 13 16 19 22 27 28

COMPARISON REFERENCES

INTRODUCTION
Sourcing strategy is an institutional procurement process that continuously improves and reevaluates the purchasing activities of a company. In a production environment, it is often considered one component of supply chain management. Sourcing techniques are also applied to non-traditional areas such as services or capital. It is focused on the Total Cost of Ownership (TCO) incorporating customer needs, organizational goals, and market conditions. Getting the best product/service at the best value is the main aim. Sourcing strategies are driven by a rigorous and collaborative approach and addresses all levers for savings. The Decisions are based on fact based analysis analysis and market intelligence. It is a continuous process.

Advantages of sourcing strategies: Best practice sharing Cost Saving Increase quality Standardize pricing Improve operational efficiency Access to new suppliers Create partnerships with suppliers

Objectives of sourcing strategies:

Reduction of cost while maintaining or improving quality Improve the value-to-price relationship Examine supplier relationships across the entire organization Leverage entire organizations spend Understand category buying & management process to identify improvement opportunities Develop & implement multiyear contracts with standardized terms and conditions across the organisation Share best practices across the organization

EXECUTIVE SUMMARY
To understand the sourcing strategies in the industry, each member of the group has chosen a company and thoroughly studied a companys sourcing strategies. A company always tries to implement the best possible strategies for a given budget level. Integration of technology to sourcing has made the companies reduce costs at various points and increase revenues to a greater extent. We have chosen three Apparel Merchandising companies, a renowned multi brand Retail Company, a Food and Beverages Company and a Consumer Electronics & Software company who already have some diverse features in sourcing.

Frito-Lay is the division of PepsiCo that manufactures, markets and sells corn chips, potato
chips and other snack foods. The primary snack food brands produced under the Frito-Lay name include Fritos corn chips,Cheetos cheese-flavored snacks, Doritos and Tostitos tortilla chips, Lay's potato chips, Rold Gold pretzels, Ruffles potato chips and Walkers potato crisps.

United Colours of Benetton, Benetton Group S.p.A. is a global fashion brand, based in
Treviso, Italy. The name comes from the Benetton family who founded the company in 1965. Benetton Group is listed in Milan. Benetton has a network of over 6,500 stores in 120 countries.

Zara is a Spanish clothing and accessories retailer based in Arteixo, Galicia, and founded in
1975 by Amancio Ortega and Rosala Mera. It is the flagship chain store of the Inditex group, The world's largest apparel retailer, the fashion group also owns brands such as Massimo Dutti, Pull and Bear, Uterqe, Stradivarius and Bershka.

Marks and Spencer plc is a major British multinational retailer headquartered in

the City of Westminster, London, with 703 stores in the United Kingdom and 361 stores spread across more than 40 countries. It specialises in the selling of clothing and luxury food products. M&S was founded in 1884 by Michael Marks and Thomas Spencer in Leeds.

Wal-Mart is an American multinational retail corporation that runs chains of large discount
department stores and warehouse stores. The company is the world's second largest public corporation, according to the Fortune Global 500 list in 2013, the biggest private employer in the world with over two million employees, and is the largest retailer in the world. Walmart

remains a family-owned business, as the company is controlled by the Walton family, who own over 50 percent of Walmart. It is also one of the world's most valuable companies.

Apple Inc., formerly Apple Computer, Inc., is an American multinational

corporation headquartered in Cupertino, California,[2] that designs, develops, and sells consumer electronics, computer software and personal computers. Its best-known hardware products are the Mac line of computers, the iPod music player, the iPhone smartphone, and the iPad tablet computer. Its consumer software includes the OS X and iOS operating systems, the iTunes media browser, the Safari web browser, and the iLife and iWork creativity and productivity suites.

