Logistics Case
With the inauguration of the new Trump Administration, Apple and other U.S.-based firms are reexamining their global footprint of supplier, manufacturing, assembly and logistics operations. The new administration has stated its goal to place a tariff on goods manufactured in other countries that are then brought in to the U.S. for sale. This tariff has been proposed at rate of 35-45% of the price of the item.
It can be anticipated that, in response, retaliatory tariffs will be enacted upon those industries in the U.S. which export goods to countries on whom the new U.S. tariffs fall heavily such as Mexico and China.
Apple Inc (AAPL) has contracted with you to redesign its entire logistics and operations footprint for the global production, distribution, inventory and sales of its iPhone 7 product. To ensure the flow of product, Apple management would like to open an unknown number of regional warehouses to serve the different markets instead of having the iPhone shipments sent directly from the subcontract manufacturing facilities.
Management requires the following recommendations, based on a desire to minimize cost while consistently obtaining a 95% service level:
1. Assembly Plants
a. Where should the iPhones be assembled, and tested, and what is the effect on total cost of the product?
b. What capacity should each location plan for based on your forecast for the iPhone product?
c. What level of automation is recommended in each facility?
d. What changes in supplier network (if any) are recommended based upon the new manufacturing strategy?
2. Packaging
a. What size master carton is recommended?
b. Given the master carton size, what unitization and container packaging do you recommend for shipments to each distribution center?
c. Do you recommend different unitization and container packing for shipments to each market?
3. Warehouse
a. How many regional warehouses should be built?
b. Where?
c. What size warehouse(s), given size of containers, master cartons and pallets? (add 20% for material handling)
d. Which markets should each serve?
e. Which factory(s) should serve which warehouse(s)?
4. Order and Shipment Quantities
a. Given the markets and factories assigned to each warehouse, what is the EOQ and reorder point for the warehouse(s)? (Standard deviation of daily demand is about 15% of average daily demand, holding cost 25% of the cost of the item.
b. How closely does the EOQ match the container/truckload size?
c. How does this affect your transportation or ordering decisions?
d. How much should be ordered at a time and at what reorder point?
5. Transportation Modes
a. What mode(s) of transportation should be used to ship from the manufacturing sites to the regional distribution centers?
b. What mode(s) of transportation should be used to ship from the regional distribution centers to each market?
6. Information Flow
a. What technologies will you use to label and track each shipment?
7. What is your estimate of the total cost for the current system and total cost for the new proposed system?
Management would like a report with not only the answers to these questions, but a written rationale for why you have made each of your recommendations.
