Global Supply Chain Management of Apple Inc - Essay Example

 Question 1: Apples supply chain for its iPhone in comparison to competitors The iPhone series of Apple Inc. has assisted the organisation to capture a strong position within global market. The different stages of iPhone supply chain management include new product development, procurement, product assembly, logistics and retail. New product development According to Senapati, et al., (2012) constant innovation assists organisation to remain competitive within global market. The author has described the theory of production lead-time by detailing that short production lead-time demonstrate the capability of rapid innovation of organisation while long lead-time restricts organisations to move into highly potential consumer market (Chopra and Meindl, 2007). The critical analysis of the supply chain management of Apple iPhone has demonstrated that the organisation utilize exceptionally short lead-time to introduce new model for iPhone in the global market. The organisation annually introduce new product and bi-annually upgrade major functions. This short development cycle of product illustrates the proper execution of end-to-end supply chain management procedure (Waters and Rinsler, 2014). Apple Inc. generally develops their software and hardware internally which has assisted the organisation to introduce a highly systematic product design process. This process allows the organisation to introduce exceptional initial performance which is far above than the competitor brands (Apple Inc., 2015). Alternatively, the integration of software vendor, such as Goggle, has assisted Samsung to only indulge in hardware development process. Though this practice has allowed the organisation to shorten their product development process to semi-annual cycle, it has also introduced fragmentation and limitation within their initial performance (Apple Inc., 2015). Apple Inc. considers the centralized supply chain coordination procedure which influences them to utilize centralized decision making procedure. The concept of centralized decision making process assists organisations to select a unique decision maker for the management and coordination of entire supply chain. The centralized coordinated supply chain model allows organisations to standardize their product quality and channel partner’s performance (Chopra and Meindl, 2007). According to the supply chain coordination theory of Chen and Chen (2005), decentralized supply chain coordination causes dilemma situation within organisations regarding the organisational performances and operations. The highly centralized supply chain coordination procedure allows Apple to efficiently integrate different stakeholders from production, software and hardware departments. Proper acquisition of essential technological products and services as well as efficient integration of research and development procedure with the profit and loss accountability has allowed the iPhone supply chain of Apple inc. to systematically balance their centralized supply chain coordination procedure. It also enables them to create long term reliance with their stakeholders. This facility assists the organisation to work in a close proximity with the suppliers (Wang and Webster, 2007). The supply chain coordination process of Samsung follows highly decentralized structure that influences the management to loosely integrate the different parts of supply chain. Decentralized process also hampers the organisation to gather unified standard information (Emmett and Crocker, 2010). Procurement Apple Inc. utilizes the time compression management (TCM) theory in terms of the supply chain of their iPhone series. Proper application of TCM theory allow organisations to reduce their process cycle time. According to the theory of TCM the supply chain process cycle of any organisation need to consider a broader context that includes all their distributors and suppliers (Kraemer, et al., 2011). The total cycle-time compression strategy for iPhone supply chain has assisted the management to ensure steady information as well as material flow across all their network of suppliers and distributors. The organisation generally purchases all the required production units to confirm proper material and key component flow in terms of their product manufacturing. The management generally purchase capital equipments for their supplier to ensure steady supply assurance. The organisation maintains proper information flow through its supply chain by forecasting the sales and demand of market in 150 days advance. Their centralized supply chain coordination assists them to rapidly update their 156 suppliers to adjust their production schedule (Kraemer, et al., 2011). The organisation follows a well-structured material requirement planning system. The theory of material requirement planning (MRP) generally describes three major objectives such as proper and steady availability of material for production, maintenance of lowest possible material in store and planned manufacturing, purchasing and delivery activities (Crocker and Emmett, 2012). The quarterly review of Apple Inc. assists the organisation to properly assess the inventory level, market demand, technology development and component costs. This process provides added advantage to Apple over other competitors as they can upgrade their production systems rigorously with new technologies and equipment. Their strategy to generate long-term contract with the premium equipment suppliers hampers the steady equipment delivery for the competitors. Hence, it causes delay in the overall market supply of new products by reducing the total production time of competitors (Crocker and Emmett, 2012). On the other hand, the improper time compression and global lead time management has affected the end product delivery of Samsung. During 2013, the organisation displayed inefficiency in delivering Galaxy S4 Smartphone as per the demand of the market. This delay in the supply chain has hampered their competitive advantage in comparison to Apply iPhone (Kraemer, et al., 2011). Implementation of vertical integration theory is essential for efficient supply chain management process. Vertical integration enables organisation to own all the parts of their supply chain process to ensure a systematic approach (Chopra and Meindl, 2007). The lack of vertical integration in the supply chain of Samsung hampers the steady flow of