Apple.Inc Pros and Cons

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Apple Inc. is the best in the world at innovative product development. Because the company develops hardware, software, and associated digital services rather than just focusing on one dimension, it can provide an unmatched user experience. This allows Apple to capture high margins from its products and services. But by my definition, product development is not supply chain management; procurement, manufacturing, and logistics are. That said, Apple Inc. has a fascinating supply chain that is very different from traditional supply chains. This supply chain comes with pre-built advantages and disadvantages. On the advantage side, demand management is easier. Apple doesn’t have to get the demand forecast for a new product right. As long as it underestimates demand for a hot new product, Apple will have loyal customers clamoring for the new devices and willing to wait. In fact, the projected backlog leads customers to line up for hours before stores open to buy a new product. This helps to create marketing buzz. Because Apple Inc. has become so large, it has procurement advantages smaller rivals can’t match. Financial analysts are beginning to focus on Apple’s supply chain. Samsung lost $10 billion in market value when Apple placed a huge order for flash memory with Elpida, securing more than half of that company’s supply. Apple reportedly has price advantages in securing key components, manufacturing capacity, capital equipment, and airfreight capacity. Like other companies that have huge procurement clout, when Apple asks a supplier for a price quote, it demands a detailed accounting of how the manufacturer arrived at the quote, including estimates for labor and material costs and projected profit. Manufacturers can get hit with penalties for quality issues and warranty claims. Apple is becoming so big that even though it has a number of customized components that it has to pay extra for, the company’s cost structure is starting to resemble that of some of its...
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