Analysis and managerial implications

APPLE SUPPLY CHAIN The key points highlighting the Apple supply chain are as follows: Innovative product development Apple is the best in the world at innovative product development. Because the company develops hardware, software, and associated digital servicesrather than just focusing on one dimensionit can provide an unmatched user experience. This allows Apple to capture high margins from its products and services. Due to highly innovative product the advantage in the supply chain of Apple is that Apple doesnt have to get the demand forecast for a new product right. As long as it underestimates demand for a hot new product, Apple will have loyal customers clamouring for the new devices and willing to wait. Procurement advantages due to operation on big scale Because Apple has become so large, it has procurement advantages smaller rivals cant match. Financial analysts are beginning to focus on Apples supply chain. For example, Samsung lost $10 billion in market value when Apple placed a huge order for flash memory with Elpida, securing more than half of that companys supply. Apple reportedly has price advantages in securing key components, manufacturing capacity, capital equipment, and airfreight capacity. It should be noted that all these privileges come with already being a worldwide recognized and desired brand which has already reached the heights of success, making it rather difficult for rival businesses to compete. Detailed Analysis of suppliers cost for the products When Apple asks a supplier for a price quote, it demands a detailed accounting of how the manufacturer arrived at the quote, including estimates for labour and material costs and projected profit. Manufacturers can get hit with penalties for quality issues and warranty claims. Apple is becoming so big that even though it has a number of customized components that it has to pay extra for, the companys cost structure is starting to resemble that of some of its rivals that only source common components. Exclusive Agreements with key component manufacturers: Apple works to lock up the supply of key components, particularly custom components, with exclusivity agreements. This serves to protect the uniqueness of its products. In some cases, Apple invests in capital equipment to make these special components (the company lends the production equipment to its manufacturing partner). At times this production machinery becomes Apple exclusive either because of exclusivity agreements or because Apple is so large that a backlog for the equipment becomes horrifically long. This all results in the fact that product perfection takes place of prime instead of supply chain management.

Supply Chain with a High risk Profile Apple, like many companies in the electronics industry, has a supply chain with a high-risk profile. Many of its key components come from northern Taiwan, the company sole sources several customized components, and it relies on massive factories located in Shenzhen, China for final assembly. Any sort of man-made or natural disaster at any of these sites could potentially grind Apples supply chain to a halt. The lack of back up institutes is also a huge risk factor and because Apple needs to apply cheap labour due to the sheer quantity of the numbers they have to produce due to high demand for the brand, no other alternatives have been applied as of yet. CONCLUSION Apples supply chain is no different from any other electronic companys supply chain in the sense that it comes with risks, advantages and disadvantages. Today, people automatically associate successful with good management but that has ceased to be true for Apple. Perhaps in the past, Apple products were well managed internally and some aspects of that management still remain in the upper echelons of hierarchy in this day but for the most part, factories manufacturing Apple products seemed to be mismanaged and employees overworked to clear backlogs and meet the high demand its excellent marketing has produced. Apple has become more products based than people based because of its popularity. However, this raises an interesting moral issue. Is Apple wrong in doing this? Whether it is or not, it cannot be denied that even with a strained SCM, it is still one of the best selling brands in the world. So in the larger scheme of things, Apple SCM factors in very little depending on the point of view. If a company is judged by how popular, successful and profit grossing it is, Apple is certainly successful. And supply chain management has very little to do about it. While it is unclear how long Apples deteriorating supply chain managing has been functioning, it has been functioning nonetheless and as everyone known, Apple has become more desirable a brand of late than anything else. So perhaps neglecting the SCM and concentrating purely on product isnt such a bad strategy after all. In the words of the late Steve Jobs if it aint broke, it dont need fixing. DELL SUPPLY CHAIN Key Features highlighting DELL SUPPLY CHAIN are as follows: Build-to-order model Dell matches supply and demand because its customers order computer configurations over the phone or online (Internet). These computer configurations are built up from components that are available. Dells strategy is to provide customised, low cost, and q uality computers that are delivered on time. Dell successfully implemented this strategy through its efficient manufacturing operations, better supply chain management and direct sales model. Dell takes orders directly from its customers; either on phone or online. Thus, Dell reduces the cost of intermediaries

that would otherwise add up to the total cost of PC for the customer. Dell also saves time on processing orders that other companies normally incur in their sales and distribution system. Moreover, by directly dealing with the customer Dell gets a clearer indication of market trends. This helps Dell to plan for future besides better managing its supply chain. Another advantage Dell gets by directly dealing with the customer is that it is able to get the customers requirements regarding software to be loaded. Dell loads the ordered software in its plant itself before dispatching it. By eliminating the need of a PC support engineer to load software, the customers gain both in time and cost. They can use the PCs the moment they arrive. Efficient Logistics at Dell In the business world the method that a particular company uses to get its products from the factory to the consumer varies. These methods are very sophisticated and often define the profitability, quality and ultimately the success or failure of a particular business. One particular logistical system that is interesting is the system that Dell uses to deliver its computers from the factory to the customer's location. To provide such a tremendous service to their customers it would seem to cost Dell a tremendous amount in unused inventory and storage costs. One would even wonder how Dell can afford to operate like this. The truth is that Dell actually carries no inventory and that they in fact force their suppliers to carry all the inventory and therefore the suppliers also assume all the risks and costs associated with this inventory. Further explanation regarding efficient Logistics at Dell: The first step in this incredibly profitable logistical system is when the customer enters his specifications for the computer that he or she will purchase. When Dell receives and processes this information, they send an order out to each individual supplier and they transport each part to a location where the product can be assembled. Then Dell simply assembles the item and ships it out to the customer. Dell is not responsible for any inventory and even more incredibly does not have to pay for any unused parts. Dell's logistical system works almost flawlessly and it would seem to the casual observer that Dell has really designed an ingenious system that allows them to run their business in this manner. However the reality is that a logistics system like this has been come up with before, but the difference is that no other company has been able to convince its suppliers to go along with an arrangement which will cost them so much. It is very difficult for a company to convince a supplier to guarantee that a certain number of parts will be in stock and ready for use and to not offer a guarantee in return that they will be paid for

