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Globalization AND Risk IN Supply Chain
(APPLE INC. CASE STUDY)
Supply Chain Management (ENG4089M)
Mu’taz Tayseer Ayed
14020192
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Table of Contents
Table of Content ..................................................................................................................................................1
CHAPTER 1. INTRODUCTION................................................................................................................................2
Introduction......................................................................................................................................................2
Project Aim........................................................................................................................................................2
Structure of the Project....................................................................................................................................2
CHAPTER 2. LITRATURE REVIEW..........................................................................................................................3
Supply Chain and Logistics................................................................................................................................3
Supply Chain Management...............................................................................................................................3
Globalization.....................................................................................................................................................3
Global Organizations & Products .....................................................................................................................3
Strategies in Global SC ......................................................................................................................................5
Global Supply Chain Risk...................................................................................................................................7
CHAPTER 3. CASE STUDY OF APPLE INC..............................................................................................................9
Company Background.......................................................................................................................................9
Apple Strategy in Global Supply Chain..............................................................................................................9
Apple Offshoring-Outsourcing........................................................................................................................12
Apple Dedicated Factories & Centralized Inventories ...................................................................................14
Risks Factors Apple Facing ..............................................................................................................................15
CHAPTER 4. CONCUSION ...................................................................................................................................16
Lessons Learned .............................................................................................................................................16
Conclusion.......................................................................................................................................................16
REFERENCES .......................................................................................................................................................17
Appendix A. Risk Drivers Scenario ..................................................................................................................19
Appendix B. Apple Main Facilities...................................................................................................................21
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CHAPTER 1. INTRODUCTION
Introduction
John Kasarda, Forbes, October 18, 1999, quoted about change the managerial way of thinking
because of industrial changes “Manufacturing now compete less on product and quality- which are
often comparable- and more on inventory turns and speed to market”. This reflect the belief that
supply chain management is the approach to illustrate the ability to compete and achieve competitive
advantage in the market (Ayers, 2001).
Logistics and supply chain management (SCM), has been recognized as an important part of
organizational strategy and the ability of the firms to remain competitive in the marketplace, as the
best practice of logistics and SCM reduce cost and add value to supply chain. (Mellat-Parast &
Spillan, 2013)
This project intend to analyse strategic aspects of globalisation and risk in supply chain by reflecting
the aspects related on the global company Apple Inc. as its one of the best companies in developing
and improving in supply chain (SC).
Project Aim
This project aims to understand aspects related to globalisation in supply chain by analysing Apple
Inc. supply chain in regard to the literature review, which discuss the global supply chain issues such
as Glocalisation, centralised inventories, focused factories and risk facing global firms.
Structure of the Project
Starting with chapter 1 as an introduction, in chapter 2 the literature review of the global supply
chain aspects and risks, then chapter 3 which analyses Apple Inc. as a case study. Finally in chapter
4, summarise the project in conclusion and lessons learned.
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CHAPTER 2. LITRATURE REVIEW
Supply Chain and Logistics
(Ayers, 2001) Defines SC as all what happens to the product from the “dirt” the beginning of
extracting raw material from the Mother Earth, through the different processes of manufacturing,
transporting and distributing, and then in the hand of the final customer who will use it and end it up
to the “dust” or for recycling; (Chopra & Meindl, 2013) to satisfy the customer needs the product;
therefore SC involves transporters, warehouses…etc.
Logistics defined as a total range of logical activities that guide the process of planning and control
the movement of materials flow, including finance and human resources committed to physical
distribution and storing from the moment they leave the original supplier flowing through to the final
customer (Christopher, 1992) (Bowersox, et al., 1986).
Supply Chain Management (SCM)
(Ayers, 2001) SCM is to manage supply chain segments by design, maintenance and operations of
supply chain processes through the upstream and downstream linkages; to achieve customer
satisfaction, extending to SC formulation and operational and maintenance subsequent. SCM is a
valuable and important discipline in organizations which is taken in the level of marketing, finance
and operation. (Chopra & Meindl, 2013) Agrees about the influence of SCM on the firm as quoted
“Supply chain design, planning, and operation decisions play a significant role in the success or
failure of firms”.
Globalisation
Regarding to Oxford dictionary, global in language perspective means “covering or affecting the
whole world”. Moreover, globalization in terms of language points for “the fact that different
cultures and economic systems around the world are becoming connected and similar to each other
because of the influence of large multinational companies and of improved communication”. In
general, globalisation has been defined in the last decades as “an umbrella term for a complex series
of economic, social, technological, cultural and political changes, which continues to take place in
the world” (Mangan, et al., 2012).
Global Organisations & Products
The impact of globalisation on SC can increase the revenue and reduce cost of companies, as Nokia,
which achieved largest global market percentage of 19% in 2007, and P&G which represented 28%
of global sales. However, many companies are not ready to turn to global level because of risk and
complexity of this level in developing supply chain and logistics (Chopra & Meindl, 2013).
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 Global Organisations
Regarding to (Waters, 2009), organisations can be classified regarding to the market they are
targeting and working in, starting with the national companies which work in their home market
only, international companies work in many countries as they have facilities in different countries
but centred in one country. Moreover, Multinational companies are linked more broadly with large
independent companies working in different regions around the world. Finally, global companies see
the world as one single market. Global companies make standard product and ship it for all the world
using different facilities which effectively located in many regions.
 Barbie, The All-American Girls Toy
In 1959 was the start of the American toy doll the typical example on global citizens` product. It is
originally made in japan, not the USA. As though, her hair is made in Japan, the plastic in her body
made in Taiwan and her clothing made from China.
