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
FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS -*** - REPORT CATEGORY SOURCING: A CASE STUDY OF APPLE AND DELL Topic: Global Procument Management Class: GPM301.2 Instructor: Dr Nguyen Minh Phuc Group: Group Hanoi, 15 November , 2023 WORK ASSIGNMENTS No Name Student ID Distribution Nguyen Cam Nhung 2113150055 100% Hoang Hai Khanh 2112150081 100% Le Thi Nhu Quynh 2113150061 100% Nguyen Thi Mai Anh 2114110031 100% Tran The Phong 2212150138 100% Table Of Content CHAPTER 1: OVERVIEW OF APPLE AND DELL 1.1 Overview of Apple 1.2 Overview of Dell .3 CHAPTER 2: CATEGORY SOURCING .4 2.1 Definition 2.2 Category Management 2.3 Four basic sourcing strategies .4 CHAPTER 3: PROCUREMENT PORTFOLIO ANALYSIS (KRALJIC MODEL) .5 3.1 Overview of the Kraljic matrix 3.2 Analysis of Apple and Dell’s category sourcing based on the Kraljic model 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, Steve Jobs and Ronald Wayne to develop and sell Wozniak's Apple I personal computer Apple Inc (Apple) designs, manufactures, and markets smartphones, tablets, personal computers, and wearable devices The company offers software applications and related services, accessories, and third-party digital content It also provides advertising services, payment services, cloud services, and various consumer and professional software applications The company's business operations span 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, it was valued at just over $3 trillion The company received criticism regarding the labor practices of its contractors, its environmental practices, and its business ethics, including anticompetitive practices and materials sourcing Apple Inc products and services Total revenue 1.2 Overview of Dell Michael Dell founded the company in 1984 Dell Technologies Inc (Dell) is a provider of desktop personal computers, software, and peripherals As of January 2021, Dell is the third largest provider of personal computers In the 2022 Fortune 500 list, Dell ranked 31st, up from 76th in 2021 It is also the sixth largest company in Texas in terms of gross revenue according to Fortune magazine It is the second largest nonoil-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 offers network servers, data storage systems, printers, Ethernet switches, and peripherals, such as displays 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 resources within a specific category of products or services in a business or organizational context The goal of category sourcing is to optimize the acquisition of goods and services by effectively managing the supply chain, negotiating with suppliers, and ensuring that the organization receives the best value for its investments 2.2 Category Management Category management is a set of practices used to optimally manage spend categories (i.e sourcing categories) to meet (strategic) business objectives It guides the content and sequencing of tactical processes such as strategic sourcing and supplier relationship management (SRM) to satisfy both category objectives and (strategic) business objectives A category is a grouping of products or services that have similar supply, usage and demand characteristics 2.3 Four basic sourcing strategies For every segment of the portfolio a different sourcing strategy is possible These strategies can be summarized as follows: Performance-based partnership Competitive bidding Securing continuity of supply Reducing operational complexity Docume Discover more from: Quản lí thu mua tồn cầu GPM301 Trường Đại học Ngoại thương 21 documents Go to course G7 W16 Grammar AND Vocab Quản lí thu mua tồn cầu Global procurement management Quản lí thu mua tồn cầu Mẫu - dfs Quản lí thu mua tồn cầu Danh sách - fkjdufijfbhfdjdfk Quản lí thu mua tồn cầu UNIT 9 GGGGGGGGGGGGGGGGGGGGGGGGGG Quản lí thu mua toàn cầu VL 12-Đáp án chương - đáp án vl Quản lí thu mua tồn cầu 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 a company in relation to the market In this approach the procurement turnover and the supplier base are analyzed on the basis of two 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, volume purchased and percentage of total purchase cost, which is often represented on the vertical axis - Supply risk, this is measured against criteria such as short-term and long-term product availability, number of potential suppliers available, cost of changing a supplier, supply market structure, supply chain complexity, geographic distance, inventory risks and available substitutes, which is often represented on the horizontal axis The combination of these variables yields a two-dimensional matrix with four quadrants 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 incurring considerable costs Balance of power between the parties involved can be differentiate between three different sub-segments: Buyer-dominated; Supplier-dominated and Balanced relationship - Leverage products: These are the products that can be obtained from various suppliers at standard quality grades They represent a relatively large share of the end-product’s cost price and are bought at large volumes A small change in price has a relatively strong effect 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 from only one supplier The balance of power is supplier-dominated, which may result in high prices, long delivery times, bad service and severe cost consequences - Routine products (Non-critical products): These products usually have a small value per item and there are many alternative suppliers The