Analysing The Procurementof Apple Company Essay

Question:

Produce an analytical report, mapping and analysing the procurement and supply chain for a chosen company.

Answer:

Introduction

In today’s world of business, many business organizations are adopting business models which are customer centered (Beske & Seuring 2014, p.322). The use of supply chain in procurement which focuses the end customer requires complete visible end-to-end strategy. This can be achieved by identifying areas which require improvement within the end-to-end supply chain. The end-to-end supply chain refers to a system which connects all the logistic and supply chain processes (Bevilacqua, Ciarapica & Giacchetta 2012, p.133). This usually begins with the customer, works through the manufacturing process and then ends at the supplier base. End-to-end supply chain is the main driver of an organization which when well managed can lead to drastic improvement in an organization’s performance by highly raising its profits.

Company of choice

My company of choice is Apple Inc. which was formerly known as Apple Computer, Inc.; Apple Company was established as an American manufacturing company for personal computers, computer softwares and computer peripherals. It became the first successful company dealing with personal computers and popularizer of graphical user interface. The company headquarters are based in Cupertino, in California (Micklethwait & Wooldridge 2015, Vol.2).

Since the company opened its first store in United States in the year 2001, its stores globally have boomed to surpass 200 stores after the year 2007 and are still increasing. Most of its stores are situated in high profile areas and cities in the world such as New York, Berlin, Shanghai ,London, Sydney, Amsterdam and Osaka just to mention a few and it typically boasts of exceptional designs like the famous glass cube traced in midtown Manhattan (Micklethwait & Wooldridge 2015, Vol.2). .

Its official opening of stores has become a reputable ideal with thousands of its consumers often turning up in large numbers in response to prize promises, prestige and giveaways. People have also been reported to line up even overnights at the company stores whenever the company is releasing new products (Micklethwait & Wooldridge 2015, Vol.2).

Apple’s vision as a company has been considerably detailed to reflect the company’s all-inclusive approach and to ensure continued growth and success. This company has proved to work hand in hand with its suppliers which help it improve its sourcing and the manufacturing procedures. The company however continues to search for ways in which it can improve its way of doing business. In unison with the suppliers, the company has continued to work towards full traceability and transparency within the supply chain, an approach which has enabled it to continue enjoying success due to its close working relationships and the two-way strong dialogue it has with its suppliers (Micklethwait & Wooldridge 2015, Vol.2).

Apple Company supply chain Analysis

Supply chain analysis is used as a tool to identify various opportunities of growth related to a certain company in a given industry (Closs, Speier & Meacham 2011, p.101). The performance of every company depends on the supply chain it adopts in its production process. A company’s supply chain involves the sequence of the sectors that are involved in the production process as well as the distribution of its produced goods and services (Christopher & Towill 2010, p.206). It’s actually considered from the point the raw materials are inculcated into the process up to the point the final goods and services are delivered to the targeted consumers.

Apple is one of the companies which have obtained a number of awards because of its supply chain strategy. For instance, Gartner, who is a US-based research and advisory company, recently awarded the company with its inaugural “Masters” award after ranking it No. 1 on his “Top 25 Supply Chains” for the previous 5 years (Linden, Kraemer, & Dedrick 2017).

The key aspect on Apple’s supply chain lies on its multiple suppliers for a similar component approach. The Governance Leadership Centre has reviewed this Apple supply chain strategy aspect to scrutinize the roles that can be played by company boards and directors to enhance the performance of supply chain management and an organizational as a whole (Linden, Kraemer, & Dedrick 2017).

Apple Company utilizes a large network of third party distributors in its supply chain. A current research has indicated that Apple has a total of 785 suppliers based on 31 countries nationwide, with 349 of them based in China (Tang 2016, p.451).


According to the company’s supplier list of 2015, approximately 97 percent of the company’s supply chain (comprising assembly, procurement and manufacture) was accounted for by the company’s top 200 distributors. That implied that 585 of its suppliers accounted for the 3percent remaining portion of the supply chain, giving the company a significant degree of latent capacity.

Also, the company has established some exclusive long-term contracts with its main suppliers and makes use of prepayments to bargain for favorable terms of pricing, get strategic raw materials and warranty high production volumes.

The company has also expanded its supply chain to accommodate new manufacturing cohorts in both China and Taiwan and also secured several suppliers for main components concerning new products (like Apple Watch). Besides diversification, the company has also invested in customized manufacturing equipments, automated assembly and the milling technology (Tang 2016, p.451). Recently, the company has also announced environmental programs with its cohorts in Chinese manufacturing to offset the increasing carbon emissions and shift to clean energy.

