Research Paper The research paper will be written on .docx

Research Paper
The research paper will be written on
some aspect of supply chain management. A 10-12
page (excluding appendices, table of contents, abstract,
reference, and bibliography) research paper (case study) is
required. This paper will be prepared consistent with the
current APA Manual and will have a minimum of ten different
references (No Wiki’s or Pedia’s).
1
Running Head: SWOT Analysis: Apple’s Supply Chain
1
SWOT Analysis: Apple’s Supply Chain
SWOT Analysis: Apple’s Supply Chain
Research Paper – Week 15
Sample Paper
MGT 5069: Supply Chain Management
Dr. Michael Essary
Spring Semester 2022

Table of Contents
Abstract 3
Introduction 4
Background 4
SWOT Analysis 6
Strengths 6
Strong Supplier Standards and Relationships 6
Effective Inventory Management 7
Sustainability 7
Weaknesses 9
Dependency on China 9
Reliance on iPhone Sales 9
Opportunities 10
Refining Pricing Power 10
Another Warehouse 10
Threats 11
COVID-19 11
Chip Shortage 12
Conclusion 13
References 16
Abstract
Apple has been a leader in the consumer electronics
industry for decades. The company has evolved and grown
tremendously to reach its current prestige. A critical component
to Apple’s success has been its world-class supply chain
management. Competitors fail to reach Apple’s leverage of
quality suppliers, extremely low level of inventory holdings,
and sustainable operational practices. This paper will explore
these further as well as some weaknesses, opportunities, and
threats faced by Apple’s supply chain system. Some lessons will
be identified upon the completion of this analysis that can apply
to all supply chain systems.
Introduction

Apple is one of the most iconic tech companies in the
world. The company that started in 1976 in the garage of two
college drop-outs Steve Jobs and Steve Wozniak is now worth
$3 trillion (Nicas, 2022). Known for its high-end consumer
electronics and top-of-the-line customer service, a key to its
unparalleled success has been its excellent supply chain
management. The foundation of Apple’s supply chain model has
been shaped around the words of CEO, Tim Cook, “You kind of
want to manage it like you’re in the dairy business. If it gets
past its freshness date, you have a problem” (Lu, 2020). This
quote illustrates Apple’s astute awareness that its products have
a limited life cycle. Treating products this way allows Apple to
optimize the efficiency of its supply chain.
Apple’s supply chain follows a logical sequence. “It starts
with research and development, in which new technologies are
developed and concepts are designed and licensed. Then goes to
concept testing, where Apple performs market research and tests
new products. Then pre-launch, which is when Apple fixes
problems that were discovered and pays its suppliers. After that
is the official launch. At launch Apple forecasts demand for 150
days. Finally, Apple performs quarterly reviews of inventories
and life cycles (Shrum, 2018). In addition to exploring the
company’s successful strategy, this paper will investigate
Apple’s supply chain management strengths, weaknesses,
opportunities, and threats.Background
Apple was on the brink of going out of business until Tim
Cook had an intervention. An analysis explains the changes that
Tim Cook made to Apple’s supply chain strategy when he came
back to the company as CEO in 1998 (Shrum, 2019). “Apple
focused on non-seasonal products with life cycles that exceed
12 months. Maintaining a long and steady life cycle helps with
forecasting and inventory management. The company cut down
the number of storage locations, leaving only one central
warehouse in California. This helped reduce inventory costs.
Apple established efficient synchronization of data between the

