Apple Operations Management

Apple Operations Management
Running Head: VICE PRESIDENT OF OPERATIONS, PART 1 0 Vice President of Operations, Part 1 Isaura Perry Strayer University BUS515: Operations Management Dr. Phyllis Parise January 22, 2017 Apple Inc’s Operations Strategic Operations Strategy refers to a plan specifying how an organization will designate its resources to support infrastructure and production. Per Tim Laseter, “An operations strategy should guide the structural decisions and the evolution of operational capabilities required to achieve the desired competitive position of the organization as a whole.” Operations Strategy addresses the question “How to go about fulfilling the company operational tasks? (Laseter, 2009). Apple, since its establishment in 1977, has had a business, marketing, and operations strategy based on highly innovative products, fast product life-cycles, spectacular promotions and introductions, high quality, and premium pricing. Apple has executed this strategy flawless over many years. However, Apple’s current operations strategy is not supporting the challenges that the company is presently facing. So, what went wrong with Apple’s Operations Strategy? Apple failed to consider the issues of their operations strategy. Such matters may have seemed technical, low-level and almost useless to the top management. Apple’s wrong decisions can have far-reaching effects; it can affect long-term competitiveness and, eventually, stock price. To maintain Apple’s competitive edge, its Vice President of Operations Isaura Perry will address these challenges and formulate a new operations strategy. Tasks that do not Align with Apple’s Operational Strategy and Tasks Weaknesses. Apple failed to align their strategic objectives with the company’s mission and vision. This is a common and easy error to make in strategic planning. Strategic objectives are fundamentals to the strategic plan; they are vital in any organization because they suggest business changes to be achieved to be able to move a company towards its goals. The setting of strategic objectives should be a collaboration between top management, line management and operational staff from engagement to implementation. Also, customers should be involved in the setting of strategic objectives (Mahadevan, 2009). Apple’s individual projects are not well coordinated with a program that can be aligned towards their operations strategy. Apple should take the decision of aligning all projects adequately with its strategy to prevent steering a project in the wrong direction. All projects should be communicated to employees per their abilities and roles. Apple’s employees have not received proper communication for efficient delivery of the company strategic objectives. It is not possible good employees’ performance if the individual projects are not linked to strategic goals (Tan & Matthews, 2009). Co-ordination of various initiatives is not getting the much need attention from managers. Top managers see these actions as technical, low-level and almost useless. Apple’s operations plan should be done in a way that management can provide with feedback on how they are working. Team members should have contact with the upstream or downstream operations. They could share tasks or assist one another in a significant way to be able to have balanced operations. The effectiveness of Apple’s operations strategy will depend on the way the company overcomes its weakness in establishing the strategic objectives, as well as executing the strategy (Mahadevan, 2009). Apple’s New Operations Strategy Operations strategy provides a plan for the design and management of the operations function in ways that support the company’s business strategy. Apple’s new operations strategy will focus on specific capabilities (cost, quality, time, and flexibility) of the operation that will give the company a competitive advantage in its market (Greasley, 2009). Cost Apple can charge premium prices and still enjoy high-profit margins. This means that within limits, the cost is not the most important consideration for Apple. However, Apple’s new operation strategy will allow the company to adjust to volume changes by shifting labor, space, and equipment to other products if volume declines (Gong, 2013). Quality Apple has a reputation for high quality. Customers purchase from Apple primarily for product features, not because of quality. However, Apple must maintain a reputation for good quality, not necessarily the best quality in the market, just acceptable quality. Higher quality will not generate more customers, but if the quality falls below market expectations could have disastrous effects on Apple’s new products. In other words, quality only becomes essential if it falls below acceptable levels. Time/services Apple should keep their time/services simple and straightforward. They should continue offering fast or on time delivery, and convenient locations. Flexibility More than anything else, Apple’s new operations strategy requires flexibility. This flexibility can come in several forms new product flexibility, volume flexibility or product