Essay on Operations Management

Published: 2021/11/17
Number of words: 4110

Introduction

Apple Inc. is a global leader in high-tech products and services. Mobile devices, Hardware, and software are all areas where the company is focused on staying ahead of the competition. Apple has grown and expanded significantly in the worldwide technology industry since its inception in 1976. Many elements have contributed to Apple Inc.’s success, including efficient operations. The company has created and executed a supply chain management system that is most effective in the contemporary business setting. A comprehensive analysis of Apple’s Supply Chain Management (SCM) divulges that it utilizes IT to enhance procurement, manufacturing, and distribution practices. The company uses various demand forecasting methods to predict how many goods it should produce and deliver to merchants located all over the globe. For the sake of identifying the organization’s process strategy and making improvement suggestions, this paper examines Apple Inc.’s SCM.

Apple approach to materials management

Supply Chain Structure

Apple divides its worldwide operations into the following sections based on topography and market close vicinity: the Americas, Europe, China, Japan, Greater, and the Asia Pacific as a whole (Forbes, 2020; CSIMarket, 2021). North America and South America are included in the Americas section, whereas Japan is solely responsible for Japan (Forbes, 2020). The European market is covered by the European sector and markets in the Middle East, India, and Africa. As an added bonus, Greater China encompasses all of Asia except for Australia, while the rest of Asia includes Asia except for China, Taiwan, and Hong Kong (Khan, 2019; Forbes, 2020). Nevertheless, this segmentation does not fully represent the company’s worldwide retail operations because of global commerce; the company’s service offerings have been fluid (CSIMarket, 2020).

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For example, the US, Europe, China, and other Asian nations are all part of the company’s global supply chain. Manufacturing takes place in China due to lower labor costs and well-developed infrastructural facilities, while the company’s central material handling is located in the United States (California). It also uses FedEx and UPS warehouses for shipping and posting to its consumers. There are also return policies that include their Trade-In Program, Warranties Return Policy, and their Recycling or Reuse Program (Black, 2015).

While Supply Chain Development activities involve research and development, prototype development, and pre-launch preparations, supply chain appraisal procedures are part of the overall supply chain planning strategy (Black, 2015). As a result, this model matches Brymer et al. explanation of Slack’s operational management model (2020). Supplier services security; logistics and delivery network design; risk management; distributions and warehousing; returns maintenance; and pricing as well as price control for all supply chain activities and processes are just a few examples of what Kaponda (2020) describes as part of the company’s supply chain process.

In contrast, the company is structurally organized into sixteen (16) units: Design, Hardware Technologies, Hardware Engineering, Software, Machine Learning, Services, and Artificial Intelligence, as well as Worldwide Marketing and Marketing Communications, Sales, Operations, and Human Resources. The latter include functional units rather than multi-divisional ones, as in Genera’s organization (Dudovskiy, 2019; Podolny and Hansen, 2020). As a result of this organizational structure, the company has been able to concentrate on what is essential: the company’s vision, which is the products and services they produce and render rather than profits or losses, and this has been achieved by encouraging task delegation as well as efficient resource allocation (Awa, 2016; Li, 2019; Podolny and Hansen, 2020).

Approach to Management of Intermediaries

Distribution channels are also included in the company’s marketing controllable. When evaluating Apple Inc.’s product distribution channel, we must consider the complete chain of companies or intermediaries that each product goes through before reaching the ultimate customer. Supply chain management is a term that refers to the more extensive connections between businesses that demonstrate the physical movement of goods and information. The company’s supply chain management scheme has been recognized as the sphere’s finest (Craighead et al., 2011). Other business participants admire Apple Inc. for its forward-thinking tactic to product growth. Apple has been compelled to diversify its product range in response to increasing competitiveness in the mobile phone market sector, including the advances in computing, software, and internet products. While this enables Apple to provide an unparalleled customer involvement and earn enormous profit margins on its products, it has also facilitated a complicated supply chain strategy (Hofman, Aronow & Nilles, 2013).

Apple Inc. has varied its organizational structure to maximize the value of its domestic and international businesses. The majority of the critical components required to operate Apple’s key business operations are produced and supplied via a network of outsourcing partners based in the United States of America, China, Asia, and Europe. Subsequently, the produced components are transported to an assembly plant in Ireland for final assembly (Edgar Online, 2013). Following assembly, the goods are kept in two warehouses until they are distributed to end-users. Intermediate storerooms are utilized to hold completed goods awaiting direct delivery to consumers who buy via the company’s online retail shops (through UPS/FedEx). Apple Inc. operates a centralized storage facility in Elk Grove, California, replete with front and back-office personnel and contact centers for holding goods awaiting delivery to end customers through alternative distribution methods.

