Supply Chain ManagementRelationships

By Luke Cairns

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Overview of Apple

American multinational company.

Designs and markets innovative consumer electronics, computer software and personal computers.

Products sold worldwide through its retail stores and online stores, as well as wholesalers, retailers and value- added resellers.

357 retail stores worldwide.

In 2011: $108.2 billion revenue and $25.9 billion of retained profit.

http://files.shareholder.com/downloads/AAPL/1536680130x0x512287/5a5d7b14-9542-4640-841d-e047ec28bb96/AAPL_10K_FY11_10.26.11.pdfhttp://mos.futurenet.com/techradar/classifications/gadgets/phones/mobile-phones/iPhone/iphone4_2up_front_side-420-90.jpg

Focused Product Line-up

Apple has very few products compared to other large companies e.g. Samsung has hundreds of products.

Predominately sells just five different gadgets – iPad, iPhone, iPod, Mac and Apple TV.

Focused product line-up allows Apple to fine tune their sourcing strategy.

As there are relatively few components, Apple need a small amount of suppliers in their supply chain.

Having small number of suppiers allows Apple to focus and build strong long term relationships.

http://files.shareholder.com/downloads/AAPL/1536680130x0x512287/5a5d7b14-9542-4640-841d-e047ec28bb96/AAPL_10K_FY11_10.26.11.pdf

Apple Annual Revenue

http://money.cnn.com/galleries/2011/technology/1101/gallery.apple_sales/index.html?iid=EL

Kraljic’s Supply Positioning

Supply’s impact on financial results

Low

Low

High

High

Supply risk

Leverage products•Alternative sources of supply available•Substitution possible

Bottleneck products•Monopolistic market•Large entry barriers

Routine products•Large product variety•High logistics complexity•Labour intensive

Strategic products•Critical for product’s cost price•Dependence on supplier

Tough competitive stance by buyer

Competitive systems tendering + E-commerce

Performance based partnership

Secure supply + search for alternatives

BuyerStrength

Number of available suppliersES4c9: Supply Chain Management – Lecture 11 Relationships

Components such as the iPad screens and the processor chips

Components such as the battery and charger units

Apple Relationships

ES4c9: Supply Chain Management – Lecture 11 Relationships

Buyer Dominance

Buyer-Supplier Reciprocity

Supplier Dominance

Arms-length • Short-term operational relationship

• Buyer appropriates most of the value

• Supplier is non-adversarial

• Short-term operational relationship

• Buyer accepts current market price + quality

• Supplier accepts normal (low) market returns

• Adversarial commercial relationships

•Short-term operational relationship•Buyer pays whatever is required•Supplier appropriates most of the value

Collaborative •Long-term operational relationships•Buyer appropriates most of the value•Supplier is non-adversarial

•Long-term operational relationships•Buyer and supplier share value relatively equally•Both agree price and quality trade-offs•Both are non-adversarial

•Long-term operational relationships•Supplier appropriates most of the value•Buyer is non-adversarial

Power Balance

Way

of w

orki

ng

SamsungFoxconn

Apple Buyer DominanceWith more then $80 billion in cash and investments Apple are able to commit to very large orders, have a lot of power and bargaining tactics.

Low profits and margins for suppliers compared to Apple.

Apple’s negotiation tactics sometimes lead to them losing out on suppliers.

Large orders limit options for competitors e.g. rivals HTC could not purchase as many screens as they needed.

http://bbfun.co.uk/ipodnano%204g.jpghttp://www.businessweek.com/magazine/apples-supplychain-secret-hoard-lasers-11032011_page_2.html

Recommendations

Do the participants in this supply chain trust each other?

Apple is paranoid about leaks from suppliers.

Apple has taken lawsuits out against suppliers Samsung related to patent infringement.

Apple should reduce their reliance on outsourcing by becoming a vertically integrated company.

Less suppliers mean less opportunity of leaks within the supply chain.

http://www.zath.co.uk/apple-macbook-pro-review-aluminium-unibody/http://wlmtips.com/wp-content/uploads/apple_tv.jpg

Any Questions?

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