Section A: an integrated case study
Apple supply and value chain.
Apple’s success over the last decade can be attributed to its advancement in research and development, providing cutting edge technology to its consumer’s year on end. Few would attribute its success to its supply chain mechanism which has proven to be streamline, efficient and timely. It has also offered flexibility in the tech space, which is often characterized by immense diversity and utility across a wide range of companies (Kodama, 2018). The company’s supply chain mechanism fits across several models; one of them is the three levels of strategy. This structure is divide into three levels, namely strategic, tactical and operational supply chain management. Vital phases are handled by top management (Marshall et at. 2016, (pp37-45)). They are focused on long term strategy, market evaluation, handling capacity issues, the formulation of new products and targeting changes in technology. Strategic decisions take longer and are dependent on cooperation. Executive management often deals with strategic supply chain management. Tactical supply chain management is handled by middle management. They deal with shorter-time decisions such as demand planning, inventory planning, and supply planning (Marshall et at. 2016, (pp37-45)). Operational supply chain management is usually treated with shorter time frames in mind, from several days to weeks. It involves the majority of operations, and these mainly demand fulfilment. Such issues include scheduling, production, transport and monitoring. Other decisions that occur include location, productivity, inventory and transportation. They can be transferred along the hierarchy depending on the short term and long term goals. For example, the area of production site may be a long term strategic decision based on operation costs and market strategy (Kodama, 2018).
Apple has adapted its supply chain system to accommodate both cost and adaptability. The apple strategy depends on several factors. This begins with the purchasing of components from various suppliers. These components are later shipped to the assembly factory in china. The reason they are sent to China is because of lower labour costs and available infrastructure to provide both transport and logistical support (Clarke and Boersma, 2017, (pp11-113)). This keeps the operating costs low. Afterwards, the products are shipped directly to the US and other destinations via courier services such as UPS and FedEx. These are usually bought from Apple’s online stores. For other distribution channels in retail stores and other centers, Apple has a storage facility at ELK Grove, California. This facility also houses the call centers. At the end of their shelf life, apple users can always send their products back to any apple center for recycling. Plant location and central distribution warehouse all account for strategic decisions. This makes costs lean and has positioned the company for steady growth over the last decade (Clarke and Boersma, 2017, (pp11-113)).
Apple Company has managed to maintain inventory costs and supply by various means. Apple has reduced the amount of stock in hand. This ensures that the company has a manageable share in the event a competitor makes launch, and the market price of a stock goes down. The market value of appliances such as smartphones, tablets and laptops drops by 1-2% of its previous value each week. Having so much stock in hand meant that there would be greater losses as the price fell even below cost. Apple also reduced the number of warehouses from 100 to 24. This forced companies to compete for apple. They also closed 10 of the 19 stores to limit overstocking. From 1998, stock in hand was limited from a month to six days. This strategy was adopted to cut on costs and limited the fallback in the event a competitor announced a competing product. By 2013, apple had 154 stores, which was lower than amazon at the time, and as a result, they made better supplier relationships. Fewer stores to manage meant fewer suppliers to keep tabs on.
The main warehouse was also in perfect synchrony with the rest 250 stores. This allowed the company to anticipate demand to study consumer trends and collect feedback and complaints. On keeping the stock in hand as low as possible, the incoming stock always found a ready buyer. New stock always cannibalized the old. Apple company had 26000 SKUs, fewer than the other tech companies which propelled their market awareness even further. Online stores also provide a consumer-friendly platform where they can make orders and look at their order status. Besides, apple products have a 12-month warranty. This made the product preferable consumers relative to other products in the market.
Despite apple’s campaign to push the product faster, they adopted the culture of not selling the product immediately. This strategy was adopted with I pad two launches. It consisted of selling the awaited commodity on the second day after delivery. This was regardless of the customers making ques in front of the stores. The reason was to ensure there was a steady tracking system and that no errors were recorded. This comes out as a tactical strategy as it deals mainly with distribution, tracking and meeting consumer demand. This has a shorter period. Many stores were closed, thus reducing operational costs and improving supplier relationships. The integration of physical stores, as well as online purchases, has led to an all-rounded distribution network to provide value at a personal level and also to ensure customer satisfaction as much as possible. Apple has proven more effective in keeping their inventory, more so than Dell, hp, Blackberry (RIM) and Motorola.
