SUPPLY CHAIN MANAGEMENT

Supply Chain Management

Supply Chain Management

Introduction

On the packaging of IPhone, Apple has written that “Designed in California, USA and manufactured in China.” In this way, they are showing that they are taking full advantage of the idea of globalization and have outsourced their production throughout the globe.

They had chosen to outsource components of their supply chain throughout the globe and in this way; they are taking maximum advantage of regional competitiveness. According to a research by “AMR Research,” the supply chain of Apple was ranked as the best supply chain in the globe (Gartner 2010, pp. 05). This research in itself is describing the story of success of supply chain management of Apple. In this report, we will discuss why Apple had chosen for outsource its supply chain, rather than using local suppliers in USA.

Table 1 Source: Gartner (June 2010)

What is supply chain management at Apple?

The supply chain of Apple links companies participating in different stages of the process together. In Apple, supply chain is a process of managing the production of different components of the products of Apple. In a research conducted by AMR Research in the 2010 by the name of “Supply Chain Top 25", they ranked the supply chain of Apple as the best among multinational giants in the whole world. They declared that the supply chain of Apple was an inebriating combination of magnificent pattern, inspirational software interfaces, and expendable commodities, which were digital. This superb design of supply chain has allowed Apple to produce the best quality products for their customers that are of high quality. Apple has outsourced its production facilities to various suppliers all over the world. In doing so, they chose to deal with foreign suppliers from different Asian countries (Gartner 2010, pp. 05)

Apple's Global Supply Chain

Process in outsourcing supply chain

Make or Buy Decision

In making to decision, whether to enter the manufacture a product at company premises or outsource it, companies like Apple have to make a “Make or Buy” decision. Make or Buy "Do" means the company had developed an activity in itself. "Buy" means that Apple will depend on a separate company to develop this activity, possibly under a contract (New 2010, pp. 76). While, “Make,” means that a company has arrived at a decision to manufacture a product at its premises. In reaching such a decision, a company like Apple focuses on a number of factors, which includes costs and quality of material. Below is an example in which a company can make a decision whether to “Make” or “Buy” (fictional).

Per Unit Cost

Total 1000 units

Make

Buy

Make

Buy

Purchase Price

£16

£16,000

Direct Material

£5

£500

Direct Labour

£4

£4000

Variable costs

£4

£4000

Fixed costs

£7

£7000

Total costs

£20

£20,000

Difference

£4000

Selection of sourcing strategy

Outsourcing is becoming one of the latest trends in the global business today. Apple has adopted the strategy of outsourcing its business activities all over the globe and has entered into contracts with a number of different Asian companies to take advantage of regional competitiveness and enjoy lower costs. Apple has viewed the concept of outsourcing as a way to manufacture ...