Apple is famous for its innovation and design.

But few people know that the way Apple handles

inventory is also a factor that led to success. As a matter of fact, Apple’s Supply Chain has
led Gartner's Supply Chain Top 25 list since 2013.

In 1997, Steve Jobs returned to the position of an Apple CEO in order to bring the company from
bankruptcy back to profitability. A year later, Cook, a supply chain expert, joined Jobs to help
reinvent, speed up and simplify the Apple supply chain. It was the best decision for the company at
the time, because now the Apple supply chain is considered to be one of the most powerful, efficient
models ones in the world.

Actually, between 2010 and 2013, the supply chain of Apple was repeatedly named the best in the
world, according to the Gartner research company. During this period, Apple’s revenue had grown
from 21.7% to a stunning 51.5%. Besides, by 2011 it took Apple only 3 days to complete the
entire inventory management cycle and sell its inventory.

So let’s see which strategies Tim Cook – who is now the CEO of Apple – was using to achieve such
tremendous results.

Apple Supply Chain Strategy by Tim Cook

 Focus on non-seasonal products with life-cycles that exceed 12 months.

 Cut down the number of storage locations, leaving only one central warehouse in California.

 Efficient synchronization of data between the central warehouse and Apple’s stores and
customers.

 Cut down the number of key suppliers that are involved in manufacturing, shipping and
storage.

 Maintain long-term and strategic relationships with suppliers.

 Outsource the manufacturing to China, thus reducing the manufacturing cycle time from 4
months to 2 months.

 Cut down the number of SKUs to predict the demand more accurately and ensure lightning-
fast Apple inventory turnover.

 Implement renewable energy sources, making up to 87% of their energy used worldwide.

 Brring in extraordinary Apple inventory management practices, which allow the company to
cut down on inventory costs, reduce waste and avoid overstocking.

Now let’s find out how Apple supply chain works.

Apple is famous for its simple and accurate supply chain planning processes. Here is what they
consist of:

1. Research and Development. At this stage, the company develops new technologies, designs
new products, licenses the intellectual property and purchases third-party businesses.

2. Concept testing. This activity involves market research, product testing and quality
assurance.
 3. Pre-launch. During the pre-launch stage, the company fixes the found issues, provides
software for the new products and makes prepayments to the suppliers.

4. Launch. After the launch, the company makes the demand forecast for the next 150 days.

5. Quarterly reviews. During the quarterly reviews, the company checks the inventory levels,
analyzes the product life-cycles, adjusts the demand forecasts and monitors the current sales
levels and costs trends.

And this is how the supply chain management Apple processes take place:

1. Sourcing. At this stage, Apple acquires components and materials from their suppliers, and
then ships them to the outsourced assembly plant in China.

2. Manufacturing. The products are manufactured at the assembly plant in China.

3. Warehousing. The manufactured products are shipped from China directly to the consumers
who order them online (drop shipping) by using the services of third-party shippers such as
FedEx or UPS. They can also be shipped to the central warehouse location in California.

4. Distribution. The products are distributed from the central warehouse location to retail
stores, wholesalers and network carriers.

5. Return. At the end of a product’s life-cycle, the consumers can participate in the
recycle/reuse program and send the products back to nearest Apple stores or specialized
recycling plants.

How did Apple manage to have such a great inventory management?

Tim Cook’s mantra was from the very beginning to slash inventory, cut down on warehouses and
make suppliers compete between themselves.

Looking back at the last five years, Apple's inventory turnover hit its lowest point in September 2018:
37.2x. That means Apple turned their inventory every 10 days. 

Keeping as little inventory on hand as possible is very important. Why? Because of costs with
warehouses and competitors possible hits. Technology manufacturers can’t afford to keep too many
products in stock because a sudden announcement from a competitor or a new innovation could
change everything and suddenly bring down the value of products in inventory.

Foreseeing sales levels accurately and not having excess inventory is absolutely crucial in the
computer industry, especially when new products quickly cannibalize the old.

Apple is famous for its innovation and design. But few people know that the way Apple handles
inventory is also a factor that led to success. As a matter of fact, Apple’s Supply Chain has
led Gartner's Supply Chain Top 25 list since 2013.

