E1829C: Inventory Management Case Study On Apple Inc Regardless of the nature of a company’s business or the sorts of products and services it sells: Inventory Management, Singapore

Title: Inventory Management Case Study On Apple Inc

CHAPTER 1 Introduction

 Regardless of the nature of a company’s business or the sorts of products and services it sells, it need inventory to run its operations. Raw Material, Work in Process, and Finished Goods are the three categories of inventory that a business has on hand. Companies classify inventory as a current asset because it has a defined economic value and is listed in the accounting books with that value. Organizations must maintain optimal inventories so that they have enough inventory on hand when needed, but not so much that it becomes obsolete and damaged.

1.1.2 Characteristics of Inventory

Apple is a technology company, and its products have a short shelf life. Because of the danger of product obsolescence, the company can only maintain its inventory for a few years. Furthermore, the company’s inventory is extremely vast due to its massive magnitude. To accomplish so, the company must keep up with the latest inventory management software and apply it as soon as possible. In order to handle such enormous inventory, both companies utilize excellent management databases and techniques.

CHAPTER 2 Layout and Their importance

To manage its vast inventory, Apple Inc. adopts a Just-in-Time inventory system. It views inventory as a necessary evil and has outsourced the manufacturing of its products to contract manufacturers. According to the JIT approach, Apple only keeps what it needs; the success of this strategy requires devoted suppliers. Almost bulk of the product hardware components are made in Asia by outsourcing partners, but certain Mac computers are made in Ireland and the United States (Apple Inc., 2017, p. 10).

National and regional retailers, cellular network providers, value-added resellers, and wholesalers are all used by the firm for completed product distribution. Through its online and retail locations, it also sells directly to educational, government, and business customers (Apple Inc., 2017, p. 13). Within a 150-day period, the firm must generally order production purchases to meet its anticipated product demand (Apple Inc., 2017, p. 14). In the manufacture of sub-assemblies, as well as the final assembly and testing of finished goods, the firm utilizes numerous outsourcing partners.

These partners are in charge of purchasing manufacturing process components and delivering completed products in accordance with Apple Inc.’s demand prediction.

The firm holds its stocks at third-party facilities, and the inventory level is reviewed on a regular basis based on demand, product lifecycle, current sales levels, product development plans, and component cost trends (Apple Inc., 2017, p. 38).

To manage its vast inventory, Apple Inc. employs a Just-in-Time inventory system.

It views inventory as a necessary evil and has outsourced the manufacturing of its products to contract manufacturers. According to the JIT approach, Apple only keeps what it needs; the success of this strategy requires devoted suppliers. Almost bulk of the product hardware components are made in Asia by outsourcing partners, but certain Mac computers are made in Ireland and the United States (Apple Inc., 2017, p. 10).

Apple Inc.’s performance is largely reliant on its suppliers and distributors, As a result, any interruption in this structure, as well as any delays from Apple Inc’s contract manufacturers, might have major consequences. Apple Inc. is obligated to buy its goods from contract manufacturers. Apple Inc’s structure exposes it to additional risk because it is reliant on contractors; yet, it also shifts the risk of inventory holding to its suppliers.

CHAPTER 3 Metrics to Evaluate Supply Chain Performance Inventory Turnover

It is one of the most important indicators for evaluating a company’s supply chain performance. It determines how many times a company’s inventory may be turned into sales or replenished. A greater inventory ratio indicates that the company’s supply chain is doing better. It demonstrates that the firm can sell its inventory more quickly. In 2017, Apple Inc. had a 40.37 inventory turnover, compared to 58.64 in 2016. (Morningstar.com, 2017).

3.1     Days in Inventory

 This measure indicates how long it takes for a company’s inventory to sell. It also demonstrates how much stock a firm may hold during a particular time period. The lower this measure is, the better the company’s supply chain is doing. Days in

inventory for Apple Inc. were 9.04 days in 2017 and 6.22 days in 2016. (Morningstar.com, 2017).

For successful inventory management, the metrics may be used to assess demand for the patterns and highlight any areas of performance. For demand forecasting, the firm should utilize an effective and appropriate forecasting approach. A sufficient amount of money should be invested in the research and development of the most appropriate and effective forecasting model for this purpose. These matrices should be used by businesses to improve their sales turnover.

 3.1.1   Improvement and Recommendation.

The company can adopt VMI (Vendor Managed Inventory) as a method to improve on its inventory management.  After delivering the customer data on sold products to the distributor, the following four procedures apply for Vendor Managed Inventory to be successful.

• Upstream and downstream must collaborate to develop.
• Pay special attention to quality predictions, as well as safety stockpiles, lead times, service levels, and ownership concerns.
• Work together to implement the VMI system.
• Review the VMI system on a regular basis and look for ways to enhance it.

The advantage of using VMI as it promotes ‘demand smoothing,’ which implies that output equals demand. A VMI provider has the ability to influence downstream decisions that might aid transportation decisions. VMI encourages long-term partnerships (due to the costs of switching suppliers).