Apple Inc and Hewlett Packard HP Inc Inventory Management

INVENTORY MANAGEMENT

Inventory Management: Apple Inc. and Hewlett Packard (HP) Inc.

Introduction

From the onset, it would be prudent to note that the relevance of effective inventory management cannot be overstated. This is more so the case given that the ability of a business enterprise to satisfy customer needs is largely founded on the effective flow of the various products it offers for sale into and out of stock. For this reason, in addition to being capable of forecasting demand, an enterprise must also be able to track its inventory and be aware of both variability and lead times. This text concerns itself with inventory management in relation to two of America’s greatest manufacturing enterprises. The said enterprises are; Apple Inc. and HP Inc.

Types and Characteristics of Inventory

To begin with, Apple Inc. concerns itself with not only the design, but also the manufacture of a wide range of computing and communication devices. These are inclusive of, but they are not limited to; mobile phones, personal computers, tablets, etc. Its flagship products are the Mac PC, iPhone, and the iPad. In essence, all of the company’s computing as well as communication devices run on its own in-house operating system christened the iOS. The company also manufactures a variety of accessories and wearables (such as the Apple watch). It is important to note that as has been indicated above, the various items that this particular company offers for sale are technology-based products. This is to say that owing to the fast-changing nature of technology, the said products become obsolete swiftly. Thus, the company’s various products cannot be held as inventory for a long period of time. Also, the fact that the company is a multinational or global enterprise effectively means that at any given time, it holds a large amount of inventory.

On the other hand, when it comes to HP, it should be noted that the company manufactures and offers for sale a wide range of computing and electronic devices including, but not limited to; personal and desktop computers, point-of-sale systems, printers, etc. Like Apple, HP happens to be a manufacturer of products and systems firmly rooted in current technological capabilities. For this reason, its products are also prone to obsolescence if, and when, they are not sold fast enough. Further, being a multinational that operates in multiple locations across the world, the company often holds a large amount of inventory so as to effectively meet and satisfy demand.

Apple sources most of its product components from Asia. More specifically, according to Ivanov, Tsipoulandis, and Schonberger (2021), available data indicates that most of the company’s suppliers for the year 2019 were concentrated in Hong Kong and China. However, it should also be noted that the company still sources for parts and components from other companies including the United States (Ivanov, Tsipoulandis, and Schonberger, 2021). Unlike most companies, Apple releases an annual report indicating the nature and extent of its suppliant engagement as well as relationships.

The various parts and components used in the manufacture of HP products are also sourced from diverse locations from across the world. As assessment of the company’s supplier list indicates that most parts and components are sourced from China, Singapore, and Taiwan (Hewlett Packard - HP, 2022).

The Integration of Design Concepts

Both companies seek to ensure that they are able to meet and exceed customer needs in a market that is increasingly competitive. One was of doing this is by ensuring that customers are able to access quality products where and when they need them. In as far as quality is concerned, both companies appear to be aware that the relevance of consistently churning out products that are able to meet and exceed customer expectations cannot be overstated. Towards this end, the companies have embraced distinct strategies. Whereas HP appears to focus on providing a wide array of products at diverse price points, Apple has consistently deployed a differentiation strategy to see to it that its products have what could be seen as a distinct competitive advantage.

Role of Inventory

In a study seeking to assess the impact of inventory on organizational performance, Atnafu, Balda, and Liu (2018) made a finding to the effect that the relevance of superior inventory management practices cannot be overstated in efforts to promote not only the competitive advantage of an enterprise, but also its performance. More specifically, the authors pointed out that the assignment of the relevant resources and tools towards effective inventory management practices “will result in increasing their competitiveness and organizational performance” (Atnafu, Balda, and Liu, 2018, p. 145). Thus, in seeking to assess the role that Apple and HP inventory play in both companies’ performance, efficiency (operational), as well as customer satisfaction, there would be need to take into consideration the said companies’ inventory management practices

As has been indicated elsewhere in this text, the various products that Apple offers for sale have a relatively brief life cycle. Indeed, as Ivanov, Tsipoulandis, and Schonberger (2021) observe, on average, the maximum lifecycle of a technology-based products such as those manufactured by Apple happen to be approximately 1 year. For this reason, the company must ensure that it does not suffer losses by letting products stay far too long before they are sold. This in effect calls for the holding of the least amount of inventory. It should be noted that according to Ivanov, Tsipoulandis, and Schonberger (2021), the company has over time been able to accomplish a relatively low ‘days to inventory.’ This the company achieves by ensuring that products reach the various retail stores within the shortest time possible. Further, thanks to the concept of ‘drop shipping’, the company has been able to slash costs related to storage and shipping.

