Apple Inc.Inventory Management Process

Topic 15

Submitted by,

Mahesh.V 13MBA0009

Introduction

Apple Inc. is an American multinational corporation headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software and personal computers. Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne on April 1, 1976 to develop and sell personal computers. It was incorporated as Apple Computer, Inc. on January 3, 1977, and was renamed as Apple Inc. on January 9, 2007 to reflect its shifted focus towards consumer electronics.

Apple is the world's second-largest information technology company by revenue after Samsung Electronics, and the world's third-largest mobile phone maker after Samsung and Nokia. Fortune magazine named Apple the most admired company in the United States in 2008, and in the world from 2008 to 2012. On September 30, 2013, Apple surpassed Coca-Cola to become the world's most valuable brand in the Omnicom Group's "Best Global Brands" report. However, the company has received criticism for its contractors' labour practices, and for Apple's own environmental and business practices.

Financial Details

Revenue US$ 170.910 billion (2013)

Operating income US$ 48.999 billion (2013)

Net income US$ 37.037 billion (2013)

Total assets US$ 207.000 billion (2013)

Total equity US$ 123.549 billion (2013)

1. TYPES OF INVENTORY USED BY APPLEItem Description

Components The aggregate carrying amount as of the balance sheet date of items held by the entity which are partially completed at the time of measurement and unprocessed items that will go through the production process and become part of the final product. Includes supplies used directly or indirectly in the manufacturing or production process. This element may be used when the reporting entity combines work in process and raw materials into an aggregate amount

Finished Goods Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale

Inventories Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer)

Apple Statement of Financial Position, Inventory level

USD $ in millions

Sep, 2013 sep, 2012 sep, 2011 Sep, 2010 Sep, 2009

Raw materials 683 124 0 0 0

Work-in-process 0 0 0 0 0

Finished goods 1081 667 0 0 0

Other Inventories 0 0 776 1051 445

Inventories 1764 791 776 1051 455

Source: Based on data from Apple Inc. Annual Reports

Source: www.stock-analysis-on.net

Meaning

Item Description

Raw Material Inventory goods on hand that will be used to manufacture a product

Work-in-process The amount or value of all materials, components, and subassemblies representing partially completed production; anything between the raw material/purchased component stage and finished-goods stage.

Sep, 2013 sep, 2012 sep, 2011 Sep, 2010 Sep, 20090

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Raw materialsWork-in-processFinished goodsOther InventoriesInventories

Item APPLE

Components Apple Inc.'s components increased from 2011 to 2012 and from 2012 to 2013

Finished Goods Apple Inc.'s finished goods declined from 2011 to 2012 but then increased from 2012 to 2013 exceeding 2011 level

Inventories Apple Inc.'s inventories increased from 2011 to 2012 and from 2012 to 2013

2.Present Level of Inventory Level at Apple Inc.

Item(March 2014) Apple(in $ million)

Raw Material 0

Work In Progress 0

Finished Goods 0

Other Inventories 1,829

Inventories 1,829

Graphical Representation

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Apple(in $ million)

Inventory Turnover

Cost of Goods sold(Mar 2014)

Average Inventory Inventory turnover = COG/Avg. Inventory

$27899 $1829 15.14(approx)

Inventory Turnover Inventory Turnover measures how fast the company turns over its inventory within a year. A higher inventory turnover means the company has light inventory. Therefore the company spends less money on storage, write downs, and obsolete inventory. If the inventory is too light, it may affect sales because the company may not have enough to meet demand.1. Days Inventory indicates the number of days of goods in sales that a company has in the inventory. Days Inventory=(Inventory in each period/COG in each period)*No. of days in that period2. Inventory to Revenue determines the ability of a company to manage their inventory levels. It measures the percentage of Inventories the company currently has on hand to support the current amount of Revenue. Apple Inc's Inventory to Revenue for the quarter that ended in Mar. 2014 is calculated as Inventory to revenue= Inventory in each period/revenue

3.Procurement System or Procedure

Some pointers on Apple’s procurement and alignment with overall organizational goal

Risk DiversificationAddition of a new supplier will provide a greater flexibility and Apple can react

faster to supply chain disruptions, should they arise. Capacity management

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 technologies.

Margins SustenanceApple is planning to introduce stripped down versions of its flagship products at

reduced prices to increase market share. To maintain the high levels of profitability as the company embarks on the next phase of growth, it needs its suppliers to help reduce costs. Positioning Pegatron as a reliable supplier will help Apple gain strong bargaining leverage.

Supplier Innovation A new supplier will also be more willing to invest in capital to fund growth as

opposed to a long serving incumbent who may have reservations on the returns on such an investment. In order to increase its share of Apple’s business, Pegatron may strive to improve operational efficiencies in an effort to differentiate itself from its competitor

Sourcing Process

Suppliers at Apple Inc. Apple requires each of its suppliers to meet the highest standards for all

goods and services. Apple’s requirements include a commitment to rigorous quality assurance. In addition, suppliers must be committed, as we are, to ensuring the highest standards of social responsibility

Supplier Diversity program Sourcing Program

Apple’s sourcing process is designed to ensure equal and fair treatment of suppliers so that they can fully participate in a competitive procurement process.

Terms Between Supplier and Apple Inc

1. SERVICES & DELIVERABLES 2. DELIVERY 3. IDENTIFICATION, RISK OF LOSS, & DESTRUCTION OF GOODS 4. PAYMENT 5. WARRANTIES- 6. INSPECTION 7. INDEPENDENT CONTRACTOR 8. SELLER RESPONSIBLE FOR TAXES AND RECORDS- 9. INSURANCE 10. INDEMNITY 11. CONFIDENTIALITY; PERSONAL DATA; DATA SECURITY 12.ANTI-CORRUPTION 13. TERMINATION 14. SURVIVAL OF OBLIGATIONS 15. FORCE MAJEURE 16. SEVERABILITY 17. REMEDIES 18. ATTORNEYS' FEES 19. LIMITATION OF LIABILITY

20. ASSIGNMENT/WAIVER 21. NONEXCLUSIVE AGREEMENT 23. COMPLIANCE WITH LAWS; SAFETY AND LABOR STANDARDS 24. PUBLICITY/MARKS 25. GOVERNING LAW 26. DISPUTE RESOLUTION, JURISDICTION AND VENUE 27. EQUITABLE RELIEF 28. ENTIRE AGREEMENT/MODIFICATION 29. THIRD PARTY CONTRACT RIGHTS

REFERENCES

  https://www.apple.com/legal/procurement/do

cs/SG_TERMS_COND-0064.pdf  https://www.apple.com/legal/  https://www.apple.com/procurement/  http://www.stock-analysis-on.net/NASDAQ/Co

mpany/Apple-Inc/Analysis/Inventory  http://www.gurufocus.com/term/Inventory/AA

PL/Inventory/Apple%2BInc  http://en.wikipedia.org/wiki/Apple_Inc.

Thank You!