FRITO LAY

COMPANY PROFILE
Frito-Lay North America is the division of PepsiCo that manufactures, markets and sells corn chips, potato chips and other snack foods. The primary snack food brands produced under the Frito-Lay name include Fritos corn chips, Cheetos cheese-flavored snacks, Doritos and Tostitos tortilla chips, Lay's potato chips, Rold Gold pretzels, Ruffles potato chips and Walkers potato crisps (Europe)each of which generated annual worldwide sales over $1 billion in 2009. Frito-Lay began in the early 1930s as two separate companies, The Frito Company and H.W. Lay & Company. The two merged in 1961 to form Frito-Lay, Inc. Four years later, in 1965, Frito-Lay, Inc. merged with the Pepsi-Cola Company, resulting in the formation of PepsiCo, Inc. Since that time, Frito-Lay has operated as a wholly owned subsidiary of PepsiCo. Through Frito-Lay, PepsiCo is the largest globally distributed snack food company in the world, with sales of its products in 2009 comprising 40 percent of all "savory snacks" sold in the United States and 30 percent of the non-U.S. market. Frito-Lay North America accounts for 31 percent of PepsiCo's annual sales.

COMPETITORS
FritoLay has competition in the snack food and potato chips category. Some of the major competitors of FritoLay are: ITCs Bingo ITCs Hippo Haldirams Chips Haldirams Boletos Haldirams Takatak Nachos

TECHNOLOGY
FritoLay uses the following technology in its production and operations: Uses automated machines to ensure efficient Inventory Management and low costs o Automated machines helps FritoLay to reduce labour costs and time spent on checking inventory and stocking it.

International patent for a method to reduce oil content in chips by a third o FritoLay uses worldclass technology that reduces the oil content in products to give the image of healthy products to its customers.

Built Knowledge Management Portal on corporate intranet o This helps the employees to share information with each other in real-time basis

Uses automated inspection machine to ensure quality o Robotic machines check whether the product is upto quality or not at every stage of production

Uses robotic machines to ensure fast and efficient production o The whole production is automated which ensures that the product is produced in 5 minutes from raw materials to final product.

Uses Java and IBMs DB2 database Technology

SUPPLIER ENVIRONMENT
Encourages Women and Minority owned suppliers Plants located close to farmers fields to reduce cost of transportation Long Term contracts with suppliers to reduce cost Spent over $2.1 Billion with M/WBEs Supplier Diversity Program for economic development of communities

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SOURCING STRATEGY
Frito Lay enters into contracts with farmers and provides seeds, saplings etc. All produce is planned 100-120 days in advance based on forecasting model. Technical team conducts regular supervision of the crops It buys the produce at a predetermined rate, at a predetermined time and according to its specifications This is a win-win for both company and the farmer as it ensures quality and sale of all produce

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UNITED COLORS OF BENETTON

THE GROUP
Benetton Group is one of the best-known fashion companies in the world. Present in 120 countries with a network of over 6,500 stores. It is a responsible group with a watchful eye to the environment, to human dignity, and to a society in transformation.

The Group has a consolidated identity characterized by color, authentic fashion, quality at democratic prices and passion for its work. These values are reflected in the strong, dynamic personality of the Groups brands: United Colors of Benetton,Undercolors of Benetton, Sisley and Playlife.

BUSINESS MODEL
The Group identifies sales locations using a flexible operational approach, applying market development strategies through two different distribution channels: Wholesale and Retail. Wholesale The wholesale channel is based on a network of independent partners, coordinated by independent sales representatives (agents) and a dedicated team of area managers directly employed by Benetton Group. Retail The purpose of the retail distribution channel is to develop a presence in areas of high growth potential not yet covered by partners and to open iconic sales outlets that are attractive to end consumers and serve as a benchmark for the partner network.

LOGISTICS
Benetton Group has direct control of the logistics phase for both own-manufactured and sourced products. It has invested in modelling, organization, and automation of logistics processes in order to completely integrate the entire production cycle, from client orders to packing and delivery.

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Automated Sorting System The state-of-the-art logistics operation at Castrette (Italy) has an innovative, fully automated sorting system, whose propulsion is based on electromagnetic fields. Castrette alone can handle individual orders for over 6,500 Benetton shops worldwide.

Folded and hanging garments are automatically sorted, packed into boxes and sent through a one-kilometre tunnel to the Automated Distribution Centre.