The use of multiple suppliers’ supply chain strategy by Apple Company has provided it with key benefits over the competitors. Among many advantages it has provided the company with, below are some (Lee 2012, p.105);

  • Has enabled the company to mitigate the delays and disruptions of supply chain, hence maintaining its gross-margins;
  • Enables the company adjust the ordering ratios with its existing suppliers, minimizing risks of third party issues of volume dependency;
  • Enables the company to quickly raise its capacity of production and respond to fluctuations in the consumer demand side;
  • It encourages low supply costs for the company as several suppliers compete to transact with it;
  • Enables the company to process large number of pre-orders, after which it analyses them to gain demand forecasts;
  • It prevents the competitors of the company from utilizing similar production capacity via exclusive affiliations with suppliers (Lee 2012, p.105).

However, despite of multiple supplier approach in Apple’s supply chain being very successful, the process has shown its flaws. Shortcomings which must to be looked into if the company wishes to maintain its past glory (Lee 2012, p.105).

Recently, the studies which have been conducted reports varying performance issues in regard to Apple’s supply chain. For instance, Bloomberg has argued that the company has lost its mojo, whereas the Greenpeace has rated the company as still the sustainability pioneer (Lee 2012, p.105).

There are other organization’s supply chains which have been scrutinized just like that of Apple. All indicating that as they outsource more of their production technologies, there have been emergences of new insights indicating that the analysts of past scoured quarterly earnings of the companies (Lee 2012, p.105).

Bloomberg found out that by making use of such a data, Apple’s supply chain ended up losing its “mojo”. That is, the major suppliers began to see experience margin frays. For instance, Taiwan Semiconductor Manufacturing and Hon Hai Precision Industry Companies which are Apple’s exclusive processor and assemblers saw their profits decline recently because of bottlenecks in the company supplies (Lee 2012, p.105). To expound on this issue, an agreement was settled to adopt organic light emitting diode screens (OLED). A decision which was adopted relatively late compared to its main rival Samsung. This resolution to opt for OLED in its new iPhone X placed its already lean supply chain under more strain.


The switch outcome was a split launch between iPhone 8 and iPhone X (OLED). The initial iPhone 8 considerably underwent struggle while the iPhone X was arguably being engineered, hence lacking the finger-print dispensation capabilities. Therefore, with the company rival companies like Huawei and Samsung increasingly gaining adept in their interactions with suppliers, Apple was slowly losing on its hardware edge after their iOS platform went under fire, a challenge which had a direct link to its supply chain management (Quinn &Hilmer 2014, p.43).

Apple Company supply chain analysis helps in drawing the conclusion that there are various opportunities in the way raw materials are sourced and the keen investigation of this by the use of the end-to-end supply chain can lead to improved company profitability. A lot of improvement in the company’s supply chain needs to be done using the available supply chain analysis tools (Quinn &Hilmer 2014, p.43). A little improvement in the company’s supply chain means a lot as far as profitability of the company is concerned as this will lead to greater increase in the company’s performance (Linton, Klassen & Jayaraman 2012, p.1075). Behind every successful business lies a transparent and efficient supply chain in the sourcing of the company’s major inputs (Carter & Liane Easton 2011, p.46).

Sustainability issues in the Apple Company Supply Chain analysis

For long, Apple Company has been praised for its supply chain which however appeared from unexpected source: the Greenpeace. The company was award a B- grade by the environmental charity because of its progress in regard to sustainability issues. The company was ranked second after its peers in China (Varsei, Soosay, Fahimnia & Sarkis 2014, p.242).

The report criticized Samsung’s supply chain to be lagging behind as far as renewal energies were concerned and Amazon for its opaqueness. Further, Apple was awarded an A-grade for its renewable energy and climate change approaches and a grade B for its hazardous material elimination practices. The company was again praised because of its closed-loop supply chain, a production philosophy that is based on the re-use of consumed materials (Varsei, Soosay, Fahimnia & Sarkis 2014, p.242).

Reports also praised Apple Company for being in the front line campaigns to eliminate the usage of harmful chemicals like polyvinyl chloride (PVC) plastics and brominated flame retardants (BFRs) in production processes.

These reports reveal just partially on the complexity of supply chain in this company. And it would sound na?ve to comfortably make a conclusion that the company sacrificed its own efficiency for the purposes of environmental reasons. It is very hard to be perfect in everything as a complex international operation (Varsei, Soosay, Fahimnia & Sarkis 2014, p.242).


Contrally to the reports, the current supplier responsibility reports by Apple have detailed multiple labor and environmental desecrations across the company’s supply chain, with the discovery of several cases where underage children have been employed by factories producing Apple products being the most troubling revelation. The internal audit revealed that more than 106 children had been employed by 11 major factories producing Apple products. But that wasn’t all; the reports also revealed that most of the Apple suppliers were not properly storing and handling hazardous waste, with over 100 facilities failing to recycle and properly dispose the harmful wastes after the manufacturing process is completed (Varsei, Soosay, Fahimnia & Sarkis 2014, p.242).

