In comparison to competitors, Apple assumes tight control over its supply chain on different levels including shipping and securing inventory projected according to predicted demand statistics. The inclination of apple to satisfy the customer in a “near-perfect” mode both product quality and timeliness in delivery has implied that Apple invests heavily in the oversight and management of its supply chain. Its association with partners is based on an exclusive agreement that logically implies that the supplier is (almost entirely) subscribed to the business wishes of Apple and that they deliver the materials and the products on time and with the expected quality. Suppliers have in turn adjusted to fit into apple’s schedule and are quite ready for impromptu demand such as the configuration of product dimensions.
However of more uniqueness to Apple’s supply chain is the actual involvement in the administration of the supply chain itself. Apple designers continually engage and moderate the production process to ensure that quality control is tandem with the company’s expectation and that key players in the supply chain do not run into costly bottlenecks. A major differentiating feature between Apple and its competitors is production. The active involvement implies the development of streamlined products with similar blueprints that fit well with voluminous industrial production system at short notice and efficiently provide a platform for the easy projection of costs.
Apple is significantly involved in its global supply chain from two major fronts; skill support through the active involvement of own personnel, for instance, the designers, and material support through investment in the supply chain process. On the part of actual Apple personnel involved in the supply chain operations, Apple is poised to exploit the advantage of importing design ideologies from Cupertino to industries in Asia. The arrangement ensures that design perfectly meets production and necessary tweaks are adopted in the most efficient manner possible. For instance, the last-minute tweaking of iPhone 5 at Foxconn through active engagement resulted in a perfected production follow-up at a rate of 10,000 phones being produced per 24 hours after only 96 hours of realignment.
On investment into the supply chain, Apple positions itself high on the production scale by outsmarting competition of sourced materials. The company opts for direct investment in equipment and skilled personnel accompanied by exclusive agreements that give Apple a first and a full-time priority. Therefore in case of spiking demand, the fulfillment of orders is conducted at a swift pace to the satisfaction of product consumers and the Apple itself, thereby retaining its quality reputation in the market. For instance, on the basis of transport, Apply pre-purchased all holiday freight flights in 1998 to ensure the presence of their Mac computers thereby outmuscling all possible competition in the spike holiday market.
Even though Apple is a superbly performing company backed by ingenious products and a soaring reputation, its supply chain would most likely face two key challenges. These include the backing out potential suppliers due to the hard bargain and (primarily) the disadvantageous situation they find themselves in, and the possible capping of ingenuity to entice more product consumption. Apple’s association with its key suppliers may be questionable since the company employs more of an unhealthy financial muscle earmarked by stringent exclusive agreements. For instance, GT Advanced Technologies Inc acknowledges that their exclusivity to Apple implied cutting off other business to fulfill Apple’s demands due to a $578 capital injection in the production process. As partners become more aware of their lost shares in the market to competitors, they may opt to pull out while others may entirely reject a close partnership with Apple.
On the other hand, Apple significantly invests in research and design as a significant segment of its business. Each passing years a rise in the R&D budget for instance between 2011 and 2014 the figure increased by $ 2.1 billion. However, Apple pushes for a streamlined range of products that focuses on quality, design, and high functionality. Consumer expectation is relatively guaranteed of a similar production with little variation. While Apple’s competitors such as Samsung and Microsoft take on a diversity principle, more consumers may be drawn to a new experience and thereby upset Apple’s dominance of the market.
The ingenuity of Apple to actively pursue innovation both in design and production as well as in the evolution of its supply chain signal some of its inherent strengths and abilities to quickly adapt. However, the drop in Apple’ stock by a margin of $175.53 in the span of two years between 2012 and 2014 allude to the dominant brand of Steve Jobs as the face of Apple. Apple, therefore, apart from the fact that it has to continue wrestling competitors on a global scale, it faces the challenge of reorienting the Steve Jobs symbolism to the new management. The fall of the stock value is presumably more attached to investor fears of the certainty of the firm with the nascence of a key defining figure. It is logical to suppose that Apple is a victim of its branding and therefore it will have to go the extra mile of boosting innovation even higher like it is doing with the increased budget of its R&D department.
However, on the flipside, Apple looks more like a precarious company for investors to continue banking their confidence. Apple management is striving hard beyond all possible limits to ensure their presence in the market remains guaranteed by their innovativeness as reflected in their products. However, the use of tactical means to control the supply chain will more likely be an impediment to the development of Apple beyond its current margins. As suppliers and key partners project their slim gains from a partnership where Apple’s profit is about 60%, the desire to keep Apple as a reliable partner may be adversely affected by the possibility of dwindling demand for Apple products. They may default to Apple competitors with more desirable partnership principles. In such a precarious state, Grant would be right not to include Apple as a key holding in BXE’s fund.
The Apple supply chain management technique differs, even though slightly, from Walmart’s system. Apple exercises tighter control and stringent participation in its supply chain to give it a competitive advantage in the market through quality control, timeliness, and assured supply. The investment made in the supply chain could be seen as a form of value addition that ultimately results in 50% profit margin in their products. However, Apple is going forward with using partners, for instance, Foxconn as the dispatch point of orders going directly to the consumer. Walmart, on the other hand, exercises a relatively strong control of its supply chain. It, however, gains a different model of competitive advantage from that of Apple. Walmart invests in the supply chain by building and optimizing warehouses tandem with latest optimization systems (Nash, 2015). The use of such systems in the company’s stores that number over 4700 ensure that costs of handling are kept to a minimum and that competitive advantage is maintained.
- Nash, K. (2015). Wal-Mart builds supply chain to meet E-commerce demands. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/wal-mart-builds-supply-chain-to-meet-e-commerce-demands-1431016708
- Richard Ivey School of Business Foundation. (2014). Apple Inc.: Managing A Global Supply Chain. Ivey Publishing. Print.