Welcome to Mekongzon — every day, we publish the latest news and analysis to keep our readers up to date on what’s happening in industry. Sign up here to get the day’s top stories delivered straight to your inbox.
Known around the world for its sleek, modern designs and cutting-edge products, Apple has remained at the forefront of its industry for years. While many people are familiar with the tech giant’s offerings and branding, the inner workings of its supply chain are lesser-known.
In the supply chain sector, Apple is widely regarded as an innovative leader, providing inspiration for other brands and forcing the competition to keep up or fall behind.
Below, we take a look at a few defining features of Apple’s supply chain.
Strong Supplier Relationships
By focusing on maintaining strong relationships with its supply chain partners, Apple can provide great flexibility in response to demand surges. This, paired with Apple’s large production capacity, allows them to provide products when and where customers want them.
The company maintains extremely strict standards for its numerous suppliers, which are named each year in Apple’s Supplier List. The top 200 suppliers in this list make up 98% of the business’s procurement. Demanding a high-quality service from these partners helps ensure the final products are reliable and long-lasting.
Because Apple is consistently innovating, its suppliers enjoy a certain degree of stability – even if one Apple product doesn’t succeed or suffers from setbacks, suppliers can rest assured that another request, for another product, will likely be coming down the pipeline.
To ensure these suppliers have the skills and experience they need to continue succeeding in an ever-shifting market, Apple offers educational and upskilling opportunities. More than 3.6 million supplier employees have participated since 2008.
Although the efficacy and efficiency of outsourcing have come into sharper focus in recent years, Apple provides proof that it can be a sound strategy — the company outsources much of its manufacturing to China, which has provided them with the revenue needed to launch new and updated products very quickly over the years.
Strategic Inventory Management
Tim Cook, Apple’s CEO, is well known for his focus on inventory and the supply chain as a whole.
It’s no wonder given that retaining a lean, streamlined inventory management system is especially important in the tech industry, where new items can practically eliminate consumer interest in older models.
“Inventory is fundamentally evil,” Cook once said of the tech-device sector. “You kind of want to manage it like you’re in the dairy business. If it gets past its freshness date, you have a problem.”
Apple keeps as little inventory as possible, providing them with the agility they need should a competitor release an innovative new product, thereby decreasing the value of any items in stock at that moment. Furthermore, having fewer SKUs to keep track of allows for more accurate forecasting.
Cook’s inventory-tracking mechanisms have also provided the company with a strong competitive edge, reducing the number of suppliers and warehouses and helping to hold partners accountable for their quotes.
Apple has introduced various initiatives throughout the years to improve sustainability across the supply chain.
Three years ago, for example, Apple announced its goal of creating a closed-loop supply chain, meaning that eventually every product would be made solely from recyclable or renewable products.
Today, every one of its global facilities is powered by renewable energy, while newer products, such as the MacBook Air, are made from 100% recycled aluminum.
The company has also invested heavily in a mix of clean energy technology, such as solar and wind. Its online Clean Energy Portal allows suppliers across the globe to identify renewable sources. In 2018, Apple and its suppliers’ clean energy generation equaled approximately the amount of electricity needed to power more than 600,000 homes in the United States.
Not only do these efforts benefit the environment, but they also provide customers with peace of mind that they’re supporting ethical businesses — an increasingly important factor for today’s consumers.
Lessons to Learn From Apple’s Supply Chain
Businesses looking to draw from Apple’s supply chain successes would do well to follow the three points outlined above — strong relationships, strategic inventory management, and sustainability initiatives.
While most companies don’t operate on the vast scale that Apple does, there are certainly ways to incorporate these factors into your business model. For example, streamlined inventory may make sense for other tech businesses, and strengthening relationships with suppliers makes sense for companies of all kinds, helping to ensure end-to-end reliability and transparency.
As consumers become increasingly conscientious, companies focusing on environmental and social responsibility will benefit from a heightened reputation and boosted brand image — all while remaining well-positioned for the future and preparing for any potential changes in regulations or consumer demands.
The Impact of COVID-19 on the Apple Supply Chain
Apple relies on many suppliers in China, which means it has faced challenges in bouncing back from the global coronavirus pandemic.
Operations slowed in the wake of lockdowns across much of the world, and some areas are experiencing longer shipping timelines. Analysts have largely reduced their shipment estimates for the first half of 2020, with projections for the rest of the year still uncertain.
As far back as January, Apple announced plans to donate to organizations focused on COVID-19, with Cook later pledging to double the company’s donations. Apple partnered with suppliers to source more than 20 million N95 masks for U.S. health care workers on the frontlines, along with more donated across Europe. The company has also been manufacturing face shields for medical workers.
As we progress into an uncertain future, Apple’s innovative supply chain is facing the ultimate test, with experts and fans alike watching to see how the company fares – and how its supply chain adapts to this unprecedented disruption.
Source: Thomas Insights.