Apple Case Study

A brief summary of Apple’s history and its development

Review Apple’s supply chain for its iPhone product, there are some differences set it apart from competitors

As Jessica Grant, what recommendations would you make to the company's VP? Explain

Buy, hold and sell are common investment strategies. We suggest that BXE Capital (BXE) should keep Apple as a key holding in the company’s fund. The function of Apple’s stock in the portfolio is to generate moderate income with low risk. Consistent growth in expected financial return and potential growth in dividend will benefit BXE if the company keep the current investment portfolio. Moreover, it is confident that Apple can consistently grow in the future.

Continuous growth of expected return (ref: http://performance.morningstar.com/stock/performance-return.action?t=AAPL)

When comparing the stock performance, Apple have better peformance than its competitor, SamSung.

  

           

(ref: http://www.gurufocus.com/dividend/SSNLF, http://www.gurufocus.com/dividend/AAPL)

Why Apple could grow in the future?

1. Strong Branding with a Valuable and Unique Market Position

There are 6 major product segment in Apple, such as iPhone, iPad, Mac, iPod, iTunes and Software, Accessories. The variety of product lines can share the R&D cost and also capture more market share.

When Apple announced the new iPhone Models, many people doubted if the new iPhone would still able to capture public’s attention. However, the iPhone 7 launched last year has turned into big hit and helped Apple capturing the largest percentage of market share in quarter 4 of 2016. The impressive sales figure has proven that Apple is very strong in keeping customers loyal to the brand.

2. A Leading Supply Chain which Helps Maintain Competitiveness

Apple is famous for innovation products and creative design, however, the powerful supply chain is also a factor that makes Apple so powerful. Research firm Gartner has ranked Apple’s supply chain is the best in the world for last 9 year (since 2007). The strong relationship with suppliers, tight control of the supply chain and strict protection on intellectual properties have made Apple’s supply chain efficiency and stand out from its competitors.  Apple’s prestige and market power helped a lot in negotiating prices with suppliers, therefore, Apple is able to capture high margin to support company growth.

3. Strong Inventory Management

Strong inventory management is key to control cost especially for innovative products. In 2012, Apple was said to turn inventory every 5 days; while Samsung turning their inventory approximately 21 days. Technology manufacturers can’t afford to keep too many products in stock because a sudden announcement from a competitor of new model product could change everything and suddenly bring down the value of products in inventory.  So, lowering the number of inventory can avoid the inventory cost and depreciation of products.

HACTL Visit

Company Background

Hong Kong Air Cargo Terminals Limited (Hactl) was founded in 1976, it provides import, export and transhipment services of air cargo. To boost up the efficiency, Hacrtl has been using an advanced air cargo management system, COSAC-Plus, which enables information sharing and tracking anytime, anywhere. The system is able to handle over 1,000,000 data transaction per day.

Hactl has built up its own air cargo facility, SuperTerminal 1, which is the largest single multi-floor terminal over the world and Hactl is capable of handling 3.5 million tonnes of cargo per year.

Introduction of Hactl

We were given an introduction about Hactl’s background, business focus and competitive advantage were given by the staff from Public Relations Department. Hactl has been providing service of air cargo handling since 1976 and the company is trying her best to contribute to Hong Kong’s air cargo business. Hactl owns and operates Super Terminal 1 (ST1) which has well-developed cargo handling facilities. For example, Container Storage System (CSS), Box Storage System (BSS) and 313 loading docks. The comprehensive facilities have helped to enhance Hactl’s productivity and efficiency. On the other hand, Hactl cares a lot about security. Hactl has installed over a thousand CCTV in ST1 and every vehicle needs an authority when it enters or leaves ST1. Apart from security, Hactl also provides customers convenience. The advance air cargo management system supports real-time tracking and information sharing. Customers can make use of that information to perform clearance in a faster manner.