purchases of these items have little impact 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 leverage products 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’s procurement process into the four sourcing categories: Overall Apple Dell Apple owns a global supply chain Detail parts & components come from all over the world, from rareearth in Mongolia, Japanese labs, American chips, to “big” manufacturing plants in China Dell Inc., a multinational technology company, relies on a diverse network of suppliers to source components and materials for its products 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 Strategic - Apple's strategic items include proprietary components like their A-series and M-series chips, high(high profit quality display panels, and impact - high specialized hardware for devices like iPhones, iPads, and Macs: supply risk) products - 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 The retail giant has got suppliers from all over the world, including major companies such as Motorola, Samsung, Sony and more All of them supply the components – HDDs, cables, motherboards - 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: - Supplier-dominated segment: Graphics processing units (GPUs): Dell has partnered with NVIDIA and AMD, two key players in the graphics and AI hardware industry 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 - Buyer-dominated segment: 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 enterprise solutions 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 - Balance relationship: manufacturing services Original design (ODM): As for Dell’s situation, ODM plays a vital manufacturing services (ODM) that builds devices role in its supply chain which are then branded by However, unlike Apple who commissioning companies stick with one ODM, Dell The main ODM of Apple is has this service provided by Quanta Computer Quanta has many firms such as: been able to meet almost all Celestica, Compal, Delta requirements of Apple and Electronics, Foxconn and that is what makes the ApplePegatron Quanta relationship - Balance relationship: sustainable Cloud computing and ⇒ Apple invests heavily in R&D virtualization: The main supplier is VMware, a and maintains close relationships leading provider of with key suppliers, often engaging virtualization and cloud in exclusive contracts to secure infrastructure solutions Dell level of control and access to these Technologies owns a critical components majority stake in VMware This strategic alliance enables Dell to offer comprehensive solutions for the field ⇒ Dell's approach to vertical 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-toorder model, allowing for customization and minimizing inventory, which is different from Apple's approach of maintaining inventory Leverage - Crucial products that can be - Dell, like many technology product obtained from various suppliers at companies, leverages its (high profit standard quality grades Apple purchasing power and strategic impact - low exerts aggressive sourcing and relationships to secure these key supply risk) tendering among prequalified components for its products suppliers, willing to make changes Battery Technology: Audio chips and IC Lithium battery maker controller:The main source Simplo Technology for this item of Apple is (Taiwan) is cooperating with Cirrus Logic which relied on battery cell producer BYD Apple for 79% of its revenue Co (China) in an effort to However in 2019, Apple secure new orders from Dell chose chips from Maxim for its value notebook-use, instead of sticking with its lithium-ion battery packs longtime supplier Cirrus The iPhone 15 models has abandoned the solid-state buttons (which Cirrus was developing IC controllers for) Storage solution: Storage solutions, including highvolume of hard drives and solid-state drives, are essential for Dell's product 10 Wireless chips from portfolio Dell EMC, a Skyworks are mostly installed subsidiary of Dell in Apple’s iPhones, iPads, Technologies, is a major Macs, Apple Watches, and supplier of Dell for this other devices However, there category 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 Bottleneck - Apple has faced challenges 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 - The impact on profitability is products (low related to sourcing these items low, the supply risk is high profit impact which are of limited value in terms because these items might be - high supply of money, but the supply is scarce sourced from a limited number of risk) Sapphire screens - at scale: Apple wanted sapphire for camera lenses and the Touch suppliers or be subject to market volatility Graphene: Dell has ID sensor The market is announced the release of a limited with Samsung which new laptop that utilizes boasts super-AMOLED graphene technology so they screens that it makes and uses demand a high-volume of exclusively or Kyocera of this material However, Japan and the super- producing high-quality expensive Vertu which offer graphene in large quantities sapphire screens but neither can be a complex and costly 11 makes them in the gigantic process so there are only a numbers Apple demands few suppliers in the field: Graphenea, Versarien and Antenna module: The XG Sciences production of these cards is handled by two companies: Semiconductors: The 2020– Murata and Career Tech 2023 global chip shortage is Murata supplied more than an ongoing, worldwide chip 60% of the antenna modules shortage affecting more than and could not cope with the 169 industries including