APPLE SUPPLY CHAIN MANAGEMENT

Supplier Quality1
Lyndia Stacey and Tiffany Bayley

Tim Cook, Figure 1, joined Apple Inc. (Apple) in 1998 as Operations Manager2. Apple co-founder
Steve Jobs, Figure 2, hired him to make daring and creative decisions to improve Apple's supply
chain. By 2015, as Apple’s CEO, Cook was well known for his talent in running a lean and agile
supply chain [1]. One of Cook’s first steps after taking over Apple's supply chain in 1998 was
reducing the number of strategic suppliers by 75%. This forced companies to compete more
aggressively for Apple's business [2]. The number of suppliers continues to be minimized, which
means it is now easier to manage and monitor the various companies. Concurrently, Apple is
vigorously involved with each supplier to enforce a culture of quality [3].

Apple has a Supplier Code of Conduct built into their contract which is one of the toughest in the
industry [4]. This code outlines Apple’s expectations for suppliers including human rights,
environmental protection, and management practices. With hundreds of companies willing to adhere
to their stringent terms, Apple can easily switch suppliers to ensure that quality requirements are met.
To monitor suppliers’ facilities, in-person audits are regularly conducted by Apple across all supply
chain levels. In 2014, over 600 audits were performed covering 1.6 million workers and 19 countries.
Apple also made 30,000 calls to employees to ensure their worker rights were being upheld [5].

Figure 1 – Tim Cook 2009 [6] Figure 2 –Steve Jobs 2008 [7]

1
This case was developed based on publicly available material.
2
See Appendix A for a summary of Apple’s corporate timeline

Lyndia Stacey and Tiffany Bayley of the University of Waterloo prepared this design case study for classroom use. The authors do not intend to illustrate either
effective or ineffective handling of an engineering situation. The author may have disguised certain names and other identifying information to protect
confidentiality.
The Waterloo Cases in Design Engineering Group prohibits any form of reproduction, storage or transmittal
of this document without its written permission. This material is not covered under authorization of CanCopy
or any reproduction rights organization. To order copies or request permission to reproduce materials contact
Waterloo Cases in Design Engineering c/o Department of Mechanical Engineering, University of Waterloo,
Waterloo, Ontario, Canada, N2L 3G1 e-mail: mailto:engcases@uwaterloo.ca

Copyright © 2016, Lyndia Stacey and Tiffany Bayley. Used by the University of Waterloo with permission
Apple Supplier Standards

Steve Jobs enforced rigorous discipline on his suppliers from 1996 to 2011 [8]. Tim Cook continues this
philosophy and every supplier must now uphold Apple’s Supplier Code of Conduct [4] as well as the
Supplier Responsibility Standards [9]. Between both documents, there are more than 100 pages of
comprehensive requirements which usually surpass local employment and environmental laws [5]. As a
bonus to the supplier, Apple’s contracts are typically a catalyst for business improvement. For example,
Foxconn (Apple's biggest supplier) invested heavily in robotics to meet production quotas [10].

Apple Suppliers

Apple works with companies in more than 30 countries [10] and publicly lists their top suppliers [11]. By
outsourcing its component manufacturing and product assembly, Apple can concentrate on design. Figure 3
provides a broad overview of the supply chain, highlighting its global presence.

Research and
Sourcing Manufacturing Warehousing Distribution
Development

USA USA China USA Global

China

Asia

Europe

Figure 3 – Overview of Apple Supply Chain [10]

Apple initiated their Supplier Responsibility Standards [12] in 2006 and has regularly worked onsite with
supplier companies to eliminate deficits. This rigorous methodology has been challenging for supplier
production management [1]. Not satisfying Apple’s requirements is detrimental for suppliers, especially if
they rely heavily on Apple for business. Quality must be consistently achieved otherwise Apple will switch
to a competitor. It is essentially make-or-break: do well, obtain high payout; fail, and severely damage your
reputation [13].

Problem Statement

Suppliers must align their quality management practices with Apple’s requirements because failure in the
supply chain is ultimately passed down the line and impacts product marketability. However, Apple’s
reputation has been damaged by poor social responsibility of suppliers in the past, even if product quality
was adequate. Do you think Apple’s supplier quality methods are effective in addressing these concerns?
References

[1] Apple Insider, “Under Tim Cook, Apple Cracking Down on Supply Chain Management”. Internet.
http://appleinsider.com/articles/12/06/18/under_tim_cook_apple_cracking_down_on_supply_chain_ma
nagement [Accessed November 16, 2015].

[2] Supply Times, “X Does it Right: Apple’s Supply Chain Management Secrets”. Internet.
http://www.supplytimes.com/inventory-management/x-does-it-right-apples-supply-chain-management-
secrets/?mode=featured [Accessed November 16, 2015].

[3] Supply Chain Opz, “Is Apple Supply Chain Really the No. 1? A Case Study”. Internet.
http://www.supplychainopz.com/2013/01/is-apple-supply-chain-really-no-1-
case.html#sthash.goeL59PP.dpuf [Accessed November 16, 2015].

[4] Apple, “Apple Supplier Code of Conduct”. Internet. https://www.apple.com/supplier-

responsibility/pdfs/supplier_code_of_conduct.pdf [Accessed November 16, 2015].

[5] Apple Computer Inc. “Supplier Responsibility 2015 Progress Report”. Internet.
https://www.apple.com/ca/supplier-responsibility/pdf/Apple_Progress_Report_2015.pdf [Accessed
November 16, 2015].

[6] Wikimedia Commons, “File: Tim Cook 2009.jpg”. Internet.

https://commons.wikimedia.org/wiki/File:Tim_Cook_2009.jpg [Accessed November 16, 2015].

[7] Wikimedia Commons, “File: Steve Jobs.jpg”. Internet.

https://commons.wikimedia.org/wiki/File:Steve_Jobs.jpg [Accessed November 16, 2015].

[8] Walter Isaacson, Steve Jobs. New York: Simon & Schuster, 2011.

[9] Apple, “Supplier Responsibility Standards – Version 4.1.1”. Internet. https://www.apple.com/supplier-

responsibility/pdfs/supplier_responsibility_standards.pdf [Accessed November 16, 2015].

[10] Beta News, “The global supply chain behind the iPhone 6”. Internet.
http://betanews.com/2014/09/23/the-global-supply-chain-behind-the-iphone-6/ [Accessed November
16, 2015].

[11] Apple, “Supplier List 2015”. Internet. https://www.apple.com/supplier-

responsibility/pdf/Apple_Supplier_List_2015.pdf [Accessed November 16, 2015].

[12] Apple, “Supplier Responsibility”. Internet. http://www.apple.com/supplier-

responsibility/accountability/ [Accessed December 14, 2015].

[13] Investopedia, “10 Major Companies Tied to the Apple Supply Chain (AAPL)”. Internet.
http://www.investopedia.com/articles/investing/090315/10-major-companies-tied-apple-supply-
chain.asp#ixzz3rgvvKOC0 [Accessed November 16, 2015].
Appendix A – Apple Timeline

1976

•Steve Jobs and Steve Wozniak found Apple Computer Company

•Apple I product released

1977

•Becomes Apple Incorporated

1984

•The first Apple computer - the Macintosh released

1985

•Steve Jobs leaves Apple

1996

•Steve Jobs returns to Apple

1998

•Jobs hires Tim Cook as Operations Manager

2001

•iPod introduced

2005

•Tim Cook is named Apple's Chief Operating Officer

2011

•Death of Steve Jobs by pancreatic cancer

•Tim Cook becomes CEO

2015

•Launch of iPhone 6s