information and materials. The market possesses very limited numbers of quality equipment suppliers. The vertical integration of supply chain and long-term contracts of Apple hampers the timely delivery of equipments for Samsung. Apple Inc. has created a closed ecosystem that assists the organisation to introduce highly sustainable supply chain in comparison to their major competitors. During 2012, the massive order of DRAM chips with premium chip supplier Elpida has hugely affected the total production time of Samsung. The advanced prediction of technology development, material and inventory requirement has allowed Apple Inc. to place huge orders of DRAM chips. This situation causes massive dip in the stock price of Samsung and various other competitors that year (Burns, 2012). Though the high volume of order caused high revenue generation for organisations, Apple’s offer to invest in capital equipment for manufacturing process causes a number of drawbacks to their suppliers in terms of material and labour cost. Therefore, it affects the projected profit of the suppliers. The high volume orders and manufacturing process of Apple restrict the freedom of suppliers to entertain projects from other organisations. Therefore, a number of suppliers decline the lucrative offers of Apple Inc (Kraemer, et al., 2011). Product assembly Apple Inc. has subcontracted Foxconn Company in China for their final product assembly procedure. The subcontracting process of Apple Inc. allows the subcontractor to employee large number of highly skilled and temporary workers as per the demand forecast and production schedule. Most of the workers of Foxconn Apple iphone assembly division are contract based employees which assisted the management to reduce their production cost while maintaining the product quality. It also enables the management to frequently update the process as per changing market demands and technology. Alternatively, other competitors such as Samsung, Nokia and blackberry outsource their production facility to other organisations. This process influences them to spend huge amount for permanent workforce and production facility. Outsourcing to a number of organisations hampers the product quality standardization procedure (Chan, Pun and Selden, 2013). The accumulation of skilled employees from different parts of the world allows the organisation to maintain the quality and frequency of their production and product assembly process. On the contrary, the inadequate control over the recruiting, job security and work scheduling process of the subcontracting company causes loss of a huge number of skilled workforces. The subcontracting company in China, Foxconn, has been accused for harsh treatment and harassment of workers a number of times. The improper employee management, work overload, tight schedule and employee harassment has caused a number of workers riot within the Apple iPhone 5 manufacturing sites of Foxconn. This situation is not only hampering the production, it is also affecting the market reputation of the company (Roberts, 2012). The contractual employment process and frequent lay-off of skilled workers can also cause scarcity of valuable workforce during critical production time. The temporary workforce process allows the organisation to limit their production cost while the absence of permanent skilled worker disables the organisation to maintain the production quality. Logistics The organisation maintains long-term contractual relationship with different air freight. The dominating shipping capacity of Apple has allowed them to secure higher market share than Samsung during holiday season (Waters and Rinsler, 2014). Worldwide Smartphone sales in 2013-14 (Source: Medhi and Mondal, 2015) The proper logistics and warehouse management system of Apple Inc. has assisted the organisation to efficiently maintain their inventory level while achieving long-term sustainability in the global market. The warehouse management system is an important part of supply chain which assists organisation to efficiently control the movement of their storage materials to eliminate wastage (Crocker, et al., 2011). The organisation maintain their national distribution centre in Elk Grove, California to ensure proper product delivery within different company owned and other retail outlets. The organisation also maintains regional distribution process with the assistance of FedEx and UPS to ensure proper delivery procedure to their online clients. The management strictly maintain minimum inventory within their regional and national warehouses to eliminate wastage. According to the data of 2012, the warehouse and logistics management process has assisted the organisation to turn their inventory within 5 days while immediate competitor Samsung required minimum 21 days (Waters and Rinsler, 2014). Retail The organisation generally sells their end products of iPhone series through company owned stores and premium reseller brands. This process allows the organisation to provide high quality of buying experience and in-depth product knowledge to their consumers. Vertical integration with the third party resellers also enables them to provide skilled and knowledgeable sales persons to ensure proper product delivery and satisfaction to the consumers (Apple Inc., 2015). The absence of visibility of the Apple product within different multi-brand stores also hinders a number of consumers to compare the benefits of each product. On the other hand, the wide availability of competitor brands such as Samsung and Nokia within a huge number of companies owned as well as multi-brand shops influence a large section of the consumers to incline towards these brands. The organisation lacks sufficient retail stores within different developing countries across the world. The scarcity of sufficient premium resellers within the developing countries is hampering the desired retail profit for the organisation (Waters and Rinsler, 2014). Drawbacks of the Supply Chain Question 2: Apple Inc. future challenges and implications for its supply chain Future challenges of Apple Inc. The unique and advanced supply chain management system of Apple Inc. also possesses various loopholes that can cause future challenges for the organisation while competition with the other major players in the market. The major future challenge for Apple iPhone is the increased market availability of different competitors from a number of Asian consumer electronic