The organisation’s key to success is an efficient logistics strategy as changes in the business affect the supply chain. This paper would highlight the features pertaining to Apple Inc and how its logistics strategy would affect the entire organisation.
This paper would initially examine the corporate strategy, logistic strategy and how they are integrated for the achievement of excellence in customer service. Further it would describe as to how warehousing and transportation are carried with the use of collaborative planning and forecasting replenishment to enhance information flow and visibility in the entire supply chain.
Furthermore Apple would be analysed by using several tools such as SWOT, PEST, etc to show the organisations growth and performance. Finally, the use of information systems and information technology in Apple along with various tools and also how a single network is used to manage information flow on a day to day basis to achieve Apple’s vision.
Apple Inc. is an American multinational corporation. They manufacture consumer electronics, computer software and computers. Apple is recognized for its Macintosh computers, Desktops, iPod, iPhone, audio books, software, and peripherals. It is famous for its designs.
The top products of Apple are
The company manages its business on a geographical basis. There are four segments.
Americas includes both North and south. Europe segment includes European countries, Middle East and Africa. Apple owns 273 retail stores in USA and other international locations.
The company believes in constant research and innovation; develop technologies, which are easy to use with a splendid design.
Apple has been able to maintain the number one spot for its iPod and a leader in the technology it offers across the world [Telegraph 2009].
Analyse the strategic position of Apple Inc. in the context of its supply chain, and critically assess opportunities to develop logistics capabilities.
It is very important for a company to device its strategy considering the products that the company would manufacture and offer to its customers. It’s further more important to devise a strategy for its new products. Apple must consider the factors given below in order to devise an efficient strategy.
Customers play a key role as they are the people who would be purchasing the product and needs service.
Manufacturing decisions are based on the infrastructure and technology that are required. Based on the forecasting, estimates of sales, strategic decisions on manufacturing the products have to be taken. The decisions on the use of 3rd party logistics must be taken. These strategies have a direct effect on the supply chain strategy with regards to manufacturing.
The company has to figure out a strategic supply chain policy for managing its suppliers. Reduction in costs of purchase, manufacturing would increase the profits. Based on the purchase and cost the company would outsource its operations and selection of suppliers who offer high discounts It. is very important that the quality of the company is not sacrificed and a strategic decision on the suppliers must align with the company objectives.
Location plays a vital role and the management has to make a strategic decision on the logistics network as it is linked to the success of order fulfilment and success of the supply chain. The design plays a vital role as all the operations of the network have a substantial effect on the performance of the supply chain. The strategy has to be devised considering the warehouses requirement, distribution centres and transportation modes. The use of a third party service provider in the supply chain may be considered.
Strategic decisions taken guide the company’s supply chain in the right direction. This decision has to be made and has to be fine tuned based on the lower level operations and helps to make tactical and operational supply chain decisions.
‘Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings’ [Isolutions 2010].
It can be seen that Apple has been able to efficiently integrate its logistic strategy with the Corporate strategy can be seen below.
A unique value of the product differentiating itself from its competitors
A tailored supply chain.
Identifying the trade offs.
Align logistics strategy. Harrison et al [2008:29]
The use of third party logistics is predominant in Apple. Most of its logistics operations are outsourced. Apple’s mission is commitment and innovation, which have a direct link to the total supply chain operations. The corporate strategy is integrated with the logistic strategy as it is committed towards the consumers and has devised for manufacturing, distribution and transportation.
The use of third party logistics is predominant in Apple. Most of its logistics operations are outsourced.
Although Apple works closely with its outsourced partners on manufacturing schedules, any delay would affect the company production schedule. The purchases of components are done for a scheduled period of 30-150 days and this gives the manufacturers a short lead time and for avoiding material constraints due to short supply, Apple has tied up with a huge chain of suppliers who would be able to supply without any limitations. All of these components arrive from various parts of the world and are finally assembled at its own factory in Ireland and third party clients in China, Korea, etc. The products are then supplied to the 3 business sectors from where it is supplied to the wholesalers and retailer. Warehousing of inventories is limited as they produce as per the demand and have a fixed schedule. Many software solutions of Apple are constructed by 3rd parties.
