Apple Inc. Supply Chain Amid COVID-19
How has the current COVID-19 pandemic affected the operations of this company?
The supply chains of most companies around the world have been affected by the COVID-19 lockdowns in respective countries. Apple Inc. has been one of the companies taking a heavy blow from the pandemic since it has been unable to ship its products from its factories to its target markets. The problem with Apple starts with its production factories and their locations. From 2017, Apple had established factories in India to complement the one it had in China. With Asia having been the epicenter of the pandemic, Apple has sort stopping shipping its iPhones and other products from both these regions. Besides, the company has also experienced a drastic drop in revenue from its forecasted first-quarter earnings.
- Do they have parts or inventory shortages?
Apple’s production and its supply chain have differed since COVID-19 measures started applying in critical Apple markets and manufacturing countries. On the production side, Apple had sufficient inventory that could satisfy the needs of its target market. However, as the supply chains suffered due to the effects of economic lockdowns in various nations around the world, the consumer market also changed. It became apparent that Apple could not suffer inventory shortage as the factories that had been in production before the shutdown of their respective economies had enough inventory to meet the company’s forecasts (Gurman, & Wu, 2020). The company’s forecasts were to hit a revenue of $64 million in the first quarter of 2020. However, this forecast fell short, and the entire batch of iPhones and other Apple products was left in various factories without enough demand to justify further production.
- Do they have to shut down factories or warehouses?
Two major regions where Apple has been manufacturing include China and India. Among the most hit nations in the world, the continuation of production was ruled out by government directives. Apple had to shut several of its factories in India, especially after the total countrywide lockdown. Additionally, the proximity of two of Apple’s production facilities to the pandemic epicenter, Wuhan, also led to the same precautionary measure of shutting down these facilities. Currently, China has reopened the Wuhan market, and the neighboring regions are considered to be out of danger of mass infections. As a result, among the production facilities that were previously shut down have reopened but with considerably lower production capacity (Gurman & Bloomberg, 2020).
- Do they reduce their production/service capacity?
In most cases, Apple reduced its production capacity due to five critical and essential reasons to the company. Firstly, consumers around the globe were struggling to get their Apple products’ orders delivered to them due to slow and grounded logistics. Secondly, due to the widespread unemployment rate across major Apple markets such as the US and UK, the company has experienced a drop in demand. The low economic capacity of these target markets has influenced a corresponding low purchasing power from the consumer markets. Thirdly, according to strategies to curb the spread of COVID-19, governments around the world ordered their citizens to work from home. This directive affected Apple’s production capacity in relation to quarterly projections. Fourth, COVID-19 has triggered a recession-like financial situation in many of Apple’s markets, leading to a drop in the service capacity of many companies. Among these include, logistics companies such as airlines which Apple uses mostly for its distribution of iPhones to its target markets. Lastly, internal controls also have to comply with administrative and health recommendations to have employees work from home. Therefore, the service segment of the company has also declined considerably (CNBS, 2020).
- Do they shift production from one geographic location to another?
Shifting production has not been an option for Apple and any other manufacturing company in 2020. In particular, Apple cannot shift production to the US due to the high labor costs and the pandemic-related lockdown. In general, Apple cannot shift production to any developed economy. In terms of developing economies, the only two viable production regions in terms of affordable labor are India and China. Shifting production from either country only differs in quantity. However, both countries have previously been locked down to slow the spread of COVID-19 (Miller, 2020).
- What actions has the company taken thus far
In response to the effects of COVID-19 on its supply chains, the company planned for risk mitigation actions in all operations and in the supply chain, evaluating the impacts on sea, air and land transport. However, it should be noted that Apple is a major player in using air over sea for the transport of its main products. Since most direct flights from China and the rest of the world have been limited, air logistics is not a viable alternative for Apple (Gurman, & Wu, 2020). In addition to the above mentioned areas, the company has also made specific adjustments in its operations with its supply chain. These considerations include;
- Developed and implemented improved supplier relationship management practices (differentiating the most critical ones with which to develop more intense collaboration strategies)
- Developed initiatives to improve risk management and supply chain.
- Rethought of making or buy and re-shoring strategies (in-house manufacturing)
- Greater alignment with financial areas for the care of the products through the efficient management of inventories and payment conditions.
References
CNBS. (2020). Apple limits bulk online purchases of iPhones amid coronavirus supply constraints. Retrieved online on April 19, 2020, from https://www.cnbc.com/2020/03/19/apple-limits-bulk-online-iphone-sales-amid-coronavirus-constraints.html
Gurman, M. & Bloomberg. (2020). Apple’s Tim Cook says coronavirus-driven supply chain changes are temporary. Accessed online on April 19, 2020https://fortune.com/2020/02/28/apple-coronavirus-iphone-supply-chain/
Gurman, M., & Wu, D. (2020). Apple’s Supply Chain Woes Linger Even as China Recovers. Retrieved online on April 19, 2020 from https://www.bloomberg.com/news/articles/2020-03-19/apple-s-supply-chain-woes-linger-even-as-china-recovers
Miller, C. (2020). WSJ: Apple ‘scrambling’ to prevent iPhone delays amid COVID-19 pandemic. https://9to5mac.com/2020/04/01/wsj-apple-scrambling-to-prevent-iphone-delays-amid-covid-19-pandemic/