Apple’s Supply Chain Analysis

Questions: 1. What are the advantages and disadvantages of Apples supply chain, cash holding and operating leverage strategies? What risks do they pose for Apple both nationally and internationally? 2.Do you agree with how Apple had used its cash holding and operating leverage to boost performance? Explain your position. 3.Describe Apples Cash Conversion Cycle and explain the measures it implemented pertaining to CCC to ensure that profitability is maximized. Discuss the implications in the context of inventory conversion period, average collection period and payables deferral period. 4.What would be a good measure for profitability to gauge the efficiency of the supply chain and the cash conversion cycle for Apple? Why and how? 5.What are Apples risk exposures as a multinational corporation? Identify five unique risks and your recommendations to minimize/mitigate these risks. Answers: 1. the advantages and disadvantages of Apples supply chain procedure are basically interrelated. Speaking of the current situation, the strategic suppliers that Apple works with are relatively smaller in number. With relatively smaller number of manufacturers and suppliers, Apple has been able to develop stronger exclusive and meaningful relationships. It also provides Apple the leverage to negotiate on the pricing part since the company assures bigger volumes in terms of material order placement and production. While the advantage lies in cost cutting but there may well certain risk factor involved. Since Apples reputation is directly connected to the suppliers it works with, any irreverent steps from the suppliers would harm on the companys reputation status. And yes, Apple did suffer from several scandals in the near and distant past in regards to suppliers. This is why careful screening process is necessary while appointing new suppliers. The present partners should also be closely monitored. The company needs to focus at transferring core compliance and values with the regulations act throughout the SCM in order to prevent any kind of damage to their branding and company image. 2. Why not! Definitely the company has approached only after extensive planning. Also, the financial backup seems to be huge or else such type of operating leverage policies cannot be brought into the light. Exorbitant spending of capital to acquire high volume of resource for the long run seems to be a worthy approach for this bigger corporate brand. The approach primarily begins at the designing stage. The company sales representatives and engineers usually spend quality time with manufacturers and suppliers for a certain period. This approach allows them to provide guidance to the suppliers and manufacturers in tweaking the industrial procedures that would translate the prototypes into highly effective mass-produced devices. The designers from Apple work closely with suppliers to develop innovative tooling equipment that would be beneficial in designing the latest Apple products. The company always try to incorporate a very unified strategy where focus is primarily given on specif ic product lines at a time along with carrying out little bit of customization for each of them. This, in itself, has been highly beneficial for the company and has reaped great results. 3. Cash Conversion Cycle (CCC) basically measures the total time required for a company to convert cash available on hand into higher cash on hand. Apple always focuses on high volume purchase of production material and then opting for a very cunning marketing process. While purchasing materials for manufacturing products, the company demands for detailed accounting from the manufacturer in regards to the quotes. The company representatives would also ask to segregate the costing part and explain the costing in context to labor and material costs. The company also requires numerous key suppliers who can ensure storing and supplying inventory items that can accommodate a couple of weeks. Also, the suppliers should have their unit located in close proximity to Apples assembly plants. Apple often delays the payment process and may deter the payment terms till 90 days post using of the part. 4. To gauge the efficiency of supply chain as well cash conversion cycle for Apple Inc., there is a very innovative approach being taken by the company itself. It has placed electronic monitors in some of the boxes of parts. This would allow the observers from Cupertino easy tracking and sneak peaking at the Chinese factories. This type of an initiative would supposedly discourage the leaks. Shipping products in tomato boxes and other containers resulted in avoiding detection. Apple employees personally monitor the scenario at every hand-off point, be it at the dock, airport, truck depot, or even at the distribution center. This is done to ensure that every single unit is accounted for. 5. Apple has always been of opinion to opt for bulk purchase of material. Also, they spend heavily in marketing campaigns while trying to leave no tones unturned. This also results in making the company suffer at the end of financial year. The bargaining tactics of Apple is considered to exert downward pressure on the prices. This would ultimately lead to lower profitability margin. Next, the sneak peaking part into the manufacturing units could be a real mess if the actual scenario comes forward. However, till date, the best of secrecy has been maintained. But in case scenarios gets leaked out, production would suffer badly. Apple has also shown delay in the payment terms post 90 days period after using the services. This is a clear indication that the company is going through some serious financial stress. But failing to pay within the payment terms definitely result in hampering the image of the organization.