Apple’s Ruthless Supply Chain Management

For the loyal Apple customer, Apple can do no wrong. Apple reported Four million iPhone 6 and iPhone 6 plus’ pre ordered in the first 24 hours. Last year Apple sold over 150 million phones.(Satariano and Burrows) The company’s success is attributed to their innovative products which have superior functionality and exceptional user experience. Second to the product is the supply chain management that allows Apple to deliver the high demand products on time to the users.

The iPhone is the most popular phone in the world, in order for Apple to produce and deliver the sheer volume of phones to meet the demand they must create exclusivity agreements with suppliers in exchange for volume guarantees. Working with its supply chain partners, Apple helped develop new manufacturing processes, some of which have been the subject of patents filed by the company.(Apple’s process,pars 5)

Apple is always innovating their products and they do it at no cost and without any consideration of the suppliers. Suppliers of Apple sometimes come out winners and sometimes losers. The iPhone alone has components that come from dozens of different companies. Apple has a reputation as a brutally tough negotiator with companies in its supply chain, demanding advanced technology at razor-thin margins, and it doesn’t hesitate to drop longtime suppliers with little notice, says Francis Sideco, a senior manager at market researcher IHS (IHS). At least nine publicly traded companies get more than 40 percent of their revenue from Apple, data compiled by Bloomberg shows.

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Audience, a mobile audio processor maker saw their stock plummet from a high of $22 a share to about $8.50 a share when their parts were left out of the iPhone 5 in 2012.(Satariano and Burrows) Peter Santos, chief executive officer of Audience says they struggled to replace lost orders with business from other phone makers because he had no notice. Apple didn’t tell him his company was cut out, and he only knew for sure when his engineers bought an iPhone 5 and took it apart.

What makes Apple great is also what gives them the reputation of being ruthless. Apple is very involved in all aspects of the supply chain management and it’s been that way since late Steve Jobs return in 1997. Apple has a lot of power and leverage when they negotiate the terms on parts, manufacturing and transportation, this in large is what allows Apple to make a superior product to its competitors at a price that is hard to rival and still make a 25 percent profit margin. The bottom line is the company is highly regarded by the end user. Apple’s ruthlessness is what gives them the advantage and keeps them in the green year after year. Some suppliers have begun to reduce their dependence on Apple.

Is the old idiom, business is business, always true? Is it okay for a company to have a ruthless mentality? When the end-users are happy and the company sees huge profits, is it all that matters?

6 thoughts on “Apple’s Ruthless Supply Chain Management

  1. Ruthless is right. Though making a profit is the goal for companies, it is business etiquette to give timely notice of an order. Though Apple is a successful company it cannot let that power go to its head. One may argue that business is business, but letting a company know of terminating use of their product is essential.

    In regards to their supply chain, Apple may be able to provide their product to many countries today, but that is a lesson that they learned with the release of the first IPhone. With the release of their first IPhone Apple did not consider the demand for the phone in other countries and incurred a shortage of phones with a waitlist of months. Apple’s supply chain has improved, but it was a result of its past mistakes.

  2. Just like Wal-Mart or any other large corporation, Apple is known for squeezing its suppliers by demanding efficiency, perfection and lowest possible prices. Is it immoral? Yes. Is it unethical? Yes. Is it a good business strategy? Definitely. Any company will do what’s best for them and their shareholders, because at the end of the day market share and profits are all that matter. I guess being the biggest kid in the yard has its advantages.

  3. I agree with the above comments. Apple, as all businesses, have a responsibility to their shareholders to heighten their stock price. In a better world, all companies would not only bare responsibility for their shareholders but also their stakeholders. It is possible Apple is not being fair to some of their suppliers (a stakeholder), but that can also be considered business as usual.

  4. I think this blog post touches a bit on the ethics and morals of business. It is a think layer that differentiates ethics and moral behavior to unethical and immoral behavior, plus this margin is constantly changing when new situations and circumstances come about. I think Apple is the best because it has the best workers doing their jobs at their potential. Does that mean that some actions taken for the benefit of the company are unethical? I don’t know, maybe yes, but I think there comes a point where management decides whether they want to have a competitive advantage at a cost of a not so moral and ethical decision, or whether they don’t.

  5. I believed Apple to be a ruthless company when I first became an iPhone user in 2012. From what I observed over the years is that they will always see things business first, that is how their company has been run. I do agree that the issue brought about is more focused on ethical issues, is it right for Apple/ any company to be so ruthless? No I do not think its right to be so ruthless, however that seems to be the model that Apple is perceived as, I can see how they are ruthless in some ways but they’re also protecting their brand and want to grow the company without letting anything or anyone get in their way, so Apple would drop long time suppliers without much thought to it. I personally feel as though if the end users are happy and the company is satisfied and generating income then that’s all that matters. You need to keep the end users happy, otherwise you begin to lose customer base which would reduce the number of outputs being sold, decreasing your productivity and lowering the company’s net worth.

  6. Apple is incredibly ruthless. Is that wrong? Unfortunately no. Apple conducts business within the law (from what we know). It is important to understand that companies should not be held accountable for finding “loopholes” because at the end of the day, as long as they abide by the law, they are not in the wrong but actually just doing right by their shareholders by maximizing profits. The discussion of morality lies with the creators of the business environment and business law. For example, if the business environment directly/indirectly dictates that profits are the goal of the game, then you need to change the rules to the game then.

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