central warehouse and its stores and customers. Fast flow of
information is vital to the oversight and management of
inventory. Apple cut down the number of key suppliers that are
involved in manufacturing, shipping, and storage. This
organically caused the remaining suppliers to fight for the
opportunity to work with Apple by offering the highest quality
service. The company started maintaining long-term and
strategic relationships with suppliers. Apple outsourced the
manufacturing to China, thus reducing the manufacturing cycle
time from 4 months to 2 months. This reduction in
manufacturing time allowed the company to reduce inventory
holdings. Apple cut down the number of SKUs to predict the
demand more accurately and ensure lightning-fast Apple
inventory turnover. Apple implemented renewable energy
sources, making up to 87% of their energy used worldwide.
Lastly, Apple brought in extraordinary Apple inventory
management practices, which allowed the company to cut down
on inventory costs, reduce waste and avoid overstocking. These
important changes are what led Apple’s supply chain to be one
of the most powerful and efficient models in the world” (Shrum,
2019). The vision of supply chain expert, Tim Cook, is
ultimately what propelled the company to such levels of
success.SWOT Analysis
Strengths
Strong Supplier Standards and Relationships
Apple prioritizes the quality of its suppliers. In order to
leverage their expectations with their end products, Apple
established the “Apple Supplier Code of Conduct” and the
“Supplier Responsibility Standards” in 2005. Its Supplier Code
of Conducts addresses ethics, labor and human rights, health
and safety, environment, and management systems. Using these
assessment tools, Apple regularly checks the performance of its
suppliers and helps make improvements for long-lasting

changes in operations (Apple, n.d.). This system is beneficial
for all parties, as it produces a culture of improvement for the
supplier while ensuring Apple is receiving top-notch parts. In
addition to the individual help it offers to its suppliers, Apple
also motivates its suppliers each to strive to outperform one
another.
To motivate suppliers and to be transparent with consumers,
Apple publishes its Supplier List each year, which names each
of the company’s suppliers. As evidence of Apple’s high
standards, the top 200 suppliers on the list make up 98% of
operational procurement. Apple is able to leverage its
relationship with these quality suppliers by promising consistent
demand for parts as new innovative products are released
annually (Ross, 2020). Suppliers rest assured that even if a
product does not sell well, there will be new products the
following year. Apple has created an environment with its
suppliers of mutual gain, where Apple empowers its suppliers to
produce the highest-quality parts.
Effective Inventory Management
Apple excels at inventory management, the practice of
keeping the lowest amount of inventory on hand to keep
operations moving. Daniel Martins explains what Apple does so
well and the benefit of inventory management in a report.
Specifically, he speaks to the company’s successes despite
being faced with the logistical complications that emerged from
the Covid-19 outbreak. He explains that from 2019 to 2020,
Apple only saw a slight bump in its inventory to under 3%,
while competitors maintained inventory levels of 10% or even
20%. One huge benefit granted by effective inventory
management is that it minimizes the amount of cash that is tied
up into the supply chain. The second huge benefit of effective
inventory management is that it allows Apple to be nimble.
Apple does not need to worry about discounting older models
when newer ones are released, nor does Apple need to worry

about its inventory becoming obsolete (Martins, 2020).
Apple has been ahead of the competition in terms of
inventory management even before Covid-19 disrupted the
industry. One study shows how well Apple did in 2011. “Back
in 2011, a comparison of how tech companies managed their
inventory shows Apple was performing much better than Dell,
HP, Blackberry (RIM) and Motorola. Using the Inventory
Turnover formula that shows how many times a company’s
inventory can be sold and replaced over a specific time period
(so the higher the number the better), in 2011 Apple performed
2 times better than Dell, 5 times better than HP, 4.5 times better
than Blackberry, and 5.5 times better than Motorola” (Lu,
2020). This makes it clear that Apple has a grasp on how to
effectively manage its inventory.
Sustainability
Apple has a focus on sourcing recycled or renewable
resources for the production and packaging of its products.
Furthermore, it seeks to minimize its carbon footprint in the
manufacturing process. “It utilizes independent, third-party
auditors to assess the smelters and refiners that process
minerals required to build Apple products. Smelters and refiners
for key minerals are required to report, assess, and mitigate
risks in their business practices based on the findings of annual
assessments. If a smelter or refiner is unable or unwilling to
meet our [Apple’s] requirements, they risk removal from our
[Apple’s] supply chain (Apple, n.d.). In addition to its eco
goals, Apple has high standards from its manufacturers. A
report performed by Apple Insider shares the company’s 2020
supply chain progress. “Apple's environmental initiatives were
once again touted, with the company noting more than 100
suppliers have committed to building products with 100%
renewable energy. Over 900,000 annualized metric tons of
carbon equivalent were avoided in the supply chain thanks to
energy efficiency efforts, while similar programs diverted