1.3.1 WAREHOUSING AND TRANSPORT
Apple’s retail stores and wholesalers store inventories eliminating the need for many warehouses. The use of cross docking allows products to be transported from the supplier to the distribution centre reducing the costs of maintaining a warehouse. The use of inter modal transportation reduces cargo handling and also reduces damages and losses. It’s highly beneficial as products have to be transported within different continents. The logistics operations are outsourced reducing costs.
1.3.2 BUSINESS STRATEGY, RELATIONSHIPS AND TECHNOLOGY
When the strategy to buy or make is evaluated, Apple buys most of its products from third party service providers as this enables them to be flexible to change suppliers and also move on from one technology to the other without having to spend high expenditure on machinery and technology.
Apple has established close business alliances with peripheral manufacturers and suppliers.
Apple distributes its products through wholesalers, retailers, resellers, and cataloguers. Apple sells its products through its own retails outlets and online stores [Apple annual report 2009].
1.3.3 COLLABORATIVE PLANNING AND FORECASTING REPLENISHMENT [CPFR]
The use of CPFR enhances the supply chain. It is a concerted action to manage inventory and replenishment of products in the entire supply chain. Information is shared between the suppliers and retailers and this assists in satisfying the customer demand. Information flow is continuous and there is constant updating of the inventory and other requirements which make the supply chain efficient. An efficient supply chain decreases expenditure for inventory, logistics and transportation across all trading partners.
The use of RFID has enabled real-time tracking of products and also vehicle tracking to optimise vehicle utilisation.
The use of Enterprise resource planning is a system which manages both internal and external informational flow. It is used for the supply chain management for effective information flow.
The diagram below illustrates how the entire supply chain is integrated in Apple Inc
STRATEGIC SUPPLY CHAIN MANAGEMENT
The key strategies of Apple are
Developing technologies with low expenditure on research and development.
Increasing the retail stores in USA and across the world.
Higher stake holder returns through increased sales.
Social commitment and environmental responsibility [Apple 2010].
1.4 LEAN STRATEGIES
Apple is one of the top brands in the world. Certain strategies that should be adopted are:
TQM is one of the strategies that can be applied to maintain consistency and Apple has been successful in applying the TQM approaches. They are-
Continuous improvement has been the key strategy of the company and has grown in its sales and market share.
Committed towards quality and business.
Maintain good relationship with suppliers.
The strategy is providing the right goods at the right place and right time. This is a key factor in the company’s production and distribution schedule. The distribution channel between the 3rd party suppliers to the assembly plant has been aligned to achieve success.
Just in time strategy helps the company maintain the correct supply of inventory without storage. The company will be able to save money time and also warehouse costs. The use of retailers and wholesalers as buffer storage points would help the company to reduce costs as apple produces based on the demand forecast. This would save costs on production and inventory.
This strategy would be able to deliver value at the lowest possible price for its products. This can be achieved by eliminating MUDA i.e. waste [7 wastes]. The elimination of seven forms of wastes identified in the production process, transport and also defects can be eliminated. Apple must concentrate on these wastes to manage production and achieve quality.
Evaluate relevant strategic approaches to logistics management for Apple Inc. and identify the management issues that derive from them. Pay particular attention to capital, technical and human resources considerations.
3.0 The differentiating strategies that would be used to evaluate Apple are
Porter’s generic strategies
Five forces framework
Porters value chain model
Ansoff growth matrix
Growth share matrix
2.0 PORTERS GENERIC STRATEGY
Competitive advantage can be achieved through product differentiation, value added product conversely keeping the price low or economical. (Jobber 2007:784).
The competitive strategies can be categorised under 2 categories:
Broad & Narrow
(Figure 19.5 Jobber: 2007)
Apple uses differentiation leader strategy to differentiate itself from the competition. The differentiation strategy is duly because of its design, quality and being unique, and they come at a premium price. The iPod is highly advanced in terms of its technology. They had launched the first touch screen iPod and this was unique. The very latest offering is iPad.