mix flexibility. Apple must be able to reconfigure for new products very quickly because of the fast life cycles. It should be able to increase production from pilot to maximum demand quickly because of the initial promotions and short life-cycles. If Apple cannot produce it probably will have lost sales. Since sales forecasts are notoriously inaccurate and new product forecasts even more so, Apple must be prepared for a landslide, a fizzle and anything in between. Then, as the product life cycle nears its end, it should be able to decrease production and prepare for the next new product. Analysis of the Structure of the Competitive Priorities and Infrastructure of the Production Process Competitive priorities Apple mostly focuses on innovation in the digital market. Its vision is “to contribute to the world by making tools for the mind that advance mankind.” (Rowland, 2015). With this drive, Apple creates most of its product and services that are the industry benchmark. It focuses on the limited product portfolio and creates innovation in this space. Due to this narrow focus, it has lost most of its market share to companies like Microsoft, and Samsung. Nowadays, Apple is entering the music industry and thrives to revolutionize it. The AirPort Express system is one of Apple’s new methods of staying on the top of its innovation. Infrastructure Apple subcontracts its manufacturing to contract manufacturers like Foxconn, Pegatron Corporation, Quanta Computers. This is so that it can focus on design, testing and developing software. It also concentrates on what is manufacture meeting specification. Presently Apple has 18 manufacturing locations spread around the globe from Ireland, USA, and China to Brazil. Its total investment in production-related infrastructure is staggering $15 billion in 2016. It has about 478 retail stores located in 17 countries. It is the largest company by total asset valuation (Apple, n.d.). Distribution related, Apple operates some of its facilities around the clock and after manufacturing data is automatically feed into a system and sorted before being palletized. This system is utilized to divert the shipment. New Enablers Enablers of variety The granularity of range of product in Apple must be small. Apple has always been the pioneer in technology in gadgets market. It is the first computer making company to have a music industry. It developed the first unibody design that helped minimize resources while manufacturing more products. Thus, it must concentrate on breakthrough innovation and trim its variety so that it can focus on this product line and make more innovative products. Pros- Will create customer delight by surprising new technology and innovation. The products will do well in the market also the organization will be lean and more sustainable as the company will grow vertically. Cons- Competitors may copy its breakthrough innovation in products and may sell it to customers at a low price. Thus, Apple will lose market share to these companies like it has lost it to Samsung. Project selection criteria Apple should be very choosy when it comes to the selection of projects. It must consider the various aspects while making this decision such financial, strategic, urgency criteria, etcetera. Project selection must be customer oriented rather than internally oriented. Pros- the Company will take its decision based on returns in the market. Its products will be strategically developed. Cons- But this will result in a shift of Apple from innovation-based to a market-based company. Location strategy Selection of location such that the operations cost is minimized. Most Apple stores are in urban centers to maximize foot traffic and brand exposure. At present, the company has more than 450 stores in 16 countries (Rowland, 2015). Pros- The strategic location will make the company leaner and will help the organization to develop sustainability. Cons- will hinder Apple to reach a new market. References Apple (n.d.). Reports – Supplier Responsibility. Retrieved January 18, 2017, from http://www.apple.com/supplier-responsibility/progress-report/ Gong, Y. (2013). Global operations strategy: Fundamentals and practice. Berlin: Springer. Greasley, A. (2009). Operations management. Chichester: John Wiley & Sons. Laseter, T. (2009, November 24). An Essential Step for Corporate Strategy. Retrieved January 18, 2017, from http://www.strategy-business.com/article/09402?gko=c5a8d Mahadevan, B. (2009). Operations management: Theory and practice. New Delhi: Published by Dorling Kindersley (India), licensees of Pearson Education in South Asia. Rowland, C. (2015, September 09). Apple Inc. Operations Management: 10 Decisions, Productivity. Retrieved January 19, 2017, from http://panmore.com/apple-inc-operations- management-10-decisions-areas-productivity Rowland, C. (2015, September 03). Apple’s Vision Statement & Mission Statement. Retrieved January 18, 2017, from http://panmore.com/apple-mission-statement-vision-statement Tan, K. H., & Matthews, R. (2009). Operations strategy in action: A guide to the theory and practice of implementation. Cheltenham, UK: Edward Elgar.
