MID-TERM ASSIGNMENT (PART 2)

THE IMPORTANCE OF SUPPORTING INFORMATION SYSTEMS TO

FIRMS THAT SUPPLY GOODS TO INTERNATIONAL MARKETS. THE
CASE OF APPLE INC.

NAME: DIMITRIOS AFENTOULIS (13775)

MODULE: LOGISTICS AND SUPPLY CHAIN MANAGEMENT (DLITSM

503)

INSTRUCTOR: dr. ROBYN PYNE

ABSTRACT

The purpose of the hereby research assignment is to introduce the reader to

the importance of information technology to today’s logistics and supply chain
management. Firstly, there is an introduction to the definitions of logistics,
supply chain and information technology and then it follows an analytical
description of the role of IT to logistics and supply chain. The main secondary
data that has been used for the assignment is: Τhe Handbook of Logistics &
Distribution Management by Alan Ruston, Phil Croucher and Peter Baker.
Regarding the case study part has been used been used academic papers
such as global supply chain by Christos Papanagnou, Apple’s supply chain
strategy by H. Hettiarachchi and Managing Information Systems by Apple by
Kishore and Nellore. Finally some web data from recognized sites specialized
In the realm of supply chain and logistics.

TABLE OF CONTENTS

Part 1

 INTRODUCTION
 LOGISITICS AND SUPPLY CHAIN
 THE IMPORTANCE OF PHYSICAL DISTRIBUTION
 WHAT IS INFORMATION TECHNOLOGY
 IT & SUPPLY CHAIN INTEGRATION
 KEY AREAS WHERE INFORMATION
TECHNOLOGY IS ASSOCIATED WITH LOGISTICS
AND SCM

Part 2
  COMPANY’S BACKGROUND
 APPLE’S WORLDWIDE SUPPLY CHAIN
 APPLES’S VS. AMAZON’S SUPPLY CHAIN
 INFORMATION SYSTEM MANAGEMENT IN APPLE
 CUTTING EDGE TECHNOLOGY USED BY APPLE TO
RETAIN ITS COMPETITIVE ADVANTAGE
 DISCUSSION & CONCLUSION
 REFERENCE LIST

INTRODUCTION

Everyone agrees that effective supply chain can be a crucial source of

competitive advantage. According to Alexandar Krstev et al. the goal of supply
chain manager should be to link the end customers, the channels of
distribution, the production process and the procurement activity in ways that
customers enjoy a better total service and company’s cost is lower than
competition’s. One of the conditions to manage that is the sufficient use of
Information Technology. The qualification to use vast amount of data quickly
and accurately has transformed the way of today’s business. The capacity to
send information between supply chain partners through cellphones, satellite
systems and electronic data interchange is being accomplished by a huge
number of companies. Information and communication systems together with
associated hardware operated in the supply chain management (scm) to
execute different roles. They may help the decision-making process, aid to
monitor operations, design simulated systems and help the communication
between individuals, companies and machines. (Rushton 2010)
 1. THEORETICAL FRAMEWORK

LOGISTICS AND SUPPLY CHAIN

There is no true definition that can be used to describe logistics because

products, companies and systems differ. Logistics is a varied system that has
to be flexible changing to different ‘’obstacles’’ and demands. One accepted
meaning:

Logistics=Material Management+ Distribution (Ruston 2010)

The supply chain covers an even broader area. This includes the supply of
raw materials and the distribution of goods to the final customer. Therefore:

Supply chain=Suppliers+ logistics + Customers (Ruston 2010)

Logistics and the supply chain cover the physical and information movement
and stockpile from raw material through to the final delivery of the final
product. Crucial significance is now given to the importance of information.

