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In a report you are required elaborate on the critique of  strategic importance of procurement and Discuss the roles of inventory in the supply chain (balancing supply and demand and Buffering against uncertainties) in relation to Apple Inc.

In a report you are required elaborate on the critique of  strategic importance of procurement and Discuss the roles of inventory in the supply chain (balancing supply and demand and Buffering against uncertainties) in relation to Apple Inc.

Understanding Business
Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
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a. In a report you are required elaborate on the critique of  strategic importance of procurement and Discuss the roles of inventory in the supply chain (balancing supply and demand and Buffering against uncertainties) in relation to Apple Inc.

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The benefit of keeping inventory levels so low is twofold. First, large inventory balances mean that cash remains tied up in the supply chain, which is usually not good news. Part of the reason why Apple has managed to generate so much cash in the past decade or more is the company's ability to manage working capital (which includes inventory) so well. Second, low inventories allow Apple to be more nimble. With the multiple product refreshes each year, the Cupertino company can afford to have the latest devices available for purchase without having to discount older models too deeply, or risk having its product stock become obsolete.
Transcribed Image Text:The benefit of keeping inventory levels so low is twofold. First, large inventory balances mean that cash remains tied up in the supply chain, which is usually not good news. Part of the reason why Apple has managed to generate so much cash in the past decade or more is the company's ability to manage working capital (which includes inventory) so well. Second, low inventories allow Apple to be more nimble. With the multiple product refreshes each year, the Cupertino company can afford to have the latest devices available for purchase without having to discount older models too deeply, or risk having its product stock become obsolete.
Apple: Kings of Inventory Management Apple Apple's fiscal third quarter P&L results were impressive. But one balance sheet item also caught my attention. Despite the COVID-19 disruptions, Apple still seems to be the king of inventory management. When Apple reported fiscal third quarter earnings, on July 30, the conversation revolved around income statement performance. In other words: how well the iPhone had sold, how much revenue growth the services segment experienced, how margins behaved, etc. But one balance sheet item caught my attention. Despite the 11% increase in product revenues in the quarter, Apple's inventory dropped by over 3% year over year. Even in an environment of demand uncertainty and disruptions caused by the COVID-19 crisis, Apple seems to have managed its supply chain tightly. Best-in-class A couple of months ago, I talked about how Apple's inventory management practices have been world class. CEO Tim Cook's attitude towards it helps to explain the company's obsession: "Inventory is fundamentally evil. You kind of want to manage it like you're in the dairy business. If it gets past its freshness date, you have a problem." So what? Apple's days inventory outstanding, which measures how long inventory sits in stock before being sold, also increased slightly in 2020 over last year's levels. Yet, the less than 10 days on average have been substantially better than Sony's and Intel's one month or longer.
Transcribed Image Text:Apple: Kings of Inventory Management Apple Apple's fiscal third quarter P&L results were impressive. But one balance sheet item also caught my attention. Despite the COVID-19 disruptions, Apple still seems to be the king of inventory management. When Apple reported fiscal third quarter earnings, on July 30, the conversation revolved around income statement performance. In other words: how well the iPhone had sold, how much revenue growth the services segment experienced, how margins behaved, etc. But one balance sheet item caught my attention. Despite the 11% increase in product revenues in the quarter, Apple's inventory dropped by over 3% year over year. Even in an environment of demand uncertainty and disruptions caused by the COVID-19 crisis, Apple seems to have managed its supply chain tightly. Best-in-class A couple of months ago, I talked about how Apple's inventory management practices have been world class. CEO Tim Cook's attitude towards it helps to explain the company's obsession: "Inventory is fundamentally evil. You kind of want to manage it like you're in the dairy business. If it gets past its freshness date, you have a problem." So what? Apple's days inventory outstanding, which measures how long inventory sits in stock before being sold, also increased slightly in 2020 over last year's levels. Yet, the less than 10 days on average have been substantially better than Sony's and Intel's one month or longer.
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