Apple Operations Management
Running Head: VICE PRESIDENT OF OPERATIONS, PART 2 0 Vice President of Operations, Part 2 Isaura Perry Strayer University BUS515: Operations Management Dr. Phyllis Parise February 12, 2017 Assignment 2: Vice President of Operations, Part 2 Due Week 6 and worth 280 points Refer to the scenario from Assignment 1. Write a six to eight (6-8) page paper in which you: Evaluate two to four (2-4) weaknesses that are evident in the selected organization’s product life cycle. Generate a new product design and process selection, and then determine three (3) strategies that the organization needs in order to strengthen the operation. Provide support for the rationale. Determine the key components of supply chain management for the company you have selected.  Determine three (3) major issues that could affect the structuring, sourcing, purchasing, and the supply chain of your organization. Provide a solution to each issue. Develop a total quality management tool that identifies and analyzes any future issues. Provide a rationale for developing the selected tool.  Analyze three (3) advantages in employing the just-in-time philosophy in your organization. Evaluate three to five (3-5) means in which the philosophy could potentially impact quality assurance. Provide specific examples to support your response. Determine a qualitative and quantitative forecasting method for your operation. Next, create a table in which you identify the characteristics of the operation that relate to each method. Evaluate the strengths and weaknesses of each method. Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not quality as academic resources. Apple Inc’s Operations Strategic The concept of product life cycle has been around for a very long time. Product life cycle describes how the sales of products evolve over a period. This concept states that just like living organisms, products pass through four stages in their life. These stages are the introduction, growth, maturity, and decline stage. Apple Inc. has taken advantage of these four steps to maximize the profitability of its products over its lifetime. To maintain Apple’s competitive edge, its Vice President of Operations Isaura Perry will evaluate Apple’s product life cycle weaknesses and generate a new product design and process selection, and then determine the strategies that Apple will need to strengthen their operation. Then, she will determine Apple’s supply chain management fundamental components and the major issues that could affect the structuring, sourcing, purchasing, and the supply chain of the company. Following, she will develop a total quality management tool that will identify and analyze any future issues. Next, she will examine the advantages in employing the just-in-time (JIT) philosophy and how could potentially impact quality assurance in Apple. Last, Vice-President of Operations Isaura Perry will determine a qualitative and quantitative forecasting method for Apple and identify the strengths and weaknesses of each method and the characteristics of the operation that relate to each approach. Apple’s Product Life Cycle Weaknesses of Apple’s product life cycle Figure 1. The Approximate representation of a common life cycle. Figure 2. Apple’s short product life cycle. The figure above represents an approximate representation of the most common life cycles. Apple has a rather distorted curve. Apple’s products are always introduced with lots of expectation and fanfare. It, therefore, follows that sales skyrocket immediately after the products are released into the market. This approach has proved ideal for firms that can attain and sustain the status of a fashion icon. However, such a product life cycle carries with it an absolute risk. A defect in the product can have a harmful effect on the firm’s reputation. Apple’s product life cycle is very short, and this may discourage customers. Apple does not just sell electronics. It also sells a lifestyle. Over time, Apple has succeeded in developing a “cult following” for its high-end products. Therefore, the consumer backlash is seen as strong when the product is seen as last year’s “hot product.” By a similar token, the backlash from investors will be vehement when a product fails to meet their expectations. Another weakness relates to the fact that Apple’s operating system does not integrate well with outsider’s hardware. While Apple does this to maintain their design standards and to keep the design control in-house, the adaptation of its software to other computers has been severely hurt, and this has led to a relatively small market share. The firm’s product development cycle heavily depends on the supply of products from IBM. In case IBM experiences manufacturing problems, then the problems would naturally extend to Apple thus the risk of losing its customers. Over dependency on a secondary firm may lead to a competitive disadvantage. New product design and process selection to improve Apple Just like any other firm, there are cases when Apple’s forecasting about demand is erroneous. A reduction in demand forces the company to reduce the production of the affected products. The decrease in demand also affects the supply of finished goods to the customers because of the reduced availability. Therefore, Apple must strive to maintain the sustainability of its products in the market. The current and future success of Apple can be attributed to its unique design and selection process. To continuously deliver high-end quality products, Apples should consider integrating design thinking with user-led product solutions. The strategy will focus on the following elements; A focus on user