Apple Inc. utilizes indirect distribution channels, including third-party cellular network carrier services, value-added resellers, distributors, and stores (Edgar Online, 2013). These channels include but are not limited to physical retail shops and sales agents. Apple also offers return policies for natural end customers. This includes warranty returns, recycling and reusing programs at designated recycling locations, and trade-in programs. The Vice Presidents of the different business divisions and the establishment’s CEO are essential stakeholders in the development process for the company’s logistics management. It is critical to emphasize that Apple Inc. is continuously improving its goods and services. As a result, the main stakeholders engaged in the strategic planning process gather regularly to discuss better the business’s methods to fulfill all its consumers’ requirements. The number of consultations required for the firm’s strategic planning process is not stated. The firm’s vice presidents and CEO meet on a frequent and need-to-know basis to handle developing problems in both the firm’s internal and external contexts. The Apple Company has developed a robust supply chain management system throughout the years. The organization’s main takeaway from its previous experience is to place hefty pre-orders for raw supplies, an approach that has enabled the company to benefit from economies of scale in the design, production, and supply of exceptional technological goods across the globe.

How Lean and Agile Can Produce Competitive advantage

There will be instances in supply chain concept and implementation when either an ‘agile’ or a ‘pure’ lean strategy is appropriate. On the other hand, circumstances may occur when a combination of lean and agile approaches is needed to complement one another; this is known as a hybrid approach (Christopher and Towill, 2000). Throughout its Process Of New Product development, Apple Supply Chain Planning exemplifies lean manufacturing (NPD). As shown in the picture below, it combines R&D, marketing research, and different supply chain management responsibilities. According to the statistic, Apple Inc. accelerates the market launch of new products by procuring licenses on time, keeping an acceptable inventory level, and managing material purchasing obligations. They pay certain suppliers in advance to obtain and lockdown prices and supplies for critical raw commodities. The inventory level is checked regularly to guarantee that raw ingredients are supplied precisely when they are required.

Supply chains that have embraced the transformational power of agility and adaptability are constantly one step ahead of the competition, as they can anticipate and react quickly to unexpected events, transforming disruption into an opportunity. Agility is needed in a less predictable market with fluctuating demand and a high degree of variation. Lean is most effective in a predictable setting with a large volume of work and slight variation (Shaw et al., 2005). The majority of organizations operate in both environments, for example, Apple with product lines such as PC that sell in large volumes and are thus predictable—here, a lean approach is recommended. In contrast, other product lines such as servers and storage sell in small volumes and have highly volatile demand, necessitating an agile approach.

Apple Inc. can continue to improve its supply chain’s lean and flexible nature by experimenting with and embracing sophisticated and developing expertise such as the “Internet of Things, cloud computing, big data and analytics, and blockchain”. In recent years, big data analytics has developed into a tool and method for organizations to gain a competitive edge. Organizations are capturing and utilizing supply chain “big” data to improve and change their Efficient Consumer Response (ECR) capabilities, the capacity to hear the customer’s voice and respond directly.

Supply chains are leveraging technological innovations such as Radio-Frequency Identification (RFID), sensors, GPS tags, chips, and barcodes to monitor and provide real-time information on the location of inventory, and then communicating this data to an application that improves visibility of the inventory’s route to all supply chain partners and accelerates decision-making and collaborative efforts. Additionally, supply chains use robots for order fulfillment and pickup through IoT, resulting in faster customer delivery after purchase. This results in increased company development through client acquisition and retention.

Supply chain clouds are collaborative supply chain platforms shared by clients, suppliers, and consumers that provide real-time SC solutions (planning, sourcing or ordering, contracting, delivery, and payment). Cloud-based supply chain systems are adaptable to the changing requirements of supply chains of any scale. Cloud computing enables different supply chain apps and platforms to collaborate and share data in real-time, allowing for improved communication and order fulfillment, thus increasing the supply chain’s efficiency. Numerous organizations have incorporated cloud computing into their supply chains, creating cloud-based systems that enable suppliers to exchange real-time data about their stocks, capacities, costs, and quality indicators.