manufacturing volume While Dell.Facing this worldwide Career has just started to shortage, Dell’s strategy has increase production rates been working closely with its supply base and giving Main camera PCB: While other smartphones, Samsung them early indications of Dell’s needs and Huawei, use a combined electronic board in dualcamera 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 wideangle sensor Routine - These items present few technical - These items are necessary for products (low or commercial problems for daily operations, they not profit impact Apple’s sourcing However Apple significantly impact Dell's - low supply actively tries to secure their control profitability or pose a significant risk) over these sections supply risk 12 Screws, metallic parts and Office Supplies and plastics pieces: Apple has Equipment: Low-impact reportedly seized control over procurement for routine the procurement of these parts office needs, posing minimal unlike in the past where risk to Dell’'s overall suppliers had free reign to operations acquire the parts needed to produce components Under packaging materials to allegedly negotiate with third- ensure secure transportation party suppliers directly, of finished products with dictating the price and order low associated risk volumes Office items: Apple sources Promotional Items: Items like branded merchandise, office items, including promotional giveaways, or furniture, equipment, and marketing materials that are supplies, from a range of used for advertising and suppliers However, the branding purposes rather specific details about Apple's than for the creation of supply chain and procurement Dell's primary products processes are closely guarded and not publicly disclosed by Packaging Materials: Routine procurement of the new policy, Apple will => From various suppliers the company => From various suppliers 13 CHAPTER 4: SOURCING STRATEGIES 4.1 Four basic sourcing strategies a Performance-based partnership The philosophy of partnership sourcing differs considerably from the traditional adversarial model of buyer-supplier relations In a partnership, buyer and supplier commit to continuous improvement and shared benefits in a long-term perspective by exchanging relevant information and working together to resolve problems The goal is to create mutual collaboration based on pre-planned, mutually agreed cost and operational improvement targets b Competitive bidding Suppliers and products are basically interchangeable, so there is no long-term supply contracts Long-term contracts and annual agreements will be combined with ‘spot’ buying Competitive bidding involves inviting multiple vendors to bid for the same material, product, or service per the business's requirements in order to find the most suitable supplier for the business needs Emphasizing multiple sourcing and periodic market analysis, this strategy prioritizes minimum pricing while maintaining quality and supply continuity Continuous market research helps avoid price arrangements between suppliers c Securing continuity of supply This strategy focuses on securing continuity of supply of products whilst reducing dependence on these suppliers at the same time by developing alternative products or finding alternative suppliers However, the costs involved in these actions often exceed the cost savings obtained, which is why management often has difficulty in approving them d Reducing operational complexity Routine products require a sourcing strategy which is aimed at reducing administrative and logistic complexity and increasing process efficiency This strategy involves simplifying administrative and logistical processes through standardized ordering methods (i.e article catalog), e-procurement solutions (i.e e-catalogs, P2P systems, B2B marketplaces), system contracts, and outsourcing to specialized procurement offices or trading houses 14 4.2 Four sourcing strategies and the Kraljic model a Competitive bidding for leverage products Competitive bidding is a widely used sourcing strategy for leverage products primarily due to its effectiveness in reducing costs and ensuring market-rate pricing Since leverage products are typically standardized with multiple available suppliers, competitive bidding allows for a transparent and fair process, encouraging suppliers to offer their best prices and services This not only aids in cost reduction but also in maintaining quality standards Additionally, by diversifying the supplier base, it mitigates risks associated with supplier dependency, making it a prudent choice for organizations aiming to optimize their procurement processes b Performance-based partnership for strategic products Since strategic products create heavy dependence on suppliers, performance-based partnership is a reasonable match as they focus on long-term value creation and align supplier goals with the company's strategic objectives This approach promotes innovation and quality improvement, and fosters stronger, collaborative relationships that are essential for strategic items requiring close cooperation Over time, this strategy can lead to cost efficiencies, making it a comprehensive approach for sourcing strategic products c Secure supply for bottleneck products Securing continuity of supply is a favorable strategy for bottleneck products due to the unique nature of this type of product - typically being scarce, hard to substitute, or having few suppliers It involves building strong relationships with reliable suppliers, often through long-term contracts, to secure