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Critical Analysis of Supply Chain Challenges

Discuss about the Sustaining Organizational Performance of Apple Inc.

Apple is one of the most successful organizations in the area of Information Technology and Mobile Phone industry. It is an American multinational corporation which has started its business operations in the year 1976 with personal computers only. The organization was founded by Mike Markkula, Steve Jobs and Steve Wozniak. With the passage of time, Apple has expanded its business operations in offering many products such as hardware, software, digital distribution, consumer electronics and online services (Apple Inc. 2017).

This firm used and managed a global supply chain with innovative development in United States. Moreover, it outsourced manufacturing in Asia and product-parts sourced from its suppliers worldwide. This report is prepared to answer the questions given in the case study. The case study shows the global supply chain process of Apple. The below report includes the critical analysis of supply chain challenges which are faced by Apple. There is the discussion about the benefits and limitations of sourcing strategies in context of Apple Organization. Furthermore, it includes the performance objectives which Apple’s suppliers expected to meet. To become a market leader, Apple needs to focus on its supply chain management and sourcing strategies. The organization should make efforts to deal with the limitations of sourcing strategies so that it can provide the products on time with highest quality components.

However, Apple Inc. has managed its global supply chain with creative development in United States and other nations. The organization has adopted various supply chain strategies to deliver its products to final customers. Still, the organization has faced various challenges in the area of global supply chain. The organization should make efforts to overcome these challenges by implementing some effective strategies. One of the major challenges of the organization is the new product development at Apple (Richard, 2014). The development of new series of iPhone seems to be saturated in recent times. The products of Apple are popular for made by assembling several components which are availed from different suppliers. Manufacturing new major product means that there will be need of large number of components for the production. It has made supply chain network of Apple more extensive and management more complex. The given case shows that market research indicated that there were some quality defects in supplier’s parts of iPhones. This is because Apple has less focus on its research and development division (Marucheck, et al, 2011). Apple has made efforts to add new technology and design in its new version and products. The followers of company are expecting more technology breakthrough in new products. It has affected the sales growth of iPhone and declining rate of products is high. The organization is unable to ensure its production capacity and order volume with the suppliers.

Sourcing Strategies

In addition to this, the organization has faced the challenges in managing sustainable relationships with new or existing suppliers (Wallace, & Hill, 2011). It secures the supply of components to meet the market demand by buying a large volume of parts from its suppliers with the prepayment. It is very difficult for the suppliers to get the orders from other customers. Thus, suppliers have become dependent on the order of Apple to generate more profits (Slack, 2015). With this prepayment, Apple’s suppliers have higher pressure to provide the components with Just-in-Time production process. They have realized a slim profit from this company so suppliers changed their attitudes. Due to this, some of the suppliers have declined the orders of Apple to manage their independence. Just-in-Time supply chain of Apple placed a burden on the suppliers’ shoulders (Jacobs, Chase, & Lummus, 2014). Delay in the components’ supply had an adverse impact on the inventory projections of Apple.

Moreover, Apple has faced the challenge in maintaining its brand image. The organization has been alleged of cooperating with the factories in its upstream supply chain. Because of its Just-in-Time production, immediate order or changes in requirements, the phone assembler may need their employees to work overtime for fulfilling the needs of Apple (Chamberlain, 2011). The supply chain of Apple is managed in such a way that it led the organization to higher cost of production. The organization is continuously making efforts to minimize the production costs, but it still has higher production cost in comparison to its competing brands such as Samsung, Nokia etc. Apart from above challenges, other challenges are such as organization is very much dependent on logistical services which are offered by outsourced suppliers. There may be possibility that these suppliers can offer the lower quality of materials and products. It relies on its partners to comply with the code of conduct of suppliers (Kozlenkova, et al, 2015). Thus, the organization has to make some improvements in its supply chain so that it can minimize the costs. It needs to review its transportation model and procurement strategy to lower the transportation and order costs. Additionally, Apple may reuse the components in reverse logistic system to minimize the costs.

