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The changing fortunes at Apple The most striking change has been in operations. When Jobs took over, Apple ended each quarter with some 70 days’ worth of finished products sloshing around its factories and warehouses, a $500 million-plus drag on profits that was the worst in the industry. Jobs quickly streamlined. He outsourced manufacturing of half of Apple’s products to contractors who could do it far more efficiently, say analysts. That got inventory down to about a month by early 1998. Jobs still wasn’t satisfied. He hired former Compaq (CPQ) procurement executive Timothy D. Cook to meet a higher goal: to get more efficient than Dell, the industry’s best. It was a daunting challenge. Cook recalls drawing a flowchart of Apple’s operations, with all the linkages from suppliers to manufacturing to distributors, that ‘looked like a printed circuit board’ And not a very fast one. Because many of the transactions between suppliers weren’t processed in real time, it could take days for a parts order to be delivered to a factory. And Cook knew he would be facing an inventory management nightmare when Jobs unveiled five different colors of iMacs. Cook wasted no time. In his first month on the job, he outsourced production of the printed circuit cards inside Macs, easing the complexity of the manufacturing job. He closed more than 10 warehouses for finished products, making do with nine regional sites. With fewer places for stuff to sit, the less stuff there would be, he reasoned. ‘If you have closets, you’ll fill them up’, says Cook. Simplicity was the key. Cook trimmed Apple’s list of key suppliers from more than 100 to just 24. That further eased the job of keeping track of all the parts used in Apple’s products. And since it meant more business for each supplier, Apple wielded more influence with each – and better prices. Finally, his team scrapped an off-the-shelf software program for managing manufacturing and inventories that had been limping along. Instead, Apple devised its own build-to-order system for handling online purchases. It has worked beautifully. Pundits snickered when Jobs predicted Dell-like online efficiency at a 1997 event. ‘We’re coming after you, buddy’, Jobs said, referring to founder Michael Dell. Today, Apple’s online store is shipping 75% of orders on the day they’re placed, up from 5% for the Apple of old. ‘That’s as good as or better than Dell or Gateway’, says Salomon Smith Barney analyst Gardner. But Cook’s biggest claim to fame is getting the inventory of parts down to less than a day – obliterating the record in an industry where weeks or even months is the norm. One reason: Apple has persuaded key suppliers to set up shop close to Apple facilities, for just-in-time delivery. Another benefit of the new system: The entire production process has dropped from almost four months to just two, so Apple can more quickly move to the latest, fastest parts. Research what happened in this particular situation to bring this situation to the present.

Step 2: Respond to the following questions: From the above case, describe how inventory management has been used for strategic advantage. What were (at minimum 3) relevant parts, products, or processes involved in this case study? What recommendations do you have regarding overcoming potential challenges and helping future growth? What is the final solution? What does the future look like in terms of globalization and this case study? What were (at minimum 3) relevant parts, products, or processes involved in this case study? What recommendations do you have regarding overcoming potential challenges and helping future growth? What is the final solution? What does the future look like in terms of globalization and this case study?