 Boeing 787 Dreamliner
The most successful product lunch for Boeing is a high-value global product which required Boeing
to apply Lean Manufacturing (LM) for the first time in the company. It formulated another SC model
in which suppliers were capable to invest their own cash to plan, make, and coordinate real areas of
the plane, in light of general determinations gave by Boeing (SONG, et al., 2014), the figure below
illustrate Boeing 787 work share around the globe.
Figure 1: Boing 787 Global Work Share (SONG, et al., 2014)
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Strategies in Global Supply Chain
 Think global act local “GLOCALISATION”
Many global companies refer to this policy which taking in consider the local and cultural
differences in many regions despite looking for the world as a single market, which allow them to
have a world-market scale, act and cope conveniently to local needs (Mangan, et al., 2012). It
involve customising marketing strategy to suit different countries by categorise countries in common
with cultural, social and technological (Vignali, 2001)
 Offshore-Outsourcing
Outsourcing is procuring parts or services, which might be previously processed at the firm, from
third party or outside foreign suppliers instead of perform it in-house, offshoring is to transfer a
particular process to a less cost region or location (Liu & Nagurney, 2011). Consequently, the term
offshore-outsourcing is widely used to refer for both as they are in common. Moreover, reasons of
resorting to offshore-outsourcing are decrease cost, rise the flexibility as the third party partner is
able to provide more services and finally and most importantly to focus only on the core
competences of the organization which should not be outsourced but can be offshored (Mangan, et
al., 2012).
However, there still a trade-off about what to outsource and what to keep in-house as Chopra
discussed “managers must decide whether to outsource all of it, outsource only the responsive
component, or outsource only the efficient components” which effect significantly on the SC value
(Chopra & Meindl, 2013). Although offshore-outsourcing has many advantages, it also reveal
various risks to SC global organisations such as production disruption risk, quality risk, supplier
default risk and foreign exchange risk. Among these risks, foreign exchange risk is considered to be
on the top of the list (Liu & Nagurney, 2011). On the other hand, Outsourcing is a recent trend,
usually adopted to gain lower production costs, but also can be used to reduce core organizational
risk (Wu, et al., 2013).
 Focused Factories
(Brumme, et al., 2015) The basic idea of focused manufacturing facilities is old, “The Focused
Factory” Skinner 1974 and other related articles in the Harvard Business Review, gave birth of it.
(Harrison & Hoek, 2005)Many global companies have prepared their production globally by setting
factories in the countries or regions, focused factory strategy includes integrate products production
to a specific manufacturing plant to supply the international market by focusing on a limited segment
of product variety. As many strategies, focused factory is a trade-off between delivery lead time and
cos, and has advantage and disadvantages as shown in table 1 next page.
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Table 1: Advantages and Disadvantages of Focused Factory strategy (Harrison & Hoek, 2005)
Advantages Disadvantages
Cost
Lower production costs
through economies of scale
Higher transport cost
Lead time
Specialised equipment may
be able to manufacture
quicker
Longer distance from
market will increase lead
time
(Skinner, 1974) agrees that focused factory is not the ultimate solution because “A factory cannot
perform well on every yardstick” which reflect the trade-off between measuring manufacturing need
to be compromised such as short delivery cycles, quality and reliability...etc. for example, it is
catastrophe to take low-cost over quality, reliability and delivery.
 Centralised Inventories
(Harrison & Hoek, 2005) Instead of having a huge number of small distribution centres, gathering
these to smaller number of distribution centres will decline cost and management complexity, which
allow remove duplication and reduce safety stocks. However, it will extend the transportation outline
because the distribution legs will be longer from the warehouse to the customer. Also, it makes a
trade-off when it comes to the product environment where the cost of inventory is more important
than the distribution cost. The table below illustrate the advantages and disadvantages of Centralised
Inventories strategy.
Table 2: Centralised inventories advantages and disadvantages
Advantages Disadvantages
 Eliminate duplication and
minimise safety stock
 Lowering logistics costs(factory-
to-warehouse cost) and
distribution cycle times
 Extend the transportation
pipeline and distribution legs
 Concern in where inventory
cost is more important than
logistics cost
 Concerns about the lead time
and delivery efficiency as the
customer demand can be
volatile and unpredictable
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In consequence, many disadvantages appears in centralisation strategy but many different levels of
centralisations approaches can be implemented to compromise the best country or location in order
to add value to the SC.
Many approaches to select an adopt location regarding to (Rushton & Oxley, 1991), firstly is the
centre of gravity method 1930, which is based the identification between the centre with minimum
cost for adequate location and the centre of gravity as defined in physics and The Tonne Mile Centre
Method, both methods are crude and clear, and emphasize major point in the location; The
importance of the demand for goods, the distance involved and decrease the product of those factor
“weight (tonnes) times distance (miles)”. Secondly, Heuristics which is derived from the ‘rule of
thumb’ principle by using knowledge and common sense to refuse any unlikely positions which
minify problems. Thirdly, Mathematical programming using known mathematical techniques like
linear programming, and finally simulation method.
Global Supply Chain Risk
(Waters, 2011) Risks in supply chain appear when a sudden event happen and might threaten the
flow of materials, information and finance through the SC from the first supplier to the customer,
which causes delays in deliveries or maybe prevention, effect or damage goods and many
consequences that might cause lost in cost, quality in services and honesty. (Manuj & Mentzer,
2008)“Risks are all those things that keep you away from the perfect path and perfect outcomes and
(you) got to be able to translate (risks) into dollars somehow”.
