Operation Management at Apple

Operation Management at Apple
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Operation Management at Apple
Introduction
Operation management is the process through which organizations plan, organize, and control the various resources it need to produce goods and services. As such, operation management involves managing the entire production process, from the sourcing of raw materials to the delivery of finished products to customers. Effective operation management is important for businesses because it improves efficiency, reduces costs, and increases customer satisfaction. To achieve operation management efficiency, the operation managers have to identify and address sources of variation, as well as implement processes and systems that optimize production and minimize waste. Each variation in operation management has negative consequences on the performance of a given organization. Notably, publicly listed companies have to address variations in their operation frequently so that they can generate value for their shareholders.
Apple Inc. is a global company involved in the design, development, and selling a range of technological products and services. The company has a number of popular products and service such as the iPhone, iCloud, and iPod, among other (Apple Inc., 2022).Steve Jobs is credited with the establishment of the company in 1976 and it is based in Cupertino, California (Apple Inc., 2022). Apple has a market capitalization of over $2 trillion, which makes it one of the largest companies in the world. To retain its position as a technology leader, the organization has to constantly address variations in its operation management that are likely to negatively impact its performance. Three potential variations that have a significant influence on Apple’s performance are customer demand variation, product variation, and process variation.
Discussion & Analysis
Customer Demand Variation
Changing customer demands are responsible for the majority of variability in the supply chain of various companies, according to Min, Zacharia, and Smith (2019). This is because customer variability can be influenced by product characteristics and environmental factors, which can make it difficult for a company to accurately determine the future demand for its offering in the market. Choi et al. (2021) also note that the irregularity of customers’ purchase of good and service introduces noise to demand forecast and results in a ripple effect on product elements such as life cycle, to the detriment of supply chain management process. Research findings have suggested that customer expectations can usually result in service system variability (Gebauer and Kowalkowski, 2012). Consequently, companies have to change their strategical approach, restructure their organizational processes, and focus on meeting customer requirements and improving customer loyalty (Yu 2013). This focus on customer service can bring financial, strategic, and marketing benefits (Yu 2013), but it can also create variability and affect resource planning and output forecasting.
At Apple Inc., variability in customer demand remains one of the major variables that have a negative impact on performance. In its annual report, Apple Inc. (2022) notes that the variability in customer demand introduces a risk of write-down with regard to the valuation of the inventory that the company holds. A mismatch between the customer demand and the forecasted demand means that Apple has to constantly write down inventory that exceeds the anticipated demand, and also accrue additional cancellation fees in instances where it places an order for excess products or components. For example, Wu and Mochizuki (2022) report that the company had to abandon its plan to increase the production of the iPhone 14 following the mismatch between the forecasted and actual customer demand for the iPhone 14. Consequently, the decision incurred cancellation fees for the suppliers who had been informed to direct their efforts toward the production of a high number of iPhones.
Moreover, there is a need to examine the influence of variability in customer demand on waiting time. If there is more demand for a product or service than the company's capacity to meet that demand, the utilization rate will rise above 100%, resulting in waiting time for customers. However, even when the utilization rate is below 100%, there can still be waiting time due to the random nature of most demand processes, where there may be a rush of customers at one time and no customers at all at other times. During most Apple product launches, customers experience wait times as they seek to acquire a newly launched product as early as possible. In most cases, some customers are forced to go home without purchasing the product.
Notably, Apple Inc. distributes its products through various channels, such as cellular network carriers, wholesalers, retailers, and resellers. Many of these distributors also carry products from competing manufacturers. The company also sells its products directly to consumers, small and mid-sized businesses, education, enterprise, and government customers through its retail and online stores and its direct sales force (Apple Inc., 2022). Some carriers offering cellular service for Apple's products offer financing, installment payment plans, or subsidies for device purchases, but there is no guarantee that these offers will continue or remain at the same levels. Apple has invested in programs to improve sales through resellers, including staffing selected resellers' stores with company employees and contractors and improving product displays, but these programs may require significant investment without guaranteed return or increased sales (Apple Inc., 2022). Additionally, the financial condition of these resellers may deteriorate, they may stop distributing Apple's products, or uncertainty about demand for Apple's products may lead them to reduce their ordering and marketing efforts.
Product Variation
Adding product variants increases complexity because it requires specialized knowledge to understand the unique needs and preferences of each market segment. This includes design knowledge, usage knowledge, and tribal knowledge, as well as the ability to ask the right questions and confidently converse with people who work and live in each market. The growth in the knowledge required is also reflected in the documentation needed to operate effectively in each market, as product management, engineering, sales, support, and manufacturing operations all need to understand the technical issues, usage limitations, design requirements, and other factors that affect the adaptation of a product to a given market. Effective variant management is necessary to ensure that product configuration and pricing are accurately and correctly executed, as the final price quoted for a product may vary significantly depending on the configuration and delivered model. Complexity also extends beyond the manufacture and sale of the product to the management of variance across the product lifecycle, which requires effective configuration management.
Notably, Apple's new products often rely on components that are only available from a single supplier. These components may be based on new technologies, in which case there may initially be limited capacity to produce them. The continued availability of these components at reasonable prices can be affected if the supplier decides to focus on producing more common components instead of those customized for the company's needs (Apple Inc., 2022). When the company has faced delays or shortages in the supply of components for a new or existing product, or when an outsourcing partner has delayed shipments of completed products, it has had a negative impact on the company's business, financial performance, and overall results (Apple Inc., 2022). This could also happen in the future, which could have a significant negative impact on the company's business, financial performance, and results (Apple Inc., 2022). Additionally, the company's performance could be negatively affected depending on how long it takes to obtain sufficient quantities of the components from the source or to find and secure sufficient quantities from an alternative source.
Process Variation