In 2020, the iPhone global supply chain began with Apple's product development team in the United States and involved dozens of suppliers, assembly operations in China, multiple distribution channels, and thousands of retail outlets. Yet Apple maintained the ability to coordinate the Phone supply chain on a realtime basis. New Product Development Apple established a rhythm of releasing a new iPhone each year, usually in the fall The one-year product lifecycle of the iPhone required close coordination among key internal and external stakeholders, including hardware and software engineering, operations, and key suppliers. For example, the hardware engineering team, led by senior vice-president Dan Riccio, worked closely with operations to ensure that new products could be produced in large volumes and meet target cost obiectives. Addle product engineers worked with suppliers to tweak designs and translate prototypes into devices that could be mass produced. The product development process was centralized to accommodate coordination and accountability among departments. The responsibility for creative design and engineering resided in California, where Apple engineers developed new technologies and acquired licences for intellectual property rights that would be incorporated in the next generation of iPhones. Apple conducted product testing and market research concurrently with product design to refine changes to the iPhone. Potential product quality problems and software glitches were identitied, and corrective action plans were created to mitigate risks. Unlike many consumer electronic devices, such as Dell PCs, consumers were not able to configure their individual iPhones. For example, the iPhone Il came in three models (basic. Pro, and Pro Max). and consumers could select from three ditterent memory sizes and, depending on the model, four to six different colours.37 This strategy allowed the company to limit variability and streamline its supply chain. Procurement Apple's global supply chain included 200 suppliers that accounted for approximately 98 per cent of expenditures for materials, manufacturing, and product assembly across all products." Located in 43 countries and six continents, these suppliers had more than 800 total production locations. In a call with investors, Cook provided the following description of Apple's supply chain: The way that I view this is the vast majority of our products are kind of made everywhere. There is a significant level of content in the United States, and a lot from Japan to Korea to China, and the European Union also contributes a fair amount. And so that's the nature of a global supply chain. I think, largely that will carry the day in the future as well. 4 The supply organization at Apple was led by Tony Blevins, vice-president of procurement, who had a reputation as a hardnosed negotiator. Blevins was relentlessly focused on the twin priorities of minimizing costs and protecting sales by enforcing delivery deadlines. To prevent staft members from developing personal relationships with suppliers, he had a policy of rotating them every few ears so as not to diminish their focus on reducing costs. One former Apple employee stated, "His job is to Viking a town and gel every resource out of it. It's like killing sheep versus shearing them. An analyst estimated that the bill of materials for the iPhone 11 Pro Max was approximately $490.50, with a suggested retail price of $1,099 (see Exhibits 8 and 9). With iPhone volumes of approximately 200 million units per year (see Exhibit 5), Apple wielded enormous clout with suppliers. Although each iPhone had approximately 1,000 individual parts, 4 there were about a dozen key components that were typically provided by single-sourced suppliers When Apple began outsourcing to contract manufacturers in China, the country was seen as a low-cost production region. By 2020, China had evolved into one of the world's largest consumer markets for Apple products and services. For iPhones destined for the Chinese market, the customs officials were able to classify the goods as exports, after which they were reclassified as imports, allowing the Chinese government to collect a value-added tax. As with shipments to North America, this process was completed electronically, without the iPhones leaving the customs facility in the bonded zone. iPhones bound for the domestic market were then loaded onto a truck and taken to Apple's national distribution centre outside of Shanghai, a journey of about 18 hours. Because a single shipment could hold approximately 35,000 iPhones, the trucks were equipped with security equipment and sometimes accompanied by armed guards.?? Apple's main US distribution facility was located in Elk Grove, California, employing approximately 5,000 people. In addition to acting as a distribution centre, the Elk Grove campus also housed operational functions, including customer support, Apple Care, and product repair and refurbishment.&3 The company operated other distribution centres located around the world, including the Czech Republic, Japan, Singapore, and the United Kingdom. The company used several direct and indirect channels to distribute the iPhone. In 2019, 31 per cent of Apple sales were made through direct channels, such as its retail and online stores and its direct sales force. The balance was via various indirect channels that included third-party cellular network carriers, wholesalers, retailers, and resellers.' Apple was the fourth-largest online retailer in the United States in 2019, with an estimated 3.8 per cent of total US e-commerce sales, representing approximately $60 billion By comparison, Walmart Inc. (Walmart) had an estimated 4.8 per cent share of the US online market.