Apple Inc: Setting New Inventory Management Standards

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Case Details:

Case Code : FINC079
Case Length : 17 pages
Period : 1993-2011
Pub. Date : 2012
Teaching Note : Available
Organization : Apple Inc.
Industry : Computer and Technology Industry
Countries : India,US,Global

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Inventory usually only gets brought up in the context of product shortages, but proper inventory management is actually very important. Companies want to keep as little inventory as possible to minimize the risk that it won't be sold, but if a company produces too few units, it gives up sales. As a result, computer companies want to try for a fairly low inventory-on-hand ratio, which Apple has certainly done. It turns out the company kept an average of just five days' worth of inventory on hand for its products during the holiday season." 1

-Justin Berka,2 An Analyst, 2009.

On October 19, 2011, Apple Inc. (Apple) declared a revenue of $108.25 billion for the financial year ended on September 24, 2011. The revenue had grown 65.95% from the previous financial year 2010. In the financial year 2011, the company's profit margin rose by 11.45% from that of the previous year. On the robust growth in the revenue and profit margin, Timothy Cook3, Chief Executive Officer, commented, "We are thrilled with the very strong finish of an outstanding fiscal 2011, growing annual revenue to $108 billion, and growing earnings to $26 billion. Customer response to iPhone 4S has been fantastic, we have strong momentum going into the holiday season, and we remain really enthusiastic about our product pipeline."4

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On the expected growth rate of Apple, Forrester5 Research Inc., forecast, "Apple Inc. is expected to achieve sales growth of above 50.0% in the next two years aided by higher demand for mobile applications and devices such as iPad and iPhone that run them." 6

Apple Inc.

Apple Inc. was established by Steve Jobs (Jobs), Steve Wozniak, and Ronald Wayne under the laws of the State of California on January 3, 1977. The company designed, manufactured, and marketed mobile communication, media devices, and personal computers. It also sold limited products of related software, services, peripherals, networking solutions, and third-party digital content and applications. Apple, known globally for its unique products, also designed and developed its own operating systems, hardware, and application software. Though some of its products became a huge hit, it also had its fair share of failures.

Apple Inc. Contd... - Next Page>>

1] Justin Berka, "Analyst Says Apple Very Efficient at Managing Inventory," www., March 6, 2009.
2] Justin Berka is a Quantative Product Analyst at Yammar Inc. He analyzed Apple's inventory position during 2009 when he worked at Ars Tecnica.
3] Tim Carmody, "Why Tim Cook is the Best Choice to Run Apple,", August 25, 2011.
4] "Apple Reports Fourth Quarter Results; Sells 17.07 Million iPhones, 11.12 Million iPads, 6.62 Million iPods, 4.89 million Macs,", October 19, 2011.
5] Forrester Research, Inc. was founded in 1983. It is a US-based company research company. The company provides proprietary research, customer insight, consulting, events, and peer-to-peer executive programs. The company generated revenue of $250.7 million in financial year 2010.
6], "Apple to See Sales Growth of 50% by 2012," www., March 27, 2011.

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