Offshoring Practice at Apple Company

Apple like many other electronic companies is no stranger when it comes to offshoring jobs such as the manufacturing process of their electronic devices. So, what is offshoring? According to our book offshoring is in contrast to outsourcing is when “ a company takes one of its factories that it is operating and move the whole factory off shore” which in this cause Apple has moved their manufacturing factory from America oversees to china. But remember that unlike offshoring, outsourcing occurs when you take what “a company was doing in-house-such as research, call centers, or accounts receivable-and have another company perform that exact same function”.

Offshoring isn’t a rare occurrence amongst massive companies seeing as how they earn the company’s immense financial savings along with a lot of other things. Apple is one of the biggest and most thriving companies in the world and I will continue to talk about why Apple started offshoring jobs and how it helped them grow as a company.I’m sure we all know about the history of apple and general overview of the company but let’s do a refresher from those than may not know.

Apple Inc is an American technology that’s headquarters is located in Cupertino, California which is also the same place that it was founded on April 1, 1976. Apple manufactures phones, personal computers, computer software, online services, etc. Some of their very popular devices include the iPhone, Mac Book, iPad, Apple TV, Apple watch etc. When it comes to products that they designed some are the iOS operating system along with MacOS. Mac App Store, iCloud, Apple music and the iTunes store are some of the online services that Apple provides. The company was founded by the late Steve Jobs, Steve Wozniak and Ronald Wayne. In 1976 the Apple 1 was released bringing is a lot of revenue and in 1980 Apple decided to go public. In 1985, Wozniak l left Apple and Jobs left to start NeXT. In 1993 Michael Spindler became the new CEO of Apple but is only great success was migrating the then Mac OS with PowerPC. But the company wasn’t able to keep up and struggled with not being able to sell their inventory which caused the company to start to see a downfall in finances and they were not able to hold themselves up to their competitors. But in 1997 Apple bought NeXT to bring Jobs back to the company where he soon became the company’s new CEO. After his return Jobs started to reconstruct Apple and rebuild it to glory. Jobs eared up with Microsoft to license the Mac OS and very soon after that came the iMac.

Over his years at Apple Steve Jobs was able to build Apple into one of the greatest companies ever known. In 2001 Apple opened their first store and in 2007 they shifted their focus more into consumer electronics. In 2017 Apple reported their worldwide annual revene to be $229 billion with 123,000 employees and around 504 stores. When it comes to their supply chain Apple almost dominates with how advanced it is. One thing that has helped over the years is that they make it a huge priority to keep good relationships with their suppliers. According to NC State University supply chain management is the “management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage”.

Apple has done a great job dominating, one way they’ve done so through their supply chain management process is by taking ownership of some 3rd party businesses. One way they also move around their supplies and save money if by purchasing their raw materials for their products from multiple locations and then sending them all to China to be assembled together. Apple is said to have over 200 suppliers for their company. Another thing that Apple made sure to integrate into their chain management process is that they use different tactics and technologies to track their inventory which not only saved money in the long run but also ensured them that they accurately pay they suppliers and that their quotes from suppliers are accurate.

Apple has also push for competition amongst suppliers by making them compete for their business which also helped with lowering the cost of supplies. Apple made sure that although their raw materials come from everywhere it must get shipped to the assembling plants in china. This helped them because since most of the materials come from China it easier for them to understand unlike if the send it to somewhere in Mexico where the materials are foreign and could possibly be complicated to understand. Apple does well when it comes to management of their inventory turnover.

Well inventory turnover is calculated by dividing the cost of the goods sold by the average inventory, this measurement helps when it comes to seeing how efficiently a company is working when it comes to their sales. In 2013 their “Days in Inventory” for their products was aid to be 4.37 days, in 2018 their inventory turnover was 4.83. Their CEO Tim Cook made it a priority to get their products out as fast as possible he stated that he believed that “inventory is evil”. Tim cook stated this because the value of technology decreases as the product becomes old. For example, since Apple has so many competitors such as Samsung it is important to move products because with if you have a lot of technology on hand with the release of a new product you lose money because peoples focus starts shifting to what’s new. Tim cook of Apple also decreased the number of Warehouses that they had holding their products. Sam Holder from Apple Insiders said the Cook “shut down 10 0f the 19 Apple warehouses to limit overstocking and by September 1998 inventory (on hand) was down from a month to six days”.

These days Apple’s supply chain has been gaining some criticism but still stands strong some risks that have been linked to being associated with their supply chain is:

• Their inventory can be more than what is being demanded
• The company is affected based on the economy of the World
• Their resellers might also carry or sell products from other manufacturers

Issues in government when it comes to different countriesApple began turning to foreign manufacturing in 2004 but why did they do so? To manufacture an iPhone in China is about $8 which is drastically lower than the mount it would cost in the United States which is about $65 which allows for Apple to make a larger gross profit. Recently Tim cook said "The number one reason why we like to be in China is the people. China has extraordinary skills. And the part that's the most unknown is there's almost 2 million application developers in China that write apps for the iOS App Store. These are some of the most innovative mobile apps in the world, and the entrepreneurs that run them are some of the most inspiring and entrepreneurial in the world. Those are sold not only here but exported around the world."Another reason that Apple offshores is because again it’s a logistical problem for the Apple products to be assembled all the way around the world if most of their materials come from China. Things like their displays are made by Japan Display or by LG Display located in South Kore. The sensors for Touch ID are made in Taiwan. Factories in China are said to be much bigger than factories located in the United States. Many of the workers live on site which makes it easier for workers to come into work at a dime notice and made it easier to hire more workers. Compared to the United States China has much more qualified technical workers which include engineers. Most don’t have a lot of certificates just the right amount where they have the appropriate skills but don’t require high pay.

Offshoring Production of new iPhone has allowed them to reach markets faster which is why almost twice a year you hear about new iPhone coming out, usually a lot of workers tend to work long hours which makes the production of these new products go way faster than if they were produced here. One of Apples biggest and major manufacturers would be Foxconn. Their main facility is located in Longhua which is very close to majority of where materials for products are made. They have about 920,000 employees I China which is outstanding and they also have about 25 different factories. But Foxconn has been the location of many scandals such as not paying their workers proper wages, over working their workers by having the work a lot of overtime and even child labor inside of their factories being present. At one-point workers were being paid $17 a day while working 12-hour work days which is ridiculously low.

China was said to have spent billions of dollars just to allow Apple to manufacture their products. A place called “iPhone city” is located in Zhengzhou, and in Zhengzhou Foxconn is located. Zhengzhou removed corporate taxes for the first five years and after those years were up they reduced it by 50%. Lastly the city allowed workers to be paid less by the companies. Offshoring of American jobs has because a big cause for concern because many Americans need jobs but have non and this has led to scrutiny against companies such as Apple. They have also been the point of concern when it comes to ethical practices. But all these things aside Apple has continued to be one of the top competitors when it comes to technologies.

Based on all the things I have listed and discussed in my paper it shows that offshoring has both benefits and disadvantages but Apple has done a great job combating these problems and continuing to lead.