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BUSI3321 Operations Management

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Steve Jobs, Steve Woznaik and Ronal Wayne started Apple Inc in their garage in April 1976. They manufactured the first generation Apple computer with a goal to provide the customers with personal and friendly system that can be set up at either office or home. They introduced their second-generation computer within just a year, which was far advanced than the ones available in the market. The Apple 2 had color illustration and open engineering. They started using floppy disk 51/4 for storing their data in second generation of Apple computers. This computer gave them a competitive advantage and put them in the lead for the next three years.

Two of the partners left the organization within the first decade, Woznaik in 1983 followed by Jobs in 1985. Woznaik reflected lack of enthusiasm, whereas, Jobs started his own software company Next and computer company Pixar. Job’s exit from Apple made the company suffer right after it gained the top position in 1990. The company felt an urgent need of operation management that led the company to purchase Next software. The arrangement was settled in the year 1997 and Jobs was positioned as ICEO. Jobs then focused on the product line offered by the company and started rebuilding it. This is the period when Jobs identified the ability of Jonathan Ive and worked together in the process of reconstructing Apple’s status. Ive and his team introduced then introduced a new line of Apple personal computers and named it iMac in 15th August, 1998. The company sold 800,000 iMac unites in just five months of its launch. This can be considered as the turning point for Apple and they introduced a number of products in the next few years.

Jobs on his return to Apple introduced their online store in 1997, which was the first e-store opened by Apple. They took an overall renovation of the company and entered the software market. They introduced IPod Mp3 player and iTune in 2001 when again was a big success for the company. The iPod was introduced on 23rd October, followed by Safari web browser and finally the iTune music store in April 2003 that sold over 25 billion songs by 6th of February 2013.

Another remarkable success for Apple came with the introduction iPhone in 9th January 2007. This helped them reducing the gap between the customers’ expectation and the mobile devices produced by the companies. They borrowed the concept of producing their other line of products to manufacture the line of mobile phones. Until date, the company launched 9 of the iPhones along with sub-divisions for each single generation. The latest mobile products introduced by the company in 2017 comes with some of the latest technologies like 3D camera resolution, photo capture option, face detection, wide screen without frame, wireless charging and many other features.

The complete line of Apple produces are iPod, iPad, iPhone, Mac computers and Apple TV. They also have a wide range of apple accessories ranging from watch, adaptor, cables, cases and covers, chargers, headphones, illustration and design, watchbands, remotes and docks. Their software products ranges from iTune, iPlay, Safar, iso, iMac and many more. This report will critically review the material management, role of relationship management and the role of emerging technologies in Apple’s supply chain.

Task 1 – Material Management

Supply Chain Structure

The company follows a simple supply chain for their business, which incorporates R&D, marketing and departmental functions. They also make prepayment to some of the suppliers for ensuring the quality of the raw materials.

Apple Supply Chain Process

1. Apple inc. purchase raw material from different sources
2. The materials are then moved to the Chinese manufacturing facility
3. Transport of the final products:
  • Directly to the customers through online store by FedEx or UPS
  • Transported to central warehouse in California to supply customers through other distributers such as retail stores.
4. The products are recollected from the customers at the end of product life cycle for the recycling purpose.

Five performance measurement of Apple Supply Chain

1. Quality – The quality assurance of Apple products undergo various steps. The quality assurance department primarily checks the quality of the products and services and then conducts third party audition to verify the quality being delivered to the customers. It helps them to deliver the flawless products for satisfying the customers’ needs.
2. Speed – The current simplified supply chain is an outcome of the effort put by Steve Jibs and Tim Cook. They successfully reduced the number of warehouses to 9 from 19 around the world utilizing the JIT method of supply chain. Minimizing the number if sources, transports, and warehouse enable the company to have better control over their supply chain hat speeds up the process. They can both deliver the products at the time of need and bring back the recyclable products that reach the end point of product life cycle.
3. Dependability – Narrowing down the supply chain to a simple one enables them to gain complete control over their product distribution. The company now can better manage the distribution of their products from their Chinese manufacturing facility to the markets. Simplicity makes the process faster as they have to follow the single supply chain and track down the product. Recycling on the other hand is the opposite of the distribution where the company takes back the products and sends them to their Chinese facility. Simple supply chain in this case can also help the company to track every single product that are being taken back. Hence, it increases the dependability of the supply chain.
4. Flexibility – Flexibility in terms of product manufacturing is the key to address the marketing strategy.
  • New product Flexibility
  • Volume Flexibility
  • Product Mix Flexibility