Reasons to be aware in global SC might be direct such as tariffs, SC information or documents and
import/export restrictions, or indirect impediment like security concerns and local factors. Which
result in delays, cost rise, financial loss and stressed business relationships (Benson, 2013).
Writers introduced risks in GSC with different perspectives. Therefore, in order to understand the
risk, those perspectives are collected and sorted in table 3 in the next page.
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Table 3: SC risks regarding to different perspectives
Writer Perspective Description and influence
Donal Waters
(Waters, 2011)
In General
 External risks: Moving products and materials
through many countries, regions cultures and different
governments with different policies make a dramatic
risk, in addition to the natural disasters that might
disturb the SC.
 Internal risks: less dramatic, but more widespread in
their effect. Those are related with the shop floor such
as breakdowns and delays.
Many traditional ways can work with it such as
having many suppliers in order to reduce risk of
material suppling or having a safety stock just in case.
Omera Khan, George
Zsidisin.
(Khan & Zsidisin, 2011)
According to the main
effect on the SC
performance goals
 Total costs too high.
 Delivery reliability.
 Insufficient quality.
 Damage to company reputation.
See Appendix (A) for scenario for each point
Ila Manuj, John T.
Mentzer
(Manuj & Mentzer,
2008)
Definitions provided
by supply chain
managers
 Potential losses (if the risk is realized, what losses will
result and what is the significance of the
consequences of the losses.
 Likelihood of those losses (the probability of the
occurrence of an event that leads to realization of the
risk).
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CHAPTER 3. CASE STUDY OF APPLE INC.
Company Background
The Company is a California corporation established in 1977 which “designs, manufactures and
markets mobile communication and media devices, personal computers and portable digital music
players, and sells a variety of related software, services, accessories, networking solutions and third-
party digital content and applications.” The Company sells its products and services globally by its
retail stores, online stores and direct sales force, in addition to third-party cellular network carriers.
The Company sells to consumers, small and mid-sized businesses and education, enterprise and
government customers. The Company’s products and services include iPhone®, iPad®, Mac®,
iPod®, Apple Watch®, Apple TV®. (Apple, 2015)
Apple is one of the big global companies which achieved a tremendous improvement in SC ranking
between 2004 and 2008 regarding to (Hill & Hill, 2009) as it ranked in 1st
position as shown in the
exhibit below. Gartner website, as the world leading IT research, ranked the SC of Apple the 1st
in
the world and 3 years in row (Gartner, 2015).
Figure 2: Apple SC management ranking 2004-2008 (Hill & Hill, 2009)
Apple Strategy in Global Supply Chain
Apple business strategy from 1997 after Steve jobs return was focused on improving cutting-edge
easy use products and new innovations in products every 12-18months, which changed the company
foundations immensely (Hill & Hill, 2009). That requires a classic SC model of new product
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development process (NPD) starting with R&D through SC functions to marketing (Supplychainopz,
2013).
As shown in Figure 3, starting with R&D and testing to produce new, easy and valuable product.
Then, the pre-lunch stage which is more related with SC by noticing main processes should be done
accurately: Manage material purchase commitments, provide proper storing levels, raise orders and
make pre-payments to suppliers to guarantee suppliers will stick with the strategy. These four
planning points reflects how ready is the company and the high commitment with the plan. In
addition to a quarterly review as a feedback to measure the current statues of the market and if there
is any action needed.
(supplychain247, 2015) The SC model of Apple Inc. is almost similar to other industries’ models,
Apple order raw materials from many suppliers around the world to the assemble plants mainly in
China and other assembling facilities that we will mention later on. After that, the products are
shipped by the assembler to customers who buy from online store and to Apple warehouse at Elk
Grove, California to supply products from there to other distribution channels as illustrated in Figure
4 next page.
Figure 3: Apple Supply Chain Planning Model (Supplychainopz, 2013)
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Figure 5: Apple Inc. worldwide suppliers in 2015 (Apple.com, 2015)
Figure 4: Apple Inc. SC Model (supplychain247, 2015)
Regarding to the entire suppliers list (Apple.com, 2015) provided by the company website, the
number of suppliers for all products is more than 200 suppliers all around the world, Figure 3.
In
comparison with 2014 suppliers’ distribution around the world, the number of suppliers in China and
Japan saw a decline from 349 to 334 suppliers. On the other hand, an increase in suppliers in
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America and Europe. This can be referred to many reasons to protect the SC such as natural
disasters, cost and quality aspects or a strategic approach the company is looking for.
Figure 6: Apple global suppliers in 2014 (Comparecamp, 2014)
Apple Offshoring-Outsourcing
Apple strategy in offshore outsourcing is to achieve huge labour cost reduction, less equipment
investment and high operations efficiency. By manufacture and assemble products mainly in China,
in addition to other Asian countries such as Taiwan, japan and Thailand (Wenji, 2005).
(Wright, 2012) Apple’s strategy is to keep the high value added task like designing, marketing and
product management within the company, and outsourcing most of low value or low cost effective
processes, like parts manufacturing and assembling to external suppliers and partners. This is
compatible with what mentioned in the literature review to not outsource your core-competence.
Outsourcing varies from touch screen controllers, storage electronics manufacturing and Bluetooth
and Wi-Fi all around the world, (supplychain247, 2015) shows specifically components outsourced
for Apple product iPhone.