Tim Cook, the current CEO of Apple, a company that reached 260.17 billion in revenues in 2019, was
before the company’s Chief Operations Officer. He had joined Apple in 1998, the same time Steve
Jobs re-entered the company, and he transforms Apple’s messy operations into a success, becoming
COO in 2005 and CEO in 2011.
Tim Cook believes that when it comes to technology such as smartphones, tablets and laptops,
inventory deprecates very, very quickly, losing 1-2% of its value each week - “inventory is
fundamentally evil” he says.

You kind of want to manage it like you're in the dairy business. If it gets past its freshness date, you
have a problem."

Back in 2011, a comparison of how tech companies managed their inventory shows Apple was
performing much better than Dell, HP, Blackberry (RIM) and Motorola. Using the Inventory Turnover
formula that shows how many times a company’s inventory can be sold and replaced over a specific
time period (so the higher the number the better), in 2011 Apple performed 2 times better than Dell,
5 times better than HP, 4.5 times better than Blackberry, and 5.5 times better than Motorola.

Apple annual inventory peaked in 2017, with a value of $4.8 billion. In 2018, the company saw a
18.52% decline year-over-year but they bounced back quickly and they had $3.8 billion in inventory
in 2019, a 3.79% increase vs. 2018. 

How does Apple run its supply chain operations?

In a nutshell, Apple purchases components and materials from various suppliers, then gets them
shipped to the assembling plant in China. From there, products are shipped directly to consumers
(via UPS/Fedex) who bought from Apple's Online Store.

For other distribution channels such as retail stores and other distributors, Apple keeps products at
Elk Grove, California (where central warehouse and call center are located) and ships products from
there. At the end of product's life, customer can send products back to nearest Apple Stores or
dedicated recycling facilities.

How did Apple manage to have such a great inventory management?

Tim Cook’s mantra was from the very beginning to slash inventory, cut down on warehouses and
make suppliers compete between themselves.

When Cook initially took over Apple's supply chain, he cut down the number of component
suppliers from 100 to 24, forcing companies to compete for Apple's business," writes San Oliver
from Apple Insider, "He [Cook] also shut down 10 of the 19 Apple warehouses to limit
overstocking, and by September of 1998 inventory [stock on hand] was down from a month to only
six days."

Looking back at the last five years, Apple's inventory turnover hit its lowest point in September 2018:
37.2x. That means Apple turned their inventory every 10 days. 

Keeping as little inventory on hand as possible is very important. Why? Because of costs with
warehouses and competitors possible hits. Technology manufacturers can’t afford to keep too many
products in stock because a sudden announcement from a competitor or a new innovation could
change everything and suddenly bring down the value of products in inventory.

By 2013, Apple was dealing with 154 key suppliers (way lower than Amazon for example), which
facilitates better supplier relationships) and kept only one central warehouse in perfect data sync
with the aprox. 250 owned stores.

Foreseeing sales levels accurately and not having excess inventory is absolutely crucial in the
computer industry, especially when new products quickly cannibalize the old.
Not having too many SKUs helps correct forecasting (in 2013, Apple had 26.000 SKUs, way less than
other technology manufacturers). Another facilitating factor is having a longer product life cycle and
Apple has more than 12 months for its key products.

And forecasting demand doesn’t come only in the form of what products your customers will buy,
but also on what kind of technologies will be in demand for the next coming years, allowing the
company to reduce costs with suppliers by placing orders for longer term. This also leads to creating
enough demand for suppliers, so that other competitors cannot order the components and hence
limiting imitations.

Although Apple was always pushing to have fast inventory turnover, it made a change in 2011 of not
rushing selling. The change was implemented with the launch of the iPad 2 and consisted of selling
the much-awaited products the second day after they were delivered to shops, despite the customer
queues in front. This measure was taken to make sure inventory tracking runs smooth and there are
no errors to lead to inventory inaccuracies.