Guided Tour

Just after the introduction section, the staff of Hactl guided us to walk around the ST1.  For the sake of protecting privacy, we were not allowed to take the photo in restricted areas. We started the visit from the fourth floor to ground floor. Fifth and sixth floor are used for storing empty containers, therefore, we have skipped these floors. The fourth and third floors are workstations for cargo build up and break down the process. The second and the first floor are used for cargo handover process and security spot-check. The ground floors is a perishable goods handling centre which is adjacent to the airport apron in order to minimise the distance between aircraft and the centre's truck docks. Hactl also operates two automated systems which are Container Storage System (CSS) and Box Storage System (BSS). The CSS is used for transfer unit load devices (ULD’s) from the tarmac straight into the system. The BSS provides storage positions for cargo awaiting import, export and transhipment in one location. Both CSS and BSS are multi-storey facilities.

 Multi-floor Container Storage System (CSS)

The apron where goods loading or unloading take place.  

Question and Answers

Since the executive staff are not able to come to the Q&A section, we are only able to clarify some of the questions with the Hactl staff.

Q. What specific or unique innovative technologies do HACTL incorporate with its cargo terminal operations to sustain the global supply chain with the airline clients? What measures does HACTL take to ensure workplace safety?

Hactl provides training for in-house workers regularly, especially for those who are new to air cargo industry. There are D.C. training and normal operations training in order to refresh their memories on how to correctly do the job tasks. Congestion sometimes happens and workers have no places to stand safety, which is quite dangerous. However, Hactl can only rely on training to teach workers to cope with dangerous situations.

Q. What would you consider the building of the third runway as an opportunity or challenge for Hong Kong’s air cargo industry?

This question cannot be answered.

Q. How does your company Container Storage System(CSS) and Back Storage System(BSS) work to facilitate cargo management?

Both CSS and BSS are multi-storey facilities which can operate automatically. The CSS is used for transfer unit load devices (ULD’s) from the tarmac straight into the system. CSS provides more than 3,500 storage positions and link with workstations located on 2/F, 3/F and 4/F. CSS allows Hactl to move, store and handle cargo in efficiency manner. The BSS is a bit different from CSS. It provides storage positions for cargo awaiting import, export and transhipment in one location. In addition, BSS cannot handle inventories with full pallet size. However, BSS is directly linked to the Customs Examination Hall which allows the customer to retrieve their inventories in a faster way.

Q. Knowing that HACTL also handles special cargos such as livestock and perishable goods, how does your company manage the complexity and optimise capacity?

A: Hactl also provides service of handling special cargos such as perishable goods, dangerous goods, livestock etc. Hactl will conduct different cargo handling process so as to avoid any defect of stocks during the transportation. For example, perishable goods are dedicated customs examinations facilities to allow for a fast release of goods.

Q. Being the largest ground handler at the world’s busiest cargo airport, how will HACTL react to increasing air transportation demand given the shortage of available slots and space constraints at Hong Kong?

This question cannot be answered.

Q. What are Hactl’s biggest competitive advantages over Cathay Pacific Cargo?

Hactl’s 2,500 employees are all in-house staff but the frontline staff of Cathay Pacific Cargo are mainly assigned to subcontractors. Having its own in-house staff, Hactl has a more flexible operation to cater to different requirements of over 100 airlines customers. As for Cathay Pacific Cargo, it faces more difficulties in managing all those subcontractors and problems always happen in operation industry. Thus, Hactl provides more reliable, flexible and experienced services to customers.

Q. With the third runway coming up, are there any strategies or expansions to cope with the increased cargo movement?

This question cannot be answered.

Q. How does COSAC-Plus system help to increase the tracking efficiency?

The customer of Hactl can perform various business decision based on the information shared through COSAC. COSAC allows information exchange, cargo tracking and clearing etc. Therefore, the customers can manage more efficiently or even react to market demand faster.  

Q. How does HACTL apply EDI to support B2B communication and enhance the services' efficiency and effectiveness?

Hactl has a system, COSAC-Plus, to connect each stakeholder for electronic information sharing. For example, if a customer has to speed up the customs clearance operation, he needs the data before the cargo actually arrives. If Hactl relies on hard-copies, the process will be very slow that Hactl has to wait for the cadet to send out the documents and then deliver to the customer. However, COSAC-Plus can have information on a real-time basis and Hactl can send the information to customers so that they can decide on whether they will do the customs check and reply via the system.