STRONG BRAND IMAGE
RESEARCH AND DEVELOPMENT
HIGHER NUMBER OF RETAIL STORES
PROGRESS TO NEW PRODUCTS
Apple has established itself across the globe and has a unique brand image in the market through its logo and products. This brand image allows apple to differentiate itself and also charges a premium price on products like the iPod, iPhone, etc. These products enable apple to gain the competitive advantage over its competitors. Apple has always looked at enhancing the product value. Every offering by Apple has a unique feature and constantly refined through research and development. Apple has acquired a high brand loyalty from its consumers and powerful presence over the internet.
Quality has always been a top most priority. Quality along with a difference is what making Apple so unique.
Apple has been involved in the infringement of patents i.e. intellectual property rights. They are having a lot many cases filed on them and most recently suits were filed by its competitor Nokia. These issues must be resolved as this would affect the company financially and earn itself a bad name.
With the customer loyalty and base widening across the globe, Apple can open up more retail stores across the globe without having to rely on other retailers and wholesalers. This would enable them to gain profits and maintain a better customer relationship through trained and experienced staff. Based on the demand and market needs stores can be opened and strategically positioned to capture the attention of more prospective customers as people are becoming more tech savvy and constantly updating themselves with the latest gizmos in the market.
As Apple offers music, audio books, games and movies online through their website, the opportunity to expand this into further unexplored areas like eBooks, shopping could be a feature. All features offered from a single window.
Progress to new products
Through scientific breakthrough’s Apple has offered a new product ‘iPad’. Constant innovation is the key to success.
There is immense competition as technology keeps evolving. All products offered by apple such as PC, iPods, software, etc. has competition. As technology evolves firms offer more features resulting in intense competition and price wars. The threat of imitation is high. Apple’s competitor in technology is Android a Google offering and Nokia.
2.2 PORTERS FIVE FORCE MODEL
Apple bargaining power with the supplier’s plays a vital role. The company headquarters is at USA and operates its business from 4 different geographical segments. Raw materials are acquired from different parts of the world. Several components are imported, which are necessary like circuits, panels, etc. from different suppliers. It is highly essential that good relationship with suppliers is maintained to ensure high quality and on time delivery as this has a direct effect on the company’s brand image and customers. The bargaining power of suppliers is very high in terms of quality.
The products of apple have a high demand and the company incurs a huge expenditure on marketing and promotions. Apple offers variety and targets different segments of people with variants of an existing product like a mini iPod and new technology. The opportunity to market their products in developing countries gives apple an added advantage. It can maintain its customers from switching brands and this is an advantage. The bargaining power of buyers is relatively less.
There is a requirement of high capital for investing in this industry as it’s highly competitive and technology oriented. The cost of Research and Development is high. There are big players existing in the market and this would be a deterrent for the new players to compete with apple as its rated number one in the market. Brand loyalty of consumers cannot be changed easily and new entrants cannot compete with Apple.
The substitute for Apple is difficult due to technical barriers and patent rights. However, the IT industry is growing at a rapid pace and this is of concern to apple as certain features similar to apple are available like the touch pad, a wider screen, video interface, etc. on which they have no control and also counterfeit products, which are available at a cheaper price.
Apple operates globally and big companies such as Google, Nokia offers stiff competition. These rival brands invest heavily on building a global image. High investment in Research and Development, marketing and product differentiation and price helps the competitors to gain strategic advantage in different parts of the world. The threat of rivalry is high from brands like Nokia, Google, and Samsung.
2.3 PORTERS VALUE CHAIN ANALYSIS
The Porter’s value chain consists of two parts. The main functions are linked by the supportive activities. The primary functions are-
Apple’s inbound logistics is well planned. Components of Apple’s products are manufactured in different countries and finally assembled at a central assembling point and disseminated products to the four different segments. Each segment plans its demand and works based on a Production schedule. This is a major advantage in terms of production as it gets rid of redundant product storage.
The company is formed on a sound foundation of research and development. This foundation enables Apple to compete with strong competition and big players in the market. Apple’s quality and service are high to maintain the consumer loyalty and brand image. Apple believes sustained growth and tenable quality.
Apple is still expanding globally. It has established partnerships with various other retailers and wholesalers who deal with their product. This enables Apple to supply, provide service in different countries.
Apple is one of the leading companies in the market and has created a brand image through innovation and excellence in design. This brand image gives them the competitive advantage and enables them to spread their brand values across the world.