400,000 metric tons of waste from landfills” (Staff, 2021). This
impressive statistic shows how far ahead of competition Apple
is in terms of its eco initiatives.
In her analysis of Apple’s sustainability in supply chain,
Laura Ross lists some of the company’s successes. She informs
the audience that back in 2017, “Apple announced its goal of
creating a closed-loop supply chain, which means that
eventually every product would be made solely from recyclable
or renewable products” (Ross, 2020). This ambitious goal will
set Apple apart from competition once achieved. She continues
to state that by 2020, “every one of its global facilities was
powered by renewable energy, and newer products, such as the
MacBook Air, were being made from 100% recycled aluminum”
(Ross, 2020). She continues with additional eco efforts achieved
by Apple, “The company has also invested heavily in a mix of
clean energy technology, such as solar and wind. Its online
Clean Energy Portal allows suppliers across the globe to
identify renewable sources. In 2018, Apple and its suppliers’
clean energy generation equaled approximately the amount of
electricity needed to power more than 600,000 homes in the
United States” (Ross, 2020). All these incredible efforts do
more than good for the environment, they also reassure
customers of the ethics that Apple has in its business practices
and help to justify the prices of their products.Weaknesses
Dependency on China
One weakness in Apple’s supply chain is its dependency on
China. Many of its suppliers are in China, as is its assembly
plant (Lu, 2020). Although there are numerous benefits to
outsourcing such operations, it also introduces risk. As
exemplified by the recent pandemic, operations in China came
to a screeching halt for months until it was safe for workers to
resume work. A report explains another problem with Apple’s
heavy dependency on China. A speculation that arises from

current world events in the Ukraine. The world has reacted to
Russia’s advancements on the Ukraine by stopping operations
and sales in/to Russia. Apple has even complied with this effort.
The potential problem lies with China. Should China make
advancements in Taiwan, the world would likely behave in a
similar manor to Russia and stop operations and sales in/to
China. Being so dependent on the Country for manufacturing
and assembly, Apple would take a significant loss by halting
these operations in China (Lovejoy, 2022). In order for Apple to
mitigate risk in future supply chain obstructions, the company
ought to consider alternative locations for assembly.
Reliance on iPhone Sales
One problem faced by Apple is its reliance on iPhone sales.
Although this has decreased in recent years as the company has
expanded its product line, a majority of its sales still come from
the iPhone each year. Apple’s Finance Chief, Luca Maestri,
stated that in 2019, 48% of the company’s revenue share was
from iPhone sales (Apple’s Reliance on iPhone Sales Begins to
Fade in Earnest, 2019). This reliance on phone sales puts a
strain on the suppliers who produce needed iPhone parts.
Additionally, it adds risk. Should something interfere with the
supply chain of the iPhone, Apple would take a large hit to
sales.Opportunities
Refining Pricing Power
Given the incredible customer loyalty Apple fans have for
the company, Apple could investigate adjusting its pricing
power. Economist, Jason Gordon, explains the definition of
pricing power. “Pricing power refers to the rise in the price of a
company’s products while demand stays the same. If a company
offers a unique product, then its pricing power will be strong.
The demand for the product will not go down even if the price

