Introduction
In 2010, Apple introduced a revolutionary product which allowed consumers to have access to movies, video games and other applications on the go (i.e. the i Pad). Since this time, competitors have introduced similar products. The only difference is these devices are using an open source operating system versus the closed end model utilized by Apple. It is believed that these manufacturers will be able to take market share away from Apple. This is because, they have more applications and can be used for a variety of purposes / other devices. These factors are illustrating the potential threat of competing products to the industry. (Standard & Poor’s, 2014)
However, in spite of these perceived benefits, Apple is still the top seller of tablets and similar devices. Evidence of this can be seen with a study that was conducted by Cocotas (2013). He determined that Apple is most dominate player inside the industry, with them accounting for 81% of sales. Out of this number, other device makers were coming in at much lower rates. The most notable include: Amazon, Samsung, Nokia and Blackberry. The figures are illustrating how Apple is the leader inside the portable tablet market. (Standard & Poor’s, 2014) (Cocotas, 2013)
One of the ways, they are able to maintain these advantages is through their supply chain and value management. To fully understand the benefits they provide to the firm requires examining the electronics industry and the influence it is having on the organization. Together, these elements will illustrate how these practices are helping the firm over the long term. (Standard & Poor’s, 2014) (Cocotas, 2013)
Apple’s Supply Chain and its Value
The most effective strategy Apple is using to improve their competitive position is through focusing on supply chain management to create value. This is achieved by reducing the amount of inventories and utilizing a real time strategy to increase turnover. The combination of these factors helps the company to quickly evolve with changes inside the industry. (Bell, 2014)
To adjust, requires Apple using an all encompassing approach that is focused on flexibility. This means that there is two step process for each phases of research, manufacturing and distribution of the product. The first part is emphasizing effective planning to deal with any problems early (i.e. planning). (Bell, 2014)
During this process, there are various phases which are involved. The most notable include: research & development, concept testing, pre launch, launch and quarterly review. Research and development is creating new products, it acquires third party intellectual / property rights and they purchase businesses which could provide them with immediate / future benefits. Concept testing is looking at market research, product assembly, manufacturing data and potential defects. The pre launch is managing production issues, controlling material costs, determining quantity and delivering new software for the operation. The launch is when any kind of backlogs are resolved and demand forecasts are made for up 150 days. The quarterly review is examining the life cycle of the product, demand forecasts, current sales and cost trends. The combination of these elements are providing added levels of support in understanding the marketplace, customer demand and how the firm can adjust with these variables. (Bell, 2014)
The second part of the supply chain is looking at different areas to understand how the product will be manufactured and distributed to key markets (i.e. the actual model). The most notable include: sourcing, manufacturing, warehousing, distributions and returns. Sourcing is specific areas where the product will be developed and marketed. Manufacturing is concentrating on the location of the device and the way its components will be assembled. They are then, sent from these areas to places where they will be stored over a short period of time. Warehousing is when Apple will use third party carriers to store these items over short term (such as: UPS / Fed Ex). At the same time, they have their own location in Elk Grove, California. Distribution is sending the product directly locations where consumers will have access to them. During this process, there are several avenues which are utilized to include: a direct sales force, online stores, retailers and affiliates. The returns are dealing with product defects, trade ins and the recycling programs. These areas are important, as they allow the firm to directly connect with stakeholders and offer them with something more. (Bell, 2014)
Both of these phases are creating value, by identifying where the firm will face added costs from developing the product and it determines quality control issues. In many ways, one could argue that this is the key which allows Apple to maintain a low pricing structure and maximize its profit margins. This is important for the industry, as consumer tastes are continually changing and require producers to take a different approach. Apple is able to reduce the total amounts of time and storage costs by turning over their inventory quickly. This is something that firms such as Amazon.com have trouble doing and it is resulting in them having more warehouses. (Bell, 2014)
Conclusion
Clearly, the supply chain management system helps Apple to evaluate different products and adjust with changes in demand. This is taking place by utilizing planning and the actual model to ensure that the firm can evolve with the challenges it is facing. This helps them to ship just enough i Pads to meet these needs and adapt to any transformations in the marketplace. Over the course of time, this reduces excessive inventory and the costs associated with storing the end product. Instead, they have higher amounts of turnover and reduce their expenses in the process. This is what helps Apple, to maintain a fixed pricing structure in the process.
- Bell, J. (2014). Supply Chain Risk. London: Kogan Page.
- Cocotas, A. (2013). I Pads Still Completely Dominate US Tablet Usage. Business Insider. Retrieved from: http://www.businessinsider.com/ipads-dominate-tablet-usage-2013-5
- Standard & Poor’s. (2014). S&P Stock Guide. New York, NY: McGraw Hill.