*5 As iPhones became increasingly expensive, it became more difficult to predict demand for new products and to allocate volumes across the distribution network. Apple allowed customers to pre-order phones prior to a new iPhone launch using the Apple Store app and the Apple website. These data were used by the company to forecast demand across product configurations and geographic regions.86 Logistics for a new iPhone launch were carefully orchestrated. In the days leading up to the launch date, iPhones were sent to UPS and FedEx sorting facilities, which also handled last mile delivery. Because volumes were large, the sorting facilities would dedicate capacity for iPhones to ensure on-time delivery to Apple Stores and customers' homes. Meanwhile, the iPhone launch team, led by the senior vice-president of retail, monitored information in real time, including pre-orders, globally.87 Apple also operated a reverse logistics system that encompassed repairs and warranty claims, trade-ins, and product recycling. Customers who wanted to trade in their device and receive a credit for the purchase of a new Apple device could either go to an Apple Store or use an online process. Customers who accepted the trade-in estimate provided at the store received an instant credit toward a purchase or an Apple gift card that could be used anytime. The online process gave customers an estimated trade-in value after they provided information about the condition of the device. Customers were given the option of sending their iPhone using a prepaid trade-in kit and shipping label, or they could take it to an Apple Store or authorized service provider. Once Apple received the device and verified its condition, the customer received an email with an Apple gift card. Instructions were provided about how to back up the device and erase all customer data. Older iPhones with no trade-in value could still be sent to Apple for recycling using the same process. $8 Customers requiring repairs or warranty claims could make an appointment at an Apple Store or an Apple authorized service provider, or they could mail their phone to an Apple repair centre. Genius Bar appointments at an Apple Store, for repairs, could be scheduled using the Apple Support App. For customers who chose to mail in their iPhone, Apple provided a prepaid shipping container and label. Retail Network Apple had 510 stores in 25 countries worldwide, including 271 stores in the United States.? Apple Stores were located at high-traffic locations in high-end malls and shopping districts. They were designed to provide a high-quality shopping experience and had the appearance of a luxury showroom rather than that of a consumer electronics shop. Visitors could experiment with Apple products; enrol in classes to receive training on how to get the most out of their devices; and shop for devices, accessories, and peripherals. Knowledgeable salespeople who were not paid a sales commission provided advice, service, and information. Genius Bar technical support stations located inside Apple Stores provided concierge-style support for customers requiring repairs to their devices by "Apple geniuses." As opposed to using checkout counters at store exits, salespeople were armed with mobile devices to handle payments. Data from Apple retail stores about product sales and repairs provided the company with information to tweak production forecasts and identify emerging quality problems." Apple Stores generated an average of approximately $6,000 per square foot, making Apple the top performer for this metric, at more than double that of other high-end retailers, such as Lululemon Athletica and Tiffany & Co.?? High consumer traffic in its retail stores provided Apple with bargaining power to negotiate favourable lease rates with mall owners. 3 Apple also had an extensive network of authorized resellers and service providers to give customers broad access to sales and service support. Authorized resellers, such as Walmart and Target Corporation, sold Apple products. Meanwhile, authorized service providers such as Best Buy Co., Inc. could provide both sales and repair services. Apple provided technicians at their service providers with the same training and certifications as those given to Apple Store employees, and gave them access to Apple resources, such replacement parts, product schematics, and documents to assist with repairs. Apple also invested in programs to support authorized resellers and service providers, including training; staffing selected resellers' stores with Apple employees and contractors; and investing in product placement displays, merchandising materials, and other resources." In November 2018, Apple announced that it had reached an agreement with Amazon.com, Inc. (Amazon) to become an authorized reseller. As part of the agreement, Amazon said it would remove non-authorized third-party sellers from its platform." Sustainability Apple's supplier code of conduct had clear policies about social and