GROUP ASSIGNMENT

SUBJECT: Supply Chain Management (SCM201)

Lecturer: Ta Minh Thao Class: IB1808

Group members

Name ID number Contribution

1 Đào Thuận An SS180922 100%

2 Lê Thùy Trang SS180974 100%

3 Nguyễn Châu Ngọc Nhi SS180994 100%

4 Lê Thị Tiểu My SS181105 100%

5 Cố Gia Nghi SS181211 100%

 1. Introduction

Overview of Consumer Electronics Industry

The consumer electronics industry (CE) encompasses a wide range of electronic devices designed for

entertainment, communication, and information purposes. The market is highly diverse and encompasses

various product categories such as personal computing devices, audio and video systems, mobile devices,

and smart home technology. These devices have become an integral part of modern life, constantly

evolving to meet the needs of consumers. The global consumer electronics market is a multi-trillion dollar

industry, with US$1012 billion in revenues worldwide in 2022, and by 2028, this is forecast to rise to

US$1,177 billion (Statista, 2023). Big names like Apple, Samsung, Huawei, HP, Dell, and Sony are the

heavyweights in this industry. They're known for constantly coming up with new and exciting gadgets,

having strong brand reputations, and making sure their products are readily available for purchase.

Overview of Apple Inc.

As a giant in the technology industry, Apple Inc. (Apple) designs, manufactures and markets a variety of

products including smartphones (iPhone), tablets (iPad), personal computers (Mac), wearables and

accessories. Their reach goes beyond hardware, offering software applications, services like app stores and

music streaming, networking solutions, and even third-party digital content. Apple's business spans the

Americas, Europe, the Middle East, Africa and Asia-Pacific, with headquarters in Cupertino, California.

Notably, Apple's recent jump in iPhone market share, reaching nearly 19.80% by 2023, shows its continued

dominance in the mobile landscape (Federica, 2024).

Founded in 1976 by Steve Jobs, Steve Wozniak, and Mike Markkula, Apple started with personal

computers like the Apple I and II. After going public in December 1980, the company became the largest

private personal computer manufacturer in the US. However, the next decade was challenging for the

company despite introducing many new products, as IBM entered the personal computer (PC) market in

1981 and quickly rose to lead the US computer sales charts in 1983. The departure of Jobs from Apple in

1985 further contributed to the difficulties. To date, Apple has continued to produce its own devices, license

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its Mac operating system to third-party manufacturers, open its own retail stores, expand cooperation with

new suppliers to provide exclusivity, and gradually improve its supply chain.

2. Apple Supply Chain

Based on the previously mentioned case study focusing on Apple's iPhone supply chain, success is due to

the combination of design, functionality, marketing, and the ability to modify production to meet increased

demand. mutation. Let's look at this supply chain from 6 perspectives: New Product Development,

Procurement, Product Assembly, Logistics, Retail Experience.

Apple's iPhone supply chain thrives on a fast-paced development cycle, a necessity to stay competitive in

the ever-evolving smartphone market. To accelerate development, Apple strategically acquires copyrights

for readily available technologies, plugging these innovations into their R&D pipeline. This integration of

R&D as the central management department ensures a focused and efficient approach to bringing new

iPhones to market quickly.

Apple's seemingly efficient procurement strategy, marked by prepayment agreements, exclusivity deals, and

demanding supplier practices, presents a complex situation with some drawbacks. One key concern lies in

Apple's reliance on single-source suppliers. Apple's stringent demands on suppliers can create tension and

potentially hinder innovation. The case study mentions requirements like cost breakdowns, managing

significant inventory near assembly plants, and enduring extended payment terms (up to 90 days) (see case

study). A study by the University of Tennessee found that such practices can lead to a 15% decrease in

supplier innovation, potentially hindering long-term growth for both Apple and its partners (University of

Tennessee, 2023).

