Apple Supply Chain Apple Inc. is one of the world’s most successful companies when it comes to supply chain management. In its early years the company struggled forecasting demand and managing inventory causing many issues in supply chain including stock-outs. As years went on Apple began investing heavily in their supply chain, controlling many aspects such as overseas production, assembly and logistics. While Apple still faces some challenges including things such as technology, competition, global market share, and leadership, it is still ranked as a master company in supply chain according to Gartner Inc, making a great company to invest in.
Key Competitive Advantages
When Steve jobs returned to Apple in 1996 he found a struggling company.
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puts Apple’s supply chain in the “masters category.” an achievement awarded only to the companies that scored in the top 5 supply chain rankings for at least 7 out of the last 10 years, and currently only populated by Apple and Procter & Gamble. Walmart’s supply chain is #16 on the list. Both Walmart and Apple are considered innovators and pioneers in the field of supply chain management.
Like Walmart, Apple uses its purchasing power to control suppliers and their costs. Both businesses invest in new supply chain management technologies and are always looking to improve their current processes. The efficiency of both supply chains leads to time and cost savings. Both organizations deal directly with manufacturers, leading to more regular inventory flow and is a major advantage in their supply chains. They focus on forecasting the demand in order to determine inventory needs. Collaboration and cooperation are key in both supply chains, with the creation of partnerships that secure high volume delivery at lower costs. Both Walmart and Apple keep very close and open communications with their suppliers – while Walmart is basically the creator of direct computer management, Apple sends representatives to work with their suppliers in person until they achieve the necessary efficiencies. Both companies basically reach out to their suppliers as if they were part of the same firm. Both businesses avoid the use of third-parties,
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They currently use an “omnistyle” strategy, which makes the inventory in stores and distribution centers available to customers to keep up with the eCommerce demands. Walmart’s omnistyle strategy is similar to what Apple is doing when they are enlisting their vendors to ship product directly to customers. This method cuts out a middle-man, potentially saves shipping costs, and gets the product to the customer quicker.
In comparison with Apple, Walmart uses a very expansive network of vendors to source all their types of different items. Apple’s key components are typically sourced from a single manufacturer and used across their whole product line. Apple’s devices are available only in a limited number of configurations, allowing the component sourcing to be managed and streamlined. Walmart’s vendor network supplies thousands of different products, making the supply chain larger and vendors more diverse. Walmart’s main controls are placed around cost, and while Apple is also cognizant of cost, they also have the capital to pay to ensure they receive high quality cost and
Complex linkage management entails planning and management of business activities involving procurement and sourcing, logistics and transportation activities. It also includes collaboration and coordination with business partner in all parts of the world. The business partners can be customers, intermediaries and suppliers of Apple product. Complex linkage integrates function with responsibility for linking Apple business functions across its companies. It includes manufacturing operations and coordination of Apple’s product design, marketing, sales and transfer of information concerning the products Complex linkage also entails the relationship between the cost of production and the price of the product at the international market. It is advisable for the company to focus on their market stock while determine linkage. There are several factors that favor complex linkage. At the international level, market diversification is a necessary condition for international complex linkage. Formulation of alliance policies and agreement with overseas suppliers is another factor for competitiveness.
On many occasions, Apple Inc. has been voted to boast the most efficient supply chain in the world. By leveraging wealth and pure business strength, Apple has been able to construct a supply chain that is both efficient and highly profitable. While much of this supply chain construction has come from great investing and business decisions by Steve Jobs and Tim Cook, it has come at the cost of many factory workers’ well being overseas. Overall, the construction of the highly organized supply chain has given Apple a competitive advantage over the rest of the market.
As seen in Exhibit F, Best Buy has 1,055 main locations that consist of their standard large format stores, and 406 Best Buy Mobile locations that focus on mobile device sales. To supply these locations, Best Buy has 23 distribution centers located throughout the country. Comparatively, Wal-Mart has 4,625 stores stocked by 158 strategically located distribution centers. This puts Wal-Mart at a huge advantage in a couple of ways. Not only is Wal-Mart much more likely to have a store nearby any given customer, they are also better equipped to keep its products in stock at all times. This means more customers visit, and due to stocking, more customers can make the purchase they want. On an international level, Wal-Mart also exceeds Best Buy’s few hundred stores with 6,308 stores in over 11 countries. This furthers Wal-Mart’s availability to customers and puts them at an advantage over Best Buy. Additionally, the increased scale of Wal-Mart’s retail and distributive operations make them extremely competitive on pricing, a major aspect of purchase decisions for high-ticket items like consumer electronics.
Analysis: With one of their main issues being sustained profitability, Wal*Mart is at a critical time in their life. They are no longer the hero, a place commonly reserved for competitors striving to be number one, because Wal*Mart is number one. No one can debate how effective they have been in getting here. Through their focus on superior technology and low cost leadership, Wal*Mart reigned supreme. They are redefining Porter’s five forces model in the discount retailing industry, and are in the enviable position of having first mover’s advantage. Yet this blessing is also a curse. By virtue of their efficient, effective system and its proven success, companies like Kmart and Target are watching closely and both emulating and improving upon this system. An analysis of the five forces model will show Wal*Mart’s main competitive advantages in supplier power and barriers to entry. A look into their distribution centers and how they have been instrumental in reducing supplier power will be followed by an analysis of how effective first mover advantage has been and where they must take it next.