Automated Distribution Centre The Automated Distribution Centre covers an area of 30,000 square metres, with a total capacity of 800,000 boxes, and can handle 120,000 incoming/outgoing boxes daily with a workforce of only 28.

The finished product is sent directly to the Group's over 6,500 stores in 120 countries worldwide.

SOURCING PLATFORM
The sourcing platform is characterised by the flexibility with which it responds to the Group's production needs and by absolute levels of efficiency and effectiveness. Benetton's production system has sites in Italy, Tunisia, the Mediterranean basin, Eastern Europe and Asia, divided into industrialised and commercialised production.

Industrialised Model (~50% of the total) (Italy, Eastern Europe, Tunisia and India). Within the industrialised organisation, the most labour-intensive production phases (tailoring, finishing and ironing) are outsourced to small and medium-sized enterprises (SMEs), directly controlled by our production sites in Italy and abroad. Strategic and operational activities requiring large-scale automation (dying, weaving and quality control) are kept in-house.

Significant investments have been channelled into two areas of intervention in recent years:

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Expansion of production centres in Tunisia and Croatia, with complete production cycles (from raw materials to the finished product). Development of quality control systems to fully meet the strict standards required, in keeping with the characteristics of the commercial offer.

Commercialised Model (~50% of the total) (China, Southeast Asia, India and Turkey). In addition to the industrialised part, the production platform also includes outsourcing of production to China, India, South-East Asia and Turkey. The constant search for new third-party suppliers allows the Group to maximise the benefits and optimise costs, while maintaining a strict control of quality levels, thanks to continuous checks and production coordination through locally based personnel.

PRODUCTION FLEXIBILITY
Benetton's industrial structure is based on a double supply chain, combining efficiency with speed. The aim is to offer high-quality products at accessible prices, fulfilling the expectations of increasingly sophisticated and demanding consumers, while optimising the timing of the offer on the markets.

These key factors have been achieved through implementation of the double supply chain, an industrial organisation combining efficiency with speed through two types of planning.

Sequential planning: a more measured and efficient system of activity, based on a sequential approach aimed at minimising costs and optimising efficiency.

Integrated planning: a more rapid system of activity, with better response times, capable of optimising R&D, product design, production activities and sales, through a response based on parallel activities.

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ZARA
INTRODUCTION TO THE BRAND
Zara is a flagship brand of the Spanish retail group, Inditex group. Inditex is the world's largest fashion group, which owns other fashion brands such as Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, Lefties and Uterqe. It was founded in 1975 by Amancio Ortega, when he decided to expand his factory in Arteixo by opening a store in La Corua. Zara has expanded since and currently operates a total of 1,671 stores in continents such as Europe, America, Africa, Asia and Oceania, of which 333 of them are in Spain.

In The Beginning: Founded by Amancio Ortega in 1975, Zara opened its first store in downtown La Corua, Galicia, Spain. Its first store carried low-priced lookalike products of popular, higher-end fashion brands. The store proved to be a success in the early 1980s, and Ortega began opening more Zara stores throughout Spain.

Global Expansion: It was only in 1988, Zara decided to venture into the international market. This was spurred by Portuguese youths crossing the border into Spain to shop in Zara. Hence, Zara responded by opening its first store in Oporto, Portugal. The expansion strategy proved to be a success. Subsequently, new stores popped up in New York (1989) and Paris (1990), the fashion capitals of the world. Since then, more stores have opened globally to a standing of 1,671 stores. Zara Company has become an icon for Spanish fashion. The corporation went public in 2001.

Financials: The Inditex group currently boasts revenue of 13.79 billion euros (2012), with profits standing strong at 1.932 billion euros (2012).

