Apple Operations and Supply Chain PPT

Apple Inc.

Livia Hejlova - Robert Gerstenmaier - Di Chang - Mohammed Ali A Alsharidah - Oleksandr Sydorenko

Agenda: •

Introduction

•

5 Performance objectives

•

4Vs model

•

Apple Supply Chain • Purchasing • Distribution • CRM

•

Conclusion

Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Introduction • Production • Computer HW, computer SW, consumer electronics, digital distribution • Area served: Worldwide • Number of employees: 73 000

• Number of locations • 393 retail stores in 14 countries (as of August 2012) • online Apple Store • online iTunes Store • Worldwide annual revenue of $156 billion in FY 2012 (ended 30.9.2012) • Publicly traded company – extreme market influence (NASDAQ: AAPL, NASDAQ100, S&P 500) Livia Hejlova - Robert Gerstenmaier - Di Chang

Apple: Performance Objectives Supply Chain - Current Situation

•

Cost – Optimization of supply and assembly - global trade (Example: iPhone: 34% Japan, 17% Germany, 13% South Korea, 3,6% China,27% Others  Assembly in China) Product cost ~ 170 $

•

Flexibility – Due to problems with main supplier Foxconn, Apple places 60% of iPad mini orders at the competitor Pegatron

•

Speed – 8 weeks delivery time for iPhone 5

•

Dependability – Unpredictable demand, no stock and Quality Control Program affect Dependability

•

Quality – Strict quality control Program affects Speed (Example: material problems with iPhone 5 “scuffgate” leads directly to production stop at the supplier Foxconn) Livia Hejlova - Robert Gerstenmaier - Di Chang - Mohammed Ali A Alsharidah - Oleksandr Sydorenko

Apple: 4 Vs model low

Volume

high

low

Variety

high

low

Variation

high

low

Visibility

high

• Volume – Huge amount of products and additional facilities sold worldwide (17 million iPads, 26 million iPhones, 4 million Macs in year – quarter ending 30.6.2012) • Variety – Products of the same product category (desktops, laptops, netbooks, music players, smart phones, servers, monitors, software, tablet computers, television box sets) • Variation – Demand for products increases rapidly in times of new product launching; (Different price sensitivity – iPad as consumer entertainment niche is more price sensitive than iPhone as a communication device) • Visibility – Apple’s strong branding secures good visibility of their products worldwide Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain Purchasing of raw materials and components from suppliers Apple’s global supply chain 1. US •

All semiconductor components with the exception of baseband chips (supplied by Infineon in Germany) and memory (supplied by Samsung in Korea)

2. Korea • Flash memory storage and a portion of LCD panels 3. Taiwan • Touch screens, casings and passive components 4. Japan • Critical materials and core technologies 5. China • Low added value acoustic components and battery modules

Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain Purchasing of raw materials and components from suppliers Characteristics of Apple’s supply chain management • Control over the supply chain: buying of components in bulk (keeping the price lower than its rivals but enormous bargaining power on its suppliers; Intel as a rare exception) • Apple keeps product design, software development, product management, marketing and other high-wage functions in the U.S. • Apple focuses its efforts further up the value chain • Apple model: taking advantage of worldwide manufacturing resources while creating wellpaying jobs at home • There is little value in electronics assembly n U.S. • Among countries, China’s economy continues to play a surprisingly small role in comparison to the U.S., Korea, Japan and Taiwan • Apple managers need to beware of relying too heavily on single customers • The iPad for instance contains more than 400 individual parts

Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain Purchasing of raw materials and components from suppliers

• Added value (margin distribution): • Approximately 58% of the sales price of a typical iPhone 4 goes to Apple Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain Distribution • Selling of an integrated hardware/software product

• Apple retail stores network (gives it a major advantage in distribution, direct customer experience of brand values) • 393 retail stores in 14 countries (August 2012) • Apple Online Store (products, accessories) • Resellers • Retail Stores (AT&T, Best Buy, Wal-Mart) • Online Resellers (computer- and consumer electronics – focused e-shops) • Mobile services providers – carriers (play a gateway role in choosing and distributing handsets) • Apple Mac-expert staff provided to selected resellers' stores • Co-branding or distributing Apple's products and services with other companies (e.g. HP was selling a co-branded form of iPod and pre-loading iTunes onto consumer PCs and laptops) Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain Distribution – Apple Retail Stores • Independent Stores • A prototype store designed around customer needs rather than products

