Although famous for design and innovation, many people are unaware that Apple Inc.’s inventory management is a large contributor to their success. When Steve jobs returned to Apple as CEO in 1996 after a leave of absence, he made several changes to the business: he allowed manufacturing to be outsourced instead of controlled in his facilities and he eliminated excess product lines. Jobs also focused on inventory. At that point in time, Apple had over 2 months of consumer product inventory in various warehouses worldwide, which resulted in $500 million in losses. He didn’t want Apple to keep many products in inventory because they could suddenly and easily drop in value. An announcement from a competitor or a new innovation could change everything. By 1998, Jobs had brought inventory down to one month but knew it still wasn’t good enough; so he asked his newly appointed Operations Manager, Tim Cook, to further improve Apple’s inventory management. By 2015, as Apple’s CEO, Cook was well known for his talent in running a lean and agile supply chain. Another focus for Cook was reducing the number of strategic suppliers by 75%. This forced companies to compete more aggressively for Apple's business. The number of suppliers continues to be minimized, which means it is now easier to manage and monitor the various companies. Concurrently, Apple is vigorously involved with each supplier to enforce a culture of quality.
Suppliers must align their quality management practices with Apple’s requirements because failure in the supply chain is ultimately passed down the line and impacts product marketability. However, Apple’s reputation has been damaged by poor social responsibility of suppliers in the past, even if product quality was adequate. Moreover, a fundamental role of inventory is facilitating supply and demand. Apple must balance an adequate supply of components and products with customer demand (often difficult to forecast). Were Tim Cook’s decisions regarding supply and inventory appropriate?
The goal of this two-part case study is for students to explore concepts of supply chain management (mainly supply and inventory) by analyzing an authentic company and relevant data.