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Figure 7: IPhone outsourced components (Comparecamp, 2014)
 The famous story “Biscuits and Tea”
(Duhigg & Bradsher, 2012) Reported, In 2007 Steven Jobs had decided to redesign the iPhone's
screen weeks before the lunch, which force an assembly line overhaul. Chines factory where able to
finish the task in 15 days by giving around 8,000 workers biscuits and tea and work all day and night
in order to fit screen glass to 10,000 iPhone a day. Regarding to (Comparecamp, 2014) if it had been
done by an American partner It would have taken 9 months as shown in figure 6. As one of the
company executives mentioned “The speed and flexibility is breath-taking, there is no American
plant that can match that.”
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Figure 8: USA manufacturing flexibility vs. China (Comparecamp, 2014)
Apple Dedicated Factories and Centralised inventories
Apple has different focused factories as each one is focusing on processing a specific segment of
products. Most of Apple products are assembled and processed in Foxconn factories. Foxconn has
tremendous manufacturing plants which divided to be dedicated to different Apple products
regarding to (Apple.com, 2015), the facilities are 18 as a main assembly factories in Ireland, Brazil
and China which most of the facilities are based in. See Appendix B to see the 18 facilities.
About Apple inventory (Oliver, 2012) mentioned “When Cook initially took over Apple's supply
chain, he cut down the number of component suppliers from 100 to 24, forcing companies to
compete for Apple's business. He also shut down 10 of the 19 Apple warehouses to limit
overstocking, and by September of 1998 inventory was down from a month to only six days.”
(Supplychain247, 2015) (Supplychainopz, 2013)Apple centralisation of inventories can be
summarised in two ways, the first is the main warehouse which is the only centralised inventory
based in California, this inventory receive finished products and then ship it all around the world,
basically in big quantities to retail stores, telecommunication companies, Apple stores and other
distributers. The second is by online shopping, which will be sent from the manufacturer to the
customer.
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Risk Factors Apple Facing
Risks factors that Apple facing and planning to avoid in case of threatening the company assets,
supply chain or competitive advantage are listed in their annual report as follow:
Table 4: Risk factors Apple Inc. facing (Apple.Inc., 2012)
Risks Factors
 Global economic conditions could materially adversely affect the
Company.
 Ability to obtain components in sufficient quantities is important
 To remain competitive, the Company must successfully manage
frequent product introductions to stimulate the customer demand.
 The Company faces substantial inventory and other asset risk in
addition to purchase commitment cancellation risk.
 The Company depends on component and product manufacturing
and logistical services provided by outsourcing partners, many of
whom are located outside of the U.S.
 The Company’s future performance depends in part on support
from third-party software developers.
 The Company’s products and services experience quality problems
from time to time that can result in decreased sales and operating
margin.
 Some components are currently obtained from the single or limited
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CHAPTER 4. CONCLUSION
Lessons Learned
 SC planning in Apple is simple and rigid and focuses because of the successful management of
suppliers and SC, while other companies has similar model but still find it complex.
 Focusing on their core-competence and outsource other aspects they are not good at.
 Apple are the kings of offshoring-outsourcing, as they rely on China which adding efficiency and
responsiveness in regard to biscuits and tea story.
 Apple has one centralised warehouse which has advantage in reducing management complexity
if they have many warehouses all around the world. On the other hand, shipping from
manufacturer to warehouses around the world is adding responsiveness to SC. It still a trade-off
judgment.
 Many parts are supplier from limited suppliers which is a case that Apple should look for in the
near future.
 Procurement importance, Cook reduced the number of suppliers to make your suppliers work for
the contract.
Conclusion
In conclusion, Apple Inc. are leading now in SCM and that increasing the company revenue because
they are adding value on their SC using many techniques and strategy such as offshore-outsourcing
and centralised inventories which is in California. In addition to dedicated factories as there
manufacturing is almost in China with many facilities, each one is focusing on segment of parts or
tasks. Moreover, Apple Inc. are facing many risks like many companies, and most of those risk
related with demand and efficiency in controlling changes in customers and suppliers as many
components are supplied from limited numbers of suppliers which sometime reach only one.
Eventually, types of risk related to global issues and disasters which is out of Apple control.