Tedarikte Havacılık

Apple, aslında 1997 Steve Jobs’ un Apple’ a dönmesiyle tedarik zinciri yönetiminde inovasyona
başladı. Zaten o yıllarda, bütün bilgisayar üreticileri tedariklerini  hava yoluna göre çok ucuz olması
sebebiyle deniz yoluyla sağlıyorlardı. Bir kargo firmasında uçuş düzeniyle ilgilenen Johny Martin, yeni
nesil iMac lerin noel hediyesi dönemine yetişmesi için Apple’ ın Steve Jobs yönetiminde hava kargosu
için 50 milyon dolar ödediğini söylüyor. Compaq gibi lojistik konusunda özürlü olarak adlandırılan
firmalar ancak bu olaydan sonra, hava taşımacılığı konusunda fiyat teklifi istediğini belirtiyor.

Uzun Vadeli Strateji

Mantıken, boşa gözüken harcamalar, uzun vadede getirdiği yararların Apple tedarik zincirinde bu
kurumsallaşmış karar mekanizması, Dizayn konusundan başlıyor aslında. Bunuda ilk baştaki anlatımda
Ive den örnekleyebiliriz. Ive ve takımı, yeni teknolojiler için, aylarca tedarikçilere ve üreticilere yakın
olup o ince ve ufak detayları yakalama adına firma dışında otellerde vs yaşayıp çalışmalarını
sürdürüyorlar. Mesela, MacBook ların unibody shell dedikleri, aliminyum parçasından yapılan o
dizayn için Apple tasarımcıları, tedarikçilerle yeni eküpmanı oluşturmak için çok yoğun çalışmışlar.
Birkaç ürüne odaklanmak, küçük özelleştirmeler firmaya çok büyük avantajlar sağlıyor. Gartner
tedarik zinciri analisti Matthew Davis bu sistem için aynen şunları söylüyor:

“Apple, çok tümleşik bir stratejiye sahip ve bu stratejiyi işletmenin her alanına uyguluyorlar”

Aynı zamanda kendisi Apple’ ı son 4-5 yılın Dünya’ nın en iyi tedarik zincirine sahip olduğunu
söylüyor.

Tedarikde Rakipler

Üretime gitme zamanında ise Apple’ ın çok büyük bir silahı var. Oda 80 Milyar $ dan  fazla nakit ve
yatırımlar olarak söylenebilir. 2011′ den 2012 geçişte tedarik zinciri üzerinde sermaye harcamalarını 2
katına planlanması bunun bir örneğidir mesela. Bu taktik Apple için uygunluk ve düşük fiyatlar
sağlıyor bazen de başka firmalar için limitler oluşmasını sağlıyor. Haziran 2010 yılında iPhone 4′ ün
piyasaya sürülüşü öncesi, HTC gibi rakipler, ihtiyaçları kadar ekran satınalamadılar. Çünkü, ekran
üreticileri, Apple siparişleri sebebiyle tamamen dolulardı.

Supply Demand Management and NPI Readiness

Join the team that forecasts demand and drives supply. These are the people who help achieve
financial and sales goals while ensuring great customer experiences. They develop demand forecasts
that support numerous key activities at Apple, ranging from corporate P&L forecasting and planning
to daily factory builds and customer-level allocation. The supply plans drive manufacturing capacity
and materials purchase requirements for this week through next year. In preparing for a new product
introduction (NPI), this team also ensures that customers receive our products when promised
through all channels of sales.

Strong Supplier Relationships

By focusing on maintaining strong relationships with its supply chain partners, Apple can provide
great flexibility in response to demand surges. This, paired with Apple’s large production capacity,
allows them to provide products when and where customers want them.

The company maintains extremely strict standards for its numerous suppliers, which are named each
year in Apple’s Supplier List. The top 200 suppliers in this list make up 98% of the business’s
procurement. Demanding a high-quality service from these partners helps ensure the final products
are reliable and long-lasting.

Because Apple is consistently innovating, its suppliers enjoy a certain degree of stability – even if one
Apple product doesn’t succeed or suffers from setbacks, suppliers can rest assured that another
request, for another product, will likely be coming down the pipeline.

To ensure these suppliers have the skills and experience they need to continue succeeding in an
ever-shifting market, Apple offers educational and upskilling opportunities. More than 3.6 million
supplier employees have participated since 2008.