Management of Materials, Logistics, and Control of Reverse Logistics

The correlation between the management of materials, logistics, and reverse logistics handling in Apple Inc. plays a crucial role in its competitive advantage. Reverse Logistics is the process of recovering value when a business deals systematically with previously delivered items, damaged products, rejected goods, and discarded raw ingredients for recycling, disposal or re-production. The primary goal of reverse logistics is to assist the environment in reducing pollution (Dowlatshahi, 2010). Cost-benefit analysis is the most critical instrument for determining the reverse logistics function’s efficacy and capacity. Cost and benefit analysis enables the determination of the monetary worth of returned goods, as well as the substantial operational costs associated with remanufacturing, reconstructing, and recycling (Dowlatshahi, 2010). Value and cost resolution is inextricably linked to the capacity of the business to accept or reject returned goods.

Apple offers commercial items as a result of the remodeling process. Commercial items are simply things returned to merchants by consumers when customers reject products. It occurs when goods are damaged in the packing, and the items do not fulfill or meet the expectations of the customer’s purchase. Returns of commercial products are often in the same condition as the new item since the consumer does not use them and some are only lightly worn. By selling these goods, the cost of revamping exceeds the money generated by the products. In summary, there is a cost associated with Apple’s choice since the revamp process necessitates inspecting, cleaning, dismantling, reassembling, testing, and the act of repackaging to return to consumers with the original authentication (Piplani & Saraswat, 2012). To deal with returned commercial products, Apple has to engage a professional amenity provider, divide the reverse logistics arrangement, and use the company’s forward supply chain strategy (Piplani & Saraswat, 2012).

When the company established the return policy, there must have been a large volume of returns from customers all around the globe eager to close the transaction. Return rates range between 5% and 50%, resulting in an average cost of returns of two to three times that of the original product (Li & Olorunniwo, 2008). Additionally, reverse logistics compels businesses to spend more significant effort in improving the quality and timeliness of returns. This also led to extraordinary expenses for the business, such as transportation and manufacturing (Dowlatshahi, 2010). Nonetheless, the take-back policy enables the industry to mitigate transaction risk and gain a competitive edge.

Apple’s GiveBack program enables consumers to discard any Apple item in-store or online. After purchasing an iPhone or other accessories from Apple, customers bring the device directly to the shop to update to a new iPhone model. Apple will then collect all the old discarded products at their facilities and recycle them methodically and responsibly. There is a possibility that such items can be repurposed at times. Additionally, Apple offers a complimentary service for consumers who bring their batteries into shops. Apple allows returns without forcing the consumer to purchase a replacement battery or item (Apple, 2021). Apple was able to transform the sector of older goods into newer ones via this method. It enables businesses to be more environmentally responsible while lowering manufacturing costs (Turrisi, Bruccoleri, & Cannella, 2013).

Additionally, Apple’s reverse logistics strategy includes recycling and repairing batteries for its customers via an experienced service partner, significantly improving customer service and happiness. For example, if the buyer buys the goods in Australia, Australian consumer law will apply. Whether customers own an iPhone, iPad, iPod, Apple Watch, or MacBook, specific terms and conditions will apply based on how their devices are used. For instance, the battery in an iPhone is designed to retain up to 80% of its original volume after 500 complete charge successions. The warranty period is one year; however, if the client is outside of the warranty epoch, Apple will still offer battery repair under certain conditions (Apple, 2021).

From there, Apple is not only able to reap social and environmental benefits by assisting consumers in avoiding disposing of batteries in trash bins, which is detrimental to neighboring residents and wildlife (Apple, 2021). Nevertheless, this reverse logistics approach enables Apple to increase consumer value and pleasure with their service (Dowlatshahi, 2010). More significantly, an efficient reverse logistics management system may be used to reduce costs, improve customer consummation, acquire competitive edge, scale economies, and enhance productivity (Li & Olorunniwo, 2008). A solid reverse logistics strategy enables a business to reduce manufacturing costs while increasing revenues (Dowlatshahi, 2010).