Apple creates technology for the future and offers unparallel software and communication solutions. Its online offerings such as the ITunes have revolutionised the music industry and is still developing with further additions to hardware, software and online gaming.
The secondary functions play a vital role in supporting the primary functions. They are Infrastructure, Human resource management, Technology and procurement.
All these functions play a vital role in the company’s performance. Procurement plays a critical role as this determines the quality of the product; Human resource management plays a major role in selecting and training employees for the job, Technology enables the company to reduce the cost and improves performance and lastly Infrastructure helps the company in establishing a suitable working atmosphere in Apple Inc.
2.4 ANSOFF MATRIX
The market penetration for iPods and iPhones started within the US where it initially started off and then the EU market. It is now developing into the new markets like Asia with its famous iPhone and iPods and several variants of iPods. The product strategy is highly technology oriented and the company looks at new markets for attracting customers. Product development and diversification are extremely essential and apple is working its way up, which started with PC, phones, iPods, ITunes and developing 3G and 4G technologies.
This matrix is able to give us an idea of the strategy and how this would enable to company to achieve success and profits. Diversification is highly essential as the demand pattern for products keep changing.
The above fig shows the Boston Consulting Group Matrix Structure for the Marston’s Plc.
Apple’s offerings are broad and the sales of laptops have helped it gain a good market share. This market is relatively stable and mature. This revenue could be used for further development in IT, communication and also for the music sector.
These are the products like the iPods and iPhones. They generate a lot of revenue and need investment to enhance the features and offer a superior product. These would eventually be the cash cows.
Market penetration and product diversification along with product variants come under this category. If these innovations fail, there would be a huge loss, but on the other hand, if it is successful it would turn out to be stars.
As technology is advancing and many features are being integrated into a single product. This coupled with global competition; Apple might phase out certain products.
A lot of revenue is generated from overseas sales in compliance with US and foreign laws. The regulations imposed by various countries would increase the costs. Apple in order to comply with these laws has designed regulations but cannot ensure compliance by the contractors or the agents which affect the company financially. The results of the legal proceeding on Apple would also have an impact on its market shares and image. The recent health issues moreover affect Apple plc.
Recession has been a worry for all the businesses in the world and Apple was also affected by this. Sales have increased lately due to the improvement in the economy. The price of Apple products is always high and in certain countries like India this would be a major drawback as people do not have too much disposable income. Expansion, new market entrance and the cost of export and import duties would affect the company’s growth.
It can be noticed that younger generations are becoming more tech savvy and constantly looking for new products. Age acts as a deterrent for purchase of such hi tech gizmos as people would not want to be hooked on the iPod or even work on a laptop for long as they become older. The other major factor is the health issue about mobile phone radiation.
Innovation attracts people. New products, variants help the company to develop itself to the demand of the present and future generations. The introduction of iPad had given Apple the competitive advantage over its rivals. Frequent changes like iPod nano would generate higher revenue to the company.
There are three distinctive approaches.
2.7.1 Human Resource: The key factor of Human resource management is creating a good working environment in the company and plays a vital role in the organisation. The process of selecting, recruiting, Job’s allocation, training, and resolving problems are very important for the Human resource management. Supplier training is also undertaken to enhance the quality. Apple success strategy is recruiting highly skilled workers, local recruitment to add flavour to work, customer service and contract based employees.
2.7.2 Technical Availability: The use of Ecommerce for shopping online is seen as a revolution. The use of IT systems has enabled apple to monitor sales, purchase order processing, monitor costs, forecast demand based on sales, conduct market research and secure e payments. These processes can be done at any time at any place and can be called technology marvels.
2.7.3 Capital Resources: Apple’s investment in its retails stores has generated high revenue due to their strategic locations across the globe. They are planning to open up another 50 retail stores. They would be having a joint venture with Small businesses to offer computer service solutions.
Critically evaluative the strategic significance of new technology developments and business trends on future logistic strategies for Apple Inc
Future is unpredictable. This is true in the world of business as the markets are turbulent and are favourable or unfavourable.
In order to have a leading edge in the supply chain for the future-
The alignment of the organisational internal processes and constant supply chain improvement.
Right choice of partners both upstream, suppliers and downstream with customers.
The competency to manage costs and increase profits [Harrison et al 2008:310].