Although the efficacy and efficiency of outsourcing have come into sharper focus in recent years,
Apple provides proof that it can be a sound strategy — the company outsources much of its
manufacturing to China, which has provided them with the revenue needed to launch new and
updated products very quickly over the years.

Sustainability Focus

Apple has introduced various initiatives throughout the years to improve sustainability across the
supply chain.

Three years ago, for example, Apple announced its goal of creating a closed-loop supply chain,
meaning that eventually every product would be made solely from recyclable or renewable products.

Today, every one of its global facilities is powered by renewable energy, while newer products, such
as the MacBook Air, are made from 100% recycled aluminum.

The company has also invested heavily in a mix of clean energy technology, such as solar and wind.
Its online Clean Energy Portal allows suppliers across the globe to identify renewable sources. In
2018, Apple and its suppliers’ clean energy generation equaled approximately the amount of
electricity needed to power more than 600,000 homes in the United States.

Not only do these efforts benefit the environment, but they also provide customers with peace of
mind that they’re supporting ethical businesses — an increasingly important factor for today’s
consumers.

Apple’s Supply Chain Challenges

What does it feel like to be “Apple Inc”? One journalist indicated that the life of Apple Inc is fairly
easy by utilizing its negotiation power. Believe me, Apple Supply Chain has very high risks. There are
many challenges to overcome, for example;

 The global economy could affect the Company.

 Some re-sellers may also distribute products from competing manufacturers.

 Inventories can become obsolete or exceed anticipated demand.

 Some components are currently obtained from single or limited sources.

 Some custom components are not common to the rest of the industries.

 Ability to obtain components in sufficient quantities is important.

 Supply chain disruption such as natural and man-made disasters can be serious.

 The company depends on logistical services provided by outsourcing partners.

 The company also relies on its partners to adhere to the supplier code of conduct.

The above information is also from the annual report. As you can see, most of the risks are on the
supply side.

Number of Key Suppliers

Supply chain management is about the relationship between trading partners. Working closely with
strategic suppliers will bring competitive advantage to the firm.

Number of Key Vendors Amazon vs Apple

Apple recently said that they have about 156 key vendors across the globe. This amount of suppliers
is quite manageable. According to this information, Amazon has about 3 million suppliers in total.
Top 5% of this is 300,000 suppliers, way more than that of Apple Inc.

Number of Warehouse Facilities

In the United States, transportation cost is a big portion of the total logistics cost. Then, good
management of related function is essential.
Number of Warehouse Facilities Amazon vs Apple

Apple inc has a central warehouse in California but Amazon has approximately 28 warehouses from
coast to coast. What Apple has to do is to synchronize data between the central warehouse and its
own 246 stores + customers. With the appropriate level of automation, this kind of operations can be
done efficiently.

For Amazon, the thing is more complicated than that. Amazon is known to employ many Ph.D.
graduates in operations research/industrial engineering. The reason is that Amazon distribution
environment must be mathematically solved through optimization method.

Typically, they have to determine how many facilities they should have, where serves which market,
items/quantity stored in each location, how to manage transportation between warehouse-to-
warehouse and warehouse to customers in order to minimize cost and increase service level.

Number of Items (Stock Keeping Unit)

Stock Keeping Unit aka SKU is another indication of supply chain complexity. One model of phone but
different software inside is considered different item/SKU.

Number of SKUs Amazon vs Apple

According to this, Amazon has about 170 million items on its catalog. About 135 million items are
physical products. For Apple, they have about 26,000 items (rough estimate, subject to change). The
point is that if you have to make a demand forecast, which one will more difficult for you, 135 million
items or 26k items.

Product Life Cycle

Put it simple way, the product life cycle is how long you can sell products (the longer is the better).
Product Life Cycle Amazon vs Apple

From a rough estimate, Amazon has some seasonal products such as summer wear. They can only
sell it for 3 months max. The life of Apple’s key products is way more than 12 months. It goes without
saying that demand forecast of seasonal, short life cycle products is very very difficult to estimate.

As you may notice, based on example characteristics, Amazon’s Supply Chain is far more complicated
than that of Apple Inc.