Sourcing strategy is a method of supply chain management which reinforces the way in which data is collected and used so that a company can leverage its buying power to get best values in market. It is a process which enhances and re-evaluates the purchasing activities of an organization. It optimizes the supply base of company, enhances efficiency and reduces the costs. The organization implements sourcing strategies by evaluating patterns of spending, describing needs and aligning the requirements of company with market capabilities. As per the given case, Apple is one of the organizations that have adopted sourcing strategies to enhance its supply chain process (Jia, et al, 2017). These strategies have both benefits and limitations to the company and its supply chain management process. These benefits and limitations of sourcing strategies to Apple are stated below;

Benefits

In context of sourcing strategies, Steve Jobs stated that it was not due to cheap labor in Asian nations, but these factories can manufacture faster with large scale and flexibility. The organization has various outsourced suppliers. One of the major suppliers of the company is Foxconn. It assisted this organization in manufacturing thousands of iPhones in a day and lowered the labor costs. In addition to this, Apple had various benefits of sourcing strategies for supply chain management. One of the significant benefits is the risk diversification as multiple suppliers assisted the company to react faster to issues and disruptions. By adopting sourcing strategies, the organization was able to increase its production capacity. As per the case, the demand of Apple’s products is increasing continuously, specifically from India and China (Meeken, 2013). Outsourcing the production from Foxconn assisted Apple in enhancing its capacity quickly to fulfill the demands of iPhones in market. With several suppliers, the organization is able to increase bargaining leverage for maintaining the low costs and profitability. Thus, outsourcing helped the labor specialization and reallocation of the organization with multiple suppliers (Pearce, & Robinson, 2011).

Apart from these benefits, Apple Organization has some limitations or disadvantages of these sourcing strategies. In the beginning, the organization has outsourced from a single manufacturer that in turn created a risk to Apple as there may be shortage of specific parts of iPhones. In this way, it will lead to a delay in the manufacturing of the products. Sourcing from all over world can cause a risk of delay without on-time component production. The given case stated that Apple has been adopted outsourcing strategies to lower the cost of production, but it has caused another problem to the company i.e. quality control (Stadtler, 2015). This issue has increased the cost of inspection to Apple Inc. The outsourced suppliers were unable to provide the expected quality in the iPhones. The organization has conducted the audit of its products and found various quality defects in iPhones. In context of Apple’s outsourcing, it can be stated that outsourcing does not mean that company put all the responsibilities away. Thus, Apple has to take the responsibility and they should conduct regular audit of their suppliers. In this way, the organization has some limitation of sourcing strategies. To deal with these limitations, Apple needs to make investment in research and development division (Babin, & Zikmund, 2015). First, it needs to enquire the suppliers and their image and then it should enter in partnership with those suppliers. It will be profitable for the growth and success of Apple Inc. in competitive business environment.

Limitations

Suppliers play a significant role in effectiveness and success of supply chain management process of an organization. The suppliers work with an organization by establishing some performance objectives. In general, the suppliers work with the objective to decrease the purchase risks and exploit overall value of purchaser (Vaaland & Heide, 2007). It includes analyzing the supplier quality, delivery performance, cost competitiveness and technological capability. Apple Inc. has used effective methods and strategies to attract the suppliers all over the world. At Apple Inc., the suppliers has established some performance objectives and expected to meet them. The major performance objectives of Apple’s suppliers are such as to minimize the cost of production for the organization, to maintain a better relationship with Apple and provide stable supply, to update the technology and manufacturing process for upgrading the iPhones and to provide better quality on reasonable prices. Suppliers of this company are accountable for quality of their services and supplies (Apple Inc., 2018). To maintain and enhance the higher quality for customers, the suppliers need to focus on effective quality management system. They should be loyal to the company and its production system.