3.0 Scenario planning would enable Apple to think of the future situations-
Problems which might occur.
Handle big bang problems.
Identify the central issue for taking the decision.
Identifying the Political, Economical, Social and Technological forces which would alter the future [Jim 2010].
These would alter the future of Apple from the business and technology point of view.
World is becoming a small place with the growth of technology with the advent of internet and high speed communication. Apple has altered the channels to the market in multiple ways
Apple Wholesaler Customer
Apple Internet Customer
Apple Mobile Customer
Apple Retailer Store Internet Mobile Phone Customer
All these channels are increasing the need for reducing the time spent on transportation. Technology is used to track the product with the use of RFID and vehicle tracking through GPS to reduce delays and improve transport efficiency.
Alliances with partners maintain a stable platform is important. This is very significant with Apple as they have a wide range of suppliers for their entire requirement. They also have strong relationships with other suppliers for any contingencies.
Apple soon may completely become a virtual organisation. This is merely due to the technical advancements and this form of an organisation can be easily reconfigured.
Ecommerce has a direct effect on the supply chain as Apple is able to synchronize their operations based on the customer demand. The use of pull strategy helps them to have a synchronized supply and demand pattern by information which is actual that forecasted and this benefits the entire system from order to delivery.
This is possible with the use of Information technology and Information systems. The different types of technology used are
Internet and Intranets
Electronic Data Interface
Enterprise resource planning
Logistics operations in Apple involve a wide range of players including domestic transporters, ocean carriers, warehouses, customs etc. Internet and wireless technology provides robust information to all in the supply chain and a complete visibility across the supply chain. ERP solutions addresses the issues on Material management, Production planning and control, sales planning, quality management and plant maintenance which reduces inefficiency in the organisation and increases information visibility across the organisation.
The use of global logistics network offers a single pipeline to all the players of the supply chain to share information and this enables them to have a visibility right from the order, manufacturing, shipping and status of the delivery which is all linked to the network
This not only improves the efficiency of the supply chain by enhanced visibility, but also enables the Apple to take proactive logistics decisions based on information [Mercatela n.d.].
*Flat file- Record/Data base
*XML – “XML’s design goals emphasize simplicity, generality, and usability over the Internet” [Wikipedia 2010].
*WAP – Wireless access protocol.
The picture above clearly outlines how different types of IT and IS systems mentioned above can be effectively used from order taking, processing, product tracking, improving internal performance with the use of ERP etc.
Hence, Apple’s high tech supply chain can meet the requirements of the efficient product delivery and customer service. The accelerated use of internet technologies such as e-commerce provides unprecedented access to logistics information that enhances the range of visibility and also enables logistic improvement initiatives that can fortify competitive advantage.
In conclusion, the integration of logistics in the corporate strategy really pays off as it’s the core of the business, especially in Apple. The logistics strategy has to be well planned as it can be seen that Apple relies on 3rd parties and this if not done effectively would affect is profits and also its brand identity. Working from the consumers end to forecast demand and develop different strategies to stand the competition in the IT industry.
Apple is a well developed brand and is expanding worldwide in a rapid base. It has to be careful in its operations and relations with its suppliers as most of its raw material such as circuits, panels, etc are outsourced. The entry into new markets must be done with a unique marketing strategy in order to compete, develop and achieve competitive advantage.
Jobber., D (2004) Principles and practice of marketing. Berkshire: Mc GrawHill International ltd
Bicheno Jhon (2000) The lean toolbox. Buckingham: PICSIE books
Wedgwood I (2007) Lean sigma. New Jersey: Prentice Hall INC
Harrison.,Van H (2008) 3rd edn. Logistics Management and Startegy. Essex: Pearson Education Limited
Wikipedia (21/05/2010) Apple Inc [online] available from
Entrepreneur zest (n. d.) Porters five forces [online] available from
Themanager (n. d.) Porters value chain [online] available from
Anything research (21/05/2010) Ansoff’s Matix [online] available from
Telegraph (29/09/2009) Apple [online] available from
Apple (2010) supplier responsibility [online] available from
Afterdawn (09/09/2009) Ipod market share [online] available from
Irakli (05/02/2007) Porter’s five forces [online] available from
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