The company should be flexible enough to introduce new products in the market matching the fast demand of the customers. Hence, it asks Apple to enable its factories to reconfigure new products quickly enough to support the fast life cycle. The volume flexibility asks the factories to increase production due to initial promotion and short life cycle. The sales are as good as lost if the factory fails to produce the right volume in time. The sale forecasts are notoriously inaccurate and higher in case of new product. It makes it necessary for the factory to be prepared for a landslide, a fizzle, or anything in between. Moreover, the company must identify the time when the product life cycle reaches its end and manage its production accordingly to launch new product.

5. Cost – “Customer come first, cost cutting come second”. Apple charges a premium price for enjoying high profit margins. In other words, manufacturing products within the decided cost is not the most important consideration at the time of designing or operating an Apple factory.

Apple’s 3BL pathway

2017 Apple progress report (supplier responsibility) reveals that the company depends on 3BL pathway that includes people, plant, and profit. Apple put people in the heart of their supply chain structure.

A. People – Apple identifies changes, develops new items and plans asking the suppliers to do things accordingly in newly prescribed ways. Apple’s safety engineers investigate on the health, security, and natural dangers. The company then initiates the configuration of risk plan by joining the forces with interior and exterior groups at the time when risk is identified. The company organize regular health test for the workers to ensure the safety and guarantee that the products manufactured in the facilities are securely manufactured.

In 2016, Apple’s procedure engineers prepared a factory readiness assessment tool for ensuring that the industrial facilities are completely arranged to provide laborer and natural consistency.

Bonded worker is the center infringement of Apple’s Code of Conduct and have zero resilience for it. If some case is discovered, the company demands the provider to reimburse all enlistment charges back to the laborer. 2016 report reveals that infringement brought about US$ 2.6 million being reimbursed to more than 1000 provide representatives. Until date, an aggregate of US$ 28.4 million has been reimbursed to more than 34,000 specialists. Essentially, all reinforced work infringement happen amid a provider's first evaluation, which is the reason we now incorporate this in our on boarding procedure for new providers. Rehash cases are exceptionally uncommon—the couple of such occurrences have brought about the finish of the business relationship.

B. Plant and Environment

Identification of Supply Chain Members – Apple first identifies the source of the materials and the members involved in the supply chain for assisting the mining countries and environmental protection. Apple is the first company that identifies the suppliers of 3TG that is Tungsten, Tantalum, and Tin. The company then publishes and refines the name of the suppliers. They also follow similar identification process for Cobalt, which gives Apple greater score in Corporate Information Transparency Index or CITI administered by Institute of Public and Environmental Affairs. Apple uses IPE data as third party advisor for identifying, supervising and facilitating solution in order to improve supplier performance and initiate new direct relationship between the suppliers and IPE.

Waste – Apple identified 20% of their produced waste in 2015 is being burnt or going for landfills. It led the company to initiate a program in collaboration with the suppliers and manufacturers to decrease the amount of waste by separating and recycling. They also involved the third party named Tech-Com situated in Shanghai that is specialized in recycling every materials using creative process. The volume of landfill waste dramatically increased over past year. It increased from about 74,000 metric tons in 2015 to 2000,000 metric ton in 2017.

Decreased Water Consumption – Apple initiated Clean Water Program in 2013 to decrease the freshwater consumption in their 86 supplier site. It resulted in saving of about 3.8 billion gallon of water and 35% reuse of fresh water, which enables them to save about 8 billion gallon of that is 18 glasses of water for every individual around the globe.