is increased (Gordon, 2022). In addition to the high demand for
Apple products, people want new products quickly. There is
high demand for Apple products coming to market fast. In turn,
this means that Apple products have a limited life cycle. Shefali
Bisht explains that “the best way for Apple to handle this is by
stabilizing their pricing power. This could be done by
increasing the product cost when the demand volume is high and
not easy to manage, which will enable the company to
efficiently handle business and grow organically” (Bisht, 2021).
This suggestion is one way Apple could combat the problem of
demand exceeding supply.
Another Warehouse
Presently, Apple ships its products to customers either
directly from the manufacturer in China, or from its central
warehouse in California (Shrum, 2019). To offset any
unreasonable inventory holding at the manufacturer, Apple
could open another warehouse in the East to ship products to
Europe and Asia. In addition to reducing transportation costs
from this new warehouse, another benefit is the mitigation of
future disruptions in the supply chain. Having an additional
location for inventory would help Apple maintain deliveries and
reduce delays. In addition to these, there are six reasons why
additional warehouses are beneficial to a supply chain. “First,
faster delivery times. The ability to keep inventory in multiple
locations means that the distance to customers will inevitably be
reduced. Second, improved disaster preparation. In addition to
the aforementioned reasons, multiple warehouses give
companies a back-up location to store and manage digital
inventory information, should a natural disaster physically
destroy one. Third, reduced shipping costs. Having multiple
shipping departure points would allow Apple to strategically
choose from where its products ship to minimize the distance
and shipping costs. Fourth, pave the way for growth. Having
multiple warehouses could enable Apple to work with 3PLs to

handle inventory and logistics and allow Apple to focus on
business growth. Fifth, reduced carbon emissions. The travel
distance reduced to customers as well as to retailers amount to
lower carbon emissions from deliveries. And lastly, the sixth
benefit is increased client satisfaction. Customers value faster
shipping times, reduced shipping costs, and an eco-friendly
storage situation” (Mueller, 2020). As outlined in these
examples, there are many benefits for Apple to relish by adding
another warehouse to its supply chain.Threats
COVID-19
The outbreak of Covid-19 led to many changes in the
world. People were stuck in quarantine, forced to wear masks,
and cities shut down around the world. Many businesses
struggled to stay afloat, and the supply chain industry was
severely disrupted. Manufacturing plants and assembly plants in
China were closed for months. As this is where Apple does its
product assembly and much of its manufacturing, this became a
major obstacle (Ross, 2020). Today, with the vaccine and
booster shot, the world has largely emerged from the global
Covid-19 ramifications, but the disease is still a threat to some
populations.
Recent lockdowns have affected suppliers in China.
Researcher, Connor Smith, states “Fresh Covid-19 lockdowns in
China will keep two of the Apple supplier Foxconn’s factories
shut down for at least a week. But for now, Wall Street analysts
don’t seem particularly concerned” (Smith, 2022). This
information should make Apple weary of the situation and
motivate the company to plan for a contingency should things
get worse in China.
Chip Shortage
A report by Esther Shein explains the chip shortage crisis.

Virtually all electronic devices today are powered by a
semiconductor chip and many use memory chips as well. In
2018 there was no shortage of these highly sought-after chips.
Then, when Covid-19 broke out, consumer behaviors changed.
There was a sharp decline in demand for new vehicles.
Disgruntled automakers shifted their focus to other areas that
were still in high demanding. In effect, these companies slowed
down the production of their chips. At this time chips were
needed to support the new 5G telecommunication network and
services such as Zoom to accommodate the increase in virtual
working environments, so demand shot up (Shein, 2021). This
overview highlights the three key factors that led to the major
shortage: consumer behaviors shifted production priorities, new
technologies, and the change in the working environment due to
Covid-19.
This crisis directly affected Apple’s capabilities. In 2021,
the company announced that it would need to lower its target
iPhone 13 production by 10 million units. “The technology giant
is one of the world’s largest chip buyers and sets the annual
rhythm for the electronics supply chain. But even with strong
buying power, Apple is grappling with the same supply
disruptions that have wreaked havoc on industries around the
world” (Wu, 2021). Wu continues to explain that Apple has also
struggled to manufacture enough Apple Watch Series 7’s and
iPads (Wu, 2021). This shows that even with the strong supply
chain that Apple has, the company is unable to avoid industry-
wide disruptions. Conclusion
From humble beginnings to global leader in the consumer
electronics industry, Apple has made mistakes along the way to
reaching its current level of success. The company continually
learned from their mistakes and made improvements to their
processes. The key to the company’s success has been its
control over its supply chain. Apple has prioritized supplier
relationships to guarantee that the highest quality parts are used
in its products. In exchange for this, Apple helps its suppliers