experience as the primary factor in the development and selection of Apple’s products. Consolidating the efforts of designers with that of product development teams. A user-centric product development cycle. This can be broken down into five crucial stages. Understand. This is a phase of information gathering that aims at giving designers a deep insight into consumer preferences and address issues of product users. This step makes critical initial observations. Envision. This is where designers brainstorm about the services they may offer to the users. This phase produces new insights and conceptual breakthroughs. Specify. This is where designers and product development teams develop a design specification for the product they have unanimously agreed to create. Implement. This entails all steps in the manufacturing process that aim at delivering a high-quality product to the customer. Maintain. The products are regularly modified to match changing needs of consumers. Therefore, the product design team plays the role of providing continuous input into modifications throughout the products life cycle. Supply Chain Management Apple’s key components of supply chain management and issues that could affect the structuring, sourcing, purchasing, and the supply chain of Apple. Supply chain management is a very critical section of any firm since it facilitates the delivery of goods from the inventory to the customers to ensure satisfaction of their needs (Arndt, 2004). Apple’s supply chain management can be categorized into five major steps. These are sourcing, manufacturing (assembly in China), warehousing, distribution, and retail. In a nutshell, Apple purchases sources materials and components from various suppliers then ship them to its assembly plant based in China. The products are then delivered to customers who buy the products through the firm’s online store. Apple also uses alternative distribution channels such as direct sales, other distributors, and retail stores. The company’s central warehouse is located in Elk Grove, California and supplies products from there (Apple, n.d.). In as much Apple’s supply chain looks well structured; it still has its downsides. There are still many challenges to overcome. In the recent past, Apple has been plagued by supply problems. The firm has had components come in late such as Airpods whereas others like Apple TV have come in a little constrained. These challenges result from inaccurate demand forecasting or lower yields than expected. Other times it is just about last minute changes to manufacturing processes. The firm needs to address miscues in its forecasting to obtain a better balance with its supply chain as well as image problems that may significantly affect sales. Although most components essential to Apple’s manufacturing process are sourced from diversified suppliers, key elements such as optical drives, microprocessors and liquid crystal displays (LCDs) are still sourced from single or limited sources. This exposes the firm to substantial supply risks since these components are subject to price fluctuations and shortages that can adversely affect its operations and profit margins. To solve this problem, the firm should consider the possibility of diversifying its supplier base to cushion itself against the shortcomings of its suppliers. Creating a new brand comes with the need to source new materials or parts. However, suppliers are not always familiar with that particular brand. The result is that providers may fail to produce the components Apple needs promptly and this may slow the production process. To jump this hurdle, the firm should leverage supplier technology to keep tabs on delivery performance, production and yield rates and compliance factors. Total Quality Management Tool Quality management ensures that a company produces goods that are consistent. It is an essential part of the production process that entails overseeing all activities to maintain a desired standard or level of excellence. Traditionally, quality management concentrated on quality control whereby goods were inspected at the end of the production and inferior products regarded as “waste” sold at a lower price or disposed of. Over time, many tools and ideas have been created to eliminate waste completely and ensure the highest standards are always realized. For improving the total quality management, Apple should employ the Flowcharts and Modeling Diagrams and the Plan-Do-Check-Act. Flowcharts and Modeling Diagrams Assist in the definition and analysis of each step in a process by illustrating it in a clear and comprehensive manner. Identify areas where the workflow may be blocked, or diverted, and where the workflow is fluid. Determine where steps need to be added or removed to improve efficiency and create a standardized workflow (Berk & Berk, 2000). Plan-Do-Check-Act (PDCA) Each project or procedure is planned per needs and outcome, it is then tested, examined for efficiency and effectiveness, and then acted upon if anything in the process needs to be altered. This is a cyclical style to be iterated until the process is perfected. Flowcharts and Modeling Diagrams and the Plan-Do-Check-Act management tool can be easily created and examined by using various types of computer software or by simply mapping them out on paper. They can also be easily integrated into team meetings, organizational newsletters, marketing reports, and for various other data analysis needs. Proper integration and use of these tools will ultimately assist in processing data, enhancing workflow, ensuring client satisfaction and creating an overall high level of quality in all areas of Apple. Advantages