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APPENDIX A. RISK DRIVERS SCENARIO
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APPENDIX B. APPLE MAIN FACILITIES
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Supply chain globalisation and risk in sc.docx

  • 1. 0 | P a g e Globalization AND Risk IN Supply Chain (APPLE INC. CASE STUDY) Supply Chain Management (ENG4089M) Mu’taz Tayseer Ayed 14020192
  • 2. 1 | P a g e Table of Contents Table of Content ..................................................................................................................................................1 CHAPTER 1. INTRODUCTION................................................................................................................................2 Introduction......................................................................................................................................................2 Project Aim........................................................................................................................................................2 Structure of the Project....................................................................................................................................2 CHAPTER 2. LITRATURE REVIEW..........................................................................................................................3 Supply Chain and Logistics................................................................................................................................3 Supply Chain Management...............................................................................................................................3 Globalization.....................................................................................................................................................3 Global Organizations & Products .....................................................................................................................3 Strategies in Global SC ......................................................................................................................................5 Global Supply Chain Risk...................................................................................................................................7 CHAPTER 3. CASE STUDY OF APPLE INC..............................................................................................................9 Company Background.......................................................................................................................................9 Apple Strategy in Global Supply Chain..............................................................................................................9 Apple Offshoring-Outsourcing........................................................................................................................12 Apple Dedicated Factories & Centralized Inventories ...................................................................................14 Risks Factors Apple Facing ..............................................................................................................................15 CHAPTER 4. CONCUSION ...................................................................................................................................16 Lessons Learned .............................................................................................................................................16 Conclusion.......................................................................................................................................................16 REFERENCES .......................................................................................................................................................17 Appendix A. Risk Drivers Scenario ..................................................................................................................19 Appendix B. Apple Main Facilities...................................................................................................................21
  • 3. 2 | P a g e CHAPTER 1. INTRODUCTION Introduction John Kasarda, Forbes, October 18, 1999, quoted about change the managerial way of thinking because of industrial changes “Manufacturing now compete less on product and quality- which are often comparable- and more on inventory turns and speed to market”. This reflect the belief that supply chain management is the approach to illustrate the ability to compete and achieve competitive advantage in the market (Ayers, 2001). Logistics and supply chain management (SCM), has been recognized as an important part of organizational strategy and the ability of the firms to remain competitive in the marketplace, as the best practice of logistics and SCM reduce cost and add value to supply chain. (Mellat-Parast & Spillan, 2013) This project intend to analyse strategic aspects of globalisation and risk in supply chain by reflecting the aspects related on the global company Apple Inc. as its one of the best companies in developing and improving in supply chain (SC). Project Aim This project aims to understand aspects related to globalisation in supply chain by analysing Apple Inc. supply chain in regard to the literature review, which discuss the global supply chain issues such as Glocalisation, centralised inventories, focused factories and risk facing global firms. Structure of the Project Starting with chapter 1 as an introduction, in chapter 2 the literature review of the global supply chain aspects and risks, then chapter 3 which analyses Apple Inc. as a case study. Finally in chapter 4, summarise the project in conclusion and lessons learned.
  • 4. 3 | P a g e CHAPTER 2. LITRATURE REVIEW Supply Chain and Logistics (Ayers, 2001) Defines SC as all what happens to the product from the “dirt” the beginning of extracting raw material from the Mother Earth, through the different processes of manufacturing, transporting and distributing, and then in the hand of the final customer who will use it and end it up to the “dust” or for recycling; (Chopra & Meindl, 2013) to satisfy the customer needs the product; therefore SC involves transporters, warehouses…etc. Logistics defined as a total range of logical activities that guide the process of planning and control the movement of materials flow, including finance and human resources committed to physical distribution and storing from the moment they leave the original supplier flowing through to the final customer (Christopher, 1992) (Bowersox, et al., 1986). Supply Chain Management (SCM) (Ayers, 2001) SCM is to manage supply chain segments by design, maintenance and operations of supply chain processes through the upstream and downstream linkages; to achieve customer satisfaction, extending to SC formulation and operational and maintenance subsequent. SCM is a valuable and important discipline in organizations which is taken in the level of marketing, finance and operation. (Chopra & Meindl, 2013) Agrees about the influence of SCM on the firm as quoted “Supply chain design, planning, and operation decisions play a significant role in the success or failure of firms”. Globalisation Regarding to Oxford dictionary, global in language perspective means “covering or affecting the whole world”. Moreover, globalization in terms of language points for “the fact that different cultures and economic systems around the world are becoming connected and similar to each other because of the influence of large multinational companies and of improved communication”. In general, globalisation has been defined in the last decades as “an umbrella term for a complex series of economic, social, technological, cultural and political changes, which continues to take place in the world” (Mangan, et al., 2012). Global Organisations & Products The impact of globalisation on SC can increase the revenue and reduce cost of companies, as Nokia, which achieved largest global market percentage of 19% in 2007, and P&G which represented 28% of global sales. However, many companies are not ready to turn to global level because of risk and complexity of this level in developing supply chain and logistics (Chopra & Meindl, 2013).
  • 5. 4 | P a g e  Global Organisations Regarding to (Waters, 2009), organisations can be classified regarding to the market they are targeting and working in, starting with the national companies which work in their home market only, international companies work in many countries as they have facilities in different countries but centred in one country. Moreover, Multinational companies are linked more broadly with large independent companies working in different regions around the world. Finally, global companies see the world as one single market. Global companies make standard product and ship it for all the world using different facilities which effectively located in many regions.  Barbie, The All-American Girls Toy In 1959 was the start of the American toy doll the typical example on global citizens` product. It is originally made in japan, not the USA. As though, her hair is made in Japan, the plastic in her body made in Taiwan and her clothing made from China.  Boeing 787 Dreamliner The most successful product lunch for Boeing is a high-value global product which required Boeing to apply Lean Manufacturing (LM) for the first time in the company. It formulated another SC model in which suppliers were capable to invest their own cash to plan, make, and coordinate real areas of the plane, in light of general determinations gave by Boeing (SONG, et al., 2014), the figure below illustrate Boeing 787 work share around the globe. Figure 1: Boing 787 Global Work Share (SONG, et al., 2014)
  • 6. 5 | P a g e Strategies in Global Supply Chain  Think global act local “GLOCALISATION” Many global companies refer to this policy which taking in consider the local and cultural differences in many regions despite looking for the world as a single market, which allow them to have a world-market scale, act and cope conveniently to local needs (Mangan, et al., 2012). It involve customising marketing strategy to suit different countries by categorise countries in common with cultural, social and technological (Vignali, 2001)  Offshore-Outsourcing Outsourcing is procuring parts or services, which might be previously processed at the firm, from third party or outside foreign suppliers instead of perform it in-house, offshoring is to transfer a particular process to a less cost region or location (Liu & Nagurney, 2011). Consequently, the term offshore-outsourcing is widely used to refer for both as they are in common. Moreover, reasons of resorting to offshore-outsourcing are decrease cost, rise the flexibility as the third party partner is able to provide more services and finally and most importantly to focus only on the core competences of the organization which should not be outsourced but can be offshored (Mangan, et al., 2012). However, there still a trade-off about what to outsource and what to keep in-house as Chopra discussed “managers must decide whether to outsource all of it, outsource only the responsive component, or outsource only the efficient components” which effect significantly on the SC value (Chopra & Meindl, 2013). Although offshore-outsourcing has many advantages, it also reveal various risks to SC global organisations such as production disruption risk, quality risk, supplier default risk and foreign exchange risk. Among these risks, foreign exchange risk is considered to be on the top of the list (Liu & Nagurney, 2011). On the other hand, Outsourcing is a recent trend, usually adopted to gain lower production costs, but also can be used to reduce core organizational risk (Wu, et al., 2013).  Focused Factories (Brumme, et al., 2015) The basic idea of focused manufacturing facilities is old, “The Focused Factory” Skinner 1974 and other related articles in the Harvard Business Review, gave birth of it. (Harrison & Hoek, 2005)Many global companies have prepared their production globally by setting factories in the countries or regions, focused factory strategy includes integrate products production to a specific manufacturing plant to supply the international market by focusing on a limited segment of product variety. As many strategies, focused factory is a trade-off between delivery lead time and cos, and has advantage and disadvantages as shown in table 1 next page.
