WEEK 2 LOGBOOK EXERCISES

1. What does the global supply chain look like? Dont worry about finding out
ALL the suppliers and ALL the hubs, etc. Just work out in overview what it
looks like by finding some specific information about Apples supply chain.
Global supply chain is the network created worldwide between different companies
producing, handling and distributing specific goods. Apples supply chain is divided
roughly among five sections, i.e. sourcing, manufacturing, warehousing, distribution and
replacement or return. Sourcing here is mainly the obtaining, purchasing or procuring the
materials or components required for manufacturing an apple product. Apples sourcing
is mainly done from United States, China, Asian Countries and Europe. Next step in the
supply chain is manufacturing. Since the pre-manufacture parts are outsourced already,
now the just need to assemble them to obtain the end product. Apples assembling of all
the components is mainly done in Chine. From china, the products are transported to
warehouses in different countries like California and Elk Grove. From warehouses the
Apple products are distributed to distributors for selling. The distributors are of various
categories like, online stores, retail stores, direct sales force, wholesalers, retailers etc.
apple also has warranty, return and trade in policies for customer satisfaction.
2. What are the main costs identified in the supply chain?
In any organisation main cost is the logistics cost. Logistical operation affects the cost of
supply chain to a great extent. Same is the case in Apple. Three major factors affecting
the cost are: Transportation, Loistical packaging and warehousing.
Apples pre-manufacture components are first transported from US and other countries
to Chine for assembling. Then the assembled products are transported to warehouses
and distributors. From the distributors, products are then delivered to the customers.
Thus Apples entire supply chain involves lot of transportation from one part of the world
to the other.
Logistical packaging is another obvious factor that affects the supply chain cost. Product
packaging without causing any damage is one of the main operation. This process
should go as smooth as possible which obviously increases the cost.
Another main cost in Apple supply chain could be the warehousing cost. Warehousing
cost includes the rent for space, handling and other operational expenses. Movement of
the products in and out of the warehouse, labor cost, electricity, fuel costs etc are
identified as the main costs in suppy chain.
3. What benefits is Apple looking for when altering its supply chain?

Apple principally searches for quality and convenient delivery of materials from
suppliers. Apple focuses on meeting demands of the customers and moving with the
latest innovation is the technology. For example when Apple introduced the new
technology of tapping sensations in apple watches, they were not able to meet the
demands as the watches were hard to be produced in a short period of time. Apple then
hired a Japanese company to manufacture these machines along with the prior
manufacturers.
By increasing the number of companies it works with, Apple reduces the risk of relying
on one company and opening itself up to production stalls and business fails.
Apple is reportedly keeping its options open when it comes to selecting manufacturing
partners for the iPhone 6 and the Apple watch by broadening the number of companies it
contracts with. These are the main benefits apple look for when altering its supply chain.
4. Find some instances of collaboration between Apple and its suppliers.
Apple made an arrangement with GTAT for sapphire screens for iphone in which they
asked GTAT to just give this material to Apple and no other company, So along
these lines apple will hold the significant business sector for sapphire screen
evacuating the vast majority of its opposition.
Glu Mobile, Inc. (GLUU): NASDAQ-listed Glu Mobile doesn't supply Apple with
hardware

but

is

major

provider

of

iOS

apps

and

mobile

games.

Valuewalk reports that Glu Mobile makes 64% of revenue from Apple, implying its
major dependency on Apple.
Pegatron Corp., named after the flying horse Pegasus, are the primary assembler of
a low-cost iPhone. Foxconn's smaller rival across town became a minor producer of
iPhones in 2011 and began making iPad Mini tablet computers last year.
Pegatron's rise means an end to the monopoly that Foxconn Technology Groupthe
trade name for Hon Hai Precision Industry Co., the world's largest electronics
contract manufacturerhas held over the production of Apple's mobile products.
(Eva Dou, Apple Shifts Supply Chain Away From Foxconn to Pegatron, May 29,
2013)

5. Can you find some evidence of how Apples supply chain copes with product
obsolescence?
Extending lifetime of products helps in less usage of energy, less resource extraction
and most importantly less wastage. However companies like Apple think otherwise.

Apple makes their products satisfactory durable but the newer versions are more alluring
for the consumers, so they tend to switch to the newest versions far earlier than it is
necessary. Products these days go out of fashion very quick, so in order to cope with
such a competitive market, Apple introduces updates in their existing products. The
effect of upgrades is the most affecting for smartphones. Apple does not launch new
product but new version of the familiar one. Apple does not upgrade or innovate its
products faster than its competitors, rather more efficiently in the sense of perceived
obsolescence by consumers. Moreover, it is very hard to determine how much upgrades
timing and innovativeness is determined by market and technological development or
how much it is determined by Apples effort coming with the reasons why you should
replace the older version by the new one.
When Apple is designing a product, they have an end user experience in mind. They
have a vision of solving a use-case problem. They work backward from there to external
hardware design - how to make the product beautiful, ergonomic, unique, and form of
genuinely stunning art. However this is where the "planned obsolescence" argument
comes into picture. Apple obviously picks components that will sometimes not be top
notch in all regards, or not pick them at all. One such example is the omission of a
camera from the first iPad. Another instance of how apple worked out a planned
obsolescence is, Before the iPhone, cell phones without user-replaceable batteries were
almost unheard of. Apple realized that they could sell more phones if they built the
phone with an integrated battery, prompting users to upgrade once the battery wore
down. A phone isnt very useful once you cant take it away from the charger for more
than an hourwhich is guaranteed to happen with every iPhone

Refrences
Eva Dou, Apple Shifts Supply Chain Away From Foxconn to Pegatron, May 29, 2013

Nejedl, B. J., 2011. PLANNED OBSOLESCENCE. UNIVERSITY OF ECONOMICS IN

PRAGUE, 29 August, pp. 77-85
Shobhit Seth, 2010. Fundamental Analysis, london: Investopedia.
.