Page 176 - DMGT310_ENTREPRENEURSHIP_AND_SMALL_BUSINESS_MANAGEMENT

Unit 11: Production Management

Notes
Inventory Management from 1995 to 1997
During 1995 to 1997, the company’s revenue growth was declining and in the same line the
net profit also declined from $424 million to ($1,045) million from the financial year 1995
to 1997. However, every product or raw material was stocked in a warehouse. The company
accumulated inventories of $1,775 million in the financial year 1995.
Inventory Management from 1998 to 2011

In 1998, Timothy D. Cook (Cook) joined Apple. He was in charge of Apple’s worldwide
operations. Jobs and Cook focused on reducing the inventories of the company. They
applied the strategy “slash inventory, shut warehouses, run manufacturing close to the
bone. This helped Apple get back on to the path of profit and set a new bar for the
electronic industry like competitors like Dell.” They closed down factories and warehouses
all over the world. They established relationships with contract manufacturers. They were
successful and the company generated a net profit of $309 million during the financial
year 1998.
Road Ahead
Cook developed a good ecosystem for the company’s business. He had gained good
experience in operational and inventory management. Under his leadership, Apple
developed an entire ecosystem of suppliers, who supported its business operations. The
company set itself the goal of obtaining stellar products and services within limited
timeframes, at a cost that represented “the best possible value” to both customers and
shareholders.
Questions
1. What are the strategies implemented by the Apple Inc to manage its inventory
effectively.
2. Critically analyze Apple’s strategy of working capital management.

Source: http://www.icmrindia.org/casestudies/catalogue/Finance/FINC079.htm

11.4 Summary

Production Management is the process of converting the input into output through a
conversion process.

Transformation takes place through machinery in manufacturing enterprises and through
employee’s skills in a service enterprise.
Capacity planning is the productive capability of a facility.

Capacity planning from day-to-day, month-to-month up to a year is called short-term
capacity planning.
Medium term capacity planning is from one year to five years.

Long-term capacity planning is planning operation above five years. Major changes in
capacity planning can be introduced.
Forecasting the demand for future will give an idea about the requirements of the
production/operation.
Continuous a production process may be, however effective production planning may be,
there is always some room for unpredictable rise/fall in demand and/or in availability of
raw material and/or lead-time between machines due to breakdowns on one machine.

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