Source: Ruston (2010)

THE IMPORTANCE OF PHYSICAL DISTRIBUTION

The physical distribution system aims to deliver the products from

manufacturers to the final customers. Consequently, all the medium sized
businesses try to invest in the physical distribution area in order to sustain a
competitive advantage. According to Manoj Sharma the 5 most important
contribution of physical distribution are:

 Creation of utilities. An efficient transportation system may give a

greater value to a product by delivering that to an area where it has
greater value.
 Improved consumer services by distributing goods at the time and
location which are agreed with customer needs.
 Cut in distribution costs.
 Increased market share.
 Price stabilization through adapting the supply demand and blocking
the price variations.

WHAT IS INFORMATION TECHNOLOGY

Information technology is the process of data through computer, the use of

technology from computers, electronics and telecommunications to procedure
and deliver information in digital form. Taking advantage the quick developing
areas of cell phones, PDAs the industry of Information Technology is
transformed from computer- focused area to a mobile technology one.
(Emmanson).

IT & SUPPLY CHAIN INTEGRATION

As it is already mentioned supply chain management is involved with the flow

of products and information among supply chain’s members. Recent
advancements in technology have aided companies to benefit from
information. For an instance, in the retail industry, margin erosion and the
demand for more advanced customer service have been both influential for
greater amount of investment in Information Technology in order to improve
supply chain. Therefore, retailers started to invest in technologies such as
Electronic Data Interchange to reduce the stock levels in supply chain.

KEY ROLES WHERE INFORMATION TECHNOLOGY IS

ASSOCIATED WITH LOGISTICS & SCM

There is a great number of technological ‘’tendencies’’ and innovations which

have affected the application of information technology in logistics and in the
supply chain. According to Ruston (2010) the most important areas where
Information Technology and logistics work together are:

 Basic Communication
 Supply chain planning
 Warehousing
 Inventory
 Transport
 E-commerce
 Other applications

Below it follows a brief summary and analysis of the most important areas and
roles:

Basic communication

The growth of satellite networks has as result the better communication

among people, remote installations everywhere in the world and vehicles such
as trucks, ships and airplanes can be found by using satellites. Consequently,
the capacity of sending and receiving data through satellite networks has
enhance the ability of supply chain manager to locate his/her assets wherever
they are.

Moreover, another crucial part of communication among companies are the

Electronic Data Interchange (EDI). According to Alexandar Krstev et.al EDI is
means the transfer of data among organizations by electronic means. By
indicating electronic means, EDI is so much more than email. Some of the
ways that EDI are used nowadays are:

 Trade data interchange

 Electronic funds transfer
 Technical data interchange

Finally, another key role of IT is barcodes. A barcode is the depiction of code

in a way that can be read by machines. For an instance, products delivered in
a warehouse might be recognized by a software can be calculated as a stock
held in a warehouse.

Supply chain planning

A crucial advancement for many important organizations is the invention of

Enterprise Resource Planning systems (ERP). ERPs give the chance to a
company to collect its own whole data into a single computer system having a
digital source for every important information such as customer orders,
financial documents and inventory (Ruston et.al 2010). Examples of this kind
of software are: SAP, Oracle and Infor.

Warehouse

Warehouse management systems are needed handle all activities a

warehouse demands. Moreover, computer systems are now created to aid in
the planning of warehouse design and arrangement. (Ruston et.al 2010).

Inventory

The role of predicting the future customer demand and the goods in stock
require the use of special software. Inventory management systems give the
ability to control the stock levels within a company. This type of software
provides the opportunity to a company not only to decrease its stock levels,
when it is required, saving money but also to maintain its customer by
avoiding stock- outs. (Ruston et.al 2010).
Transport

These type of computerized systems allows the manager of a company to

supervise the effectiveness of a company’s vehicle fleet. The Information that
is gathered may involve:

 Mileage travelled
 Tones carried
 Maintenance details
 Fuel used
 Driver’s details
 Tachograph details and analysis
(Ruston et.al 2010)

E- Commerce

To conclude with, the internet has created a great number of business

opportunities abolishing the limits of time and space. For example, a customer
has now the chance to make an order to a internet based company every time
he/she want and even he/she lives to a different geographical area.
Source: Chandrasekaran N.

