Comprehensive Analysis of Apple Inc’s Operations Management
Operations management refers to the process of managing and administrating business practices such as decision making and coordinating resources to maximize profits in an organization. Creating the high-leveled efficiency in the production and manufacture of goods is the sole purpose of operations management. Most successful especially the high-technology companies rely heavily upon operations management tools to meet the hi-tech demands of the world markets. They use technology to hasten the working pace of the employees, customer transactions and asset maintenance among other routine business operations. This analysis has narrowed its focus to the Apple Inc. which is indisputably the world’s most successful technological company. Operations management at Apple Inc involves 10 main decisions that guarantee a smooth running of business operations in all aspects. Through careful and deliberate implementation of these decisions, Apple has proven to be successful in coordinating operations with thin its chain of supply including product design and growth, marketing and sales (Lashinsky, 2012). A well-structured operations management strategy holds the greatest secret of Apple’s success in terms of efficiency, innovation, maintenance of the customer base, competition and profit margins. This paper will provide a comprehensive analysis of the operations management practices such as quality management, design of goods and services, layout design, Value chain management and marketing position among other areas of decisions in the operations management of Apple.
The first area of decision in the Apple’s operations management is the design of goods and services. The company is widely for its innovative capacity in developing hardware, software as well as other associated digital services. Instead of focusing on a single dimension, Apple has excelled in continuous product development in hardware, software and supplementary services. Some of the apple products include desktops, laptops, IPOD, ILIFE, IPAD, ITUNES, MAC BOOK PRO, IPHONE AND MAC BOOK among many others (Lashinsky, 2012). Each product’s design has to go through several official components for verification and quality assurance. For instance, the design of Mac has to be approved by Mac software and hardware engineers. It is also important to note that the Apple’s wide range of products forms a broad customer base hence making it possible to have a steady supply of goods and services (Boyer &Verma, 2010).
Value chain management refers to a range of activities that a company does right from the purchase of raw materials until the product reaches the end user. Value is gradually added to a product as goes through manufacturing until the marketing process (Cousins, Lawson & Squire, 2006). Apple has a very large and sophisticated supply chain of more than 200 product and service suppliers majorly located in China, Japan and Asia. To maintain the highest quality standards, the company has set very high procurement standards for the suppliers. Apple Inc. is known for its consistent emphasis on high quality standards in all areas whether in production, HR management, sales or in marketing (Boyer &Verma, 2010). VP managers for Operations are required to ensure compliance to the quality standards that have been set by the company. Apple products are manufactured in different nations. During the manufacturing process, the company tries to reduce labor costs, reduce the use of toxic substances, and recycle materials all of which help in managing the costs (Mahadevan, 2010). Apple has established a wide distribution channel that gets improved daily to suit the ever changing markets. In sales and marketing, Apple has gained roots in retail and online markets through advertising in social and mass media. The company also provides excellent after-sales support to its customers. This includes a one-year warranty, experts calls for assistance and product repairs. Basically, Apple’s large value chain gives it a high bargaining power, reduces labor costs, facilitates recycling, and minimizes wastage of resources (Cousins, Lawson & Squire, 2006).
Marketing position can be described as the place a brand has in the mind of the customer as compared to the competitors’ brands. It can also be looked at as how distinguished a given product is from similar products from the competitors. Apple Inc has been enjoying a very unique market position that works from the reverse. Instead of investigating and working upon customer needs, Apple creates needs by innovatively offering feature rich products. In other words, the company produces products that are not yet needed by customers (Latif, Jaskani, Ilyas, Babar & Gulzar, 2014). Apparently, the product has no use at first sight. This implies that Apple makes big and risky bets on production technologies very early even before competition awakes. the uniqueness of Apple’s positioning strategy is that much of its designs and developments are out of the customer’s sight. All developments of custom solutions are internal but holds a crucial role in determining the company’s success.
The unique marketing position goes hand in hand with forecast and planning operations. The company goes ahead to imagine the would-be customer needs, sales levels, risks and solutions to the scheduled operations. Forecast is the key driver of advance planning in Apple. It is able to foresee the market potential using two approaches: the top-down and bottom-up forecast (Mahadevan, 2010). Top-down forecast involves assessing the market holistically such as sales trends and market size. Bottom-up forecast involves the analysis of the factors of production such as the potential of the employees, production capacity and specific expenses. Properly combined, Apple has always been able to accurately predict fluctuations in revenue, budgeting and cash flow issues (Abraham, 2014). To facilitate finance management and planning, the company’s senior management obligates operations managers to prepare periodic budget reports. At every stitch, they are also required to collect basic information regarding growth of the profit margins, sales and costs (Boyer &Verma, 2010). These help them to come up with a business forecast necessary in decision making and the overall plan process.
The operation management of Apple often evaluates and monitors the company’s productivity by assessing areas such as quality standards, company’s global size and different benchmarks. This is done using a number of criteria. First, productivity for every Apple store is measured by Revenue per Square Foot and the effectiveness of the supply chain is measured by Product Units per Time. The other criterion is Milestone per Time which is the productivity measure of the human resource during a product development phase (Abraham, 2014).
Inventory management is basically the administration of stock items and non-capitalized assets. The Apple Company has had a consistent level of efficiency in inventory management for many years. In fact, it only took an average of 5.3 days to make an inventory move which is considerably shorter than what other high tech companies take. Apple uses diverse inventory management methods such as first in, first out (FIFO) and serialized methods to ensure effectiveness in keeping track of the company’s assets (NicolásMarínXiménez & Sanz, 2014). The FIFO method ensures that units that are old-modeled are quenched before the new ones are released. Unlike companies like HP and Dell, Apple Inc. has a high inventory turnover and this gives it a competitive advantage for new products.
