Case 1. Read the case and answer the questions at the end. Each question marks are given, total 30 marks Apple supply Chain Supply Chain Planning at Apple is the classic example of the New Product Development Process. It's the integration of R&D, Marketing and various functions under supply chain management. Apple accelerates the new product introduction by acquiring licensing and 3rd party businesses. The whole process looks very similar to that of other industries. Interesting point is that Apple has to make pre-payments to some suppliers to secure strategic raw materials. Apple purchases raw materials from various sources then get them shipped to assembling plant in China. From there, the assembler will ship products directly to consumers (via UPS/FedEx) for those who buy from Apple's Online Store. For other distribution channels such as retail stores, direct sales and other distributors, Apple will keep products at Elk Grove, California (where central warehouse and call center are located) and supply products from there. At the end of a product's life, the customer can send products back to nearest Apple Stores or dedicated recycling facilities. Inventory Turnover is the traditional financial measure to determine how efficient company uses its financial resources to create sales, the higher number is the better. Supply chain professionals also use this metric in the inventory management function. Generally accepted calculation is (Cost of Goods Sold / Average Inventory). Inventory turnover of Amazon and Apple is 10 and 59 respectively. From the face value, Apple seems to be more efficient. Supply chain management is about the relationship between trading partners. Working closely with strategic suppliers will bring competitive advantage to the firm. 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. In the United States, transportation cost is a big portion of the total logistics cost. Then, good management of related function is essential. Apple 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, 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. Stock Keeping Unit is another indication of supply chain complexity. One model of phone but different software inside is considered different item/SKU. 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. Put it simple way, the product life cycle is how long you can sell products (the longer is the better). 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 difficult to estimate. As you may notice, based on example characteristics, Amazon's Supply Chain is far more complicated than that of Apple. 1. Compare the complexity of supply chain of Apple versus Amazon. 2. Inventory turnover of Amazon and Apple is 10 and 59 respectively. From the face value, Apple seems to be more efficient. Explain the reasons for this. 3. From this case study, discuss how Apple can gain more success in its supply chain operations