2. CASE STUDY

COMPANY’s BACKGROUND

The firm designs and sells mobile devices, personal computers and a diversity
of complimentary applications. The firm’s hardware commodities consist of: I
phone (smartphone), I pad (tablet), mac (pc), I pod, apple watch and apple tv.
The company produces also its own software: ios,macOs, watchOs and tvOs.
Some of the firm’s most significant complimentary applications are: itunes,
appstore, Mac app store and Tv appstore. Apple is popular for leading
innovation and its premium designs. But a few only knows that a key point
also is how the company manages its inventory. It needs to be highlighted
that Gartner classify the firm’s supply chain as the world’s best form 2010 to
2013. Apples’ Chief Executive Officer, Tim Cook has been the company’s
Chief Operating Officer in 2005 and he was responsible for the modification of
the company’s chaotic and complex operations. Cook regards that the
inventory in the market of technology like smartphones, tablets and pc
amortize very soon and has characterized the inventory as evil (Clara Lu,
2014).

APPLE’S WORLDWIDE SUPPLY CHAIN

One of the most important modifications in the company’s supply chain was
that the focus change from cost reduction to the improvement of the final
consumer.

Supply chain characteristics:

According to Papanagnou the key supply chain characteristics of a company’s

are the below:

 Asset management.
Tim Cook’s (Apple’s CEO) main belief was the massive reduction of inventory,
of the number of warehouses and letting the main suppliers to compete to
each other.

 Procurement

Procurement is the procedure of discovering and buying goods from an

outside source, usually through a competitive operation considering the best
fee, quality and time (Weele Arjan 2010). It has been Apple’s motto to provide
satisfaction to suppliers and customers via its superioty. Being the largest,
designer of electronics, Apple has, Foxconn, one of its significant supplier that
produce approximately 10.000 of Apple’s items/day. It can be assimilated that
their relationship commonly favored.

 Supply chain planning

This characteristic includes all the data considering all departments to

advance the process of goods distribution in order to equilibrate supply and
demand (gartner, IT glossary).

Supply chain planning at Apple Inc.

Source: supply chain 24/7

 Supply Chain Strategy

Whereas the business strategy contains the general route that a company
aims to take the supply chain strategy includes the firm’s operations in order
to meet a particular supply chain aim (UPS 2005). Considering Apple’s case,
its supply chain strategy deals with customers’ changeable needs, whereas
the danger of inadequate supple is limited by pooling inventory (Hettiarachchi
2017).

 Logistics management

International supply chain can only be fulfilled by logistics management

showing how a company supports the connection between distribution and
logistic modes. One of Apple’s crucial feature of supply chain is its trustworthy
supplies globally. Apple may make researches or design products in USA but
has suppliers across the globe discussing terms about price, raw materials
and large quantity of production.

Apple supply chain map

source: supplychain247.com

Apple’s supply chain confrontations

 Global economic crisis

 Apple’s customers trade also products and services from rival
designers
  Inventory could be out of dated or surpass the expected
demand.
 Supply chain ‘’deranges’’ caused by humans or the nature could
sometimes be dreadful.
 The firm relies mostly on services offered by its logistics
partners.

Source: supply247.com

Barriers in Apple’s supply chain

Thera is a great number of elements that cause the limitation of the

company’s worldwide supply chain. The most important issue are
(Papanagnou):

 Supplier’s risk

The company does not manufacture its own products. The most crucial
Apple’s product (iphone) is produced in China by others. As a result a great
risk is created towards Apple because the company depends on its supplier in
a great degree.

 Competiveness

In contrast to other competitors like Samsung or Sony, Apple has design its
own operating systems like ios and MacOs. It is easily assimilated that the
company establishes its own standards in the products designs but a
customer may want to choose something with less quality but cheaper than
an iphone or ipad.

