(Tiểu luận) category sourcing a case study ofapple and dell

Dell is headquartered in Round Rock, Texas, the US.Dell Technologies Inc products and services Trang 6 CHAPTER 2: CATEGORY SOURCING2.1 DefinitionCategory sourcing refers to the strategi

SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS

-*** -REPORT

CATEGORY SOURCING: A CASE STUDY OF

APPLE AND DELL

No Name Student ID Distribution

1 Nguyen Cam Nhung 2113150055 100%

2 Hoang Hai Khanh 2112150081 100%

3 Le Thi Nhu Quynh 2113150061 100%

4 Nguyen Thi Mai Anh 2114110031 100%

5 Tran The Phong 2212150138 100%

Table Of Content

CHAPTER 1: OVERVIEW OF APPLE AND DELL 2

1.1 Overview of Apple 2

1.2 Overview of Dell 3

CHAPTER 2: CATEGORY SOURCING 4

2.1 Definition 4

2.2 Category Management 4

2.3 Four basic sourcing strategies 4

CHAPTER 3: PROCUREMENT PORTFOLIO ANALYSIS (KRALJIC MODEL) 5

3.1 Overview of the Kraljic matrix 5

3.2 Analysis of Apple and Dell’s category sourcing based on the Kraljic model 6

CHAPTER 4: SOURCING STRATEGIES 13

4.1 Four basic sourcing strategies 13

a Performance-based partnership 13

b Competitive bidding 13

c Securing continuity of supply 13

d Reducing operational complexity 13

4.2 Four sourcing strategies and the Kraljic model 14

a Competitive bidding for leverage products 14

b Performance-based partnership for strategic products 14

c Secure supply for bottleneck products 14

d Reducing operational complexity for routine products 14

4.3 Sourcing strategies of Apple and Dell 15

a Business Model 15

b Supply Chain Strategy 15

c Supplier Relationships: 16

4.4 Challenges of Apple and Dell’s sourcing strategy 17

REFERENCES 18

CHAPTER 1: OVERVIEW OF APPLE AND DELL

1.1 Overview of Apple

Apple was founded as Apple Computer Company on April 1, 1976, by Steve Wozniak, SteveJobs and Ronald Wayne to develop and sell Wozniak's Apple I personal computer Apple Inc(Apple) designs, manufactures, and markets smartphones, tablets, personal computers, andwearable devices

The company offers software applications and related services, accessories, and third-partydigital content It also provides advertising services, payment services, cloud services, andvarious consumer and professional software applications The company's business operationsspan the Americas, Europe, the Middle East, Africa, and Asia-Pacific Apple is headquartered

in Cupertino, California, the US

Apple became the first publicly traded U.S company to be valued at over $1 trillion in August

2018, then at $2 trillion in August 2020, and at $3 trillion in January 2022 In June 2023, itwas valued at just over $3 trillion The company received criticism regarding the laborpractices of its contractors, its environmental practices, and its business ethics, including anti-competitive practices and materials sourcing

Apple Inc products and services

Total revenue

Michael Dell founded the company in 1984 Dell Technologies Inc (Dell) is a provider ofdesktop personal computers, software, and peripherals

As of January 2021, Dell is the third largest provider of personal computers In the 2022Fortune 500 list, Dell ranked 31st, up from 76th in 2021 It is also the sixth largest company inTexas in terms of gross revenue according to Fortune magazine It is the second largest non-oil-related company in Texas

Dell provides a broad range of technology products for the consumer, education, enterprise,and government sectors In addition to its line of desktop and notebook PCs, Dell offersnetwork servers, data storage systems, printers, Ethernet switches, and peripherals, such asdisplays and projectors.The company has business presence across the Americas, Asia-Pacific,the Middle East, Africa, and Europe Dell is headquartered in Round Rock, Texas, the US

Dell Technologies Inc products and services

Total revenue

CHAPTER 2: CATEGORY SOURCING

2.1 Definition

Category sourcing refers to the strategic process of procuring goods, services, or resourceswithin a specific category of products or services in a business or organizational context Thegoal of category sourcing is to optimize the acquisition of goods and services by effectivelymanaging the supply chain, negotiating with suppliers, and ensuring that the organizationreceives the best value for its investments

2.3 Four basic sourcing strategies

For every segment of the portfolio a different sourcing strategy is possible These strategiescan be summarized as follows:

Performance-based partnership

Competitive bidding

Securing continuity of supply

Reducing operational complexity

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CHAPTER 3: PROCUREMENT PORTFOLIO ANALYSIS

(KRALJIC MODEL)

3.1 Overview of the Kraljic matrix

The Kraljic matrix is a method for classifying and analyzing the purchasing portfolio in order

to guide the procurement strategy of companies It is a tool for managing item categories for acompany in relation to the market

In this approach the procurement turnover and the supplier base are analyzed on the basis oftwo variables:

- Impact on the bottom line of the company The profit impact of a given sourcing category

or item is measured against criteria such as cost of materials, total costs, volumepurchased and percentage of total purchase cost, which is often represented on the verticalaxis

- Supply risk, this is measured against criteria such as short-term and long-term productavailability, number of potential suppliers available, cost of changing a supplier, supplymarket structure, supply chain complexity, geographic distance, inventory risks andavailable substitutes, which is often represented on the horizontal axis

These represent the sourcing categories, each representing different interests to the company

- Strategic products: The company's operations depend on these items These are high tech,high-volume products which are often supplied at customer specification Only one source

of supply is available, which cannot be changed in the short term without incurringconsiderable costs Balance of power between the parties involved can be differentiatebetween three different sub-segments: Buyer-dominated; Supplier-dominated andBalanced relationship

- Leverage products: These are the products that can be obtained from various suppliers atstandard quality grades They represent a relatively large share of the end-product’s costprice and are bought at large volumes A small change in price has a relatively strongeffect on the cost price of the end-product The balance of power is buyer-dominated

- Bottleneck products: These items represent a relatively limited value in terms of money,but they are vulnerable with regard to their supply They can mostly be obtained fromonly one supplier The balance of power is supplier-dominated, which may result in highprices, long delivery times, bad service and severe cost consequences

- Routine products (Non-critical products): These products usually have a small value peritem and there are many alternative suppliers The purchases of these items have littleimpact on the company's activity and their procurement remains simple but take up 80%

of the time and energy of the procurement department

The emphasis of procurement should mainly lie with the strategic, bottleneck and leverageproducts Work related to routine products has to be limited as much as possible

3.2 Analysis of Apple and Dell’s category sourcing based on the Kraljic model

With the Kraljic matrix applied, we will categorize some identical items in Apple and Dell’sprocurement process into the four sourcing categories:

Overall Apple owns a global supply chain.

Detail parts & components come

from all over the world, from

rare-earth in Mongolia, Japanese labs,

American chips, to “big”

manufacturing plants in China

Apple’s network of suppliers can

reach 800, spread across 30 different

countries In particular, there are key

players such as: Foxconn, Luxshare,

Petragon, Qualcomm, LG or even its

rival – Samsung

Dell Inc., a multinationaltechnology company, relies on adiverse network of suppliers tosource components and materialsfor its products

The retail giant has got suppliersfrom all over the world, includingmajor companies such as Motorola,Samsung, Sony and more All ofthem supply the components –HDDs, cables, motherboards

- Apple's strategic items include

proprietary components like their

A-series and M-series chips,

high-quality display panels, and

specialized hardware for devices

like iPhones, iPads, and Macs:

- Supplier-dominated segment:

Communication chips that

are difficult to develop with

only a handful of suppliers

including Qualcomm,

MediaTek and Samsung

Displays from either

Samsung for OLED or LG for

LCD because of their superior

technology in these displays

manufacturing

Camera sensor from Sony,

the company which kept the

lead with 42% CMOS sensor

market share in 2022

- For Dell, strategic components might include high-performance processors from suppliers like Intel and AMD, advanced storage solutions, and specific high-end graphics cards for their premium ranges:

Software: Dell utilizes

Windows from Microsoft which is one of the most widely used operating systems for personal computers in its products Additionally, Dell and Microsoft have collaborated

on cloud computing and

Graphic processors relied

heavily on GPU designs from

Imagination Technologies

Although the supplier sources

for phone GPU is limited, the

balance of power shifted to

Apple when they announced

that it will stop using

Imagination Technologies

intellectual property within

two years working on its own

custom graphics architecture

- Balance relationship:

Original design

manufacturing services

(ODM) that builds devices

which are then branded by

commissioning companies

The main ODM of Apple is

Quanta Computer Quanta has

been able to meet almost all

requirements of Apple and

that is what makes the

Apple-Quanta relationship

sustainable

⇒ Apple invests heavily in R&D

and maintains close relationships

with key suppliers, often engaging

in exclusive contracts to secure

level of control and access to these

critical components.