  • 7. 6 | P a g e Table 1: Advantages and Disadvantages of Focused Factory strategy (Harrison & Hoek, 2005) Advantages Disadvantages Cost Lower production costs through economies of scale Higher transport cost Lead time Specialised equipment may be able to manufacture quicker Longer distance from market will increase lead time (Skinner, 1974) agrees that focused factory is not the ultimate solution because “A factory cannot perform well on every yardstick” which reflect the trade-off between measuring manufacturing need to be compromised such as short delivery cycles, quality and reliability...etc. for example, it is catastrophe to take low-cost over quality, reliability and delivery.  Centralised Inventories (Harrison & Hoek, 2005) Instead of having a huge number of small distribution centres, gathering these to smaller number of distribution centres will decline cost and management complexity, which allow remove duplication and reduce safety stocks. However, it will extend the transportation outline because the distribution legs will be longer from the warehouse to the customer. Also, it makes a trade-off when it comes to the product environment where the cost of inventory is more important than the distribution cost. The table below illustrate the advantages and disadvantages of Centralised Inventories strategy. Table 2: Centralised inventories advantages and disadvantages Advantages Disadvantages  Eliminate duplication and minimise safety stock  Lowering logistics costs(factory- to-warehouse cost) and distribution cycle times  Extend the transportation pipeline and distribution legs  Concern in where inventory cost is more important than logistics cost  Concerns about the lead time and delivery efficiency as the customer demand can be volatile and unpredictable
  • 8. 7 | P a g e In consequence, many disadvantages appears in centralisation strategy but many different levels of centralisations approaches can be implemented to compromise the best country or location in order to add value to the SC. Many approaches to select an adopt location regarding to (Rushton & Oxley, 1991), firstly is the centre of gravity method 1930, which is based the identification between the centre with minimum cost for adequate location and the centre of gravity as defined in physics and The Tonne Mile Centre Method, both methods are crude and clear, and emphasize major point in the location; The importance of the demand for goods, the distance involved and decrease the product of those factor “weight (tonnes) times distance (miles)”. Secondly, Heuristics which is derived from the ‘rule of thumb’ principle by using knowledge and common sense to refuse any unlikely positions which minify problems. Thirdly, Mathematical programming using known mathematical techniques like linear programming, and finally simulation method. Global Supply Chain Risk (Waters, 2011) Risks in supply chain appear when a sudden event happen and might threaten the flow of materials, information and finance through the SC from the first supplier to the customer, which causes delays in deliveries or maybe prevention, effect or damage goods and many consequences that might cause lost in cost, quality in services and honesty. (Manuj & Mentzer, 2008)“Risks are all those things that keep you away from the perfect path and perfect outcomes and (you) got to be able to translate (risks) into dollars somehow”. Reasons to be aware in global SC might be direct such as tariffs, SC information or documents and import/export restrictions, or indirect impediment like security concerns and local factors. Which result in delays, cost rise, financial loss and stressed business relationships (Benson, 2013). Writers introduced risks in GSC with different perspectives. Therefore, in order to understand the risk, those perspectives are collected and sorted in table 3 in the next page.
  • 9. 8 | P a g e Table 3: SC risks regarding to different perspectives Writer Perspective Description and influence Donal Waters (Waters, 2011) In General  External risks: Moving products and materials through many countries, regions cultures and different governments with different policies make a dramatic risk, in addition to the natural disasters that might disturb the SC.  Internal risks: less dramatic, but more widespread in their effect. Those are related with the shop floor such as breakdowns and delays. Many traditional ways can work with it such as having many suppliers in order to reduce risk of material suppling or having a safety stock just in case. Omera Khan, George Zsidisin. (Khan & Zsidisin, 2011) According to the main effect on the SC performance goals  Total costs too high.  Delivery reliability.  Insufficient quality.  Damage to company reputation. See Appendix (A) for scenario for each point Ila Manuj, John T. Mentzer (Manuj & Mentzer, 2008) Definitions provided by supply chain managers  Potential losses (if the risk is realized, what losses will result and what is the significance of the consequences of the losses.  Likelihood of those losses (the probability of the occurrence of an event that leads to realization of the risk).