 Geographical environment

Every nation has its own customs and traditions and a company needs to
adopt in the global environment. In the UAE Facetime, an app like Viber,
Whatsupp and Skype is prohibited not only reducing Apple’s total revenues in
the area but also the consumer interest for using Apple’s products.

APPLES’S VS. AMAZON’S SUPPLY CHAIN

There is a great number of people presuming that the apple’s supply chain is
really complicated. We will try figure out the answer by comparing Apple’s
supply chain with Amazon’s (supplychainopz)

 Inventory Turnover

A short quantity in inventory turnover may indicate in overstocking, out of

dated products and inadequate marketing strategy (Pirrok). One of the most
used formula for calculating the inventory turnover is: Inventory turnover=(
Cost of goods sold/ average inventory)

Source: supplychainopz

From the above chart appears to be Apple more efficient than Amazon and
the reason for that is that Amazon is a distribution company which need to
keep a huge amount of stock.

 Important suppliers

Source: supplychainopz

Amazon has a total of 3 million suppliers worldwide. The most crucial from
them are approximately 300.000. On the other hand, globally Apple has only
156 of major suppliers.

 Number of storage rooms in USA

Source: supplychainopz

 Stock Keeping Unit

Stock keeping Unit is a number allocate to a product in order the company will
be able to follow the inventory. It is without a question that the stock keeping
unit is a mark of supply chain complication.

Source: supplychainopz

As everyone can observe the Amazon’s supply chain is by far more complex
than Apple’s.

INFORMATION SYSTEM MANAGEMENT IN APPLE

Being a firm with worldwide existence, Apple’s information systems demand

to allow the correct intelligence, to the right staff at the right time, making sure
that the decision making process is constantly the suitable information. The
company’s intranet offers the chance to handle the procedure of virtualization.
(Virtualization is the process of making a virtual source like server, desktop,
operating system, file storage or network aiming to handle workloads by
modifying traditional computing to make it more extensible, technopedia.com).

From an outside point of view, Apple has an extranet, empowering it to

collaborate efficiently with its most crucial suppliers and partners. This allows
the company to ‘’construct’’ value chain in the information technology
department by making a connection between suppliers and the manufacturing
process which afterwards is connected to the final customer. Subsequently,
the data from the retail stores is linked with customer service department
creating a huge amount of intelligence making Apple capable to provide
services ‘’at the click of a mouse’’. (Nellore, 2010)

To conclude with, Apple also handles utility Computing. Utility Computing is

the procedure of offering on-demand computing services (technopedia.com).
This has allowed Apple to distinguish from the main rivals providing unique
type of services. Some examples of Apple’s utility computing are: icloud and
itunes.

Future recommendations for Apple Information Systems:

 Information security management

The networks’ safety should be one the main Apple’s worries. After the
tremendous increase in Apple’s market share, ending Microsoft monopoly,
this could make Apple vulnerable to hackers attack. Therefore the firm should
grow its networks security.

 Corporate Social Responsibility and Information Technology

The element of corporate social responsibility is becoming really distinguished

in today’s business. Therefore the concern of data protection from trading
purposes needs to clearly defined, making sure that the firm is not involved
into data scandals.

 Intellectual Property Management

Intellectual property is an expression to define intangible capital such as

human capital. The intelligence found by information technology is already
well noticed in today’s business environment. A cutting edge company like
Apple could build virtual communities for its employees and suppliers in order
to communicate in daily basis to exchange information and knowledge.

