role of operations management
- strategic role of operations management - cost leadership, good/service differentiation
Strategic role of operations management
- Cost leadership : Apple achieves cost leadership through its outsourcing partner Foxconn, based in china with economies of scale
- ==Foxconn ranked 20th in the Fortune Global 500==
- Good/service diff
- product features: iOS, touch screen, apps, iTunes, Siri
- Key challenge: in 2012 Samsung surpassed apple as the highest selling smartphone maker
- due to Apple’s lack of innovation and rising competition
- in 2018, apple fell to 3rd in market share (behind Huawei and Samsung)
- Quality:
- iPhone marketed as a premium product
- Quality issues in production of iPhone 5 (scratched casing)
- lead to iPhone 5 discontinued in 2013 (replaced with 5c)
- Add-ons:
- ECOSYSTEM: compatible devices (apple watch, Mac, iPads,)
- more loyalty, expensive to escape walled garden
- goods and/or services in different industries
goods & services in different industries
- iPhone is a standardised good
- (mass produced on production line, not customised)
- interdependence with other key business functions
interdependence with other key business functions
- Finance:
- 2018 Trump-China tariff war → threatened profitability
- due to dependence on china outsourcing (Foxconn)
- HR:
- in prep for the iPhone 14 (2022)
- → Foxconn employed 30,000+ additional factory staff to meet production targets
influences
- globalisation, technology, quality expectations, cost-based competition, government policies, legal regulation, environmental sustainability
Influences
- Globalisation:
- Foxconn also manufactures for (Nokia, Motorola, Dell, Nintendo, Sony, etc.)
- they are privy to the innovation and technical knowledge of leading companies
- Apple Glob threats:
- ==iPhone 8 (2017) release delayed due to Apple’s dependence on Samsung for OLED screens==
- Tech/innovation
- iPhone X media launch (2017):
- Apple exec (Craig F) fumbled the demonstration of face ID
- after release iPhone X faceID was defective for many consumers
- → lost revenue & warranty expenses & bad rep
- Quality Expectations
- replacing iPhone 5 with 5c (2013) looked bad
- cheap & quality compromise
- smartphone prices don't really influence consumer choice much
- ← as they finance it on a monthly contract (w/ phone provider)
- Legal reg
- Apple has been party to extensive legal battles w/ Samsung
- both companies claiming IP infringement (patents, trademarks, UI)
- Samsung counter-sued Apple in Korea, Japan, US, UK, & German courts
- in 2016, courts ordered Apple to pay ==US$234 million== to the University of Wisconsin-Madison for infringing patent on microprocessor tech
- Foxconn violating human rights:
- ==72.5% of workers working overtime exceeding the legal limit in China==
- 12 Mfs jumped from buildings in 6 months
- Apple released ‘Supplier Responsibility Progress Report’
- where they audited Foxconn factories for underage workers
- and busted a fraudulent vocational school, w/ false student IDs
- Gov policies:
- Trump and China Tariff war (2019) → shit for Apple
- Trump asked US companies to look for alternatives to China
- → Apple stock immediately dropped ==4%==
- Enviro sust. :
- Apple suppliers dumping heavy metals in China rivers
- in 2018, Apple announced Daisy (recycling robot)
- disassemble up to 1.2 mil devices/year
- Apple recycled 7.8mil+ devices/annum
- diverted 48,000+ metric tons of e-waste from landfills
-
operations processes
- inputs
- transformed resources (materials, information, customers) Transformed resources
- materials: phone components
- customers: preferences are an input
- in response to feedback
- → iPhone 5 had LCD display
- → and iPhone 6(+) larger displays
- transforming resources (human resources, facilities)
- transformation processes
- outputs
- customer service Customer service
- warranties Warrenties
- in 2018, Australian federal court ordered Apple to pay ==$9 mil== in penalties
- for false representation of customer rights (w/ faulty phones) under ACL
operations strategies
- performance objectives - quality, speed, dependability, flexibility, customisation, cost performance objectives
- Quality:
- Tim Cook:
“We have never been about selling the most. We’re about selling the best and having the best experience and the happiest customers.”
- Speed:
- Outsourcing suppliers (China) have low lead-times (Biscuit and Tea):
- Steve Jobs (2007), wanted glass screen for iPhone
- signed deal with new china factory
- → 8,000 workers roused from sleep given a biscuit and tea to fit glass screens into iPhones
- Dependability:
- iPhone X release (2017) delayed:
- ← issues w/ OLED displays supplied by Samsung
- Cost (examples of Apple making cost a perf objective):
- low-cost models (iPhone SE)
- Replacing suppliers w/ in-house development (Apple silicon chips)
- Cheaper suppliers
- for processors: replaced Samsung with TSMC (2014)
- new product or service design and development new product or service design and development
- increased R&D spending
- ==from 2% of rev (in 2007) → to 7% of rev (in 2021)==
- supply chain management - logistics, e-commerce, global sourcing supply chain management
- global sourcing: Apple sources components from all over world (China, US, Japan, etc.) → delivered to Foxconn
- outsourcing - advantages and disadvantages outsourcing
- Foxconn (outsourcing) advantages:
- economies of scale
- apple can focus on design & marketing
- Access and proximity to other China suppliers nearby
- Cheap labour, materials, energy, etc.
- Foxconn got tech expertise
- Disadvantages:
- Loss of Quality control
- communication challenge and cultural barriers
- reputation and CSR hindered by Foxconn actions
- Apple dependant on Foxconn to meet deadlines
- Security risks - must protect IPs from competitors
- technology - leading edge, established technology
- inventory management - advantages and disadvantages of holding stock, LIFO (last-in-first-out), FIFO (first-in-first-out), JIT (just-in-time) inventory management
- quality management quality management
- control
- assurance
- improvement
- overcoming resistance to change - financial costs, purchasing new equipment, redundancy payments, retraining, reorganising plant layout, inertia
- overcoming resistance to change
- global factors - global sourcing, economies of scale, scanning and learning, research and development
global factors