Question

What strategies is Apple using to source and manufacture its products? How does Apple view its responsibility to its suppliers and those who build its products?

Answer 1

Sourcing Strategy of Apple revolves around 4 main goals:

1. Risk Diversification: Apple sources its components from at least two suppliers. Having multiple suppliers lowers the risk and provide more negotiating power to apple. Having more suppliers gives apple an advantage over supply chain disruptions. It can react faster to any disruption as it has multiple suppliers at different locations.

2. Capacity Management: There are times when apple experiences sudden high demands. To meet such demands quickly and effectively, it needs to have a set of suppliers and manufacturers who can help increase the capacity faster. This is the reason Apple is setting up assembly lines in India for specific models of iPhones.

3. Margin Sustenance: To be competitive in the market and survive in the long run, the profits have to be better. In addition to the increase in revenue, the costs also have to be reduced to ensure high margins/profits. The suppliers and manufacturers should be able to cut cost effectively without compromising the quality of products or services.

4. Supplier Innovation: As there are multiple suppliers and apple tries to add more suppliers, the existing suppliers have to continuously innovate on their existing setup or processes to be more efficient. A new supplier would be more willing to invest and hence the existing ones have to innovate.

Manufacturing Strategies:

The manufacturing strategies have to be aligned with marketing strategies for efficient production and effective product distribution.

The strategy depends on the components as mentioned below:

Flexibility: There are three kinds of flexibility:

New Product Flexibility: The product specifications, designs change almost every year due to innovation. The manufacturing setups should have the flexibility to adapt to this change.

Volume Flexibility: The volumes can suddenly increase due to any unexpected demand in some countries especially in India and China. It should be flexible enough to be able to get prepared for such high quantities and produce the same

Product Mix Flexibility: Apple has multiple products in their portfolio. A manufacturing unit should have the capability to adapt to the production of the product mix apple offers and respond to the requirements as needed

Quality: Apple maintains a very high quality for its products and it would want to maintain the same. The manufacturing units have to be aligned with this objective.

Cost: Though apple charges a premium for its models, it doesn't mean that there should be no control over the costs. The manufacturing units should be able to have a great facility at a lower cost but also not at the expense of quality or ethics.

Apple's Responsibilities to its suppliers:

Apple extends its responsibilities towards the suppliers, the supplier employees, and even to the places where its suppliers are sourcing or extracting materials.

1. Apple has a supplier diversity program that ensures the suppliers from each class or category to be associated with it.

2. Apple's principle is " people come first n everything we do"

3. Apple train supplier employees on their rights before getting started

4. They ensure workplace safety at the supplier's facility

5. Apple is strongly against debt bonded labor and hence they work with the suppliers towards stopping it.

6. They provide opportunities like education healthcare even in such locations where their suppliers source materials.

7. It makes efforts along with the suppliers towards 0 waste and water conservation.