9 Major Companies Tied to the Apple Supply Chain

Apple (AAPL) is one of the most valuable companies in the U.S. with a market cap of over $1.3 trillion
as of April 2020.1 A big part of its success has come from its ability to be a true innovator in personal
technology. Millions of customers are willing to pay top dollar for the quality, design, and features of
Apple devices, making products like the iPhone, iPad, Mac, iPod, and Apple Watch top sellers. 

To achieve this greatness though, Apple doesn't depend on its own manufacturing alone. It has over
200 suppliers that it relies on for procuring components for assembly.

KEY TAKEAWAYS

 Apple releases a supplier list annually.

 Apple has established high standards for managing supplier relationships.

 Apple’s 2019 suppliers list reports on 200 suppliers and shows over 800 production facilities.

Apple puts a great deal of effort into the monitoring of its suppliers. Relationships that help to make
the tech giant a manager of one of the most efficient supply-chain management systems on the
market right now. Each year it releases a progress report outlining its supplier relationship efforts as
well as a list of its top 200 suppliers, which account for 98% of its procurement. Below discusses nine
of the most prominent.

Taiwan

Taiwan is Apple’s number one supplier region, but this is somewhat of a smokescreen.

1 Hon Hai Precision Industry: Foxconn (HNHPF)

Hon Hai Foxconn is one of the major reasons that Taiwan is on the map for Apple. Foxconn is one of
Apple’s oldest and largest suppliers. The company has its headquarters in Tucheng, New Taipei City.

However, while being based in Taiwan, Foxconn is often thought of as Apple’s largest China supplier
because of its vast number of Chinese supplier locations. In 2018, Foxconn had 35 supplier locations
servicing Apple from Taiwan, China, India, Brazil, Vietnam, and the United States, and 29 of its 35
locations are in China. Foxconn has also helped Apple to branch out to India with one location there. 2

2 Wistron

Wistron is another Taiwan-based company that’s also helping Apple expand into India. Wistron has
five supplier locations with three in China and two in India. A focus for Wistron in India has been
printed circuit boards for iPhones.

3 Pegatron

Pegatron is another company rounding out the Taiwan lineup. It has its headquarters in Taiwan with
only one Taiwan supplier location in Taoyuan. Pegatron’s other 17 locations include 12 sites in China
along with sites in the Czech Republic, Singapore, Korea, Japan, and the United States. Pegatron is
similar to Foxconn in that it provides iPhone assembly.

China

In general, China is a very important global region for Apple. The 2019 suppliers list shows Chinese
and Hong Kong-based suppliers growing to account for a larger share than America and Japan,
second only to the region of Taiwan. By physical location, China accounts for 380 of the total 809
production facilities.2 However, Apple has shared some concern over its dependence on China given
the 2020 Coronavirus outbreak as well as the Trump Administration’s new tariff rules.

4 Goertek

Goertek and Luxshare are two Chinese companies that have been in the Apple supplier spotlight.
Both companies agreed to set up productions in Vietnam to improve the manufacturing cost
efficiency of the Airpod. Goertek has three supplier locations, two in China and one in Vietnam. The
company has its headquarters in Weifang, China.

5 Luxshare

Luxshare is also in partnership with Apple for the production of the Airpods. It has eight supplier
locations with seven in China and one in Vietnam.

United States

Despite its reliance on an international supply chain, Apple is also still very dependent on many
companies in the U.S., including 3M (MMM), Broadcom (AVGO), Qualcomm (QCOM), Intel (INTC),
Jabil (JBL), On (ON), Micron (MU), and Texas Instruments (TXN). Other U.S. companies also
include Finisar (FNSR), Qorvo (QRVO), Skyworks (SWKS), and Corning (GLW).

6 Qualcomm (QCOMM)

Qualcomm and Intel have made U.S. headlines over fierce legal actions. NASDAQ-listed Qualcomm is
a world leader in semiconductor, mobile, and telecom products and services. It is known to supply
multiple electronic components to Apple, including envelope power trackers, baseband processors,
power management modules, and GSM/CDMA receivers and transceivers. These are various
instruments used in device power management systems and in mobile signaling. Qualcomm has also
come through for Apple devices, offering necessary modem technology.