Reduction in Carbone footprint – Apple developed an objective to reduce Carbone footprint through their supply chain and supplier sites. They plan to use renewable energy in all their factories by 2018, which will reduce the Carbone emission by 70,00,000 metric ton every year. It is equal of removing 1million and 500 thousand cars every year.

Using third-party audit – Apple has collaborated with China Chamber of Commerce of Metals, Minerals and Chemicals importer and Exporter or CCCMC for creating a third-party audit for cobalt. The program initiated in 2016 demands participation of every cobalt suppliers in a third-party audit. This resulted into elimination of 23 suppliers from the supply chain of Apple. Apple used third-party audit in different level of supply chain, evaluated above 500 data points correspondent to their Code of Conduct, and turned all areas for improvement.

C. Profit

“With revenue up 7 percent year-over-year, we’re happy to report our third consecutive quarter of accelerating growth and an all-time quarterly record for Services revenue,” said Tim Cook, Apple’s CEO

 “We reported unit and revenue growth in all our product categories in the June quarter, driving 17 percent growth in earnings per share,” said Luca Maestri, Apple’s CFO.

Apple Inc. 2017 Q3 Financial Report compared with 2016 Q3 Report


Q3 2016

Q3 2017


42.4$ billion

45.4$ billion

Earning /diluted share



iPhones (unit sold)

40.4 million

41.026 million

 iPads (unit sold)

 9.9 million

11.424 million

Macs (unit sold)

4.2 million

4.292 million

The report published on Q3 2017 and cumulative return reflects:

  • 17% growth in earning /share
  • 7$ billion returned to investors in Q3 2017
  • 223 $billion returned on cumulative capital
  • Forecasting of Q4 2017 to be the revenue between 49$billion and 52$billion

Apple Operation Management Decisions

Product and Service Designing – The product design of Apple is finalized by a number of administrators in the company. Apple has assigned one vice president for each of their operation management, who is authorized to take decision in their departments such as development, production, and software engineering.

Management of Product Quality – The responsibility of quality control is distributed among eight of their vice presidents for ensuring the product’s quality offered by Apple. These vice presidents are assigned in various departments like design and development of products, marketing, retail sales, E-store sales, designing and HR management.

Design of process and its Capacity – The HR management in Apple utilizes the strategy to increase products development and innovations by enhancing the capacity of the workers and by ensuring the quality of the raw materials provided by their suppliers. Steve Jobs was no doubt excellent in his job; however, Tim Cook implemented a different social environment in Apple for their employees. It helped the organization to coordinate the employee behavior in relation to their group.

Strategy designing – The Company believes in simple decoration of the stores highlighting the products and featured items. The operation management further prioritizes the creativity of the employees and provides them the opportunity to implement innovative ways of introducing the products and services to the customers that are more efficient.

Supply Chain Management – The supply chain of Apple is considered to be the most effective due to several reasons. They are:

  • The conception is set up by the CEO and followed by the departments and employees
  • The company monitors and evaluates every step in the Supply Chain process
  • Apple have a Code of Conduct applicable to all their suppliers
  • Risk identification and preparing plan to overcome it is the key to their supply chain success.
  • Consideration for a simple supply chain process that helps Apple to minimize the steps towards their goal.

Inventory Turnover Management

Inventory Turnover = COGS/ ((BI + EI) / 2)

COGS: Cost of Goods Sold

BI: Beginning Inventory

EI: Ending Inventory

Tim Cook implemented JIT method in their supply chain similar to Dell. He further implemented FIFO that ensures the sale of old products prior to the new ones. It further makes sure that no inventory is accumulated in the warehouse or in the stores. Cook also decided to decrease the time of inventory turnover from 2 months to 1 month and later to 6 days. It also decreased the number of suppliers form 100 to 24. Moreover, he decreases the cost by reallocating the warehouses to its nearest Apple facility. These decisions taken by Cook made serious impact on the product costing that is reflected on the profit of Apple.