who are struggling or run into problems. Another thing Apple
does exceptionally well is inventory management. Apple has
figured out how to keep lower inventory levels on hand than all
the competition and still maintain regular sales levels. The final
strength in Apple’s supply chain system highlighted in this
paper is its efforts in sustainability. Apple has demonstrated
many initiatives in sustainable practices. From ensuring
suppliers are following sustainable practices, to using recycled
materials in production, to reducing packaging, and to recycling
obsolete devices (Staff, 2021). Apple does have a few
weaknesses in its supply chain as well. Apple relies too heavily
on China for much of its operations, and Apple depends too
much on iPhone sales. There are opportunities for Apple to
improve its supply chain. These include adding another
warehouse. This could have many benefits for the company that
would lead to increased revenue. Another opportunity for Apple
would be refining its pricing power. Adjusting the pricing of its
products in relation to demand could help the company leverage
inventories when they are low (Bisht, 2021). Threats exist in all
industries, as natural disasters and politics never cease. One
threat to Apple’s supply chain is Covid-19. Though the
pandemic had immediate implications to the company and the
world, it still poses a threat of uncertainty. A second threat to
Apple is the chip shortage that the world is currently facing.
This has been limiting on the production of the 2022 iPhone
models and may continue to affect production of future models
as well (Wu, 2021).
One take away lesson from this analysis on Apple’s supply
chain is that flexibility is possibly the most important feature a
supply chain needs to have in order to succeed. This can be
achieved by having multiple reliable suppliers and warehouses
around the world, or by effectively managing inventory levels.
These are things Apple does well. Another important lesson is
understanding customers and how the supply chain can best
benefit the company and the customer. There are many things
that the customer wants or even expects, such as new products

every year, fast shipping, and eco-friendly packaging and
processing. These can all directly be influenced with supply
chain decisions. Producing new models each year affects the
optimal amount of inventory to be kept in warehouses. Fast
shipping can be achieved through having multiple shipping
points. Apple can and has reduced the size of their iPhone boxes
to be more sustainable, produces laptops using 100% recycled
metals, and refurbishes or recycles older Apple devices to
minimize waste (Ross, 2020). One final lesson from the analysis
is that international benefits need to be factored into creation of
the supply chain while also considering the dangers of relying
too heavily on international partners. It’s true that labor is much
cheaper overseas and the quality can be monitored, but various
factors make heavy reliance on these partners risky. There is the
risk of natural disaster or political complications slowing down
operations. Apple can use these lessons to reach greater success
in future endeavors. Apple embraces this concept of continual
improvement as it eloquently states “We know our work will
never be done. We believe that if we aren’t finding ways to
improve, we aren’t looking hard enough. As the world and our
business continue to change, our strategy changes with
it. We’re always listening, learning, and challenging ourselves
to do better and we share our best thinking with leading
organizations, industry associations, and governments. By
forging solutions together, everyone can achieve progress more
rapidly” (Apple, n.d.).
References
Apple. (n.d.).
How We Work With Suppliers. Retrieved April 15,
2022, from https://www.apple.com/supplier-
responsibility/pdf/How-We-Work-With-Suppliers.pdf
Apple’s reliance on iPhone sales begins to fade in earnest.

