YEAR PRESENTERS

2023 Arissa V, Soumik D.

APPLE INC.
Case Study: A Deep Dive into Apple Inc.'s
Cutting Edge Supply Chain Strategies

DATE
03/09/2023
02 INTRODUCTION
APPLE’S BACKGROUND
Founded bv Steve Jobs. Steve Wozniak & Ronald Wavne in
1976

• Headquartered in California

• Technology, Consumer Electronics & Software

• Most Valuable Company

• Market Cap - $2.4 Trillion: Net Income $57.4 Bn:

Employees - 147.000
03 INTRODUCTION
At a Glance: Tim Cook's Supply
Chain Objectives

• In-house Design & Development

• Inventory reduction
3 • Higher inventory turnover
• Cutting down on key suppliers
• Maintaining long-term relationship with suppliers
04 Apple Supply Chain Ecosystem
Apple Supply Chain Ecosystem

Design &
Component Final Support & Recycling &
Development Logistics* Retail Store
Suppliers* Assembly* Services Sustainability
Engineering
05
Design and
Engineering
• Apple spends approx. 6-8% of total revenue on R&D ($16.2 Bn in 2019)

• Major initiatives include AI, healthcare, autonomous vehicle &

improvements in hardware & software of existing products

• Design & Engineering team works with suppliers to tweak designs &
translate prototypes into devices

• Product development was centralized so that they can coordinate across

multiple functions

• Filed for patents to protect IP

• Product Testing & Market research was conducted in tandem to make

changes in the design

• Each new model of iPhone came in limited varieties & colors so that SKU
can be minimized
06 Suppliers
iPhone 11 Pro Max Suppliers
 Component Suppliers
07
Apple’s global supply chain includes 200 suppliers, accounts for 98% of total
expenditure in materials, manufacturing & product assembly
Suppliers located in 43 countries with more than 800 production locations

Centralized procurement led by Tony Belvins

Minimize cost and enforce delivery deadlines

High volume of sales enabled Apple to negotiate discount on material cost

Credit term of 90 days

Suppliers to provide breakdown of labor, material, overhead & profit

Controlled supplier margins

Invested in suppliers equipment to increase capacity, implement new tech, reduce

cost & improve quality
Altered orders with suppliers based on sales forecast and demand
 Bill of Materials for iPhone 11 Pro Max
08
 Retail Sales Price Vs Bill of Materials for iPhone
09

9
10
Final Assembly – Contract
Manufacturing

• Foxconn, Pegatron & Wistron Corp are major contract manufacturers

• Foxconn relationship spans for more than 2 decades

• Foxconn employed more than 1 Mn people and depended on 50% of

revenues from Apple

• For each new model, Foxconn upgrades their assembly lines, works in
tandem with Apple engineers

• Apple assembly was mostly manual and involved more than 400 steps

• Undergoes rigorous testing and quality checks for assembly

 AT A GLANCE

11
Logistics in Apple Inc.
Apple has a long history of working closely with in-house manufacturing and outsourcing to
third-party manufacturers to ensure that its products are made to the highest quality
standards and delivered on time. To achieve this, the company has implemented a number of
strategies and practices, such as:

• Vertical integration: Apple has invested in a number of in-house manufacturing facilities

and has developed strong partnerships with key suppliers to produce a wide range of
components and finished products. This helps the company to maintain control over its
supply chain and ensure that its products meet its high quality standards.

• Globalisation: Apple sources components and finished products from a global network of
suppliers and manufacturers, which allows the company to take advantage of lower labor
and production costs in different parts of the world.

• Lean manufacturing: Apple uses lean manufacturing principles to optimise its production
processes and reduce waste, which helps to increase efficiency and reduce costs.

• Collaboration: Apple works closely with its suppliers and manufacturers to develop new
products and technologies, and to continuously improve its supply chain processes.
12
AT A GLANCE

Logistics in Apple Inc.

- the key to success

Overall, Apple’s supply chain strategy is focused on maintaining control

over its production processes and ensuring that its products are of the
highest quality, while also taking advantage of global sourcing and
manufacturing to reduce costs and increase efficiency.
 The Last Leg: Customs and Shipping

After the iPhones are manufactured, they are transported to a large customs
facility built by China just a few hundred yards away. Foxconn sells the finished
iPhones to Apple who then resells them to customers around the world.

Distribution in China

iPhones are loaded in a truck and travel 18 hours from Zhengzhou to Apple’s
national distribution centre in Shanghai.

Shipping to the US

The iPhones land in Anchorage, AK where they refuel and head to major
logistics hubs in the US.

The Finish Line: iPhone Reaches Customers

AT A GLANCE

Apple Inc. Retail Stores Customers in China actually pay 20 percent more for their iPhones than
customers in the US due to currency fluctuations and added tax.
 CUSTMOMER SATISFACTION

Service and Support: AppleCare

14

COLOR

SHADOW

Both AppleCare+ options provide repair or replacement hardware service for your iPhone. Depending on the plan
you choose, you'll get unlimited incidents of accidental damage protection and up to two incidents of theft or loss
coverage every 12 months. Each incident is subject to a service fee or deductible
 PEOPLE, PLANET, PROFIT

15
Sustainability
COLOR

Sierra Blue

SHADOW

Long
 PEOPLE, PLANET, PROFIT

16
Sustainability
COLOR

Sierra Blue PEOPLE

They’re committed to inclusion and diversity for their team
and in the world. They we have programs and benefits to
support the development of team members. They will also
continue to prioritise the health and safety of their teams,
SHADOW customers, supplier, employees, and communities.

PLANET
Apple Inc. has been carbon neutral for their own operations since 2020,
Long PROFIT including business travel and employee commute, and are progressing toward
Apple (AAPL) topped the list with $259 billion in an urgent goal to be carbon neutral across the entire business - including the
sustainable revenue, with an estimated 71% of the tech full life cycle of their products - by 2030. They’re on an ambitious journey to
giant's revenue coming from sustainable sources, after not one day make our products using only recycled or renewable materials. They’re
even making the list two years ago- designing their products to be safe for anyone who assembles, uses, or recycles
them - and to be better for the environment.
17

WHAT IS APPLE’S STRATEGY?

Apple has a number of exclusive long-term agreements with its key
suppliers and uses prepayments to negotiate favourable pricing
terms, secure strategic raw materials and guarantee high volumes of
production.Apple has taken steps to diversify its supply chains away
from China and into Vietnam and India after Covid lockdowns
stalled production. Apple was set to shift 5% of global iPhone 14
production to India by late 2022 and it is expecting to produce 25%
of all iPhones in India by 2025.
18

HOW IMPORTANT IS THE IPHONE TO APPLE?

iPhone is Apple's most valuable product and has, since 2008, been its
main source of revenue. Even though Apple has diversified its
product line with Watch, AirPods and services, iPhone is still
responsible for 52% of its revenue.
What challenges are the company facing?
 APPLE’S SUPPLY CHAIN STRATEGY

19
20

APPLE'S KEY WEAKNESSES

Despite its dominance in the space of mobile devices and computing,
the company does face some key challenges. Among these
weaknesses are its highly-priced products, entering areas of higher
competition, and incompatibility with other software.
21 Challenges & Threats

• Reliance on Foxconn & China

• Geopolitical Threat – US & China

• Depending on external chip manufactures & not developing their

own technology

• New supply chains for wearables and automobiles (if rumors are
true)

• Creation of content for Apple TV

• Shifting assembly to India & Vietnam

22

Thank You
Ask us!
Arissa V. [email protected]
Soumik D. [email protected]