Procurement and Sourcing

In: Business and Management

Submitted By recneps
Words 495
Pages 2
Best practice
Recently, news surfaced that Apple is planning to award more business to a relatively unknown company called Pegatron. This company already manufactures iPad Minis and some versions of the iPhone. It is perceived as a step towards achieving better stability in Apple’s supply chain. Though the jury is still out on the success of such a move, it nevertheless provides some pointers on the procurement’s alignment with overall organizational goals.
Risk Diversification: Many analysts feel that the motivation behind the addition of a new supplier is to diversify supply chain risks. A bulging product portfolio, burgeoning growth from the much anticipated “cheaper” iPhone, increasing design complexities and ever decreasing time to market necessitate frequent revisits to supply chain strategy and supply partners. Addition of a new supplier will provide a greater flexibility and Apple can react faster to supply chain disruptions, should they arise. As a result of its strong commitment towards safe and ethical manufacturing practices, Apple needs to be in a position to sever ties with any supplier that doesn’t comply with its Code of Conduct. It doesn’t mean non-compliance from Foxconn but a mere option to exercise—if needed.
Capacity Management: Apple has a history of competing with multiple companies across the value chain. Unlike Google, Apple cannot afford the luxury of working with multiple handset partners such as Motorola, Samsung, LG, etc. Since Apple’s proprietary OS is closely linked to its hardware design, it needs to manage handset capacity issues as well. To succeed in emerging markets such as China and India (one the world’s largest user base), Apple needs to ramp up its production capacity rather quickly. Having a second supplier will ease some of the capacity constraints and help Apple focus on its core business – developing groundbreaking…...

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