brands. The frequent innovation and rapid production of a huge number Asian brands has generated future market threat for the organisation. This situation is causing high challenge of market volatility due to increase in market dynamics in terms of demand. The long term and high volume orders as well as the offer to invest in capital requirement by Apple Inc. have reduced the independence of their suppliers. It limits their ability to handle further orders from other projects. Therefore, a number of suppliers are denying the lucrative initial offers of Apple Inc. On the other hand, the outsourcing capacity of competitor brands is influencing different organisations to readily introduce low cost and high featured Smartphone to the consumers (Lemke and Petersen, 2013). Electronic wastage and inventory waste are the other challenges that Apple iPhone supply chain may face within the near future. The rapid introduction of new models of Smartphone has reduced the lifecycle for each product within their iPhone series. This situation increases the chances of e-wastage for the organisation. Improper forecast of market demand and fluctuating demand of consumer electronic market can also cause inventory wastage for the organisation in the future (Lemke and Petersen, 2013). The major future challenge for Apple Inc. supply is the employee relationship and retention. Improper management of huge workforce and tight production schedule is hampering the employer and employee relationship within different subcontracted manufacturing and product assembly locations of Apple Inc. This situation has indicated challenges regarding the downfall and closing of different manufacturing locations. The largest supplier of Apple iPhone, Foxconn, has been convicted with poor workplace condition, over stressful job allocation and improper and harsh employee management. A report of Fair Labour Association has demonstrated that workers are laid off very frequently with the different production facility of Foxconn. It has also detailed that the workers generally works 56 to 61 hours a week without the required hour off. This poor worker management has demonstrated challenges towards the future employee-employer relationship and sustainable supply of quality products. It has also affected the corporate citizenship image of the organisation (Lemke and Petersen, 2013). Sustainability and Implications for Future Supply Chain Proper implication of the supply chain management requires the utilization agile supply chain management theory. Apple Inc. needs to focus on agile supply chain management theories to effectively handle their future challenges. Application of Agile Supply Chain Theory The organisation needs to focus on strengthening the implementation of agile supply chain management concept in terms of eliminating this industrial-scale risk of supply chain. The concept of agile supply chain allows organisations to respond to the changing needs of the market and different parts of the channel partner. The proper implication of agile supply chain management assists organisation to expedite their product delivery process through the supply chain (Qrunfleh and Tarafdar, 2013). A number of researchers describes that agile approach in supply chain can assists organisations to maintain market position within economic upheaval (Qrunfleh and Tarafdar, 2013). The agile supply chain process allow organisations to quickly adapt and design sourcing, logistic and product development of organisational supply chain as per changing demand and preferences of customers (Gilaninia, et al., 2011). Implication of agile supply chain management can assist the organisation to improve its responsiveness towards its consumers and channel partners. The agile supply chain will enable the marketers to focus on information based supply chain rather than inventory based supply chain (Abdollahi, et al., 2015). The information based approach will enable the management of Apple Inc. to properly assess and respond to the demands of suppliers and end consumers. The implication of their process integration, collaborative approach between buyers and suppliers and common system and shared information will enable the organisation to incorporate new and demand focused technologies in their manufacturing and assembly procedure. This demand driven supply chain approach will enable the marketers to increase their customer attraction by localizing their configuration while maintaining the quality and effectiveness (Qrunfleh and Tarafdar, 2014). This agile supply chain will assist Apple Inc. to quickly address market opportunities and demands while maintaining their production and supply costs. Therefore, it can also enable them to offer price related to market competition. Integrated and Responsible Approach and Cross-Functional Team The organisation needs to shift their focus from process subcontracting to own a manufacturing and product assembly location in overseas. The organisation needs to properly integrate the product assembly procedure within China. The product assembly location in China has allowed the organisation to gather huge number of knowledgeable and skilled employees from different parts of Asia. It has enabled the management to gather high level of diversified expertise by investing minimum amount (Chan, Pun and Selden, 2013). On the other hand, improper employee management process can reduce the productivity and performance of the workforce. The organisation needs to properly maintain and monitor the guidelines of employee management and employee benefits. The close integration of the product assembly location as well as strict guidelines for the employee management and employee benefit process will enable the organisation to improve the productivity and performance of this diversified workforce (Chan, Pun and Selden, 2013). This process will also allow them to properly manage the cross-functional team within the manufacturing and product assembly locations. The cross-functional team within the manufacturing and product assembly location assists the organisation to accumulate different functional expertise to achieve a common goal. Proper management of employee benefits, employee work schedule and employee work condition within the cross functional team can assist the management to reduce the future challenges while improving long term relationship with the stakeholders (Kerzner, 2013). 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