Apples SC Secret?

Hoard Lasers
Management Information Systems 17.12.2012

Outline
1. What is SCM about? What has to be managed?

2. Why is effective SCM crucial for companies like Apple?

3. How does Apple use SCM to achieve operational excellence?

4. What other companies rely heavily on SCM?

Apple

o Founded April 1, 1976 by Steve Jobs, Steve Wozniak, Ronald Wayne o 394 retail stores o Worldwide operations o Electronic devices with own software and hardware o Famous for: iMac, MacBook, iPhone and iPad o Biggest company on the world based on market capitalization

Supply Chain Management

Procurement

Manufacturing

Distribution

Managing flow of...

... in both directions.

SCM Goal

Competitive advantage

o Increasing effectiveness and efficiency operational excellence o Decrease operational costs o Communication and relationships in a network of companies

Company

Importance and value

Companies like Apple: o Highly innovative o Short product life cycle continuous improvement o High number of competitors o Limited number of suppliers o Investments needed o Trade secrets o Worldwide operations o Decreasing margins Operational Excellence as competitive advantage o High control over costs and information o Speed product time to market o Delivery based on demand o Increased sales and margins o High quality o Reduce inventory levels

Example of Apples success related to SCM

o Design requirements: Light shining through aluminum, holes invisible to human eye cut with hoard lasers o Exclusive contract with laser manufacturer (impact on competitors supply chains) o Long-term commitment, dependability of supplier on Apple o High volume, pressure on prices, negotiation high margins

Contracts earlier in time

Monitoring and control

Quick adaptions

No delays

Lesser sales loss

Apples SCM
They have taken operational excellence to a level never seen before.
Driving factors of their effective SCM

1. Closed ecosystem 2. Big discounts due to Apples volume 3. Mentality to spend exorbitantly

Apples SCM
4. Apple engineers work close with suppliers optimize industrial process 5. Focus on a few product lines do little in the way of customization 6. Big weapon - $80 Billion in cash and investment 7. Tough bargaining with suppliers o o o demands detailed price quote requires key suppliers to keep two weeks of inventory does not pay as long as 90 days after delivery

Apples SCM
8. Control reaches peak before announcement of new product o factories work overtime o surveillance to track efficieny / ensure pre-launce secrecy o every handoff point is monitored 9. Retail stores give it a final operational advantage o track demand by store / hour o extra spending to get around bottlenecks
Enormous profits and margins due to their operational edge

Tricks Apple uses

o innovative production techniques

o buy up all available air freight handicapped rivals

o manufacturers are busy with Apple orders rivals like HTC fall behind

o ship product in tomato boxes to avoid detection

Toyota SCM at its highest point

o Toyota Production System - pioneer of Just in time

delivery o worlds top carmaker o hyper-efficient supply chain Well-intentioned BUT carries also unintended consequences be exposed to supply chain surprises can compromise quality e.g. Toyotas massive recall in 2009

Thank you!