Apple has successfully set a coordination between the company strategies, marketing function, and operational function. Their marketing strategy is successful in both identifying and satisfying the customers’ need. The operational function on the other hand successful in identification of the products required in the market.

Their strategies are set accordingly to meet the goals and concepts of “think different” and “excellence” that helped them to simplify the steps, reduce the cost, provide good service to the customers, create brand reputation, and reduce environmental damage and to put the people at the core of company’s heart.

Task 2 – Role of Relationship


“Supply chain is the football coach, and logistics is the quarterback. They both provide direction regarding how field assets must be situated and positioned. However, the coach provides the overall game plan, and the QB executes the moves, adapting on the fly as needed.”

Jasen Incidis, Application Developer and Support Specialist, UltraShipTMS

Cook has changed the face of Apple supply chain. He not only considered changing the ecosystem of the supply chain, but also provided opportunity for millions of credit system. This in turn help the company to attract various suppliers to involve in long-range agreements with Apple. The purpose of the supply chain is not limited to reducing cost, increasing profit, or fulfilling customers’ demand, but goes beyond to make excellent brand reputation. It makes it absolute necessity for the company to choose the suppliers wisely to avoid calamities that might grind the brand reputation. Apple gets its raw material from Taiwan and manufactures its products in their China facility. Hence, logistics used is important to hold the brand reputation, maintain their ranking, and share in the market.

Apple have a greater control over its supply chain that enables them to retain control over the price and costing of its products while maintaining its quality. It give Apple the upper hand to prescribe code of conduct for each supplier and score for each materials supplied with the definite requirement. The company have complete information of how the producers conferred at the quote, including the gauges for work and material expenses and anticipated benefits from the products.

Apple made exclusive agreements with all their suppliers to protect the uniqueness of its products. Apple in many cases invested in the capital equipment and lend it for the manufacturing of the products to make exclusive component of Apple. This report identifies the major contract between Apple and its suppliers and manufacturers in the market.

Contract between Apple and GT Advanced Technologies

GT Advanced Technology is a US based company that manufactures crystal equipment, global solar, LED and electronic devices. The goal of the company is to provide innovative products to its customer’s low cost products with greater quality and efficiency. Apple signed agreement with GT Advanced Technologies in manufacturing the screen of iPhone6 and 6plus. The contract dates back to 2012 before launching their iPhone 5. The detail of the contract includes:

  1. A delay of more than four days in supplying the glass to apple will cost GT 77million dollars.
  2. The company could not press release the new about their contract with Apple without taking prior approval from Apple.
  3. The Apple held the right to get all the documents back as it is confidential
  4. Breaking any of the above-mentioned agreement will cost GT 50 million dollar. This is irreversible in case of GT, which means that GT will not receive any money from Apple if they release the news.
  5. Apple will be supplying the crystals in the form of bricks of boules as mentioned in the contract, which GT then have to convert into glass sheets.
  6. Apple will be supplying GT with equipment without any guarantee
  7. Selling the glasses to anyone other hand Apple will cost GT an amount of $640,000/ boule or $650,000/month.

Apple always considers the new materials offered by the supply members for producing competitive products. Apple ended its contract with Imagination Technologies Group Plc. in 2015 that was previously supplying graphics to Apple since 2007. They announced the reason for incapability of Imagination in providing Apple with innovative graphics. Apple previously advised Imagination to supply them new and unique IP for all its devices, which was delayed. It contradicted Apple’s view of future iDevices that led the company to extend its contract with Imagination Technologies Group Plc.

Apple-Foxconn Relationship

According to Chan, Pun and Selden (2013), Apple sold off all of in house and abroad industrial capacity in 1991 to a large US manufacturing organization, retaining only Macintosh computer, whose manufacturing facility was situated in Ireland. They then moved their facilities to Asia that resulted in Apple’s growth, efficiency, and effectivity in management of suppliers and assemblers.