COMPETITORS
H&M Mango United Colors of Benetton

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GAP

SUPPLY CHAIN FACTS

Zara controls most of the steps on the supply-chain, designing, manufacturing, and distributing its products Zara set up its own factory in la corua in 1980, and upgraded to reverse milk-runtype production and distribution facilities in 1990 If a design doesn't sell well within a week, it is withdrawn from shops, further orders are cancelled and a new design is pursued Internet retailing is followed The product life cycle is short ZARA plans to achieve toxic-free production by 2013

SOURCING STRATEGY
Zaras method of sourcing product is very different from the traditional methods used in the fashion industry because the company controls every part of the supply chain. Instead of using an outsider to design the clothes, the firm uses 300 in-house designers and relies heavily on store manager input. Using information technology the store managers track selling trends real-time through IT systems connected to headquarters. Store managers detect what customers are looking for but do not find in the stores. This collaborative effort between store managers and the company designers results in an industry record: new products are designed and placed in the stores within two weeks. Using e-collaboration tools, from store to corporate design offices in Spain, Zara employees help forecast fashion trends instantly giving Zara a competitive advantage in speed. Speed it not limited to the design of new product. Vast quantities of neutral fabric are stocked at production facilities, which can quickly be dyed or printed to speed up production of better selling colours. While a small amount of fashion basics like tee shirts are ordered from other sources, the vast majority of products are manufactured in Europe at Zara owned facilities. All of the fast-fashion clothing going to Zaras stores passes through its own distribution center in the Northern part of Spain, helping to consolidate shipping. Zara copied JIT methods from Toyota and shipping on the continent takes only 24 hours. Asia and the

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US shipments take 48 hours. While shipping cost are higher using commercial airlines, versus sea transportation, batches are smaller making this type of shipping cost effective. The difference is not only fast, but fresh. Rather than the traditional six seasons each year, the stores change clothing about twice a week. The collections are small and often times sell out creating an air of get it now with shoppers and require few price reductions. Some best selling items are reordered by store staff and replenished quickly. Store managers have a vested stake in the sharing of ideas, since store sales weight heavily into their salaries. However, while there is some localization, the majority 85 percent of product line up is standard from country to country, with about 15 percent varying for local tastes. A sophisticated inventory optimization model developed by faculty, graduates and a student intern from MIT Sloan, supplements the managers intuition. The forecasting model is an information system based on historical data that can calculate a demand estimate for individual stores to maximize sales as a whole. Predictive modelling systems combined with a strong fashion sense helps ZARA remain one of the most sought after brands.

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MARKS & SPENCER

ABOUT MARKS & SPENCER:
Marks and Spencer plc (also known as M&S; colloquially known as Marks and Sparks, Marks's or, simply, Marks) is a major British multinational retailer headquartered in the City of Westminster, London, with 703 stores in the United Kingdom and 361 stores spread across more than 40 countries. It specializes in the selling of clothing and luxury food products. M&S was founded in 1884 by Michael Marks and Thomas Spencer in Leeds. In 1998, it became the first British retailer to make a pre-tax profit of over 1 billion, though a few years later it plunged into a crisis which lasted for several years. In November 2009, it was announced that Marc Bolland, formerly of Morrisons, would take over as chief executive from executive chairman Stuart Rose in early 2010; Rose remained in the role of non-executive chairman until he was replaced by Robert Swannell in January 2011.

SUPPLY CHAIN MANAGEMENT

a) Integration: The common objectives for Marks & Spencer and its suppliers are to: increase sales minimize stocks minimize commitment Maximize flexibility. The key to doing this has been to manage, or integrate, the supply chain so that both Marks & Spencer and its suppliers are working towards the same business objectives. Communication is therefore important between all parts of the chain to ensure that the differences between demand from customers and the suppliers ability to meet such demand can be minimized. b) Developing supplier relationships: Marks & Spencers ability to respond quickly to changing customer needs lies with mutually advantageous relationships developed with suppliers throughout the supply chain. Many of the suppliers have seen their businesses grow alongside that of Marks & Spencer. The strength of these relationships and the mutual trust and support each provides is a critical element for the development of each business. An important element in managing this supply chain is fairness. Working closely with a limited number of suppliers involves helping each of them to meet their own business aspirations, but not at the expense of other key suppliers. The starting point for managing the supply chain is to coordinate Marks & Spencers business strategy with each of the suppliers business plans. This will provide the structure and direction for each supplier to follow. Marks & Spencers strategic objectives are to develop all new products so that they:

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fully satisfy the customer in terms of comfort and fit are available at the required time are clearly specified so that they can be launched into any manufacturing site provide the maximum benefits permitted by each design. The beginning of season strategy meeting provides suppliers with the opportunity to discuss their expectations with Marks & Spencer, such as the areas of business they would like to grow. It also enables Marks & Spencers decision-makers to provide suppliers with a realistic assessment of where they need to develop. Discussions at this stage may broach issues such as how to encourage others to take their products further forward and how to spread knowledge. At the heart of this process is integrity. It is important that all parties are dealt with in a fair and equitable way which sustains relationships to provide long-term business opportunities and developments. c) The buying process: Members of the buying team work with either primary suppliers who manufacture garments or secondary suppliers who provide the fabrics as part of the range building process. By working with suppliers throughout the buying process, Marks & Spencers contribution to the finished product is all encompassing. The buying team comprises: 1. Selectors - work closely with Marks & Spencers design group and suppliers, and are responsible for offering choice to customers and delivering it into stores on time. Doing this involves considerable research in order to keep upto-date with the latest trends. 2. Merchandisers - are responsible for profitability. Their role involves negotiating prices, estimating the quantities needed, sales analysis and scheduling the production with manufacturers and suppliers. 3. Technologists - develop and monitor specifications and quality control systems. They act as technical advisors to the selectors and merchandisers, as well as to manufacturers. They also work on long-term projects with secondary suppliers which provide the business with advances in manufacturing and fabrics.

Plan A:
Marks & Spencer believes the five key areas that represent the biggest challenges it faces as retailer are: Climate change, waste, natural resources and being affair partner. In the five years since they launched Plan A, theyve managed to reduce the carbon footprint even as the business has grown. And now theyve taken one step further; by offsetting their remaining emissions to become carbon neutral in their Irish and UK operations. Under Plan A, since 2007, M&S has cut back its non-glass packaging across food, clothing and home ware by an average of 26 percent. The weight of glass used in food packaging has also been reduced, saving 1,100 tons a year. And clothing packaging has decreased by 46 percent, including reductions achieved through hanger recycling.

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At M&S, they have very high standards when it comes to animal welfare, sustainable fishing, and farming. All our fresh turkey, duck and Oakham chicken are grown on specially selected farms in UK. In addition to higher welfare and free range turkey, we also sell a range of organic and devon bronze whole birds.

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WAL-MART
Wal-Mart began with the goal to provide customers with the goods they wanted when and where they wanted them. Wal-Mart then focused on developing cost structures that allowed it to offer low everyday pricing. The key to achieving this goal was to make the way the company replenishes inventory the centerpiece of its strategy, which relied on a logistics technique known as Cross Docking. Using cross docking, products are routed from suppliers to Wal-Marts warehouses, where they are then shipped to stores without sitting for long periods of time in inventory. This strategy reduced Wal-Marts costs significantly and they passed those savings on to their customers with highly competitive pricing. Wal-Mart then concentrated on developing a more highly structured and advanced supply chain management strategy to exploit and enhance this competitive advantage. A successful supply chain management strategy can lead to lower product costs and highly competitive pricing for the consumer. Wal-Mart is the worlds largest and arguably most powerful retailer with: 1. Highest sales per square foot 2. Inventory turnover, and 3. Operating profit of any discount retailer. Wal-Mart owes its transition from regional retailer to global powerhouse largely to changes in and effective management of its supply chain. Wal-Mart has been able to assume market leadership position primarily due to its efficient integration of: 1. Suppliers 2. Manufacturing, 3. Warehousing 4. Distribution to stores

Its strategy has four key components: 1. Vendor partnerships 2. Cross docking and distribution management 3. Technology