Apple's iPhone assembly process is a complex dance between efficiency and social responsibility. Although

relying on subcontractors such as Foxconn allowed for rapid expansion, it caused much public criticism due

to the use and layoff of a temporary workforce. Apple's just-in-time approach puts enormous pressure on

suppliers, increasing the impact of parts delays on its own inventory forecasts. Despite the rapidly evolving

global recruitment system, managing a large temporary workforce can lead to worker unrest and

information leakage.

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Apple's billion-dollar backlog in 1997 exposed critical flaws in their logistics. This includes a Just-in-Time

(JIT) inventory system, strategically located warehouses, and a streamlined reverse logistics system for

faster returns and repairs. The primary concerns stemmed from the lost revenue due to unfilled orders, the

potential erosion of customer satisfaction and brand loyalty, and the cascading operational challenges across

production, distribution, and customer service. Consequently, addressing this critical bottleneck became a

top priority for Apple.

Apple's retail strategy is a carefully crafted customer experience that drives sales and maintains a

competitive advantage. Their stores are located in high-traffic locations, equipped with strictly curated staff

who can provide expert advice and product recommendations. By closely monitoring sales data across all

retail channels, Apple can forecast production needs and ensure optimal inventory levels, further optimizing

the entire supply chain.

Tim Cook enhances efficiency and control while managing logistics, which reduces costs and improves

inventory management and flexibility. Although this strategy makes use of technology, reduces waste, and

strengthens relationships with suppliers, it has also raised questions about the welfare of employees and the

environment.

3. Apple issue analysis and solutions:

Since the iPhone was officially released in 2012 until now, Apple's iPhone supply chain also has many

problems that pose great risks to businesses, and Apple itself also has solutions that are worth learning

from. We will analyze this uniqueness through 3 aspects: Procurement, Product Assembly, Logistics.

Apple's procurement activities within its supply chain present both opportunities and challenges. While the

company's quick response to sales, exclusive supplier agreements, and close collaboration between Apple's

engineers and suppliers contribute to its efficiency and competitiveness, they also create some notable

drawbacks. Although this approach benefits Apple by reducing costs and ensuring a stable supply of

components, it can compromise supplier autonomy and flexibility through prepayment and exclusivity

agreements. It begs the question of whether this approach creates a win-win or a win-lose scenario. By

securing pre-production capacity and exclusive agreements, Apple essentially limits competitors' access to

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critical resources, potentially hindering their ability to innovate and compete. However, such dominance

can also raise concerns about limited consumer choice and hinder overall market innovation.

Apple also has some problems with both suppliers and workers in Product Assembly. First, human rights,

environmental and ethical issues persist within Apple’s vast global supply chain (Clarke & Boersma, 2015).

Research of Dr. Nagel, P. shows that “for Apple’s component suppliers, receiving assembly orders meant

that they had to focus efforts on hiring thousands of temporary workers and laid off just after a short time

period. In response, Apple pointed to its supplier code of conduct, which had clear policies governing

abusive practices such as harassment, involuntary labor and human trafficking (Clarke & Boersma, 2015b).

This demonstrates that Apple has established a set of rules and standards for its suppliers to ensure fair and

proper treatment of employees, but to ensure this code is strictly implemented Apple must have strong

mechanisms for strict monitoring and compliance with its suppliers. Second, Dr. Nagel, P. also pointed out

that due to Apple’s just-in-time supply chain, which placed significant responsibility on the shoulders of

suppliers, component delays had an impact on Apple’s inventory projections. Although Apple has

recognized the problem, it has not taken specific measures for this, so it could put production costs,

shipping costs and profits at risk. Apple can improve supply chain management by enhancing tracking and

control of manufacturing and component supply.