access to these critical resources Additionally, it may include maintaining higher inventory levels or identifying alternative sources to safeguard against supply chain vulnerabilities This approach is vital for bottleneck products as their scarcity and importance can significantly affect production processes and overall business continuity if not managed effectively d Reducing operational complexity for routine products Routine products, typically low-value and frequently used, can burden resources with their management By simplifying processes, like automating orders and consolidating suppliers, 15 businesses save time and reduce administrative overhead, allowing them to focus on more strategic aspects of operations 4.3 Sourcing strategies of Apple and Dell Whilst both companies follow a combination of sourcing strategies, each for a different product type, their main strategy differs from one another, depending on which products being their top priorities Dell's emphasis on Leverage items, as opposed to Strategic items like Apple, is influenced by their distinct business models and supply chain strategies: a Business Model Dell: Unlike Apple, Dell targets a broader market segment, including budget-friendly options This requires maintaining a balance between quality and cost, which is achievable through effective management of Leverage items Dell’s business model focuses on providing cost-effective and customizable computing solutions Leverage items allow Dell to exploit economies of scale and negotiate better terms with suppliers, resulting in competitive pricing for customers Apple: Apple positions itself in the premium segment, focusing on innovation and quality Strategic items are essential for Apple to maintain its competitive edge in technology and design Apple's control over critical components like custom-designed chips ensures product differentiation and quality, aligning with its brand promise to deliver a seamless experience b Supply Chain Strategy Dell’s Lean and Responsive Supply Chain: Dell is known for pioneering the Just in Time manufacturing process, focusing on reducing inventory costs and enhancing supply chain responsiveness This approach helps in maintaining low inventory levels, reducing costs, and ensuring timely delivery 16 Speedy Manufacturing and Low Inventory: Dell maintains a rapid manufacturing process, holding inventory for no longer than six days, which reduces warehousing costs Apple’s Controlled Supply Chain: Apple’s approach is more vertically integrated (a vertically integrated supply chain refers to a business model in which a company is involved in multiple stages of the production and distribution process for its products) - First, by having its R&D teams, Apple can identify strategic components that align with its product vision and can be developed or customized to meet its requirements - This control is crucial for managing the high risk associated with strategic items, ensuring innovation, quality, and uninterrupted supply - This level of customization also allows Apple to tailor products (or custom components such as the A-series chips for iPhones or the M-series chips for Macs) to its specific requirements, ensuring optimal performance and differentiation from competitors - Finally, Apple's vertically integrated approach allows the company to keep its product development and component sourcing strategies confidential This secrecy helps protect Apple's intellectual property and prevents competitors from easily replicating its products c Supplier Relationships: Dell’s Multi-Vendor Sourcing: Dell contracts multiple vendors for procurement needs, a strategy that allows flexibility and competitive pricing Leverage items in Dell’s portfolio are less risky and can be sourced competitively Different vendors are pitted against each other to secure the best price and quality Apple: Apple often enters into long-term agreements with suppliers for strategic items, ensuring a stable supply of high-quality components essential for its products 17 In summary, Dell's focus on Leverage items aligns with its broader market reach, customizable product offerings, and lean supply chain approach, whereas Apple's focus on Strategic items supports its commitment to innovation, quality, and brand exclusivity 4.4 Challenges of Apple and Dell’s sourcing strategy Both Apple's and Dell's sourcing strategies, while successful, are not without their challenges: Challenges in Apple's Strategy: Supply Chain Risk: Apple's heavy reliance on specific suppliers for critical components can lead to vulnerabilities Any disruption (like natural disasters, political instability, or pandemics) at these supplier sites can significantly impact Apple's production Cost: Maintaining a tightly controlled supply chain with high-quality standards and innovation can be costly This can impact the final price of the products, limiting their market to predominantly premium segments Geopolitical Tensions: Apple's significant reliance on manufacturing in regions like China can pose risks amid rising geopolitical tensions and trade wars, potentially impacting supply chain stability Challenges in Dell's Strategy: Competitive Pressure on Margins: Dell's multi-vendor sourcing and competitive bidding approach, while cost-effective, can put pressure on margins, especially in a highly competitive market where price wars are common Quality Consistency: Managing a wide range of suppliers can sometimes lead to inconsistencies in quality, which can impact customer satisfaction and brand reputation 18