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4. Integration 1. Vendor Partnerships: Wal-Marts supply chain begins with strategic sourcing to find products at the best price from suppliers who are in a position to ensure they can meet demand. Wal-Mart establishes strategic partnerships with most of their vendors, offering them the potential for long-term and high volume purchases in exchange for the lowest possible prices. Recently Wal-Mart announced its strategic partnership with Li & Fung, a Hong Kong sourcing company. 2. Cross docking and distribution management: Suppliers then ship product to WalMarts distribution centers where the product is cross docked and then delivered to Wal-Mart stores. Cross docking, distribution management, and transportation management keep inventory and transportation costs down, reducing transportation time and eliminating inefficiencies. 3. Technology: Technology serves as the foundation of their supply chain. Wal-Mart has the largest information technology infrastructure of any private company in the world. Its state-of-the-art technology and network design allow Wal-Mart to accurately forecast demand, track and predict inventory levels, create highly efficient transportation routes, and manage customer relationships and service response logistics. A new global sourcing strategy adopted by Wal-Mart is been designed to reduce costs of goods, accelerate speed to market, and improve the quality of products. The strategy involves the creation of Global Merchandising Centers (GMCs), a change in leadership and structure, and a strategic alliance with Li & Fung, a global sourcing organization. Li & Fung is forming a new company to manage the Wal-Mart account, and is expected to build capacity that would enable it to act as a buying agent for goods valued around US$2 billion within the first year. The company believes that these centers will create alignment between sourcing and merchandising and drive efficiencies across various merchandise categories. The company said the core of its overall global sourcing strategy would be to continue increasing direct sourcing for the company's private brands.

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CONCLUSION
Wal-Marts sourcing strategy has provided the company with several sustainable competitive advantages including lower product costs, reduced inventory carrying costs, improved instore variety and selection and highly competitive pricing for the consumer. This strategy has helped Wal-Mart become a dominant force in a competitive global market. As technology evolves, Wal-Mart continues to focus on innovative processes and systems to improve its supply chain and achieve greater efficiency.

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APPLE Inc.

COMPANY PROFILE
Apple Inc., formerly Apple Computer, Inc., is an American multinational corporation headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software and personal computers. Its best-known hardware products are the Mac line of computers, the iPod music player, the iPhone smartphone, and the iPad tablet computer. Its consumer software includes the OS X and iOS operating systems, the iTunes media browser, the Safari web browser, and the iLife and iWork creativity and productivity suites. The company was founded on April 1, 1976, and incorporated as Apple Computer, Inc. on January 3, 1977. The word "Computer" was removed from its name on January 9, 2007, the same day Steve Jobs introduced the iPhone, reflecting its shifted focus towards consumer electronics. Apple is the world's second-largest information technology company by revenue after Samsung Electronics, and the world's third-largest mobile phone maker after Samsung and Nokia. Fortune magazine named Apple the most admired company in the United States in 2008, and in the world from 2008 to 2012. As of May 2013, Apple maintains 408 retail stores in fourteen countries as well as the online Apple Store and iTunes Store, the latter of which is the world's largest music retailer.

COMPETITORS
Apple has competition in its smartphone, tablet, TV and MP3 player category. Some of the major competitors of Apple are: Samsung Microsoft Dell Nokia Sony HP

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Intel IBM Acer

SUPPLY CHAIN MANAGEMENT

A report by AMR research has named Apple as the company with the best supply chain practices in the world.

In a feature exploring the secret behind Apples success, it was found companys ability to bring together two sides of the supply chain (digital and physical) efficiently and at low cost.

DIGITAL SUPPLY CHAIN

It is a new media term that encompasses the process of the delivery of digital media, be it music or video, by electronic means from the point of origin (content provider) to destination (consumer). 1. The main processes of a digital supply chain are as follows: 2. True on-demand product availability 3. Ease of use and speed for content search and activation. 4. Pricing and subscriptions 5. Quality management built on licensing and refunds

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APPLES SOURCING STRATEGY - HOW DOES APPLE DO IT?