(2019, July 31). The Irish Times. Retrieved April 18, 2022,
from https://www.irishtimes.com/business/technology/apple-s-
reliance-on-iphone-sales-begins-to-fade-in-earnest-1.3973340
Bisht, S. (2021, December 10).
Analyzing Tech giant Apple’s supply chain
planning.. Medium. Retrieved April 20, 2022, from
https://medium.com/@shefalibisht00/analyzing-tech-giant-
apples-supply-chain-planning-a124ed4ad2ee
Gordon, J. (2022, April 16).
Pricing Power - Explained. The Business Professor,
LLC. Retrieved April 24, 2022, from
https://thebusinessprofessor.com/en_US/economic-analysis-
monetary-policy/pricing-power-definition
Lovejoy, B. (2022, March 2).
Ukraine crisis, and Apple’s unsustainable dependence
on China. 9to5Mac. Retrieved April 20, 2022, from
https://9to5mac.com/2022/03/02/ukraine-crisis-apple-china/
Lu, C. (2020, April 15).
Apple Supply Chain - The Best Supply Chain in the
World. Intuit Quickbooks. Retrieved April 23, 2022, from
https://www.tradegecko.com/blog/supply-chain-
management/apple-the-best-supply-chain-in-the-world
Martins, D. (2020, August 11).
Apple: Kings Of Inventory Management. Apple Maven.
Retrieved April 23, 2022, from
https://www.thestreet.com/apple/news/apple-kings-of-inventory-

management
Mueller, S. (2020, November 20).
7 Reasons to Diversify Your Inventory Across Multiple
Warehouses — Symbia Logistics. 3PL (Third Party Logistics)
Services | Symbia Logistics. Retrieved April 24, 2022, from
https://www.symbia.com/blog/reasons-to-diversify-your-
inventory-across-multiple-warehouses
Nicas, J. (2022, January 3).
Apple Becomes First Company to Hit $3 Trillion
Market Value. The New York Times. Retrieved April 15, 2022,
from https://www.nytimes.com/2022/01/03/technology/apple-3-
trillion-market-value.html
Ross, L. (2020, June 30).
How the Apple Supply Chain Stays Top Ranked in the
World. Thomas. Retrieved April 15, 2022, from
https://www.thomasnet.com/insights/apple-supply-chain/
Shein, E. (2021, November 18).
Global chip shortage: Everything you need to know.
TechRepublic. Retrieved April 24, 2022, from
https://www.techrepublic.com/article/global-chip-shortage-
cheat-sheet/
Shrum, A. (2019, January 3).
A Look at Apple’s Supply Chain Management. Dynamic
Inventory. Retrieved April 24, 2022, from
https://www.dynamicinventory.net/apple-best-supply-chain-
management-company/

Smith, C. (2022, April 24).
An Apple iPhone Supplier’s Factories Are Closing
Because of Covid. Wall Street Isn’t Worried, Yet. Barron’s.
Retrieved April 22, 2022, from
https://www.barrons.com/articles/fed-interest-rates-
51650661768
Staff, A. (2021, May 29).
Apple details supply chain progress in annual
responsibility report. AppleInsider. Retrieved April 22, 2022,
from https://appleinsider.com/articles/21/05/29/apple-details-
supply-chain-progress-in-annual-responsibility-report
Wu, D. (2021, October 12).
Apple Set to Cut iPhone Production Goals Due to Chip
Crunch. Bloomberg. Retrieved April 24, 2022, from
https://www.bloomberg.com/tosv2.html?vid=&uuid=4895abfa-
c3f6-11ec-901b-
6441756b4e61&url=L25ld3MvYXJ0aWNsZXMvMjAyMS0xMC
0xMi9hcHBsZS1wb2lzZWQtdG8tc2xhc2gtaXBob25lLXByb2R1
Y3Rpb24tZ29hbHMtZHVlLXRvLWNoaXAtY3J1bmNo

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