Apple identified that the concentrating all the manufacturing in a single area will help them making profit by reducing the cost and receiving discount on transportation and air flight. This supplemented in building relation with Foxconn. Foxconn started to cut down the cost in many items for Apple maintaining the desired quality. Foxconn imposed a premium service on demand engineering and quality assurance. The partial credit in improving the iPhone devices goes to the top producers of Apple who provided analysis and constructive suggestions.

Apple further put pressure on Foxconn for decreasing the profit margin while meeting the technical demands of Apple and providing large volume of production. Foxconn’s expansion in and out of China and high wages also effected the revenue.

An average Chinese worker cost about $10 out of the $587 iPhone retail price. This means that Apple collaborated with Foxconn extracted most out of the Chinese workers for gaining high profit margin. In addition to that, other main material suppliers like Samsung and LG held about only 14% of the value of iPhone.

Apple ensured high profit margin by paying attention to the details of production, changing product design in the last minute, complete control over the price, and managing the inventory by forecasting the production according to the daily demand of the worldwide customers. According to Lee and Strategos (2012), Apple and Foxconn prioritized the manufacturing process, which are highly innovative regarding the quality of the products, pricing and fast production life cycle. They focused on the quality, flexibility, and cost of the products to ensure these.

Foxconn hired unskilled labors from different part of China especially the western part with different as China has more than 130 languages. Foxconn used short production cycles with long lines of assembly and few automation with short time working. The repeating short-term task cycle made the unskilled labors learn faster. Foxconn further put one supervisors per four production workers, which means it assigned 30000 supervisors for 700000 in technical engineering. Moreover, the Chinese worker belongs form the poor villages compared to the US workers. This means that the motivation in case of Chinese workers derived form the primary needs to support their family and ensure the safety. However, motivation in case of US worker were different from the Chinese, which is a mixture of social, regard, and self-satisfaction. This required a distinctive remuneration and association structure.

Employee Management

According to the Apple Progress Report (2017), Apple set up commitments towards employee at all suppliers an assembly chain members, which includes the following:

  1. Working for full time does not mean working all the time – As per International Labor Organization or ILO and Electronic Industry Citizenship Coalition (EICC) guideline, 60 hours per week should be the limit set by every organization including a day off. Apple tracks the suppliers and their 1,200,000 workers around the world to ensure that the guideline is being followed.
  2. Elimination of Underage Workers – The legal working age around the world is set at 16. Apple by assessing more than 705 of the manufacturing facilities of their suppliers and 1.2 million workers identified that a considerable number of them were 15. This led Apple to decide for their suppliers and asked them to provide secure home corridor, salary, and education unless they reach the legal working age. Moreover, the suppliers should also ensure jobs in their facilities at the time these underage workers reach the legal working age.
  3. Safety and Health – Apple conducted an assay in 2016 for each of their final assembly to ensure the use of hazard free elements in their production. They extended this review to their equipments, chemicals, storage, and locations to verify the pollution in their manufacturing facilities.
  4. Education as an opportunity for the Workers – Apple also ensures the education of their workers, which can be noticed from the success of Jiang Hong Liu. She started working as a technician at the assembly line in Apple-Foxconn. She utilized the Supplier Employee Education Development for gaining two of her university degrees that helped her to become manager at the company.
  5. Hear the Voice of Employee –As mentioned earlier, Apple prioritizes the opinions of their employees for innovation as the greater the greater number of mind involved in the process increases the chances of development. Hence, Apple made it mandatory for the suppliers to seek of the employee opinions in their facilities and evaluate their proposal.


The dominance of Apple in terms of pricing, onsite production, process surveillance and product delivery has profound consequences on labor process. Foxconn’s competitive advantage, the basis for securing contracts with Apple and other branded multinationals, hinges on its ability to maintain flexibility. The mega factory has to reorganize its production lines, staffing and logistics in a very short time to be demand-responsive. Transnational supplier like Foxconn, on the other hand, has grown rapidly through internal development and acquisition. Their profit driven goal and desire of gaining higher position along the global value chain follows similar pattern. The result of competitive manufacturing is now threatening the factory condition. It further leading to controversies on the grounds of labor relation as issues is occurring more frequently.