Hot products, $60 billion in cash, and it's a big company. Those three factors allow it to get more of its fair share of components, and ultimately market share. Apple aggressively uses its size and vast array of resources -- including its very deep pockets -- to get the deals it wants with component makers. The company sends executives to its Japanese suppliers literally with cash in hand to make sure supply remained adequate. But Apple's key to supply-chain success isn't as simple. Part of the reason Apple wins in the supply chain is simply because Apple is so successful overall. In times of a shortage, suppliers are going to sell to their biggest customers first," said Tom Dinges, senior electronics manufacturing consultant at IHS iSuppli. Sales of Apple's devices have risen astronomically over the past several years, and the company has grown to become one of the world's biggest component purchasers. But there are lots of big companies out there. What separates Apple from the rest is its ability to sell a lot of products while selling remarkably few different kinds of products.

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Apple predominately sells just five different gadgets -- iPad, iPhone, iPod, Mac and Apple TV -- and a combined total of 15 different variations of those devices, excluding modifications like the amount of available memory. That small handful of products shares many parts common to all the devices. That makes Apple's supply chain among the most precisely honed in the world. For a company of Apple's size, no one out there sells so few different products. As a result, Apple's sourcing strategy can be much more finely tuned than other companies with very disparate products. Further, in the electronics industry, most telephone handset vendors rely on one main source for certain key components Apple has sourced its iPhone touchscreen display from four suppliers, who bid each time Apple releases a factory order. By pitting suppliers against each other, Apple maintains the upper hand and keeps its costs low. In 2012 alone, Apple sold more than 120 million iPhones, 60 million iPads, 35 million iPods, 15 million Macs staggering numbers, to say the least. The success of the worlds biggest technology company has come on the back of a robust supply chain network. Foxconn, a Taiwanese company, is one of its strategic supply partners that churn out tens of thousands of its flagship products each day. Manufacturing for Apple isnt easy. Sales estimates are difficult to forecast, and for such complex products, the time to market is extremely short. As Apple needed Foxconn and Foxconn needed Apple, the relationship was mutually beneficial. It was a fine example of procurement playing an instrumental role in managing growth. Furthermore, Apple is planning to award more business to a relatively unknown company called Pegatron. This company already manufactures iPad Minis and some versions of the iPhone. It is perceived as a step towards achieving better stability in Apples supply chain in the form of following pointers: Risk Diversification: Addition of a new supplier will provide a greater flexibility and Apple can react faster to supply chain disruptions, should they arise. Capacity Management: Since Apples proprietary OS is closely linked to its hardware design, it needs to manage handset capacity issues as well. To succeed in emerging markets such as China and India (one the worlds largest user base), Apple needs to ramp up its production capacity rather quickly.

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Margins sustenance: With the advent of Android and successful market penetration of Samsung and other competitors, Apple is planning to introduce stripped down versions of its flagship products at reduced prices to increase market share.

Supplier Innovation: A new supplier (Pegatron) will also be more willing to invest in capital to fund growth as opposed to a long serving incumbent who may have reservations on the returns on such an investment.

Apple has been seen to willingly tweak procurement strategy and align with the larger organizational strategy. It strongly underlines the companys commitment to innovation. This is a classic example of procurement playing an instrumental role in managing growth.

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COMPARISON

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REFERENCES
1. http://ast.umich.edu/pdfs/What-is-strategic-sourcing-102811.pdf 2. http://en.wikipedia.org/wiki/Zara_(retailer)#Manufacturing_and_distribution 3. http://prezi.com/rgb8tcgpggj_/zara/ 4. http://zarafashion2013.wix.com/zara#!brand-position/c1q1p 5. http://www.benettongroup.com/group/business/stores ast.umich.edu pdfs What-is-strategic-sourcing- 2 6. www.fritolay.com 7. filamentgroup.com/portfolio/frito_lay_inc/ 8. prezi.com/lho3iargxhwt/copy-of-frito-lay-business-model 9. www.nytimes.com/.../business/frito-lay-strategy-aims-for-top-and-bottom-o... 10. www.marketresearch.com/.../Frito-Lay-North-America-SWOT-7825429/ 11. http://www.benettongroup.com/value-chain/index.html .pdf