Operations and Supply Chain Management
Apple Inc. is one of the most technologist firms in the world. It develops desktop computers, iPads, and iPhones, which has contributed to its success today. With its headquarters in California, United States, it has branches in over twenty-five countries. Currently, the company is experiencing a shortage of semiconductor chips for MacBooks and iPads, a supply chain issue. The lockdown, which resulted from the COVID 19 pandemic, led to the deficit because the company imported the chips from countries such as China. This paper identifies IOSCM tools that apply to the issue and their suitability to the problem. It also explores the application of the recognized tools to propose a solution and later analyses the expected results based on the proposed solutions.
Application of IOSCM Concept and Tools
As identified in the section above, Apple Inc. can apply Enterprise Resource Planning (ERP), an IOSCM tool. It is a system that incorporates autonomous business processes and functions across a company to increase its productivity. It allows interconnection of functional areas such as customer services, purchasing, production, accounting, and finance (Sternad et al., 2011; Garg & Khurana, 2017 cited by Aziz et al., 2018). Apple Inc. has developed its path by modeling, developing, and producing its hardware, applications, and operating systems and has acquired several other companies over the years. The company has different systems for its online store, App Store, iTunes, and other online store services. It also uses various systems for human resources and finance departments.
Aziz et al. (2018) explain that companies develop ERP systems to acquire the capacity to connect themselves with business partners and suppliers, thereby addressing problems associated with activities between them and their suppliers. Using an ERP system company for inventory management will help Apple Inc. have more spontaneous communications, providing early warnings for quantity adjustments and better lead times. It will also allow the company to monitor performance and provide sharable information to improve supply preparations. An integrated and well-implemented system will allow Apple Inc. to develop a robust supply chain because it will balance its sales demand, inventory control, and purchasing processes with its suppliers’ capacities and abilities. Additionally, the firm can maintain its stock at certain levels and automatically increase purchase orders when semiconductor computer chips’ stock reaches a certain level.
The other applicable tool to Apple Inc. is inventory or production management. Inventory management is crucial because it determines the supply chain’s state. It facilitates maintaining adequate inventory for efficient sales operation and production and prevents stock-out issues that a firm would face if it lacked proper inventory management (Kalipi, 2018). Inventory management will help Apple Inc. to safeguard itself against stock-out and create a balance between its demand for the semiconductor chips and their supply. It will also buffer the uncertainties of supply and demand of the chips. According to Kalipi (2018), inventory management protects a business against three forms of uncertainties, including uncertainty in supply, lead time, and future demand uncertainty. Due to lead time uncertainty, Apple Inc.’s customers will experience a delay in their orders. Additionally, inventory management will allow the company to address how much to keep as safety stock (Kalipi, 2018). In this case, since there is a shortage of semiconductor chips, Apple Inc. should consider storing more of the material to prevent interruptions in the production process (safety stock).
Safety stock is crucial to compensate for the supply chain’s weakness of unavailability of materials. According to Amirjabbari& Bhuiyan (2014), product availability measures the supply chain’s performance. They add that various issues may lead to product unavailabilities, such as inadequate product capacity, improper scheduling, demand, lead time variability, and low delivery performance. Therefore, while many companies perceive safety stock as a cost, Apple Inc. should consider it an active component that will maintain its market share via providing product availability in required quantities when clients make their orders. Moreover, customer sensitivity to stock-outs is different from one customer to another and may cause the company many customers, thus affecting its sales and, consequently, its profits.
Expected Results Analysis
ERP used to share information across the organization and with suppliers will improve Apple Inc.’s supply chain management’s (SCM) performance. According to Aziz et al. (2018), incorporating an ERP system in a company will enhance its SCM’s performance in many ways, including improving its relationships with supply chain partners, customers, and suppliers, collaboration with outsourcing suppliers, promotion of information flow across departments in the company. It also leads to a reduction in operation and inventory costs, customer responsiveness, and flexibility (Arnold, 2020). ERP also leads to improve visibility. In this case, visibility refers to tracking a product’s components as they move to the manufacturer from the supplier.
Safety stock will improve Apple Inc.’s SCM’s performance by creating a flow in the supply of semiconductor chips and preventing disruption in the manufacturing and consequent processes. The company will provide top customer service as inventory management will allow it to meet its demand without uncertainties and, as a result, forecast the need to have safety stock (Arnold, 2020). In some situations, shortage cost due to delayed production, which results in delays of deliveries to customers, is higher than having safety stock. Since Apple Inc. has a global market, it is evident that the shortage cost will be much greater than the cost of storing safety cost.
Due to lockdown due to the COVID 19 pandemic, Apple Inc. experienced a shortage of semiconductor chips, particularly for MacBook and IPad. Using IOSCM tools such as inventory management and Enterprise Resource Planning will improve its supply chain performance and acquire solutions for its present predicament. Sharing information across the company will allow it to see the need to collaborate and outsource suppliers since their current suppliers, Foxconn Limited, are also supplying the chips to other countries (Amirjabbari & Bhuiyan, 2014). Additionally, by having safety stocks, Apple Inc. will continue with manufacturing without any disruptions, thus overcoming issues of delays, leading to reduced sales and a decrease in the value of their stock.
Amirjabbari, B., & Bhuiyan, N. (2014). Determining supply chain safety stock level and location. Journal of Industrial Engineering and Management (JIEM), 7(1), 42-71.
Arnold, J. T. (2020). Introduction to materials management.
Aziz, M. A., Ragheb, M. A., Ragab, A. A., & El Mokadem, M. (2018). The impact of enterprise resource planning on supply chain management practices. The Business & Management Review, 9(4), 56-69.
Kalipi, E. (2018, March 5). Unit 3: Inventory Management. Namibia University of Science and Technology | NUST. Retrieved October 13, 2021, from https://www.nust.na/sites/default/files/documents/OLM612S%20-%20UNIT%203.pdf