QUESTION THREE $[20]$

Case Study: Apple$$s Supply Chain Vulnerability

Apple has an extensive network of third party suppliers in its supply chain. According to

recent research, Apple has $785$ suppliers in $31$ countries worldwide, $349$ of which are based in

China. A security researcher has detailed how he was able to hack into systems belonging to

Apple, Microsoft, PayPal, and other major tech companies in a novel software supply chain

attack. Bug hunter Alex Birsan detailed in a blog post published yesterday $($February $9)$ how

he gained access to his targets$$ internal systems by exploiting a vulnerability dubbed

$$dependency confusion$.$

Dependency confusion is the name given to a vulnerability that can allow an attacker to

execute malware within a company$$s networks by overriding privately$-$used dependency

packages with malicious, public packages of the same name.

Latest News

Apple executives warned that the group could sustain a hit of up to $$8$bn in the current

quarter from headwinds including supply chain shortages and factory shutdowns in China,

underscoring how the challenges posed by the pandemic are far from over for the world$$s

most valuable company. $$Supply constraints caused by Covid$-$related disruptions and

industry$-$wide silicon shortages are impacting our ability to meet customer demand for our

products,$$ Apple$$s finance chief Luca Maestri told analysts on Thursday.

$$We expect these constraints to be in the range of $$4$bn to $$8$bn$,$ which is substantially larger

than what we experienced during the March quarter,$$ he said, adding that $$Covid$-$related

disruptions are also having some impact on customer demand in China$.$ Apple$$s stock, which

rose $4\mathrm{.}5$ per cent in Thursday$$s trading session, initially gained $2$ per cent in after$-$hours trading

following the earnings report, which showed the iPhone maker$$s revenues had risen $9$ per cent

from a year ago to $$97\mathrm{.}3$bn in the first three months of $2022.$

That was well above the $$94\mathrm{.}1$bn expected by analysts. But shares subsequently reversed

course to fall more than $4$ per cent after the call during which executives detailed the

challenges ahead for the company. $$Covid is difficult to predict,$$ said Apple$$s chief executive

Tim Cook. $$And I think we$$re doing a reasonable job currently navigating what is a challenging

environment.$$ The comments highlighted that the tech group, known for the sophistication of

its supply chain, was braced for a period of prolonged uncertainty this year. Pre$-$pandemic,

Apple routinely offered quarterly revenue guidance, but it stopped doing so as coronavirus

spread.

The projected $$4$bn to $$8$bn hit for the June quarter compared with a more than $$6$bn dent in

its revenue in the December quarter, and was the starkest warning Apple has offered since

February $2020,$ when it signalled $$a slower return to normal conditions than we had

anticipated$.$ The pessimistic commentary on supply chain woes came after Apple$$s March

quarter results showed a $6$ per cent jump in net profits to $$25$bn$,$ making it Apple$$s third most

profitable quarter on record despite not being a holiday period.

Maestri cited silicon constraints in the supply chain. Reports have indicated that Apple has

prioritised the chips it has for the iPhone rather than the iPad. Regionally, results were mixed.

Apple$$s board also authorised another $$90$bn of share buybacks and raised its dividend $5$ per

cent, the $10$th straight annual increase, according to Maestri. Analysts had called the report

more important than usual given broad concerns about the health of consumer spending amid

higher inflation. Zino applauded Apple$$s $$aggressive$$ moves to please Wall Street with

buybacks and dividends and characterised its overall results as $$extremely$$ good.

Question

Integration of the supply chain by managers result in substantial efficiencies. The flow of

materials from suppliers, to production, to warehousing, to distribution, to the end$-$user takes

place among separate and independent organisations. This may lead to sub$-$optimal

efficiencies within the entire chain. Evaluate the issues that Apple would face in managing

their integrated supply chain.

Answer requires a page count of six $(6)$ pages maximum.