environmental responsibilities and ethical conduct. In 2018, the company conducted 1,049 supplier assessments in 45 countries to monitor supplier compliance." However, working conditions at subcontractor factories in China provided constant challenges for Apple. Over the years, industry observers had reported various problems at Foxconn plants, including worker suicides and excessive overtime. , In September 2019, Apple and Foxconn admitted to violations of Chinese labour law at the Zhengzhou iPhone plant by exceeding the limit for the number of temporary workers. Apple said that it was working with the supplier, and taking corrective action to address the problem." New Apple products were using designs that incorporated the greater use of recycled material as part of the company's commitment to conserve natural resources. Starting in 2019, Apple was using aluminium recovered from its Apple Trade In Program for the MacBook Air enclosures, and the body of the iPhone 11 was made from 100-per-cent recycled aluminium. In addition, the company was using 100-per-cent recycled tin in the main logic boards of 11 different products. Apple used its recycling robot, Daisy, to disassemble used iPhones to recover material collected through the Apple Trade In Program. The Daisy robots were able to handle 15 different models at the rate of 200 per hour. Some important recovered materials were integrated into Apple's upstream supply chain. For example, recovered cobalt was sent to suppliers for the production of new Apple batteries creating a closed-loop supply chain.' During a call with investors in October 2019, Cook stated the following: We continue to invent and improve on cutting-edge renewable materials, including the 100 per cent recycled aluminium alloy found in many of our products, and we've added rare earth elements to our list of recycled materials with the introduction of iPhone 11. We're disassembling, recycling, or refurbishing millions of devices every year with the help of Daisy, our recycling robot, and we're pushing the entire global supply chain toward recycled or renewable materials.102 CHALLENGES AHEAD In February 2020, Apple was the most valuable company on Earth. For the first quarter of fiscal year 2020, the company reported iPhone revenues of $56 billion, up from $33.6 billion in the fourth quarter of 2019, driven by strong sales of the new iPhone 11.103 However, despite spending billions each year on research and development, there were no signs that Apple would be able to repeat the success of the iPhone anytime soon. While the company had been turning its focus to its other businesses, such as services and wearables, amid the stagnation of the smartphone market, the iPhone remained critical to Apple's long-term success. Under Cook's leadership, Apple built an organization and supply chain capable of managing the explosive growth of the iPhone and created one of the world's biggest brands in the process. Relying on a core group of technology suppliers and contract manufacturers, Apple's supply chain was ranked by Gartner, Inc. in its prestigious "masters" category. I04 However, some senior supply chain executives at the company remained concerned. First, centralizing iPhone production in one country created risks, including fallout from recent trade tensions between China and the United States and exposure to rising labour costs.105 Second, Apple relied on third parties for some of the important technologies used in the iPhone, even as it continued to press forward to develop these capabilities internally, seeking to reduce its dependence on companies such as Oualcomm and to reduce costs. Although the company had explored diversifying production into other regions, it was difficult to duplicate the capabilities and advantages offered by China. The country provided a business environment with a stable network of low-cost suppliers, an efficient infrastructure, and supportive government policies. China's large labour force was skilled in precision manufacturing, and the country had millions of well-trained engineers. Moving out of China would also jeopardize Apple's position in the world's largest smartphone market. The expansion of the wearables and services business segments represented an additional set of challenges, requiring the creation of new supply chains and suppliers. Content needed to be developed for streaming services and Apple News+, and licencing agreements needed to be negotiated. Supply chains also needed to be created for wearable products, which required different technologies and assembly operations than those of the iPhone. While Apple's business model would certainly continue to evolve, a key challenge facing Tim Cook was determining how the company's supply chain should change to support its strategic objectives. Question. As the case study notes Apple has "more than 800 production locations" across 43 countries.What challenges will Apple face as these countries continue to globalize? Your answer should include references to the impact of globalization on low-cost countries and industrialized countries

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Challenges Apple Will Face Due to Globalization of Supply Chains Globalization has significantly altered the landscape for multinational companies like Apple which relies on an extensive and intricate ... View the full answer