Task 3 – Role of Emerging Technology to Supply Chain

Emerging Technology in supply chain plays active role in changing it by bringing monetary development and restoration. These are the deciding factors in planning and degree to which financial and social advantages are attained from the future ventures like added substance advances, propelled materials, elective vitality, and biotechnology. Only a few of the scholarly work is currently present on the related topic. Moreover, the existing studies fail in properly explaining the emergence of technology in the supply chain due to lack of availability of the information. This led the works remain understudied. The emerging technologies in supply chain connect the string of operation and procedures that start, advance, and create amid assurance of the craftsmanship. The related methods help accomplishing something novel to deliver an incentive as new items and new administrations to a definitive buyer. This part of the report considers and outlines the writings on emergence of technology in supply chain. An interdisciplinary study to look into the matter incorporates more than 20 points.

SAP is one of the largest multinational software company headquartered in Germany. They are one of the largest suppliers of ERP and other enterprise applications around the world. The company has over 33000 customers in 190 countries around the world ( 2016). Most of the companies utilizing SAP ERP software are small to medium. With involvement in 75% of the global business transaction, the company is in third ranking right after IBM and Oracle.

The company provides opportunity to the other business organizations availing their services to run better by utilizing their products and services. From back office to meeting room, distribution center to customer facing facade, and desktop to cell phone – SAP engages individuals and associations to cooperate even more productively and utilize business understanding even more viably to remain in front of the opposition. SAP’s services empower more or less 310,000 business and clients to work gainfully, adjust constantly and develop economically.

Apple started their joint venture with SAP in the year 2016, where SAP supported Apple developers with training. SAP further offered the Apple developers tools and training of new generation of designing and planning. SAP is now offering them SDK, which will run for iPhone and iPad. It will also develop a new Cloud service named SAPHANA for iOS enabling it for more data collection and analysis of touch, notifications, and services of location. SAP will further develop local iOS applications for supporting business operation. SAP will be working along side with Swift™, which is Apple’s cutting edge, secure and intelligent programming dialect for developing these applications. This will offer Apple a comfortable client involvement with the SAP Fiori for iOS plan dialect. Laborers crosswise over businesses will be engaged to get to the basic undertaking information, procedures, and client encounter. They have to settle on choices and make a move ideal for their iPhone or iPad through applications intended to empower a field upkeep specialist to arrange parts or timetable administration, or a specialist to impart the most recent patient information to other human services experts.

It is possible to conclude from the above that Apple is seeking assistance form the technological firms to compete with other companies present in the market. They new partnership with SAP will help them in utilizing future of information technology, material planning, and system development. They are planning to develop their cloud system by introducing new cloud developed by SAP for governing their operation in the local market. Their plan for developing future generation applications will enable them to enjoy the advantage in the upcoming years.


It can be concluded from the above discussion that Apple’s supply chain structure perfectly reflects the company strategies, marketing function, and operational function. The marketing strategy taken by the company can successfully identify and satisfy the customers’ need. The operational function on the other hand successful in identification of the products required in the market. The secret behind the success is the five-step performance measurement in the supply chain that ensures flexibility, dependability, cost, quality, and speed of the supply chain.

The waste management procedure implemented by Apple can considerably reduce the industrial wastage and contributes in reducing the production cost for the company. Moreover, their operation management has maintained the innovative quality, design, and service.

The efficiency of Apple’s supply chain can also be measured in term of relationship management. The company follows strict regulation over their suppliers and partners in the business to ensure the quality, design, durability, and timing of the product. They have strict guideline for each of their suppliers and partners that is the key to their high quality products.

The company seek further innovation in terms of technology, which led them to collaborate with SAP. This helped them in producing cutting-edge applications and programs to support their supply chain.


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