  • 10. 9 | P a g e CHAPTER 3. CASE STUDY OF APPLE INC. Company Background The Company is a California corporation established in 1977 which “designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players, and sells a variety of related software, services, accessories, networking solutions and third- party digital content and applications.” The Company sells its products and services globally by its retail stores, online stores and direct sales force, in addition to third-party cellular network carriers. The Company sells to consumers, small and mid-sized businesses and education, enterprise and government customers. The Company’s products and services include iPhone®, iPad®, Mac®, iPod®, Apple Watch®, Apple TV®. (Apple, 2015) Apple is one of the big global companies which achieved a tremendous improvement in SC ranking between 2004 and 2008 regarding to (Hill & Hill, 2009) as it ranked in 1st position as shown in the exhibit below. Gartner website, as the world leading IT research, ranked the SC of Apple the 1st in the world and 3 years in row (Gartner, 2015). Figure 2: Apple SC management ranking 2004-2008 (Hill & Hill, 2009) Apple Strategy in Global Supply Chain Apple business strategy from 1997 after Steve jobs return was focused on improving cutting-edge easy use products and new innovations in products every 12-18months, which changed the company foundations immensely (Hill & Hill, 2009). That requires a classic SC model of new product
  • 11. 10 | P a g e development process (NPD) starting with R&D through SC functions to marketing (Supplychainopz, 2013). As shown in Figure 3, starting with R&D and testing to produce new, easy and valuable product. Then, the pre-lunch stage which is more related with SC by noticing main processes should be done accurately: Manage material purchase commitments, provide proper storing levels, raise orders and make pre-payments to suppliers to guarantee suppliers will stick with the strategy. These four planning points reflects how ready is the company and the high commitment with the plan. In addition to a quarterly review as a feedback to measure the current statues of the market and if there is any action needed. (supplychain247, 2015) The SC model of Apple Inc. is almost similar to other industries’ models, Apple order raw materials from many suppliers around the world to the assemble plants mainly in China and other assembling facilities that we will mention later on. After that, the products are shipped by the assembler to customers who buy from online store and to Apple warehouse at Elk Grove, California to supply products from there to other distribution channels as illustrated in Figure 4 next page. Figure 3: Apple Supply Chain Planning Model (Supplychainopz, 2013)
  • 12. 11 | P a g e Figure 5: Apple Inc. worldwide suppliers in 2015 (Apple.com, 2015) Figure 4: Apple Inc. SC Model (supplychain247, 2015) Regarding to the entire suppliers list (Apple.com, 2015) provided by the company website, the number of suppliers for all products is more than 200 suppliers all around the world, Figure 3. In comparison with 2014 suppliers’ distribution around the world, the number of suppliers in China and Japan saw a decline from 349 to 334 suppliers. On the other hand, an increase in suppliers in
  • 13. 12 | P a g e America and Europe. This can be referred to many reasons to protect the SC such as natural disasters, cost and quality aspects or a strategic approach the company is looking for. Figure 6: Apple global suppliers in 2014 (Comparecamp, 2014) Apple Offshoring-Outsourcing Apple strategy in offshore outsourcing is to achieve huge labour cost reduction, less equipment investment and high operations efficiency. By manufacture and assemble products mainly in China, in addition to other Asian countries such as Taiwan, japan and Thailand (Wenji, 2005). (Wright, 2012) Apple’s strategy is to keep the high value added task like designing, marketing and product management within the company, and outsourcing most of low value or low cost effective processes, like parts manufacturing and assembling to external suppliers and partners. This is compatible with what mentioned in the literature review to not outsource your core-competence. Outsourcing varies from touch screen controllers, storage electronics manufacturing and Bluetooth and Wi-Fi all around the world, (supplychain247, 2015) shows specifically components outsourced for Apple product iPhone.
  • 14. 13 | P a g e Figure 7: IPhone outsourced components (Comparecamp, 2014)  The famous story “Biscuits and Tea” (Duhigg & Bradsher, 2012) Reported, In 2007 Steven Jobs had decided to redesign the iPhone's screen weeks before the lunch, which force an assembly line overhaul. Chines factory where able to finish the task in 15 days by giving around 8,000 workers biscuits and tea and work all day and night in order to fit screen glass to 10,000 iPhone a day. Regarding to (Comparecamp, 2014) if it had been done by an American partner It would have taken 9 months as shown in figure 6. As one of the company executives mentioned “The speed and flexibility is breath-taking, there is no American plant that can match that.”
  • 15. 14 | P a g e Figure 8: USA manufacturing flexibility vs. China (Comparecamp, 2014) Apple Dedicated Factories and Centralised inventories Apple has different focused factories as each one is focusing on processing a specific segment of products. Most of Apple products are assembled and processed in Foxconn factories. Foxconn has tremendous manufacturing plants which divided to be dedicated to different Apple products regarding to (Apple.com, 2015), the facilities are 18 as a main assembly factories in Ireland, Brazil and China which most of the facilities are based in. See Appendix B to see the 18 facilities. About Apple inventory (Oliver, 2012) mentioned “When Cook initially took over Apple's supply chain, he cut down the number of component suppliers from 100 to 24, forcing companies to compete for Apple's business. He also shut down 10 of the 19 Apple warehouses to limit overstocking, and by September of 1998 inventory was down from a month to only six days.” (Supplychain247, 2015) (Supplychainopz, 2013)Apple centralisation of inventories can be summarised in two ways, the first is the main warehouse which is the only centralised inventory based in California, this inventory receive finished products and then ship it all around the world, basically in big quantities to retail stores, telecommunication companies, Apple stores and other distributers. The second is by online shopping, which will be sent from the manufacturer to the customer.