the parts. From a supplier's point of view it would not be beneficial to assume all the risk of unused inventory. How Dell convinces its suppliers to agree to take part in a system in which the supplier will assume all of the responsibility for the over-forecasting of sales and unsold parts is still a mystery. One of the only possibilities is that Dell chooses small suppliers and makes sure that the majority of their business is done at Dell. Dell then leverages this position and coerces them into taking part in a logistical system that is clearly not beneficial to the supplier. In order for the supplier to allow this to happen Dell has to keep sales high so that Dell can give the individual suppliers enough business to stay afloat and be profitable. This is of course easier said than done and this is the reason that Dell is one of the only companies that can offer a customizable product that can be assembled and delivered quickly to the consumer. Dell has appointed freight forwarders such as DHL, CEVA, Panalpina, UPS etc sector wise to pick up shipments from vendor locations, transport the collected shipments by road and consolidate inventories of all vendors in the freight forwarders consolidation warehouses situated at the gate ways in each country and ship out cargo by ships to the port of destination or airfreight shipments to the plant locations after completing exports and customs clearance formalities on behalf of vendors. While the shipments are in transit, the freight forwarders electronically transfer shipment information and documentations to their overseas offices or agents at the destination and keep Dell and vendors informed of the status of shipments. Freight forwarders at the destination ports file advance shipment documents with customs and on arrival of cargo, complete customs formalities and custom cleared cargo is then transported to freight forwarders warehouse or customs bonded warehouse or to another designated third party warehouse which houses all inventories meant for Dell. The third party service provider who manages the inventories in his warehouse receives the cargo, unpacks the shipments from bulk skids to individual carton level and completes inbound formalities including updating of inventories in its system and stocks the materials in designated rack locations. Both vendors and Dell are continuously kept informed of the data regarding shipments and stocks. The warehouse stocks inventories in the name of various vendors at SKU level. Most of the times these warehouses are situated adjacent to the plant or at close proximity. Upon receiving a production order from Dell, as per Bill of Material received through DELL ERP system, items are picked up, loaded into the supply cages and trays as per pre determined design and delivered to the plant after completing documentation and system entries to remove inventory from its system held in vendors name, invoice raised and physical delivery accompanied with documents completes the supply chain cycle of Raw material supply.

The revenue recognition happens when material is transferred out of the warehouse and its system and invoiced to Dell. Delivering products with minimal environmental impact Dell ships products to 180 countries worldwide, at a rate of one system per second. Whether one laptop is sent to a student in India or thousands of desktops and servers to an enterprise in Indiana Dell ships products in a way that gets each order to its correct destination on time, with all contents intact. Dell works hard to minimize the environmental impact of each shipment. From choosing the right transportation mode for each order type to minimizing packaging, Dell continuously refines global transportation and logistics network so that transactions are more eco-friendly without added cost or complexity. Refinement started in 2011 when Global Fulfillment and Logistics (GFL) team streamlined our processes to reflect our evolution from PC supplier to end-to-end solutions provider. New transportation modes and routes are explored including shipments from Asia to Europe, and from China to South Asia. Our Air to Sea initiative has reduced carbon emissions by shifting many international shipments from aircraft to ocean freight. Retail Partner Expansion Newer ways to complete our retail orders closer to end customers and consolidate them into fewer shipments are found out. This reduces travel distance, fuel consumption and carbon emissions. For example, in the U.S., we process some orders for efficient routing through retail distribution centers, while others are handled directly. In Europe, we expanded our fulfillment center distribution network for retail orders on the mainland, and changed the way we deliver accessories. Both these changes reduced truckload volumes and fuel consumption. Container Optimization Processes have been refined for pallet building and trailer loading because shipping trailers and containers with higher densities reduce fuel consumption and carbon emissions. Packaging Innovations Innovative packing methods using 3Cs strategy, pioneering the use of bamboo packaging for lightweight consumer products and mushroom-based packaging for heavier products.

Reverse Logistics (Product Returns) Dell looks to prevent waste by cutting down on returns and dealing with returned products efficiently. Eliminates the root causes of returns, and then make more than 90 percent of returned assets available for resale through our Dell Outlet. Dell also strives to reduce carbon footprint further by shipping Dell Outlet products from one central location so we can efficiently bundle orders.