Apple Inc.

Livia Hejlova - Robert Gerstenmaier - Di Chang - Mohammed Ali A Alsharidah - Oleksandr Sydorenko

Agenda:
Introduction 5 Performance objectives 4Vs model Apple Supply Chain Purchasing Distribution CRM Conclusion

Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Introduction
Production Computer HW, computer SW, consumer electronics, digital distribution Area served: Worldwide Number of employees: 73 000

Number of locations 393 retail stores in 14 countries (as of August 2012) online Apple Store online iTunes Store
Worldwide annual revenue of $156 billion in FY 2012 (ended 30.9.2012) Publicly traded company extreme market influence (NASDAQ: AAPL, NASDAQ100, S&P 500)
Livia Hejlova - Robert Gerstenmaier - Di Chang

Apple: Performance Objectives

Supply Chain - Current Situation

Cost Optimization of supply and assembly - global trade (Example: iPhone: 34% Japan, 17% Germany, 13% South Korea, 3,6% China,27% Others Assembly in China) Product cost ~ 170 $

Flexibility Due to problems with main supplier Foxconn, Apple places 60% of iPad mini orders at the competitor Pegatron
Speed 8 weeks delivery time for iPhone 5 Dependability Unpredictable demand, no stock and Quality Control Program affect Dependability Quality Strict quality control Program affects Speed (Example: material problems with iPhone 5 scuffgate leads directly to production stop at the supplier Foxconn)
Livia Hejlova - Robert Gerstenmaier - Di Chang - Mohammed Ali A Alsharidah - Oleksandr Sydorenko

Apple: 4 Vs model
low low low low Volume Variety high high high high

Variation
Visibility

Volume Huge amount of products and additional facilities sold worldwide (17 million iPads, 26 million iPhones, 4 million Macs in year quarter ending 30.6.2012) Variety Products of the same product category (desktops, laptops, netbooks, music players, smart phones, servers, monitors, software, tablet computers, television box sets) Variation Demand for products increases rapidly in times of new product launching; (Different price sensitivity iPad as consumer entertainment niche is more price sensitive than iPhone as a communication device) Visibility Apples strong branding secures good visibility of their products worldwide
Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain

Purchasing of raw materials and components from suppliers
Apples global supply chain
1. US All semiconductor components with the exception of baseband chips (supplied by Infineon in Germany) and memory (supplied by Samsung in Korea)

2. Korea Flash memory storage and a portion of LCD panels 3. Taiwan Touch screens, casings and passive components 4. Japan Critical materials and core technologies 5. China Low added value acoustic components and battery modules

Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain

Purchasing of raw materials and components from suppliers
Characteristics of Apples supply chain management
Control over the supply chain: buying of components in bulk (keeping the price lower than its rivals but enormous bargaining power on its suppliers; Intel as a rare exception) Apple keeps product design, software development, product management, marketing and other high-wage functions in the U.S. Apple focuses its efforts further up the value chain Apple model: taking advantage of worldwide manufacturing resources while creating wellpaying jobs at home There is little value in electronics assembly n U.S. Among countries, Chinas economy continues to play a surprisingly small role in comparison to the U.S., Korea, Japan and Taiwan Apple managers need to beware of relying too heavily on single customers The iPad for instance contains more than 400 individual parts

Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain

Purchasing of raw materials and components from suppliers

Added value (margin distribution): Approximately 58% of the sales price of a typical iPhone 4 goes to Apple
Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain

Distribution
Selling of an integrated hardware/software product

Apple retail stores network (gives it a major advantage in distribution, direct customer experience of brand values) 393 retail stores in 14 countries (August 2012)
Apple Online Store (products, accessories) Resellers Retail Stores (AT&T, Best Buy, Wal-Mart) Online Resellers (computer- and consumer electronics focused e-shops) Mobile services providers carriers (play a gateway role in choosing and distributing handsets) Apple Mac-expert staff provided to selected resellers' stores Co-branding or distributing Apple's products and services with other companies (e.g. HP was selling a co-branded form of iPod and pre-loading iTunes onto consumer PCs and laptops)
Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain

Distribution Apple Retail Stores
Independent Stores A prototype store designed around customer needs rather than products

Significant Stores Located in prime locations of major cities (New York, London, Paris, Shanghai, etc.), amazing architecture, staff trained not to sell rather to respond to customer queries and provide solutions to customers problems Offering The Genius Bar specially trained staff offer one-on-one training on how customers can maximize their use of a Mac or their iPhone
Branding Apples stores as a part of the companys branding strategy, reflecting the companys now-popular minimalist design philosophy and offering clutter-free zones