On the other hand, Khan and Sumer (2020) indicate that HP has in the past had inventory management problems which it has worked had to resolve within the last decade. In so doing, the company has significantly reduced the number of supply chain nodes. Supply chain nodes, in the words of Khan and Sumer (2020) could be defined as “the locations in a supply chain network” (192). The company also has in place the Just-in-Time (JIT) inventory management approach. This way, it can be able to make maximum use of its organizational capabilities and minimize both production/distribution system costs as well as flow times. According to Khan and Sumer (2020), JIT is especially instrumental in efforts to ensure that an organization and its supply chain do not hold excess inventories. Indeed, zero inventories could be seen as the overall goal on this front – which in the case of HP is crucial to avert a situation whereby its high-technology products become obsolete. This way, customers are able to get products that satisfy their present needs best.

Types of Layout

Layouts could be grouped into four categories. These, according to Russell and Taylor (2019) are “process, product, hybrid, and fixed position layouts” (213). In basic terms, Apple and HP makes use of the hybrid layout in their production and operations management. This is necessitated by the fact that they have multiple unique products that they offer for sale in their diverse product categories. For instance, in relation to communication/mobile devices, Apple presently offers for sale iPhone 13 Pro, iPhone 13 Pro Max, iPhone 13, iPhone 13 mini and iPhone SE. On the other hand, HP has a wide range of computer brands. These are inclusive of, but they are not limited to the HP Pavilion, HP Envy, HP EliteBook, HP Omen, HP Chromebook, etc. A combination layout permits both companies to combine diverse aspects (as well as benefits) of a process layout and product layout.

To a large extent, a process layout comes in handy in batch production. However, unlike product layout, it may not be ideal in instances whereby there is a huge production volume. On the other hand, product layout is ideal in large production volumes scenarios. In the present case, both layouts would not be ideal when used in isolation owing to the fact that both Apple and HP make items that differ in terms of type and functionality. Russell and Taylor (2019) points out that in this particular kind of layout, “machinery is arranged in a process layout but the process grouping is then arranged in a sequence to manufacture various types and sizes of products” (217). By deploying this kind of layout, both companies are able to reap numerous benefits, including increased productivity and consistency.

Supply Chain Performance Evaluation

There are various metrics that could be deployed in efforts to evaluate supply chain performance. In selecting the metrics to be used to evaluate the supply chain performance of both Apple and HP, I took into consideration a few factors. One of these factors is ease of understanding the metric. On this front, I sought to ensure that the metrics selected could be easily understood, i.e. in relation to ease of computation and clarity of what exactly is being measured. I also sought to ensure that the metric selected was not subjective, but sourced from real data. For this reason, I ensured that the inputs were quantitative. With these factors in mind, I settled on two metrics: i.e. the cash conversion cycle and the inventory turnover ratio.

To begin with, using the most recent annual financial data for both companies, Apple’s and HP’s cash conversion cycles are -80 days and -30 days respectively. In basic terms, the cash conversion cycle could be described as “the time between when a company sends cash to suppliers and when it receives cash from customers” (Ackerman, 2007).

On the other hand, Apple’s and HP’s inventory turnover ratios are 39.7x and 5.1x respectively. According to Ackerman (2007), this happens to be an instrumental ratio in efforts to determine or assess the number of times an enterprise or commercial entity sells and replaces inventory within a given time period, i.e. 1 fiscal year in this case. The authors further indicate that this is an instrumental ratio for businesses in efforts to ensure sound decision making in as far as manufacturing and pricing are concerned.