Supply Chain Management Relationships By Luke Cairns .
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Transcript of Supply Chain Management Relationships By Luke Cairns .
Supply Chain ManagementRelationships
By Luke Cairns
http://i1-news.softpedia-static.com/images/news2/iOS-May-Turn-Apple-TV-into-a-Gaming-Console-2.jpg
Overview of Apple
American multinational company.
Designs and markets innovative consumer electronics, computer software and personal computers.
Products sold worldwide through its retail stores and online stores, as well as wholesalers, retailers and value- added resellers.
357 retail stores worldwide.
In 2011: $108.2 billion revenue and $25.9 billion of retained profit.
http://files.shareholder.com/downloads/AAPL/1536680130x0x512287/5a5d7b14-9542-4640-841d-e047ec28bb96/AAPL_10K_FY11_10.26.11.pdfhttp://mos.futurenet.com/techradar/classifications/gadgets/phones/mobile-phones/iPhone/iphone4_2up_front_side-420-90.jpg
Focused Product Line-up
Apple has very few products compared to other large companies e.g. Samsung has hundreds of products.
Predominately sells just five different gadgets – iPad, iPhone, iPod, Mac and Apple TV.
Focused product line-up allows Apple to fine tune their sourcing strategy.
As there are relatively few components, Apple need a small amount of suppliers in their supply chain.
Having small number of suppiers allows Apple to focus and build strong long term relationships.
http://files.shareholder.com/downloads/AAPL/1536680130x0x512287/5a5d7b14-9542-4640-841d-e047ec28bb96/AAPL_10K_FY11_10.26.11.pdf
Apple Annual Revenue
http://money.cnn.com/galleries/2011/technology/1101/gallery.apple_sales/index.html?iid=EL
Kraljic’s Supply Positioning
Supply’s impact on financial results
Low
Low
High
High
Supply risk
Leverage products•Alternative sources of supply available•Substitution possible
Bottleneck products•Monopolistic market•Large entry barriers
Routine products•Large product variety•High logistics complexity•Labour intensive
Strategic products•Critical for product’s cost price•Dependence on supplier
Tough competitive stance by buyer
Competitive systems tendering + E-commerce
Performance based partnership
Secure supply + search for alternatives
BuyerStrength
Number of available suppliersES4c9: Supply Chain Management – Lecture 11 Relationships
Components such as the iPad screens and the processor chips
Components such as the battery and charger units
Apple Relationships
ES4c9: Supply Chain Management – Lecture 11 Relationships
Buyer Dominance
Buyer-Supplier Reciprocity
Supplier Dominance
Arms-length • Short-term operational relationship
• Buyer appropriates most of the value
• Supplier is non-adversarial
• Short-term operational relationship
• Buyer accepts current market price + quality
• Supplier accepts normal (low) market returns
• Adversarial commercial relationships
•Short-term operational relationship•Buyer pays whatever is required•Supplier appropriates most of the value
Collaborative •Long-term operational relationships•Buyer appropriates most of the value•Supplier is non-adversarial
•Long-term operational relationships•Buyer and supplier share value relatively equally•Both agree price and quality trade-offs•Both are non-adversarial
•Long-term operational relationships•Supplier appropriates most of the value•Buyer is non-adversarial
Power Balance
Way
of w
orki
ng
SamsungFoxconn
Apple Buyer DominanceWith more then $80 billion in cash and investments Apple are able to commit to very large orders, have a lot of power and bargaining tactics.
Low profits and margins for suppliers compared to Apple.
Apple’s negotiation tactics sometimes lead to them losing out on suppliers.
Large orders limit options for competitors e.g. rivals HTC could not purchase as many screens as they needed.
http://bbfun.co.uk/ipodnano%204g.jpghttp://www.businessweek.com/magazine/apples-supplychain-secret-hoard-lasers-11032011_page_2.html
Recommendations
Do the participants in this supply chain trust each other?
Apple is paranoid about leaks from suppliers.
Apple has taken lawsuits out against suppliers Samsung related to patent infringement.
Apple should reduce their reliance on outsourcing by becoming a vertically integrated company.
Less suppliers mean less opportunity of leaks within the supply chain.
http://www.zath.co.uk/apple-macbook-pro-review-aluminium-unibody/http://wlmtips.com/wp-content/uploads/apple_tv.jpg
Any Questions?
http://www.jeiboy.net/wp-content/uploads/2011/07/refurbish-apple-product.jpg