Apple's innovative and effective supply chain management strategies include using just-in-time (JIT)

inventory management and implementing a streamlined reverse logistics system. Apple leverages its

warehouse network, including those operated by UPS and FedEx, along with their own facilities, to secure

supplies for various sales channels such as online stores and retailers. In fact, minimizing stock outs and

reducing inventory costs. However, this complex system requires careful coordination to avoid over- or

under-stocking. Apple's streamlined reverse logistics system allows for online reporting and quick pickup

for warranties, exchanges, their recycling program, and provides prepaid boxes and shipping labels for

hassle-free returns, reducing return hassles and waiting times, and potentially reducing costs. This allows

them to quickly diagnose and return or refurbish products, reinforcing their "Apple Certified" program.

Apple's use of plain packaging for shipments provides a dual benefit: reduced theft risk due to less

identifiable content, and a potential competitive advantage by keeping specific products secret and

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hindered. Competitors know about their shipments. It may delay shipping due to stricter customs

supervision.

4. Recommendation & Conclusion

To build a balanced and collaborative Procurement strategy that fosters innovation, Apple should reconsider

extended payment terms, which can create financial pressure for suppliers and restrict their investment in

research and development. Exploring more reasonable payment terms can cultivate stronger supplier

relationships and drive innovation. Additionally, Apple should regularly evaluate supplier performance

beyond cost and delivery metrics to select suppliers and encourage innovation and development.

Regarding the Product Assembly approach, although Apple has a code of conduct with suppliers to address

concerns about worker treatment, it has not yet ensured strict implementation of these regulations.

Moreover, Apple's just-in-time approach, while efficient, leaves the company vulnerable to component

delays. To mitigate these challenges, Apple should strengthen its supply chain management by enhancing

tracking and control of manufacturing and component sourcing. This would not only improve worker

conditions but also establish a more resilient system to prevent production disruptions.

To enhance Apple's logistics strategy, there is a need to focus on strengthening supply chain management to

ensure continuity and reliability in the supply of components and products. Additionally, optimizing the

reverse logistics process will provide a better customer experience and reduce costs. Investing in

technology and automation will enhance the efficiency and effectiveness of logistics management.

Furthermore, close collaboration with reliable logistics partners and staying informed about and

implementing new trends in the logistics field will ensure that Apple maintains competitiveness and

responds swiftly to industry changes.

Apple's strong supply chain management makes it an attractive investment, but there are risks to consider.

Delays in the supply chain can impact production costs and profitability, while human rights and

environmental sustainability issues may affect the company's reputation and stock value. Investors should

monitor Apple's efforts in addressing these concerns and track their supply chain management practices,

such as real-time inventory management and optimized reverse logistics, to minimize risks and ensure

smooth operations.

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 5. References

1. Statista. “Consumer Electronics: Market Data & Analysis.” Statista, 2023,

www.statista.com/study/55488/consumer-electronics-market-market-data-and-analysis/ [Accessed

8 Mar. 2024].

2. Federica, Laricchia. “Apple IPhone Market Share 2007-2023.” Statista, Jan. 2024,

www.statista.com/statistics/216459/global-market-share-of-apple-iphone/#:~:text=Market%20share

%20of%20Apple%20iPhone%20smartphone%20sales%20worldwide%202007%2D2023&text=Ap

ple%20claimed%20a%2024.7%20percent [Accessed 8 Mar. 2024].

3. University of Tennessee. (2023). The Impact of Buyer Power on Supplier Innovation: A

Meta-Analysis (Working paper). [Accessed 1 Mar 2024].

4. Clarke, T., & Boersma, M. (2015b). The Governance of Global Value Chains: Unresolved

Human Rights, Environmental and Ethical Dilemmas in the Apple Supply Chain. Springer.

https://doi.org/10.1007/s10551-015-2781-3 [Accessed 28 Feb 2024]

5. Mark, K. (2014). Apple Inc.: Managing a Global Supply Chain. IVEY Publishing. [Accessed 27

Feb 2024]

6. Abbreviation

IBM : International Business Machines

R&D: Research and Development

JIT: Just-in-Time

UPS: United Parcel Service

FedEx: Federal Express

Presentation slide: Group Assignment_Group 3_Apple