Modem technology is however at the core of the Apple, Intel, and Qualcomm 504 disputes. Apple
announced it was buying Intel’s smartphone modem business. This led to a lawsuit by Qualcomm
which resulted in maintenance of the modem manufacturing relationship for Qualcomm even after
the Intel acquisition.

7 Intel (INTC)

In July 2019, Apple announced its agreement with Intel to acquire the majority of its smartphone
modem business. With the acquisition, Apple broadened its patent ownership and setup a strong
plan for 5G development. Moreover, after the acquisition, the Mac now uses Intel processors. On the
2019 supplier list, Intel reports nine supplier locations, with three locations in the U.S. and others in
China, Israel, Vietnam, Ireland, and Malaysia.

Other Countries

8 Murata Manufacturing Ltd. (MRAAY)

Murata is based in Kyoto, Japan. It supplies to Apple from 26 manufacturing facilities spread across
Malaysia, Japan, Thailand, Vietnam, China, and Singapore. It has 16 supplier sites in Japan.

Apple and Samsung are Murata’s top two clients, procuring ceramic capacitors from the company.
These electronic parts are used to control the flow of electricity in electronic devices.

9 Samsung

Samsung has its headquarters in South Korea. It supplies multiple components, including flash
memory used for storing data content, the mobile DRAM used for multi-tasking various applications
in devices, and the application processors responsible for controlling and keeping devices running.

Despite being a competitor to Apple in the mobile phone market, Samsung uses its supplier status to
reduce its own component manufacturing costs via bulk production.

Supplier Relationships

Apple is known to maintain one of the best-managed supply-chains in the world. Using its stature
and global reach, the tech giant is able to demand high-quality products and impose stricter terms on
its suppliers. When one of Apple's Chinese suppliers of "tactic engines" for the iPhone 7 proved
unreliable, for example, the company quickly procured them from Japanese firm Nidec Corp.

Apple has hundreds of such suppliers willing to abide by the terms Apple sets forth. What's more, by
outsourcing its supply-chain and assembly operations, Apple can do what it does best—concentrate
on designing great products that offer rich functionality and are easy-to-use.

On the flip side, being associated with a brand like Apple can be a remarkable boon for a supplier
firm. Apart from the small novice firms, who may derive much of their business from Apple, even
larger companies like Samsung use the relationship to their advantage. As noted, Samsung continues
to compete with Apple in the mobile phone market; however, large orders from Apple allow
Samsung to increase bulk production, which reduces manufacturing costs for its own mobile phone
components.
Another advantage for suppliers is that Apple has a reputation for innovation. Regardless of how
specific products have performed and despite missteps that have occurred, people expect Apple to
come out with something new on a regular basis and eagerly anticipate these products. To a certain
extent, this shields Apple suppliers, who will continue to see new demands for their goods and
services.

It should be noted, however, that failing to please Apple can spell doomsday for a small or medium-
sized supplier that has built its business around Apple product sales. If suppliers do not maintain
high-quality goods at the right price, Apple has the positioning to replace them with another
competitor.
https://www.dynamicinventory.net/apple-best-supply-chain-management-company/

https://www.tradegecko.com/blog/supply-chain-management/apple-the-best-supply-chain-in-the-
world

http://bahadirkaya.com.tr/apple-ve-tedarik-zinciri-basarisi/

https://www.apple.com/careers/us/operations-and-supply-chain.html

https://www.thomasnet.com/insights/apple-supply-chain/

https://www.supplychain247.com/article/is_apples_supply_chain_really_the_no._1_a_case_study

https://www.investopedia.com/articles/investing/090315/10-major-companies-tied-apple-supply-
chain.asp
Gerekli mi emin olamadığım bazı şeyler

https://www.thomasnet.com/insights/apple-supply-chain/

https://www.bloomberg.com/news/articles/2021-10-13/apple-finally-falls-victim-to-never-ending-
supply-chain-crisis

https://asia.nikkei.com/Spotlight/The-Big-Story/Apple-s-nightmare-before-Christmas-Supply-chain-
crisis-delays-gift-deliveries

https://www.apple.com/supplier-responsibility/pdf/Apple-Supplier-List.pdf