  • 16. 15 | P a g e Risk Factors Apple Facing Risks factors that Apple facing and planning to avoid in case of threatening the company assets, supply chain or competitive advantage are listed in their annual report as follow: Table 4: Risk factors Apple Inc. facing (Apple.Inc., 2012) Risks Factors  Global economic conditions could materially adversely affect the Company.  Ability to obtain components in sufficient quantities is important  To remain competitive, the Company must successfully manage frequent product introductions to stimulate the customer demand.  The Company faces substantial inventory and other asset risk in addition to purchase commitment cancellation risk.  The Company depends on component and product manufacturing and logistical services provided by outsourcing partners, many of whom are located outside of the U.S.  The Company’s future performance depends in part on support from third-party software developers.  The Company’s products and services experience quality problems from time to time that can result in decreased sales and operating margin.  Some components are currently obtained from the single or limited
  • 17. 16 | P a g e CHAPTER 4. CONCLUSION Lessons Learned  SC planning in Apple is simple and rigid and focuses because of the successful management of suppliers and SC, while other companies has similar model but still find it complex.  Focusing on their core-competence and outsource other aspects they are not good at.  Apple are the kings of offshoring-outsourcing, as they rely on China which adding efficiency and responsiveness in regard to biscuits and tea story.  Apple has one centralised warehouse which has advantage in reducing management complexity if they have many warehouses all around the world. On the other hand, shipping from manufacturer to warehouses around the world is adding responsiveness to SC. It still a trade-off judgment.  Many parts are supplier from limited suppliers which is a case that Apple should look for in the near future.  Procurement importance, Cook reduced the number of suppliers to make your suppliers work for the contract. Conclusion In conclusion, Apple Inc. are leading now in SCM and that increasing the company revenue because they are adding value on their SC using many techniques and strategy such as offshore-outsourcing and centralised inventories which is in California. In addition to dedicated factories as there manufacturing is almost in China with many facilities, each one is focusing on segment of parts or tasks. Moreover, Apple Inc. are facing many risks like many companies, and most of those risk related with demand and efficiency in controlling changes in customers and suppliers as many components are supplied from limited numbers of suppliers which sometime reach only one. Eventually, types of risk related to global issues and disasters which is out of Apple control.
  • 18. 17 | P a g e References Apple.com, 2015. http://www.apple.com/uk/supplier-responsibility/. [Online] Available at: http://www.apple.com/uk/supplier-responsibility/our-suppliers/[Accessed 23 Nov 2015]. Apple.Inc., 2012. Annual Report, California: Apple Inc. Apple, 2015. http://investor.apple.com. [Online] Available at: http://investor.apple.com/financials.cfm[Accessed 22 Nov 2015]. Ayers, J. B. ed., 2001. Handbook of Supply Chain Management. 1st ed. Florida: CRC Press. Benson, T. R., 2013. Globalisation, Trade, and the Impact of Customs Initiatives on Global Supply Chain. Mercer L. Rev, Volume 65 , pp. 683-699. Bowersox, D. J., Closs, D. J. & Helferich, O. K., 1986. Logistics Management. 3rd ed. New York: Macmillan Publishing Company. Brumme, H., Simonovich, D., Skinner, W. & Wassenhove, L. N. V., 2015. The Strategy-Focused Factory in Turbulent Times. Production and OIerations Managment , 24(1059-1478), p. 1513–1523. Chopra, S. & Meindl, P., 2013. Supply Chain Mnagement: Strategy, Planning and Operation. 5th edition ed. London: Pearson Education Limited. Christopher, M., ed., 1992. The rediscovery of logistics. In: Logistics (The strategic issues). 1st ed. London: CHAPMAN & HALL, pp. 1-6. Comparecamp, 2014. http://comparecamp.com/. [Online]Available at: file:///N:/SC/How&WhereiPhoneIsMadeComparisonOfAppleManufacturingProcessCompareCamp.com.html [Accessed 24 November 2015]. Dornier, P.-P., Ernst, R., Fender, M. & Kouvelis, P., 1998. Global Operations and Logistics: Text and Cases. 1st ed. New York: Wiley & Sons. Duhigg, C. & Bradsher, K., 2012. How the U.S. Lost Out on iPhone Work, New York: New York times. Gartner, 2015. http://www.gartner.com. [Online] Available at: http://www.gartner.com/technology/supply- chain/top25.jsp[Accessed 25 November 2015]. Harrison, A. & Hoek, R. v., 2005. Logistics Management and Strategy. 2nd ed. Essex : Personal Education . Hill, A. & Hill, T., 2009. Case Studies. In: 3rd, ed. Manufacturing Operations Strategy . London: Palgrave Macmillan, pp. 375-384. Hill, T., 1993. International Comparisons. In: Manufacturing Strategy. 2nd Edition ed. London: THE MACMILLAN PRESS LTD, pp. 1-10. Khan, O. & Zsidisin, G. A., 2011. Current State of Risk Management in Global Supply Chains. In: HANDBOOK FOR SUPPLY CHAIN RISK MANAGEMENT. Florida: J. Ross Publishing Inc, pp. 11-29. Liu, Z. & Nagurney, A., 2011. Supply chain outsourcing under exchange rate risk and competition. Information Sciences, 39(5), p. 539–549.
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  • 20. 19 | P a g e APPENDIX A. RISK DRIVERS SCENARIO
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  • 22. 21 | P a g e APPENDIX B. APPLE MAIN FACILITIES
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