Apple and Supply Chain Management

Apple Inc.

An Analysis of Apple's Manufacturing Process

What products or services of the company are you analyzing?

Apple is one of the world's premier manufactures of a product mix consisting of electronics goods, and related software applications, in a broad range of different industry segments. The company has a global supply chain that spans the globe and markets its products in a number of different international markets.

Apple's current mission statement is "Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App store, and is defining the future of mobile media and computing devices with iPad (Investopedia, 2015)."

How are these products made or services provided?

The distribution channels for Apple's products depend on the particular product. For example, software and digital media can be directly downloaded from the company's web platforms. Apple's electronic goods are distributed through direct and indirect channels however. From its direct and channel pricing strategy to its retail and online storefronts, Apple sells its products like no other company in the consumer electronics space and Apple never discounts through its direct channel as well as manages to keep reseller prices relatively stable by employing a number of different strategies (Josep, 2015). Therefore, Apple has developed its distribution channels so that they can maintain a significant amount of control internally and use this strategy to maximize its value to its shareholders.

Does the company provide both products and services?

Yes. One type of service could be considered the software and software updates that are regularly applied to existing products that have been sold in the market. However, in addition to product software updates, Apple also offers a range of service programs that are focused on the physical maintenance and service of the products that it sells as well.

Did the company outsource the manufacture of its products?

Apple's strategy is to outsource nearly all of its production to strategic partnerships in foreign locations where there is labor that is highly skilled and comparably inexpensive; primarily China. Apple basically creates the product designs internally, by collaborating with its suppliers, and then hands off the production operations to their strategic partners in the supply chain. Furthermore, Apple tries to keep many of the details about the operations about its supply chain as confidential as possible and it can be difficult to get any of the specifics about the company's use of supply chain management (SCM) to produce the goods it sells. There are many reasons for upholding a level of secrecy about operations and there have been cases of SCM insiders actually selling information about SCM operations to potential suppliers who are trying to win Apple supply contracts (Cunningham, 2014).

Apple's supply chain strategy has been effective however and has actually won awards for its ability to perform well in metrics such as speed, agility, efficiency, responsiveness, and innovation and was rated as the number one rated supply chain in 2010 by Gartner's (Wailgum, 2011). However, there are also many issues that are presented by Apple's use of outsourced production partners. For example, there are Apple suppliers in China that produces electronic goods or components that have come under criticism for using child labor as well as violating employees' human rights (Moore, 2010). Furthermore, Apple's suppliers have also been cited for violating environmental regulations in China which are far less comprehensive than the regulations in the developed world (Meyer, 2011). There is one Apple supplier, Foxconn, that has consistently been the subject of a wave of negative publicity related to their unethical social and environmental performances.

Process Map for the iPhone