Operational functions are units that define particular roles and activities within an organization. In Apple, operational functions majorly entail communication services and facilitation of product distribution. Operations managers are in charge of these units in which they are assigned a number of basic roles. First, they are required to abide and practice management principles that ensure highest level of honesty and ethics (Boyer &Verma, 2010). This promotes a smooth running of business operations as the company’s value is maintained. The operations managers are also tasked to make and implement policies perhaps concerning the expected level of performance among the employees, customer satisfaction safety regulations and employee retention among other areas. Policy making is expected to conform with the company’s mission statements and goals (NicolásMarínXiménez & Sanz, 2014). The main objectives include attaining a low cost of production, to reduce the amount of time taken between customer order and delivery, maintaining high quality services and products and to develop an exceptional ability of meeting the customer’s needs. In times of an organizational crisis, operations managers are looked upon to exercise their problem-solving competences. Apple operations managers are expected to be quick and rationalized when making crucial decisions when an impending problem reckons (Latif, Jaskani, Ilyas, Babar & Gulzar, 2014). All day-to-day operations are collectively merged to achieve the company’s objectives and goals.
The other area of operations management is human resources and job design. HR and job design strategies in Apple are changing gradually as the trending HR needs change. Conversely, the strategies are grounded upon Steve Job’s highlights on excellence (Boyer &Verma, 2010). Under Tim Cook’s governance, the labor force the manufacturing plants has diverse levels of skills, stability motivation and experience. For instance, workers in the China unit at Foxconn have literacy competence but lack adequate technical skills in most industrial operations. On the other hand, workers in the US manufacturing plant are well acquainted with experience and technical skills. Labor costs within the United States is very high which amounts to $15 per hour compared to $2.5 in Foxconn (NicolásMarínXiménez & Sanz, 2014). For Apple to reduce the overall cost of production, it has opted to manufacture products outside America.
Customer service strategies in any organization serves an important role of keeping its image blameless hence being considered to be a social responsibility (Mahadevan, 2010). To adjust to the changing market needs and customer preferences, Apple has applied a number of strategies most of which try to match both customers and firm’s perception. Some of the business operations regarding customer service include staying online, staff empowerment and prioritizing service delivery to the customers. Apple’s target is to get hold of the high-end customers. In order to meet the demand of these customers, it has established separate channels of retail particularly for iPhone (Latif, Jaskani, Ilyas, Babar & Gulzar, 2014). As a result, it has increased the coverage, reach and distribution network of iPhone. This single-product strategy is the reason behind Apple’s high scale advantage as opposed to the multi-product strategy that is practiced by competitors such as Nokia.
The other operational management decision within Apple Inc. is process analysis and maintenance. For a company works hard to be at the front position of cutting edge technology, process analysis that supports an environment for improvement must be invested upon (Mahadevan, 2010). Apple has dedicated IT teams that ensure IT servers and assets are working efficiently. Intensive and extensive research is continually done by the firm’s maintenance teams which work to solve periodic system failures, macroeconomic factors and business relationships and improve quality of the products. Through a well-structured process analysis, the company has brought forth discoveries of innovative technologies which puts it ahead of its competitors. The company’s HR ensures that maintenance personnel have the adequate capacity to keep up high performance.
Layout design and strategy is the other operational management practice that emphasizes on the customer’s expectation. Customers have high expectations and what they see may impress the customer to carry a positive or negative perception about the company (Abraham, 2014). Layout design is meant to ensure maximum utilization of equipment and space. Apple store are designed in a way that maximizes the focus on the products. They are spacious and have minimal decorations. They have a cellular arrangement that improves quality and flexibility, less inventory and less handling. Closely related is location strategy is the other management practice that should be examined carefully by the operational managers of a company. Location strategy for Apple is very selective for the purpose of maximizing the brand exposure and foot traffic. The main store is located in Silicon Valley, a place where most industries in the united states are located. Currently, the company has at least 450 stores found in 16 countries which are commonly located in urban areas (Abraham, 2014). However, Apple limits the authorization of sellers and suppliers. The selective location strategy has lead Apple to be the most profitable company in terms of revenue per square foot.
In conclusion, Apple Inc. is a good example companies that have succeeded after using operations management tools as observed in the discussion. Some of the operations management practices include quality management and controls, customer service, measuring the company’s productivity and design of goods and services. Location selection and layout design are also considered by Apple because of their capacity to influence the customer’s expectations and perceptions. The value of supply chain is also given special attention by the company by incorporating 200 suppliers of raw material from all over the world. The global scope of Apple has made it easy to deal with common political economic and social variations and hence contributing greatly to its success. As discussed, Apple has a unique marketing position that is beyond the customers current needs. it also uses different inventory management methods most of which are effective in selling old-modelled products. Apple has so far won the competitive edge in terms of marginal profit, invention capacity, inventory management and quality standards. Operations management is therefore the cornerstone of business success.
References
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Latif, M., Jaskani, J. H., Ilyas, T., Babar, Z. K., &Gulzar, H. (2014). Issues faced by Apple Inc in smart phones industry. International Journal of Accounting and Financial Reporting, 4(2), Pages-50.
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