Apple’s Supply Chain Strategy, Its Success and Risks

Subject: Company Analysis
Pages: 5
Words: 1119
Reading time:
5 min
Study level: Master

Apple’s Supply Chain Strategy and Main Operational Aspects

Apple’s supply chain strategy is governed by five key operational elements. These are research and development, concept testing, pre-launching in the markets, actual product launch, and review of the product’s performance in the market. In research and development, the company seeks to develop new products and acquire licenses to ensure operations, as well as third party businesses that would aid in fulfilling this objective (Strategos Inc. 3). Then, the company engages in concept testing through which the research department undertakes market research on the new product, likely costing, and quality defects, among other aspects. The product is then pre-launched.

In this stage, the management undertakes the management of the potential production issues provides the required software and carries out the purchase of the materials required for product assembly (SupplyChainOpz par. 2). It is also at this stage the company liaises with its suppliers to ensure proper inventory levels and making pre-orders for stock items that are not easily available. The next stage is the launch, where the company resolves any backlog issues and forecast product demand by up to 150 days in advance (SupplyChainOpz par. 2). Thus, the product is taken and unveiled to the market for use. After this stage, the company engages in quarterly reviews to access product performance in the market, assessing issues such as the existing inventory level, demand forecast, and its life cycle, among other issues.

How Apple’s Supply Chain Strategy Is Operationalized, Successful Aspects, Challenges, and Risks

The main operational aspect of Apple’s supply chain strategy is new product development. The company is known for the introduction of new products into the market after very short periods. The operations of the company are based on research and development and aggressive marketing, among others (SupplyChainOpz par. 3). One of the ways through which the business can intensify new product development is through licensing and using other businesses. However, the company utilizes particular key suppliers to ensure that they can purchase unique raw materials for their product development purposes.

Secondly, the company’s operations in new product development are made possible through collaboration with suppliers. One operational aspect of the company’s supply chain is effective global and supplier management strategy. Essentially, the company has a particular list of vendors for its products. In turn, it has furnished these suppliers with the required standards and expectations that define agreements and volumes of materials to be supplied (SupplyChainOpz par. 3). It is notable that Apple maintains healthy interactions with the supplies. Consequently, the company has been able to maintain its operations to meet the clients’ expectations. Further, the company has also been able to develop new products and manufacturing processes that are a patent of the business through the close collaborations with its suppliers (Satariano and Burrows 51). Moreover, the company produces high volume goods. In effect, it is impossible for its competitors to order the same supplies from the company’s suppliers (Satariano and Burrows 3).

Another way that the Apple’s supply chain operates is through the diversification of its product assembly function. The Apple Company is moving towards forming more manufacturing partners in the development of its products (Aronow et al. 48). This way, the company can reduce vendor risks and raw material shortages that may have an impact on the company’s production efforts. In effect, the company is contracting some manufacturers to work with to ensure smooth operations.

There are some risks and challenges that face the operations of the Apple Company. First is the risk of supply chain disruption through the use of various suppliers and outsourcing. There is the likelihood of having below par supplies from the main outsourcing partners. In effect, this will have an impact on the company’s ability to operate efficiently.

The fact that the company manages global suppliers worldwide implies that it is affected by the global economy. The operations of the company are globally based. This suggests that global disruptions emanating from foreign exchange, among other factors, affect the overall operations of the firm (Kraemer, Linden, and Dedrick 6)

Further, the Apple Company operates through forecasting of demand. Thus, the company pre-orders depending on the production needs. However, forecasting of inventory may lead to excess inventory storage in a case where the items become obsolete or when the demand is less than the forecasted inventory (SupplyChainOpz par. 6).

It is possible that the company’s suppliers may also fail to adhere to the code of conduct stipulated by the company. The company believes and assumes that the suppliers will adhere to the rules and regulations as per the company’s regulations. This is a challenge and risk to the company, as some suppliers may fail to behave in the required manner, thereby affecting the operations of the enterprise.

Management of Apple’s Supply Chain

The Apple Company manages its supply chain through proper inventory management, creating positive supplier relationships, and efficient storage and distribution processes. First, the company maintains its inventory through forecasting. This way, it can predict the required product amounts and possible purchases. In effect, the company experiences a high inventory turnover, meaning that it has minimal inventory storage (Monczka et al. 54). Thus, the products are used once they arrive, depending on customer demand for specific items.

Secondly, the company operates through selecting particular suppliers to aid in its production processes. Apple boasts of having about 156 suppliers all over the world, who supply every product the company needs (SupplyChainOpz par. 8). The suppliers are also few, meaning that the company can manage the suppliers effectively, check whether they comply with the required standards and whether they deliver the required quantities on time, among other quality checks.

Apple operates a main warehouse located in California to ensure product quality and effective monitoring of the products that leave the store. Thus, once the products arrive from the suppliers, they are checked for consistency and stored (SupplyChainOpz par. 12). They are later distributed to the 246 stores owned by the company in different locations, depending on demand. Operating a central warehouse enables the company to synchronize inventory dates from the central warehouse and all over the stores, thereby ensuring effective inventory management operations.

Overall, the risks and challenges prone to Apple are dependent on their relationship with the main suppliers. The entire company’s supply chain process is dependent on the management of these suppliers, as they are involved in every aspect of the company’s strategy. Their involvement begins during product development, the supply of inventory, and during the manufacturing stage. In essence, Apple is the king of outsourcing functions. Thus, it is imperative that the company gauges and monitors this aspect to ensure an effective supply chain network now and in the future.

Works Cited

Aronow, Stan, Debra Hofman, Mike Burkett, Jim Romano, and Kimberly Nilles. “The 2014 Supply Chain Top 25: Leading the Decade.” Supply Chain Management Review 53.10 (2014): 48-55. Print.

Kraemer, Kenneth, Greg Linden, and Jason Dedrick. Capturing value in Global Networks: Apple’s iPad and iPhone. 2011. Web.

Monczka, Robert, Robert Handfield, Larry Giunipero, and James Patterson. Purchasing and Supply Chain Management. 6th ed. Boston: Cengage Learning, 2015. Print.

Satariano, Adam, and Peter Burrows. “Apple’s Supply-chain Secret? Hoard Lasers.” Bloomberg Business 4 (2011): 50. Print.

Strategos Inc. Apple, Foxconn & Manufacturing Strategy: A Study in Manufacturing & Strategy. 2012. Web.

SupplyChainOpz. Is Apple Supply Chain Really the No. 1? A Case Study. 2015. Web.