Operations and Supply Chain Management of America’s Businesses
Supply chain strategies are applied in a related set of few organizations. No business operates completely independently of all trading partners on multiple levels and, thus, it is possible to explore how businesses interact with other people in a structured form. Supply chains have existed since the trade routes were developed to allow different peoples of the world for exchange of goods. The driving forces include a greater emphasis on supply chain management in the recent development of information technologies, which allows fast and inexpensive connection between several parties and the globalization of world trade, enabling speeding up of the exchange of goods across borders. Thus, when considering supply chain strategy, the nature of global supply chains on the example of a company should be first investigated (Boyer & Verma, 2009).
A smooth launch of the system of supply chain management can help organizations gain a sustainable competitive advantage. This may assist the organization in improving the quality of products and services while reducing costs at the same time. Nature tourism product is perishable and should be used when it is ready to be served. Thus, hotels must provide services in line with demand. Because of this nature of the production, integration on the internal level is more important than the external client integration for the hospitality industry.
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Management of supply chain is closely linked with the rule of best experiences. In the adoption of supply chain management initiatives, it is necessary that the company has a long-term approach. It should pay attention to all media that are used in the process of transformation of raw materials into the end-user supplies. Top management commitment is necessary at the moment. Organizations should redesign how business is done at all levels in the organization and beyond. Apple is highly appreciated for its innovative products. They combine modern functionality and user experience. Advanced products, as a rule, require innovative approaches to production and Apple is considered as the leader in this sphere with the best-of-breed position being a reflection of its financial power. (Parker, 2013)
For the fiscal quarter ending in December 2012, Apple reported revenue of $54.5 billion, net income of $13.1 billion, both records for the company. These results were driven by record quarterly sales, including 47.8 million iPhone and almost 30 million iPad.
Cupertino, California-based company wanted to lower production costs variants, including through the use of foreign suppliers. However, it also made a strategic decision to cooperate with production companies that understood these mechanisms. Apple products require different methods and approaches, which often must be placed in a very short time.
Apple has taken measures at an early stage to manage the supply chain and suppliers in it. The company has established a formal waiting list for suppliers and quickly moved to the creation of exclusivity agreements in exchange for the amount of the guarantee.
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During some period of time, Apple has developed its relations with suppliers. This has helped Apple quickly increase operations to customers for existing and new products. Working with their partners in the supply chain, Apple has helped to develop new technological processes, some of which have been the subject of patent applications filed by the company.
In addition, the company has used its deep pockets to ensure normal production capacity by placing a large amount of pre-orders with suppliers. This has also prevented competitors from gaining access to one of the production resources (Parker, 2013).
While outsourcing Apple advantages, it does not come without risk. Outsourcing can make any corporation vulnerable to disruptions at key stages of the supply chain. Those disruptions can potentially be caused by any of natural disasters or changes in international trade agreements. Apple has also been criticized for labor conditions.
In December 2012, Apple announced that it would again place some of its factories in the United States, about 10 years after it had stopped production there. Apple said it would spend about $100 million on production of Mac computers in the United States. The company stated that it sold 4 million Macs during the quarter that ended in December 2012. It was a decrease from 5.2 million compared to the same period in 2011 (Parker, 2013).
“Next year we will bring some of production to the United States”, said Tim Cook.
Observers reported a number of factors that caused such company’s movements, including the increase of prices for natural gas and oil from China and other developing countries, as well as reducing the difference in pay between the US and overseas workers. Lower transport costs and faster delivery time to the market when associated with the United States manufacturing may also encourage the company to return to the USA where it can combine its design, engineering, and manufacturing operations (University Alliance, n.d.).
However, successful companies change the situation due to impossible ideas. Initially, Steve Jobs thought that research for the supply chain was done. One of the supply chain lessons by Steve Jobs is that the customer comes first. Steve thought that better products should be made. While the new product has a strong value proposal and there is a wide choice of products, supplying them to customers is not the problem. Additionally, Apple employees spend a lot of time with suppliers to produce precisely elaborated Apple products as intended.
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Thanks to Apple retail stores, the company may make a demand forecast easily. Thus, company is not able to increase turnover of inventory due to a reduction in the average inventory. If Apple tries to hold more reserves, they will be more likely to become obsolete or damaged. In addition, Apple product life cycle is longer than that of seasonal items, so Apple is not easily affected by seasonal factors. However, Apple takes a decisive action during holidays. As the demand for products can increase rapidly over this period, Apple orders goods by air instead of sea. This is because the delivery of products on the ship takes longer compared to air transport. In addition, the company has a warehouse in California, so it reserves all products from this stock, resulting in a simplified supply chain process. In other words, Apple’s retail stores act as a stocking point between up and downstream. Finally, simplifying products is a good strategy to get rid of unnecessary product lines. It is connected with “lean production”. When Jobs returned to Apple in 1997, he chose only 4 product categories, hence being able to reduce the complexity of the supply chain (“7 supply chain lessons from Steve Jobs”, n.d.).
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The supply chain management is seen everywhere. It can be seen in the formulation of strategies, segmentation of the product, and product design for customer satisfaction. Supply chain experts accept concepts, which help creating value. Although Apple’s supply has some weaknesses such as different problems with suppliers from Asia, it is certainly one of the role models in the supply chain management (Parker, 2013).
According to Digitimes, Apple has adjusted its operating model in terms of manufacturers. Instead of being responsible for procurement of spare parts and materials and production, they are now only responsible for the production.
Apple regulates the OEM operating model, for instance, Taiwan Apple led their OEM operating model equipment manufacturers responsible for both procurement and production, clean production, according to the Taiwan-based OEM manufacturers.
The new strategy and its impact are expected to influence the Taiwan OEM’s profitability in the long term because part of its income comes from cooperation with upstream suppliers.
As more suppliers are able to supply components for Apple’s products, suppliers based in the USA have recently started adjusting their partners to increase profits from their products.
Apple has also agreed that its manufacturers raise prices to support their gross margins and the plan can help increase the OEMs’ profits from 3 to 5%. Anyway, these changes are expected to ease equipment manufacturers in terms of bearing component stocks and reducing pressure.
What are both positive and negative implications for Apple producers? Negative one is that producers have no opportunity to negotiate the reduction of raw materials to control their profits. On the positive side, there is no more pressure on the inventory management. Last year, Apple requested its partners-producers to maintain a certain level of stock of all production components. This put additional pressure on manufacturers whose strength was in production.
Moreover, from a mechanic viewpoint, part of the profit has been received from the revaluation of the cost of spare parts and materials. Apple has reportedly agreed to its producers raising prices to preserve profits. According to Digitimes, this will lead to increased profits for Apple’s partners-manufacturers, namely 5%, as well as controlling expenses and quality for Apple.
The CEO of Apple Tim Cook has been called the supply chain genius. He systematically took a tighter grip on the supply chain than ever in the history of Apple, which led to strict requirements and a more watchful approach to indicators of quality management and treatment of workers abroad.
Despite tight deadlines of deliveries of gold iPhone 5S and its new iPad, Apple has sold nine million iPhone 5C-5S and phones. This has been cited as an impressive display of supply chain management.
Apple Inc. still enjoys the confidence of the market and it has perfect ammunition to beat its competitors. Nevertheless, the company needs to reduce its costs while the quality of its products and the market remain the same (“7 supply chain lessons from Steve Jobs”, n.d.).