• Significant Stores • Located in prime locations of major cities (New York, London, Paris, Shanghai, etc.), amazing architecture, staff trained not to sell rather to respond to customer queries and provide solutions to customers’ problems • Offering The Genius Bar – specially trained staff offer one-on-one training on how customers can maximize their use of a Mac or their iPhone • Branding • Apple’s stores as a part of the company’s branding strategy, reflecting the company’s now-popular minimalist design philosophy and offering clutter-free zones

• Apple Store visit • Experiencing a stimulating, no-pressure environment, • Discovering more about the Apple family, • Trying out the company's products getting practical help • Feeling of inclusiveness by a community that really understands what good technology should look and feel like - and how it should fit into people's lives Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain Distribution – Branding Strategy • Customer focus • Strong focus on customer satisfaction, trust and good – feeling (solving problems and advising approach to customers rather than selling) • Emotional connect • Apple – customer partnership • Advertising – Iconic product • Initially as free-thinking and non-conformist • Later on as creative (e.g. the Think Different campaign) and intelligent (e.g. the Get a Mac campaign) • Today highlighting qualities such as hip and cool (e.g. the iPod silhouette), obsessed with perfection and minimalism • Logo • Reflects the minimalist design philosophy • Brand architecture • Monolithic brand identity – everything being associated with the Apple name Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain Customer Relationship Management • Apple works as an integrated service provider model – takes ownership of the entire customer experience • Apple products are designed as an integrated system – only hardware and software developed or approved by Apple will work with them • Provide their customers with highly-personalized experience

• Staying on the top of the American Customer Satisfaction Index for eight years, topping its own record from 86 to 87 on 2011

Livia Hejlova - Robert Gerstenmaier - Di Chang

Apple: Supply chain Customer Relationship Management • Online/Retail Store Apple Care Services • Financing/Leasing options (for consumers, businesses, schools and universities) • Personalized assistance from Apple employees in the Apple Shops • Valuable IT lifecycle services for integrating and managing customized Mac and multiplatform solutions in your existing environment • Comprehensive implementation and integration services for audio, broadcast, film, photography, publishing, and video professionals • Certified technology consultants • Apple fully understands that all aspects of the customer experience are important and that all brand touch-points must reinforce the Apple brand

Livia Hejlova - Robert Gerstenmaier - Di Chang

Apple: Supply Chain Customer relationship management Strategies for improving loyalty: • A store just for Apple • Complete solutions

• Varied products • Consistency • New innovations • Attractiveness

Apple: Conclusion

• While the iPhone and iPad, including most of their components, are manufactured offshore, the most value from these products goes to Apple.

Livia Hejlova - Robert Gerstenmaier - Di Chang

References Offline Research and Practical Issues of Enterprise Information Systems II Volume 2: IFIP TC 8 WG 8.9 International Conference on Research and Practical Issues ... in Information and Communication Technology). 1 Edition. Springer.,2007. Slack Nigel/ Chambers Stuart/ Johnston R, 2010. Operations Management. 6 Edition. Pearson College Div. Linstone, H.A. and Turoof, M.(1975) The Delphi Method: Techniques and Applications, Addison-Wesley.

Livia Hejlova - Robert Gerstenmaier - Di Chang - Mohammed Ali A Alsharidah - Oleksandr Sydorenko

References Online Channeling Steve Jobs: http://ezproxy.napier.ac.uk:2334/docview/1024159625 BROWN, B., 2011. Surveys find Apple most admired, most satisfying company. Network World (Online), . Available: http://go.galegroup.com/ps/retrieve.do?sgHitCountType=None&sort=DASORT&inPS=true&prodId=EAIM&userGroupName=napier&tabID=T003&searchId=R1&resultLi stType=RESULT_LIST&contentSegment=&searchType=AdvancedSearchForm¤tPosition= 1&contentSet=GALE|A267972228&&docId=GALE|A267972228&docType=GALE&role= http://www.thestreet.com/story/11731645/1/heres-why-the-next-3-months-will-be-hugefor-apple.html http://www.saleschase.com/blog/2012/04/09/apples-innovative-distribution-strategyrevealed/ http://www.saleschase.com/blog/2012/04/17/how-apples-branding-strategy-made-it-anicon/ http://www.apple.com/supplierresponsibility/ http://cmuscm.blogspot.co.uk/2012/02/two-sides-of-apples-supply-chain.html http://www.ausmt.org/index.php/AUSMT/article/view/155/136

Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

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