The one reason of Walmart’s success is its Supply Chain and Logistics management. The company is saving significant cost by using its information system properly that managed inventory level, orders, sales and other information. Any information can be easily accessible at each store at any
Access to distribution channels: Accessing major distribution channels might be challenging and it stands to be a significant barrier. Apple products are sold by third party retailers, Apple brick and mortar stores and on Apple’s website. It might not be too easy for a new entrant to convince a third-party retailer to prioritize its product over major products like Apple’s.
It's headquarters if filled with sample furniture from vendors trying to peddle their goods through Wal-Mart. It doesn't stop there either. Wal-Mart demands the same of it's suppliers. All suppliers are required to provide a toll free number for consumers at the cost of the supplier. Shifting cost to suppliers to keep prices low has become the norm for the coorporation and at no risk for Wal-Mart since they have all the power. Despite inflation Wal-Mart will demand it's suppliers to sell for cheaper. Since Wal-Mart is usually the largest buyer by a large margin most companies cannot refuse Wal-Mart's order, resulting in cheaper materials used, less features, moving factories overseas, etc. One specific example is that of deodorant. Before the 1990's deodorant came in a cardboard box. Wal-Mart decided that the cardboard box was a waste of money. It cost money to make, to ship, and took up shelf space. Wal-Mart asked the deodorant makers to get rid of the box with the power they have. Now today you will see no deodorant
In order to succeed, managers have to realize that they cannot do it alone and they must work together on a daily basis with the whole organizations in their supply chains. Because supply chain management involves all functions within an organization, managers need to know what a supply chain is, why it is important, and the impact of supply chain management on the success and profitability of their organization. Today, Wal-Mart topped the list of the America’s biggest companies on the Fortune 500 list, “with sales of almost $345 billion — more than a quarter of a trillion dollars” (Forbs). Wal-Mart’s supply chain management is becoming recognized as a core competitive strategy.
Walmart removed a few of the links in the supply chain by working directly with manufacturers to cut costs and more efficiently manage the supply chain (Lu). Just like Walmart, the distributing company can implement Vendor Managed Inventory (VMI), where real time data lets the distributor know when the shelves need to be re-stocked including the products that need to be replaced. Lu also states that Walmart streamlined supply chain management by constructing communication and relationship networks with suppliers to improve material flow with lower
Walmart is a retail giant that just about everyone in America has purchased something from them. It is a one stop shop for anything that a person could ever need. Walmart stores can be found anywhere in fact most people are less than an hour drive away from a Walmart store. Walmart’s success has put many companies out of business. The chains success is primarily from low prices and using an information technology system to meet customer demands giving them a competitive advantage. Walmart’s first major use of information technology came in 1975 when the company leased an IBM computer system to track inventory in warehouses and distribution centers. Computers have come a very long way since this time and are used almost everywhere. But in 1975 this was cutting edge technology and gave Walmart the competitive advantage over other retailers. Another thing that Walmart used to be revolutionary in their supply chain was the use of scanning barcodes in 1983. Before barcodes objects had to be read by a skilled cashier. With barcodes all that was needed was a quick scan and the computer would do all the work. This greatly sped up checkout time and made tracking inventory and data collection much faster and easier for both customers and the employees. Since this time it has become an industry standard for products.
With the ability to control its stock and see at a glance how any store is performing, Wal-Mart is able to keep its finger on the pulse of its business and make critical adjustments as necessary. The low transportation costs it achieves with its own transportation system makes it possible to deliver goods to different stores within or under 48 hours, and transportation costs are only 3% of the total costs, as compared with 5% for their competitors ("Wal-Mart 's Supply Chain Management Practices: The Benefits Reaped"). Its advanced methods of transport, This combination of technology and down-home attention to customers as people makes Wal-Mart hard to beat on any soil, and it uses the winning formula to maximum advantage.
Wal-mart has been able to achieve respectable leadership in the retail industry because of its focus on supply chain management. Discuss in detail the distribution and logistics system adopted by Wal-Mart.
From the manufacturers’ warehouse to the shelves, the business must orchestrate a symphony of the right products to the right places at the right times. Walmart serves customers and members more than 200 million times per week in retail outlets, online and on mobile devices. The company is able to offer a vast range of products at the lowest costs in the shortest possible time (Chandran, 2001). The main reason for this incredible growth of Walmart is because its distribution centers are highly automated.
Walmart’s ownership and execution of the supply chain is a core competency that sets them apart from the competition. They have minimized the turnaround time to replenish inventory back into the stores. They also have agreements with suppliers to deliver products direct to the stores. Walmart owns 158 distribution centers strategically located in close proximity to many Walmart stores. The distribution centers employ 7,000 truck drivers to deliver truckloads of merchandise to the 10,700 retail stores with their tractors and trailers, as the inventory system dictates.
But, perhaps the most revolutionary was the practice of unprecedented coordination with suppliers (Chekwa, 2015, Page 62). Gross profit during the year 2015 was actually a $10 billion increase from fiscal year 2014 (University of San Francisco, 2015). Over the past six years, Walmart continues to generate these types of numbers, representing increases in growth, time and time again. The company’s income was generated by more than 4,500 stores in the United States alone, which is supported by a supply chain that moved from number 14 to number 13 on research and analyst company Gartner’s annual ranking (University of San Francisco, 2015). Many business professionals have analyzed and interpreted Walmart’s supply chain management approaches, making it apparent which elements of their strategy have proven effective.