Kerry Logistic Company Visit

Company Background

Kerry Logistics is a company that provide different logistic services. They include third party logistics, international freight forwarding, warehouse operations and supply chain solutions. The headquarter of Kerry Logistics located in Hong Kong. It also operates distribution network and hub in China and Asia region. Over 100 brands from different industries around the world employ Kerry logistics, including fashion & lifestyle, electronics & technology, food & beverage, FMCG, to industrial & material science, automotive, and pharmaceutical & healthcare. They aim to deliver products faster and more cost-effective by applying world-class assets, industry experts and award-winning IT systems and process.

Introduction of Kerry Logistics hub in Hong Kong

The employee explains the background of the distribution centre project. Their project operates in two floors in the building, which are the fourth floor and seven floors. The fourth floor mainly for retail products storing. The eleventh floor mainly for franchise products storing. The distribution centre is operating for three brands. For the retail industry, Kerry mainly serves the local market, but they serve the oversea market for franchises. Products transport to the distribution centre by three logistic models, which are by truck, by sea and by air.

Guide Tour

After we arrived Kerry Logistics Building, we went to a floor that have a hanging garden in the middle of the office. Then we went to visit the warehouse.

This is the inbound area. The first step that they do is sort by purchasing order when the products arrive. After that, they will do the scanning by cartons. Then they will do the inbound audit activities, which included 5 percent quantity check per purchasing order and check the price tag in the garments.

Then, they will do the demix receiving and put-away of products procedures. Demix means that classify the product, such as classify by size. After these procedures, the products would be put on the storage shelves.

Then we go to visit the outbound area. This is the product allocate shelves for each store. If the store log is full, the products would be deliver. There are three types of packing methods, which are piece pick, pick-to-store and full-carton pick. Piece pick means the worker will go the check the quantity needed by the handheld, and then pick the products and put the products to empty cartons. Piece pick productivity is relatively low, which is about 100 piece per hour. Pick-to-store means that the products are pick to meet the quantity required by each store. The productivity for pick-to-store is about 200 to 300 piece per hour. So the productivity is greatly increased by using pick-to-tore.

This electric truck is used to transfer products in the warehouse. No license is need to use the truck.

The cartons are group by divisions, such as men, women and babies. It helps the workers to do the packing because picking is picking by divisions.

Bar code and detail information about each product is shown clearly on the tag.

We also went to visit eleventh floor. This floor mainly serve for Netgear, which is a network equipment company in US. The warehouse separate to two parts - finish products logistics and return logistics. Finish products logistics is similar to normal logistic. But return logistic is more special in the warehouse. After received the return products, there is an area to test and repack the products. Apart from receiving and picking area, we also visit the relabeling area and testing area in the warehouse.

The hub is serving GAP, Banana Republic and Old Navy.

The screen near the office is showing all inbound and outbound data. It keeps updating every hour so the employees can know whether they meet the daily target.

Question and Answers

Q.How exactly does your “KerrierVISION” IT Platform work to enhance supply chain management?

KerrierVISION is key to monitor the transportation process. When we pick up the goods from center, the 3PL can enter data and updated data in system, until they transport to our warehouse. The client can check the record and data in the KerryVision. It will also transport to the final consumer, so they can also check the record in the system. That’s why it can help them to monitor its process and goods. Thus, the system helps to analysis the data and improve the time management.

Q.How does Kerry take advantage of advanced technologies (such as Internet of Things, wearable technology, etc.) to enhance accessibility and connectivity along the supply chains?

Kerry applied various technologies in supply chain, such as use Voice Picking system in warehouse for order picking and packing procedure. Worker can just use the Android phone and connect with headset and microphone. When it connected to warehouse management system, worker will receive picking command, such as where should they go and which goods they should pack. It can free their hand as they did not need paper and pen. They can pick and pack the goods more comfortably and easily.

Q.Kerry Logistics provides different supply chain solutions to clients from different industries such as fashion, F&B, automotive, etc. How does Kerry Logistics fulfil the wide variety of requirements with limited resources?

Kerry is one of largest company which servicing different kinds of clients, such as food & beverage, electronic plant and fashion lifestyle plant. It will separate their colleague into different segment groups which have expert experience for servicing different industries. They can use their expertise to service their clients more comprehensively as they can understand their clients and fulfill their specified requirements.

Q.How does Kerry Logistics use tracking and tracing system to provide real-time service to customers? Are there any tailored-made systems for specific customers and/or high-end products?