CUTTING EDGE TECHNOLOGY USED BY APPLE TO RETAIN

ITS COMPETITIVE ADVANTAGE

 Data Analytics

Apple being one of the profitable technology firm began to use big data
analytics for designing systems that customers tends to use. One great
reason that Apple decided to design its own smart watch (Applewatch) was
24/7 gathering of data. Moreover, by collecting a huge amount of data the
company has the opportunity to provide better customer services fulfilling the
majority of customers’ needs. One of the most famous attribute of big data is
Apple’s Siri (Marr, 2015)

 Cloud computing

The service that Apple provides for cloud computing is icloud. The most
important advantages that the apps has are: (Tanhf, 2012)

I. The unlimited storage capability

II. The capability of playing videos and musing directly from the cloud.
III. The back -up and restore data from all someone’s Apple products.

DISCUSSION &CONCLUSION

To conclude with, logistics information system are as much crucial for logistics
& supply chain as the physical distribution because they are the mechanism
of capturing, analyzing and communicating information about logistics and
scm. They key areas where information technology is applied to logistics are:
basic communication, supply chain planning, warehousing, inventory,
transport and e- commerce. As a result logistics now, from focusing just on
the distribution of sufficient products to customers, it can:
  Carry data about order status and product availability.
 Decrease inventory
 Give flexibility to how, when and where the raw materials can be
process to gain competitive advantage.

Regarding the case of Apple understands its supply chain as a medium for
value-added and as a key instrument for achieving sustainable competitive
advantage. The following triumph of the company’s supply chain relies on how
efficiently the firm interacts with its suppliers and how well the company
designs innovative products. A powerful tool of innovation is the adequate use
of information systems in the supply chain. Apple in order to maximize its
profits uses leading technology like big data and cloud computing. To
conclude with, Apple’s supply chain is one of the most efficient globally,
turning inventory into sales every 5 days (!!) placing the company above its
direct competition.

REFERENCE LIST

 Aleksander Krstev, Aleksander Dauer, Dejan Krstev. IT in Logistics:

Advantages, challenges and opportunity efficiency from problem
decision in different activities.

 Alan Ruston, Phil Croucher, Peter Baker. The Handbook of

Logistics & Distribution Management. (4th edition 2010). Chapter 1:
Concepts of logistics and distribution.
 Emmansonme.wordpress.com. Role of Information Technology in
Logistics and Supply Chain Management (12/03/2012)
 Alan Ruston, Phil Croucher, Peter Baker. The Handbook of
Logistics & Distribution Management. (4th edition 2010). Chapter 31:
Information and Communication Technology in the Supply Chain.
 Chandrasekaran N. Fundamentals of Logistics (course Material)
 Clara Lu, 2014. Apple supply chain- The best supply chain in the
world.
 Papanagnou Christos, 2018. Global Supply Chain. University of
Salford Manchester.
 Purchasing & Supply chain management, 2010. 5th edition.
Cengage learning.
 Gartner. IT glossary. Available at: https://www.gartner.com/it-
glossary/scp-supply-chain-planning
 UPS Supply chain solutions, 2005. Supply chain Strategy. The
importance of aligning you strategies.
 H. Hettiarachchi, 2017. Apple’s Supply chain Strategy. University of
Kelaniya.
 Supplychain247.com, 2013. Is Apple’s supply chain the No.1.
Available at:
https://www.supplychain247.com/article/is_apples_supply_chain_re
ally_the_no._1_a_case_study
 Supplychainopz.com. Ben Benjabutr, 2013. Is Apple’s supply chain
really the No.1. Available at:
https://www.supplychainopz.com/2013/01/is-apple-supply-chain-
really-no-1-case.html
 Sai Kishorre, Nellore, 2010. Managing Information system by Apple.
Available at: https://www.scribd.com/doc/45851282/Managing-
Information-Systems-by-Apple#
 Bernard Marr, 2015. How Apple use Big data to drive success.
Available at:
https://www.datasciencecentral.com/profiles/blogs/how-apple-uses-
big-data-to-drive-success
 Tanhf, Ian, 2012. The advantages and disadvantages of icloud.
Available at: http://blog.nus.edu.sg/is1103grp202/2012/12/03/the-
advantages-and-disadvantages-of-icloud/