In addition to this, the suppliers of Apple are expecting to generate significant profits by supplying the components and other materials to Apple’s manufacturers. They are aimed to enhance the performance of Apple that assists its suppliers in achieving identification among manufacturers. They are competing on different factors other than price of materials only. As mentioned above, Apple is adopting Just-in-Time system for the production of iPhones so suppliers ensure that they have complete resource and material availability when organization needs. The suppliers at Apple are performing with the objective to increase the business and market share of Apple. They are striving to enhance the operational efficiencies to differentiate Apple from itself from competing brands. In addition to this, they are performing their responsibilities with the objective to offer the materials and components of reasonable prices that is favorable for both Apple and its suppliers itself (Mangan, Lalwani, & Lalwani, 2016). These performance objectives of suppliers are stated in the code of conduct of Apple Inc. The suppliers are making efforts to meet these performance objectives. Meeting these objectives successfully will be very effective and beneficial for the growth and success of Apple’s business.

Conclusion

From the above analysis, it can be concluded that Apple Inc. has maintained its top position in Information Technology and mobile phone industry. With the support of suppliers, the organization offers several products like iPad, iPhone, iPod, Apple TV, Smart watch etc. In addition to this, it provides online services like iOS app store, iTunes Store, iCloud, Mac App Store etc. Apple is successfully managing its global supply chain system and manufacturing products by using Just-in-Time process. The above report concludes that this company has faced some challenges under its supply chain process. However, it has faced various challenges but supply chain of Apple is not that much complex.

To deal with these challenges, it has adopted sourcing strategies. These strategies are both advantageous and disadvantageous for company’s growth and brand image. Apple has to emphasize on its research and development process and make investment in marketing research. To overcome the challenge of new product development, Apple can manage the product in better way and consider the current needs of potential customers by reviewing the old and returned iPhones. It should focus on developing more effective strategies to manage its suppliers and supply chain process. In this way, this organization will be able to manage and improve its supply chain management in global environment.

References

 Apple Inc. (2017). About Apple Inc. Retrieved from https://www.apple.com/in/ on 26 March 2018.

Apple Inc. (2018). Supplier Responsibility. Retrieved from https://www.apple.com/in/supplier-responsibility/ on 26 March 2018.

Babin, B. J., & Zikmund, W. G. (2015). Exploring marketing research. UK. Cengage Learning.

Chamberlain, G. (2011). Apple's Chinese workers treated 'inhumanely, like machines. Retrieved from https://www.theguardian.com/technology/2011/apr/30/apple-chinese-workers-treated-inhumanely on 26 March 2018.

Jacobs, F. R., Chase, R. B., & Lummus, R. R. (2014). Operations and supply chain management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.

Jia, F., Orzes, G., Sartor, M., & Nassimbeni, G. (2017). Global sourcing strategy and structure: towards a conceptual framework. International Journal of Operations & Production Management, 37(7), 840-864.

Kozlenkova, I. V., Hult, G. T. M., Lund, D. J., Mena, J. A., & Kekec, P. (2015). The role of marketing channels in supply chain management. Journal of Retailing, 91(4), 586-609.

Mangan, J., Lalwani, C., & Lalwani, C. L. (2016). Global logistics and supply chain management. US. John Wiley & Sons.

Marucheck, A., Greis, N., Mena, C., & Cai, L. (2011). Product safety and security in the global supply chain: Issues, challenges and research opportunities. Journal of Operations Management, 29(7-8), 707-720.

Meeken, Z. (2013). The Risks and Benefits of Outsourcing Supply Chain Management. Retrieved from https://www.business.org/software/supplier/the-risks-and-benefits-of-outsourcing-supply-chain-management/ on 26 March 2018.

Pearce, JA., & Robinson, RB. (2011). Strategic management: Formulation, implementation, and control. 12th edn. UK. McGraw Hill Higher Education.

Richard. (2014). Apple INC.: Managing a Global Supply Chain. London. Ivey Publishing.

Slack, N. (2015). Operations strategy. US. John Wiley & Sons, Ltd.

Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Berlin. Springer.

Vaaland, T. I., & Heide, M. (2007). Can the SME survive the supply chain challenges?. Supply chain management: an International Journal, 12(1), 20-31.

Wallace, W.L., & Hill, C.A. (2011). Insights into the Strategic Sourcing Decision: Understanding Buyer-Supplier Relationships. Operations Management Education Review, 5, 69-88.

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