Microprocessors and Semiconductors: Dell has

been known to source microprocessors from companies such as Intel and AMD - two major players in the microprocessor market, providing CPUs (central processing units) for a wide range of computing devices

- Buyer-dominated segment:

Original design manufacturing services

(ODM): As for Dell’s situation, ODM plays a vital role in its supply chain However, unlike Apple who stick with one ODM, Dell has this service provided by many firms such as: Celestica, Compal, Delta Electronics, Foxconn and Pegatron

- Balance relationship:

Cloud computing and virtualization: The main

supplier is VMware, a leading provider of virtualization and cloud infrastructure solutions DellTechnologies owns a majority stake in VMware This strategic alliance enables Dell to offer comprehensive solutions for the field

integration is less extensive compared to Apple They rely on key suppliers for critical components and customization rather than designing their own components Dell's supply chain efficiency is evident in its build-to- order model, allowing for customization and minimizing inventory, which is different from Apple's approach of maintaining inventory.

- Crucial products that can be

obtained from various suppliers at

standard quality grades Apple

exerts aggressive sourcing and

tendering among prequalified

suppliers, willing to make changes

Audio chips and IC

controller:The main source

for this item of Apple is

Cirrus Logic which relied on

Apple for 79% of its revenue

However in 2019, Apple

chose chips from Maxim

instead of sticking with its

longtime supplier Cirrus The

iPhone 15 models has

abandoned the solid-state

buttons (which Cirrus was

developing IC controllers for)

- Dell, like many technology

companies, leverages its purchasing power and strategic relationships to secure these key components for its products

Battery Technology:

Lithium battery maker Simplo Technology (Taiwan) is cooperating withbattery cell producer BYD

Co (China) in an effort to secure new orders from Dell for its value notebook-use, lithium-ion battery packs

Storage solution: Storage

solutions, including volume of hard drives and solid-state drives, are essential for Dell's product

high-Skyworks are mostly installed

in Apple’s iPhones, iPads,

Macs, Apple Watches, and

other devices However, there

are reports claiming that

Apple was developing its own

wireless chips to pivot away

from third-party chipmakers

3D-sensing chips and lasers: to

power Face-ID features, mostly come

from the Lumentum supplier and

there are reports claiming that Apple

could split some of its laser orders

with Sony

subsidiary of Dell Technologies, is a major supplier of Dell for this category

Plastic and Metal Casings:

from Various global suppliers Dell exercises leverage in sourcing casings from multiple suppliers, ensuring flexibility and cost control

in design and manufacturing

- Apple has faced challenges

related to sourcing these items

which are of limited value in terms

of money, but the supply is scarce

Sapphire screens - at scale:

Apple wanted sapphire for

camera lenses and the Touch

ID sensor The market is

limited with Samsung which

boasts super-AMOLED

screens that it makes and uses

exclusively or Kyocera of

Japan and the

super-expensive Vertu which offer

sapphire screens but neither

- The impact on profitability is low, the supply risk is high because these items might be sourced from a limited number of suppliers or be subject to market volatility

Graphene: Dell has

announced the release of a new laptop that utilizes graphene technology so theydemand a high-volume of this material However, producing high-quality graphene in large quantities can be a complex and costly

numbers Apple demands.

Antenna module: The

production of these cards is

handled by two companies:

Murata and Career Tech

Murata supplied more than

60% of the antenna modules

and could not cope with the

manufacturing volume While

Career has just started to

increase production rates

Main camera PCB: While

other smartphones, Samsung

and Huawei, use a combined

electronic board in

dual-camera smartphones, in the

iPhone, a separate module is

provided for each sensor In

production, the key supplier

Interflex faced a low-quality

circuit designed for a

2023 global chip shortage is

an ongoing, worldwide chip shortage affecting more than

169 industries including Dell.Facing this worldwide shortage, Dell’s strategy has been working closely with its supply base and giving them early indications of Dell’s needs

- These items present few technical

or commercial problems for

Apple’s sourcing However Apple

actively tries to secure their control

over these sections.

- These items are necessary for daily operations, they do not significantly impact Dell's profitability or pose a significant supply risk.