Apple is known for its extensive research and innovation. They spend tremendously on getting the right talent and being at the forefront of innovation. This causes the company to spend a lot on research, usually in the billions. It is a capital intensive; however, it has led to high customer relationships, excellent market penetration and consumer preference have improved over the years. Apple’s online store makes the direct channel that the company connects to consumers. Company stores and companies make up the indirect channel of the company. This is characterized by the level of control the company has on consumer perception, product monitoring before delivery and return policy, among other factors.
Section B: critically analyze how amazon fits the three levels of strategy
Amazon is the premier online shopping and distribution chain in the world. Spanning every major city and experts in last destination delivery and customer experience (Cohen, 2018 (pp75-86)). They are the benchmark for an in-house delivery system that embraces technology and automation. All the while, minimizing cost and redirecting funds to much-needed avenues of the business. They have primarily developed five channels in this regard. The company has an online platform where sellers can show their wares, the buyers go online and order a consignment of the product they need. The buyer then makes a purchase and chooses from a wide variety of delivery options. They can even choose other delivery systems such as UPS and FedEx to get their consignment (Winchmann and Kaufmann, 2016). Another option is where the seller opts for a Fulfilment by amazon clause or if they choose to fulfil the delivery themselves. Fulfilment by amazon uses the nearest warehousing facility gets the goods ordered and delivers them to your doorstep. This will depend on the proximity of the warehouse or the proximity of a delivery party to you. FBA works in six steps namely; they send inventory, receive and store the inventory, the customer orders the product, amazon picks, and packs and ships the product to the destination (Gosling et al., 2016 (pp1458-1469)). Customer support is always available 24/7 and customer returns are handled once processed. They are later corrected and re-delivered. Other adaptations include the means by which amazon communicates inventory. One is the probability level demand forecast. It allows the vendors to make critical decisions about their own businesses and also impact amazons operations. This appears as a strategic approach as amazon decentralizes their decision making system to vendors. Using a probability estimate, they are in a better position to anticipate demand. Use of technology also has a long-term effect on operational costs and efficiency. This leads to increased marginal costs and redirecting these costs to other places in the business. This is a long term strategy that intergrades well with daily operations in-house (Gosling et al., 2016 (pp1458-1469))
Amazon has adopted efficient delivery channels. This is to fulfil their objectives by making deliveries accessible anywhere in the world they have opened warehouses big metro areas and population hubs (Cohen, 2018 (pp75-86)). Inventory is spread amongst these stores to ensure supply meets demand. They have also opened mini-warehouses in smaller locations to ensure delivery to every possible area. The warehouses are organized into five unique sections (Winchmann and Kaufmann, 2016). These are meant to ensure minimal time is spent picking the consignment and sending it to delivery. It also offers a platform to have an opinion vote based on previous sales and utility (Swanson et al., 2017 (pp299-356)). A company called pluggable technologies adopted the facilities amazon offered, and as a result, their product got good amazon ratings and thus maintained a steady cash flow through purchases. Amazon is primarily a retail company. The products sold are mainly from other firms and businesses. As a result, it presents a conduit for opinions, and this offers a tactical advantage to companies and vendors to have a platform, reduce value chains in a system and hence provide just value to a consumer (Swanson et al. 2017, (pp299-356)). There are a two-day shipping and free shipping policy. Based on consumer preference, product delivery terms are arranged and met. The opening of delivery centres is a tactical strategy as it can provide convenience to its end-user. It uses the predictive methodology to track and anticipate demand and as such needs are met at the end-user (Swanson et al., 2017 (pp299-356)).
Amazon has adopted technology further than its competition. This has made the company have organized storage, orderly warehousing and reduced time in picking and delivery of the consignment. This minimizes operational costs, keeping the tasks as lean and efficient as possible. They have adopted robots to ensure deliveries are orderly. This reduces staffing costs as most of the work is automated. The company also wanted to launch Amazon air. It isn’t operational yet but once launched, and it will provide urban deliveries within thirty minutes of being ordered. Current delivery modes include company trucks, company vans, delivery bikes and third-party service providers such as UPS and FedEx. In accord with amazon’s policy, having a reach to everyone, at any possible time is crucial. The drones are tailored to land on the roof or back yard. It is ensuring last destination services (Winchmann and Kaufmann, 2016). In recent times, Amazon has expanded its operations to include manufacturing operations. Some of the products include making of batteries, backpacks, Bluetooth speakers; I phone chargers, dog poop bags, among many other items. This came as a realization that amazon could produce and retail these items at a lower cost than their third party companies. The company’s high volume naturally lends itself to low-cost production. The manufacturing support for its retail operations provides amazon with an important opportunity for revenue growth (Swanson et al. 2017, (pp299-356)).
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