Apple Store visit Experiencing a stimulating, no-pressure environment, Discovering more about the Apple family, Trying out the company's products getting practical help Feeling of inclusiveness by a community that really understands what good technology should look and feel like - and how it should fit into people's lives
Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain

Distribution Branding Strategy
Customer focus Strong focus on customer satisfaction, trust and good feeling (solving problems and advising approach to customers rather than selling) Emotional connect Apple customer partnership Advertising Iconic product Initially as free-thinking and non-conformist Later on as creative (e.g. the Think Different campaign) and intelligent (e.g. the Get a Mac campaign) Today highlighting qualities such as hip and cool (e.g. the iPod silhouette), obsessed with perfection and minimalism Logo Reflects the minimalist design philosophy Brand architecture Monolithic brand identity everything being associated with the Apple name
Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Apple: Supply chain

Customer Relationship Management
Apple works as an integrated service provider model takes ownership of the entire customer experience Apple products are designed as an integrated system only hardware and software developed or approved by Apple will work with them Provide their customers with highly-personalized experience

Staying on the top of the American Customer Satisfaction Index for eight years, topping its own record from 86 to 87 on 2011

Livia Hejlova - Robert Gerstenmaier - Di Chang

Apple: Supply chain

Customer Relationship Management
Online/Retail Store Apple Care Services Financing/Leasing options (for consumers, businesses, schools and universities) Personalized assistance from Apple employees in the Apple Shops Valuable IT lifecycle services for integrating and managing customized Mac and multiplatform solutions in your existing environment Comprehensive implementation and integration services for audio, broadcast, film, photography, publishing, and video professionals Certified technology consultants Apple fully understands that all aspects of the customer experience are important and that all brand touch-points must reinforce the Apple brand

Livia Hejlova - Robert Gerstenmaier - Di Chang

Apple: Supply Chain

Customer relationship management
Strategies for improving loyalty:
A store just for Apple Complete solutions

Varied products
Consistency New innovations Attractiveness

Apple: Conclusion

While the iPhone and iPad, including most of their components, are manufactured offshore, the most value from these products goes to Apple.

Livia Hejlova - Robert Gerstenmaier - Di Chang

References
Offline
Research and Practical Issues of Enterprise Information Systems II Volume 2: IFIP TC 8 WG 8.9 International Conference on Research and Practical Issues ... in Information and Communication Technology). 1 Edition. Springer.,2007. Slack Nigel/ Chambers Stuart/ Johnston R, 2010. Operations Management. 6 Edition. Pearson College Div. Linstone, H.A. and Turoof, M.(1975) The Delphi Method: Techniques and Applications, Addison-Wesley.

Livia Hejlova - Robert Gerstenmaier - Di Chang - Mohammed Ali A Alsharidah - Oleksandr Sydorenko

References
Online
Channeling Steve Jobs: http://ezproxy.napier.ac.uk:2334/docview/1024159625 BROWN, B., 2011. Surveys find Apple most admired, most satisfying company. Network World (Online), . Available: http://go.galegroup.com/ps/retrieve.do?sgHitCountType=None&sort=DASORT&inPS=true&prodId=EAIM&userGroupName=napier&tabID=T003&searchId=R1&resultLi stType=RESULT_LIST&contentSegment=&searchType=AdvancedSearchForm&currentPosition= 1&contentSet=GALE|A267972228&&docId=GALE|A267972228&docType=GALE&role= http://www.thestreet.com/story/11731645/1/heres-why-the-next-3-months-will-be-hugefor-apple.html http://www.saleschase.com/blog/2012/04/09/apples-innovative-distribution-strategyrevealed/ http://www.saleschase.com/blog/2012/04/17/how-apples-branding-strategy-made-it-anicon/ http://www.apple.com/supplierresponsibility/ http://cmuscm.blogspot.co.uk/2012/02/two-sides-of-apples-supply-chain.html http://www.ausmt.org/index.php/AUSMT/article/view/155/136

Livia Hejlova - Robert Gerstenmaier - Di Chang - Oleksandr Sydorenko

Thanks for your attention.

Livia Hejlova - Robert Gerstenmaier - Di Chang - Mohammed Ali A Alsharidah - Oleksandr Sydorenko