of Just-In-Time (JIT) Apple can accrue the following advantages by implementing a Just-In-Time JIT philosophy. The development of a homogeneous workload plan. To reduce the delays in the supply chain, Apple can effectively distribute its workload between different workstations. The firm can manage its inventory by calculating the required quantity of the needed raw materials for manufacturing the next products in the production line (Cheng & Podolsky, 1996). Just-in-time (JIT) philosophy can help reduce the overall production time and the timing of delivery products since it enhances the cooperation between operational processes (O’Grady, 2012). Another advantage of JIT is that it can significantly reduce the setup time required to make changes to an existing production process to come up with quality products in the shortest time possible. Researchers argue that there is a correlation between JIT and the quality of goods. This is because JIT integrates quality control with the operational process. Furthermore, JIT enables the organization to identify technical faults before the production process thus providing them with an opportunity to rectify the problem and improve the quality of the final products. This is of importance because it forces the production personnel to employ their best practices. When this is done, the workers reduce their error margin and substantially improve the quality of their products. JIT impacts quality assurance in the following ways: Continuous improvement. Through JIT, a firm can remove steps and processes that do not add value to the final product. Come up with mechanisms to detect and identify problems. Quality control at the Source. This is where workers take responsibility for their input in the production process. Preventive maintenance to optimum performance of machinery and equipment. Eliminating waste. JIT helps to reduce waste from overproduction, processing waste, transportation waste, inventory waste, product defects and waiting time. Automation is also an element of JIT that helps to reduce errors. Machines with more autonomous judgments can perform mundane and repetitive work so that humans can carry out more useful tasks. Worthwhile to mention, JIT increases flexibility and facilitates multi-skilled workforce which has higher productivity, flexibility and small margins of error. Qualitative and Quantitative Forecasting Method The quantitative forecasting is largely dependent on the ability of Apple’s forecasting team to make calculations that help the company to generate forecasts related to Apple’s effective supply chain management. On the other hand, qualitative forecasting relies on the ability of the firm’s forecasting team to make educated and sophisticated guesses. Makridakis et al. (2008) says that quantitative forecasting requires past data whereas qualitative forecasting relies on the ability of the forecasters to predict trends and extract meaningful insight from it. Table 1. Qualitative and quantitative forecasting method Quantitative Forecasting Method Quantitative Forecasting Method. The sharing of work in the production line and its influence on the supply chain management. Product growth in the market The production process and its impact on the production process. Customer desires and their trends. The role played by existing technology in the product manufacturing process. Market demands and tastes. Under quantitative forecasting, aspects such as the demand of the market, consumer purchasing behavior and the performance of the supply chain management can be assessed. On the flipside, qualitative forecasting is not very efficient because the market is usually volatile and therefore, no firm can accurately predict the future of marketing. This is because qualitative forecasting relies on data on customers about desires and purchasing potential which are subject to change. Quantitative forecasting, on the other hand, can be very useful in making informed judgments by taking advantage of previous data to predict future trends. However, qualitative forecasting can prove indispensable especially when done by experienced forecasters who have accrued market experience and can provide informed forecasts for their products. Conclusion Apple Inc. should consider integrating design thinking with user-led product solutions in their new product design and process selection. Apple Inc. to solve their supply chain problem should explore the possibility of diversifying its supplier base to cushion itself against the shortcomings of its suppliers. Also, it should leverage supplier technology to keep tabs on delivery performance, production and yield rates and compliance factors. Hence, the improvement in operation process with the help of Total Quality Management Tool and Just in Time (JIT) would help Apple to reduce the entire issues related to product life cycle and gain the huge market share with the aid of increase in products’ maturity. References Apple (n.d.). Reports – Supplier Responsibility. Retrieved January 18, 2017, from http://www.apple.com/supplier-responsibility/progress-report/ Arndt, H. (2004). Supply Chain Management. Gabler Verlag Springer Fachmedien Wiesbaden GmbH, Wiesbaden. Berk, J. & Berk, S. (2000). Quality Management for the Technology Sector. USA: Butterworth- Heinemann. Cheng, T. & Podolsky, S. (1996). Just-in-Time Manufacturing: An Introduction. Springer. Makridakis, S., Wheelwright, S. C., & Hyndman, R. J. (2008). Forecasting methods and applications. John Wiley & Sons. O’Grady, P. J. (Ed.). (2012). Putting the just-in-time philosophy into practice: a strategy for production managers. Springer Science & Business Media.