Apple Twin City Case Annalysis

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Rajan Jayakrishnan Nair
PGWPM13RAJ

APPLE: A Tale of Three cities
The case will be used for understanding the following concept: •

The potential role which third party logistics providers can play in supply chains



The analysis of costs and benefits at a company level and at a multi-company level in supply chain management.
The Case also provides background on two existing supplier hubs - one in Cork, Ireland and one in Fountain Colorado. This allows us to contrast the effect of a hub in the US with that in Europe. (Deferral of payment of duties, tax advantages related to avoidance of establishment of a sales/manufacturing entity)

The need to develop supply chain solutions which support business goals, and to implement performance measures which motivate the desired behavior. This case describes a situation faced by Lori Amador, head of Apple's Supplier Management Organization for its Personal Computer production facility in Sacramento, California. Faced with a growing space shortage,. Apple is considering various alternatives for implementing off-site storage of component parts. One particularly intriguing alternative is the use of a supplier hub process similar to that which Apple has implemented at its facility in Fountain, Colorado. As part of her review of the alternatives, Lori must analyze the supplier hub concept as implemented at Fountain and how it could potentially address Sacrainento's needs.

------------------------------------------------------------------------------------------------------------------------------1. What strategy is Apple pursuing to remain competitive? What role does Apple's materials management organization play in making Apple successful? What performance measures should Apple use with respect to materials management?

Apple focused on two strategies, R&D investment to generate a steady stream of new product introductions and cost reduction to maintain or improve margins while reducing prices. Further in an effort to decrease distribution and service cost Apple moved its North American distribution centre and service operations from San Francisco Bay area to new site in Sacramento, California further to move final assembly, test and pack its products as well. This co-location (manufacture & distribute) would improve response times to customers. The main challenge for Apple was to meet growing, uncertain demand for the various models while minimizing inventory level and cost, the success of this laid with the material management organization at Apple and was done by reconfiguring dealer inventory when stocking levels of various models become unbalanced.

Apple used four performance measures to track effectiveness of the above i.e, •

Inventory turns



Dollars of inventory as a percentage of goods sold.



No. of days of inventory on Apple’s book



Obsolescence cost

2. Analyze the hub process at Fountain, Colorado.
a. What changes were made as part of the hub implementation? Apple, Fountains’s major obstacle to growth was shortage of space and to solve this issue Apple project team identified the goal as ,


Free up space at the Fountain site by developing a local supply base with deliveries to the Fountain site every shift.



Reduce inventory on Apple’s book.



Defer payment to suppliers until material was pulled for use by production.

As part of the above and the already available system @ the Apple Cork facility decided on the hub concept. After thorough verification Apple choose Fritz to implement the same. As part of the hub implementation, Apple identified four part nos. of one commodity type to flow through the Fountain hub. Moving inventory to the hub would free space to allow installation of new production line. Secondly under the hub model the ownership of the item were still held by the supplier at the hub for a given period reducing inventory on Apple’s book. Finally this led to deferred payment to suppliers as payment...
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