Apple Inc Supply Chain

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Apple Inc. is one of the world’s most successful companies when it comes to supply chain management. In its early years, the company had difficulties estimating demand and managing inventory often leading to stock-outs. In mid 2000s Apple began working with suppliers, providing their upfront capital in return for volume commitment. This concept not only reduced the overall price per unit but was the turning point for Apple in better handling its supply chain. In conjunction with working closely with suppliers, Apple was able to keep tighter control of the supply chain by limiting the outsourcing of processes almost completely. Through its large investment in R&D, Apple was able to limit the types of configurations of products (unlike competitors) …show more content…
Apple began to use sales targets to forecast demand 150 days in advance to ensure supply to all their sales outlets. In 2001 they began to ship directly to customers from the assembly plays in China using air freight while competitors used slower less responsive sea freight. By managing reverse logistics Apple is also able to lower costs as well as improve the customer service level.
Apple gained a key advantage through its improved supply chain by directly controlling their supply chain, locating assembly and production in China, and improving key logistics. These competitive advantages have allowed Apple to grow net profits 650% from 2009 to 2013 compared to Samsung’s 349% growth during the same period. Apple also saw an 18.7% profit margin vs 13.5% for Samsung in 2013 largely due to the cost savings and low inventory costs afforded by Apple’s streamlined supply
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Apple’s supply chain is ranked #1 by Gardner’s and this core competency gives the company a significant competitive advantage relative to industry peers. Apple already has a unique ability to modify production to meet fluctuating demand to prevent stock outs or excess inventory because they have the capability to coordinate its supply chain on a real time basis. Apple controls the entire supply chain that allows them to observe each process and make necessary adjustments to make the process more efficient. Additionally, Apple is investing another $10.5 Billion to further automate the supply chain with cutting edge technologies. These investments will make their operations more scalable and able to achieve more consistent performance, thus reducing manufacturing and logistics costs versus their competitors whom outsource the production of their phones. We believe the superior supply chain also enables them to be ready to introduce the next generation of successful products without materially disrupting existing segments. The uncertainty from new leadership has hurt the stock price, but we think it will rebound because of the focus and investments within the supply chain. Apple has also made strategic bolt-on acquisitions along with acquiring licenses for intellectual property to further strengthen their supply chain. The reduction in costs and thus increase in profit margins relative to peers positions the company for

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