Therefore, while Reverse logistics is the most cost-effective way of implementing a supply chain structure for a business, its interrelationship with materials management and the public company logistics plays a vital role in the company’s competitive advantage. Reverse logistics is a representation of the company’s cost and benefit analysis. A well-organized RL is capable of assisting a business in meeting its revenue maximization and cost-cutting objectives simultaneously. Similarly, Apple Inc. is the most successful example that has amassed many values using the RL function. They adopted the Offer Back policy, servicing and recycling, and reproduction are their primary operations for achieving customer value and increasing customer satisfaction in exchange for a greener environment, capturing competitive edge to differentiate themselves from rivals, and achieving economies of scale. While there are some expenses involved, such as the cost of revamp during the selling of profitable products and a high rate of reverted items under the take-back dogma, it is capable of reversing this obstacle and using it to reduce the risk of transaction for the customer, thereby regaining a competitive advantage. In summary, Apple maintains a steady path by balancing cost-cutting and profit growth.

The Role of Emerging Technologies in Apple Slant to Supply Chain

Information Technology in Supply Chain Management

Modern companies, such as Apple Inc., see data as a critical competitive reserve for SCM. Notably, a firm’s information technology (IT) substructure tools allow a competitive setting of different business activities, such as succession time decrease and process redesign. Information is critical to Apple Inc.’s supply chain effectiveness because it serves as the foundation for decision-making by various managers (Coyle et al., 2016). The corporation’s information technology consists of the instruments used to collect information about information, analyze the gathered information, and execute the right strategy based on the analysis’s results to improve the supply chain’s performance. Notably, IT assisted Apple Inc. in developing a supply chain architecture that enhances collaboration across its many divisions. Additionally, IT enables the company’s supply chain management to make intelligent choices, contributing to its increased profitability.

Material Handling

By using a sophisticated yet straightforward supply chain strategy, Apple has outperformed its rivals and competition by 2.0 – 5.5 times (Lu, 2020). After Tim Cook took over from Steve Jobs two months before the end in October 2011, he implemented several strategic adjustments. After moving away from decentralized storage, extensive inventories, and expensive inefficiencies among the company’s suppliers, he implemented centralized storage, lean inventories and encouraged competition among the company’s suppliers. Demand and sales are anticipated and evaluated regularly, as noticed by Black (2015), enabling the company to keep assets in cash instead of a significant inventory level. Black (2015) noted that most of its suppliers are also situated near the company’s production facility in China, reducing the amount of time wasted, minimizing the effect of supply chain disruptions, and increasing logistical efficiency. The FIFO principle of managing inventory is also used to manage the introduction and sales of the company’s new products in the market by ensuring that the company’s existing product inventories are wholly depleted before announcing a new one, which prevents unnecessary product price discounts and the retention of old model stock (Martins, 2020).

Systems Development to Managing Supply Chain

Apple Inc. is a multinational conglomerate specializing in designing, manufacturing, and selling a wide range of electronic devices, apps, and applications (Cole, 2013). Established in 1976, the company has grown to become a worldwide leader in information and communication technologies (ICT) (Lusted, 2012; Reuters, 2019). One reason for this company’s success can be traced back to its strong executive team and its ability to oversee various business and organizational procedures. Apple Inc. has unquestionably amassed a sizable market share in the global technology sector. The company’s ability to lead other corporations in delivering complex and high-quality technological goods on the US market and other nations across the globe is mainly due to its ability to innovate and run its operations effectively.

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The Apple Corporation has one of the most proper SCM structures in the world, in addition to an efficient operations management system. Early on in its existence, Apple Inc. developed a list of requirements for suppliers and rapidly formed exclusive contracts in return for volume assurances. Apple the Company recognizes the significance of its connection with suppliers. In order to prevent rivals from obtaining the same production facilities as Apple, the company may use its financial power to ensure sufficient supply capacity via massive pre-orders (Slack & Brandon-Jones, 2018). As a result, it is almost impossible for Apple’s competitors to make devices that meet the company’s standard requirements. According to product design, Apple has complete control over its supply chain, according to Slack and Brandon-Jones (2018).

Conclusion

Conclusively, Apple is one of the world’s most fiercely competitive technological firms. The company has seen tremendous development and expansion since its establishment in 1976, thanks to increasing innovation and excellent leadership. Using cutting-edge product design and manufacturing, the company has been able to gain, retain, and enhance its competitive advantage in the global technology industry. Using an effective system of operations management, Apple Inc. has captured a large portion of the global technology market. As a result of implementing a supply chain management system, the company has created and manufactured goods that are superior to those of its main rivals. To be successful in today’s corporate environment requires a combination of strategic planning, capacity planning, customer value innovation, operation planning, and program management to be implemented. Overall, Apple Inc. is a great case study of a business with a successful operations management system that other organizations may learn from.

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