A Study under Prof. James Hogan for understanding Apple’s Supply Chain with focus on Apple iPhone, supplier selection and global supply chain management.

1. FB 500 Company Analysis
Team 1
Ankur Kale
Abhi Rampal
Nitin Maurya
Rajagopal Srinivasan
Rekha Masilamani
Sumita Das

2. Agenda
• An Introduction
• Financial Information and Supply Chain Laurels
– Consolidated income statement/Spend
– Organization Reporting
• Supply chain goals & objectives : iPhone
– How Supply Chain works?
– Supplier Selection
– Worldwide Supplier Base
• SWOT Analysis
• Challenges
• References

3. An Introduction
• 1971: Started by Steve Jobs, Steve Woznaik, Ronald Wayne as Apple
Computer Inc.
• 1980 : Went Public, Worth $1.8bn in 1980
• 1983: Entered into Fortune 500 companies
• 2013: Valued at $171 bn, most valuable company in the world
• Revolutionized the world 4 times:
– 1982: Lisa, World’s first PC
– 2001: iPod, First Hard Disk Based Music Player.
– 2007: iPhone, first capacitive touchscreen based Phone
– 2010: iPad, Not the first, but revolution in tablets.
• Leading markets with largest shares are America, Europe and Greater
China.
• USP: hardware and software products are tightly woven together for a
seamless experience
• Earns $300,000 per minute
* Source: Apple Annual report 2014

4. Financial Info & Supply Chain Laurels
• Revenue: $183bn (7%)
• Profit: $39.5bn ( 6%)
• Gartner Best Supply chain for last 8 years (since 2007)
• Inventory Turns: Every 5 Days, 73 Inventory turns per year.
• Dell: Every 10 days, 36 Inventory Turns per year.
• McDonalds: Every 2.75 days, 142 Inventory turns per year.
• When Tim Cook joined, he said –“ Slash Inventory, Cut Down warehouses -> let suppliers compete”
• CENTRALIZED SUPPLY CHAIN STRUCTURE (HQ: CUPERTINO)
• CEO – TIM COOK
– SVP: OPERATIONS – JEFF WILLIAMS
» DIRECTOR, VENDOR STRATEGY – MICHELLE BROWN
» DIRECTOR, OPERATIONS – TARA BUNCH
» VP, Apple Care – Susan Gallagher
36%
22%
16%
8%
6% 12%
2014
Sales Mix by Operating Segment
America
Europe
Greater China
Japan
Asia Pacific
Retail
56%
17%
13%
1%
10%
3%
2014
Sales Mix by Product Segment
iPhone
iPad
Mac
iPod
iTunes, Software
services
Accessories
*Source:AppleAnnualreport2014
• ONLY 154 suppliers

5. Consolidated Income Statement

6. Design & Development Sourcing
USA , China, Europe , Asia
China (50/50 split between Foxconn &
Pegatron)
Manufacturing/ Assembling
Warehouse in, California
Intermediate warehouses via UPS/FEDEX for online
stores.
Supply Chain - iPhone

7. iPhone 1 | iPhone3 | Iphone 3gs | iPhone 4 | iPhone 5 | iPhone 6
iPhone
Models Iphone Iphone 3 Iphone 3gs Iphone 4 Iphone 5 Iphone 6
Release
Date Jan-07 Jul-08 Jun-09 Oct-11 Sep-13 Sep-14
Features
Full Touchscreen
with icon based
interface 3G Speed Data
High Speed
Data LED Screen
Fingerprint
Scanner NFC
New iOS GPS System Siri Nano Sim Nano SIM
Apple Store
Updated Camera
with HD Recording
Motion Data
Processor Barometer
No Front Camera Micro- SIM Card
Lightening
Connector
Multitouch
Features Stainless Steel Aluminum
Front Camera
Sapphire Crystal
Lens
Features- iPhone

8. Supplier Selection
• Location of Supplier
• Reputation and Quality Standards
• Alignment with Apple’s Goals and strategies
• Deliveries as per Apple’s Crunch timelines
• Agile and Flexible as per the changing market.
• Trust and NDA, as most of the apple product are under-covers
before release.
• Strategic selection of suppliers
– Risk Diversification
– Capacity Management
– Supplier Innovation
• Apple Maintains a SID(Supplier Information Database): includes
potential and current suppliers, capabilities, Supplier diversity
certification, Product and Service Descriptions, UNSPSC Code,
contact info.

9. Supplier Base - Worldwide
China - 349 USA -60 Taiwan -42 South Korea -32 Malaysia -21Japan - 139

10. Strategic Suppliers List
Component Supplier Location
Sapphire Crystal Components GT Advanced Technologies Mesa, Arizona
Chips Samsung Austin, TX
Chips (New) Global Foundries Malta, New York
Chips Texas Instruments Richardson, TX
Chips Maxim Integrated San Jose, CA
Corning Glass Corning Harrodsburg, KY
Display Japan Display Inc. Japan
Display Innolux Taiwan
Display LG South Korea
Storage Toshiba Japan
Storage SK Hynix South Korea
Touch ID TSMC Taiwan
NFC chip NXP Netherlands
Gyroscope -Old STMicroelectronics France
Gyroscope -New Invensense CA
Assembly Foxconn Taiwan (Assembly in China)
Pegatron Taiwan (Assembly in China)
New Assembly Foxconn Brazil

11. SWOT Analysis
Strengths
• Customer loyalty
• Innovative Products
• Efficient Supply Chain
• R & D investments
• Marketing and
Advertisements
• Product Focus
Weakness
• Incompatible with other
OS
• Market Share decreasing
• Limited Products
• Relatively high prices
• Law Suits
Opportunity
• Expanding Mobile Device
Market
• Rising Demand in Cloud
Services.
• Innovative Approach
towards problems- Macbook
• iOS for Car/TV
Threats
• Rapid Changes in
Technology
• Android OS Market
• Limited Customization
Options
• Prices dependent on
Global economy
• Fluctuating Dollar Value

12. Challenges
• Rapidly changing Technology market.
• Decreasing market share
• Global Supply Management
• Governance issues related to different suppliers and different countries.
• Increasing demand/waiting times resulting in unsatisfied customers.
• Fluctuating world economics
• Too many eggs in one basket – Suppliers
• Manufacturing Complexities causing disruptions in Supply Chain.
• High logistics cost with only 1 warehouse – 1 Assembling country – higher
lead times.
• Increasing labor issues in Chinese assembling plants.

13. References
• Source: http://appleinsider.com/articles/15/01/28/apples-rd-spending-shoots-up-42-year-over-year-hit-new-19b-
record-in-q1
• http://financesonline.com/how-iphone-is-made/
• http://www.supplychain247.com/article/apple_supply_chain_strong_as_iphone_6_closes_in/supply_chain_optim
ization
• http://www.opsrules.com/supply-chain-optimization-blog/bid/359149/iPhone-6-Apple-Supply-Chain-Revisited
• http://www.tradegecko.com/blog/apple-had-the-best-supply-chain-in-the-world-for-the-last-four-years-here-is-
what-you-can-learn-from-it
• http://www.forbes.com/sites/timworstall/2014/05/07/explaining-the-economics-of-apples-sapphire-supply-
chain/
• http://www.usanfranonline.com/resources/supply-chain-management/apples-process-improvements-make-it-a-
global-supply-chain-leader/#.VR8Q3hPF_XI
• http://bgr.com/2014/11/12/iphone-6-vs-android-sales/
• https://www.yahoo.com/tech/by-the-numbers-iphone-vs-android-97842025474.html
• Source: Apple Annual report 2014