A case report on

Apple Inc.: Managing a

Global Supply Chain

Group 1:
Debayan Ghosh
Rosismita Laskar
Souvanik Batabyal
Swapnajit Banerjee
Synopsis of the case:
Apple is investing in its next generation of products potentially the first new major
products lines since Tim Cook took over from Steve Jobs. Analyst Jessica Grant needs to make
a presentation of pros and cons BXE Capital should make to their portfolio, based on the Apple
supply chain, to the vice president of her company. She found that apple managed a global
supply chain that operated on a real time-basis. A big factor of their success was due to the
combination of design, functionality, marketing and the ability to quickly modify the
production process based on consumer demand. Being the world’s largest company by market
capitalization, “Apple was able to gain better control over its supply chain by working with
new suppliers on proprietary parts for which Apple would provide upfront capital in return for
volume commitments and a lower overall price per unit”. Instead of outsourcing manufacturing
like typical retailers, Apple chooses to maintain full control of the supply chain internally. They
work in very close proximity to the suppliers in order to make any necessary tweaks for the
products that may change last minute. Gartner group voted Apple as the number one supply
chain; their composite score was 3.64 points higher than their closest competitor, McDonald’s.
The expert management of the supply chain is best displayed in an example of how the iPhone
5 was produced all the way inception to delivery to consumer. Going forward, the Apple
financial information was inspected all the way from 1996.

About Apple Inc.:

Apple Inc. was founded on 1st of April, 1976 by Steve Jobs, Steve Wozniak and
Mike Markkula to manufacture and distribute desktop computers. To sell an initial order of 50
units of their “Apple I” computer to a local computer shop, they struck a deal and negotiated a
30-day credit term to pay for the parts. After selling 200 units of “Apple I”, Wozniak improved
the design and showcased the Apple II in April 1977. Both Jobs and Wozniak brought in
Markkula as they needed capital for the next phase and Markkula at that time had recently
retired from his previous job. By 1980, the company had become the largest private
manufacturer of personal computers in the United States.
By 1983, IBM’s Personal Computer became the best-seller in the computer
market in the United States. Despite Apple’s various efforts, they could not stop IBM.
Following Jobs’ exit from the company in the year 1985, the company stumbled for the next
decade. In order to gain the lost market share, Apple launched a line of Macintosh Computers
but failed to gain a grip in the market.
In the year 1996, Apple began licensing Mac Operating System to 3rd party
manufacturers. After going through three CEOs from 1993-1996, Steve Jobs returned to the
company as CEO. Throughout this time, Apple continued to manufacture its own products.
In the year 2001, Apple announced that they would be launching their own retail
stores and in the month of October of the same year, they launched the iPod portable digital
audio player. Following that, they entered into a negotiation with five largest labels to be part
of iTunes that was supporting the iPod.
As a part of their global expansion, they opened their first Japanese store in
2003. By 2004, Apple was able to gain better control over its supply chain by working with
new suppliers on proprietary parts.
 In April 2010, Apple reinvented the tablet computer market by launching its
iPad. It sold 70 percent of its products and services directly to consumers and businesses.
Appe launched iPhone5 in September 2012 which eventually sold at a rate of
3.7 million units per week for the first three months. They made it available in 100 countries
from 240 mobile phone carriers.

Problems Faced:
 Product Development: with the incoming of various other mobile phone
manufacturers, the company is under constant pressure to release new products
within very short ranges of time.
 Suffering Leadership Challenge: frequent changes of CEOs lead to a kind of
unstable atmosphere inside the organisation which in turn effected the
company’s performance.
 Mass Production challenge: in order to have massive production at a lower
cost, Apple manufacture its products in Foxconn which is in China. Apple has
been criticized for using sweatshop labor and squeeze their profits. Sometimes
there are sudden increased in Apple products, and the workers have to work
overtime without extra pay. The working condition in Foxconn is poor also. It
adversely affect the image of Apple.
 Control over Manufacturers: since they were taking the help of various parts
manufacturers, their control over their manufacturers was not very high.
 Risky sourcing method: various suppliers had various ways of sourcing their
products and Apple was not being able to control all the methods undertaken by
their suppliers.

Drivers of Global Supply Chain:

 Global Market Forces
 Technological Forces: they were sourcing their products from various parts of
the world and the final assembly was made in China.
 Global Cost Forces: since they had manufacturers from various parts of the
world, they had to maintain warehouses in various regions of the world.
 Political and Economic Forces

How they practiced Supply Chain Management:

They had suppliers from around the world which reduced their transportation costs.
They helped their suppliers upfront. Apple engineers also worked closely with suppliers to
update the technology and manufacturing processes with them. However, high-volume orders
of Apple allow them to bargain a better price with suppliers, which greatly affect the profit
margin of them.
Recommendation:
Apple has been highly regarded for its innovative products, which combined with
advanced functionality, attention to detail in design and exceptional user experience. Its
cutting-edge products typically require innovative manufacturing approaches and Apple is
generally considered as the leader in mobile industry. Apart from the excellent performance in
mobile market, Apple also leads the global supply chain management. They need to take more
control of the supply chain to make sure the quality of the components and production can meet
the standard, and deal with the fluctuation of demand.