Apple may get some points due to its transparency in operations, but the discoveries by Supplier Responsibility Progress Reports are alarming. In addition to child labor, the reports, after monitoring the top 400 suppliers of this company uncovered a number of other offenses associated with sustainability practices of the company, ranging from the mandatory pregnancy tests imposed to the workers, to bonded employees whose salaries had been confiscated for purposes of settling the debts which had been imposed by the recruitment agencies without their conscience (Varsei, Soosay, Fahimnia & Sarkis 2014, p.242).

In regard to environmental violations, the reports revealed that 35 of Apple Company suppliers lacked the essential protections to inhibit storm water pollution.in addition, 120 suppliers were also reported to lack proper air emission monitors and about one-quarter of the company suppliers have not been compliant what has been outlined by the company’s sustainability plan.

Improvement programs to mitigate the challenges being faced by the Apple Company across its supply chain

Despite of the praises which have been accorded to Apple Company in regard to its supply chain management, it has been facing several problems in its production and delivery of products which ought to be addressed with urgency to improve the business performance.

The problems are experienced right from the suppliers to the delivery of the output to the final consumer. The major goal of every business organization is maximize its profits at the minimum costs possible. An appropriate supply chain (end-to-end supply chain) adoption by the Apple Company will greatly help maximize its profit (Varsei, Soosay, Fahimnia & Sarkis 2014, p.242).

Adoption of flexible distribution system

Apple Company should make sure that it uses effective and efficient distribution systems. Some of the customer orders from various countries are not met on time. The current distribution system can meet only 80% of the customer orders some of which are delivered late than expected. An efficient distribution which can meet all the customer orders at the expected time and at the right place should be adopted so as to increase the company’s performance as well as building its reputation across all its customers world-wide (Vermeulen & Seuring 2009, p.269). The company should increase the frequency with which it supplies its products to various stores in different countries as its products are highly demanded.

Recycling of materials policy

The company should introduce strict policies which encourages the recycling of materials at the distribution centers. Company materials which are capable of being recycled should be done so to prevent wastage and safe the available resources (Gold, Seuring & Beske 2010, p.230). The recycling of materials will help the company safe on costs which they could have incurred as they procure new materials from the suppliers as well as conserving the environment since materials which could have been harmful if disposed such as metals and plastics are recycled (Gos?lbez & Grossmann 2009, p.99).

Adoption of sustainable glass sourcing

Apple Company intensively uses glass in producing its products. The supply chain should ensure that the company has sustainable supply of glass. The company has attempted to do so by partnering with glass companies with an aim of improving global standards for production of better products. The company has also launched sustainable glass programs. Sourcing of the sustainable glass will aid conserve the environment and maximize the company’s profit.

Transparency and accountability in supply chain

Even though the company’s supply chain promotes transparency and accountability among its suppliers, there are still loopholes which need to be addressed. The company involves the use of numerous suppliers from different countries which increases chances of bribery and corruption in the way the tenders and contracts are awarded. Any business organization should involve a manageable number of suppliers who rightly deserve it and well known to the company (Seuring 2013, p.1513). The company should also use gender balance across its supply chain for the benefit of all gender parties

Proper monitoring of the supply chain process

The company should keenly monitor its supply chain activities right from the purchase of the raw materials through the manufacturing process up to the delivery of the final goods to the final consumer. Proper monitoring will ensure that prices set by the company concerning its products are the best in the industry (Govindan & Cheng 2015, p.177). This will help in consumer satisfaction as the consumers are not violated and hence increase the company’s customer base. Proper monitoring will also help eliminate any middlemen activity which may exploit the final consumer (Seuring & M?ller 2013, p.1699).

Conclusion

The major goal of any business organization is to maximize the profit at minimum costs. Efficient and effective supply chain in an organization greatly contributes towards achieving this (Ahi & Searcy 2013, p.329). End-to-end supply chain involves the connection of all the company’s production activities right from the supply of the raw materials through the manufacturing process up to the final consumer. This helps improve the company’s way of doing business as transparency and accountability are maintained throughout the supply chain process in the organization (Mason-Jones & Towill 2011, p.137). Apple Company is a manufacturing company based in United States which majors in computer and phone manufacturing. It has an established end-to-end supply chain which can be improved to achieve the best. Some of the mitigations which can address the problems experienced by the company’s supply chain include adoption of a flexible distribution system, recycling of all reusable end products, encouraging transparency and accountability in the supply chain process and proper monitoring of the activities undertaken from the purchase of raw materials up to the delivery to the final consumer (Chaabane, Ramudhin & Paquet 2012, p.37). Efficient end-to-end supply chain is essential for every business organization and should be properly managed to achieve the best.

References

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