Kerry has Proof of Delivery (POD) system, when Kerry delivery goods to final customers, it will have android phone to recording where are we transporting our goods. When the goods leave warehouse, it will record data manually to update in the system. Then the driver or delivery man will call the final customer and ask them to record the receiving process. So, our customer can track the goods via the system to see the delivery stage.  

Q.Apart from adopting environmental friendly designs in office, what other practices do Kerry Logistics has deployed in promoting sustainability?

Kerry use LED lighting for in house operation. Apart from this, Kerry got a certificate for proofing the structure of building with environmental friendly, which means we used LED lighting and use environmental friendly material. In addition, Kerry have some range of water collection facilities inside the warehouse. Also, the trucks they used for delivering goods are preferred to use electronic rather than oil fuel.  

Q.What kinds of unique value-added service do Kerry logistics provide to its customers?

Kerry has Return merchandise authorization process (RMA) and some checking for clients. Also, they would fulfil some client’s special request. For example, it was used to help Godiva to pack and unpacking gift set during valentine day and Christmas day and then delivery to their store.

Q.How do Kerry logistics expand new customer base?

Kerry have professional sale team which response to continuously explore business in Hong Kong or overseas. Also, Kerry has integrated logistic part and the international freight forwarding part. So, there are different customer base between IFF part and IL part. So, the sale team would try to use cross selling strategy. For example, they would ask the client from IFF part whether they are interested to use the IL service.

Q.How did Kerry manage to keep its operation smoothly when Kerry had to redesign its warehouse layout to cater the implementation of the robotic butler system in its P3C facility? Is it always the case that automation brings positive impact towards the company?

Kerry has team of PME to plan how to allocate goods and service. They will work with not only PME team but also the warehouse staff. As the warehouse staff have many experience in dealing with the good demand size like the season fluctuation, they have more knowledge to implement the robotic butler system.  

While in the planning process, Kerry will develop some emergency plans. Under certain circumstances, it will plan some guideline for the employee to follow. So, it can solve some problems more easily with more detail planning.

Q.What are the competitive advantages of Kerry Logistics in logistics industry?

As Kerry has been established over 30 years, it has many different expertise from years. Kerry has accumulated a lot of knowledge and history. The old staff can help to training the new staff based on their experience; while the new staff would bring new ideas into company. Also, Kerry has sufficient support to employee. It will provide some training for all worker so that they can master new technology.

Also, Kerry can enjoy economic of scale. It can make use of some warehouse and many manpower. When the different client has a different peak season, it can allocate a different resource from the different warehouse and then it can support each other more easily.

Q.How Kerry Logistics adopts green technology in the warehouse operation and transportation?

The answer is same as question 5.

HIT Group Company Visit

Company Background

Hong Kong International Terminals Limited (HIT) was established in 1969, operated in Kwai Tsing Container Terminals. HIT is one of the world’s busiest container ports and owns 12 berths at 4 Terminals. HIT has been using advanced IT systems, equipment, and modern management techniques to improve productivity and efficiency of the operation.  HIT has expanded in the Pearl River Delta to develop its cost-effectiveness and efficiency port and logistics network, so that HIT can create an integrated supply chain network with a full set of logistics value-added services.

Introduction by HIT's Representative

The representative came from Human Resource Team and she was responsible for introducing her company to our class during the visit. Firstly, she introduced HIT’s infrastructure, history and future development in Hong Kong.

She mentioned that Hong Kong was regarded as a free container port, which meant containers could enter in or out without inspection by customs offices. This can save a lot of time and cost. Besides, she started to introduce more about HIT’s infrastructure and facilities. About twelve berths at Terminals 4, 6, 7 and 9 are operated by HIT. Equipped with the latest quay cranes capable of handling 24-across container vessels.

Next, she showed a timeline of the comprehensive development history of HIT from the establishment of HIT to the present. For the most significant development of HIT was the Yantian International Container Terminals in Shenzhen. The container throughput has reached 123 million, even more than Hong Kong. In the future, HIT plans to build a strong relationship with other oversea terminals.

Secondly, it came to Q&A session and finally led us to walk around the container port.

Guide Tour

We first came to the exhibition room of HIT. A big demonstration screen showed HIT's name and logo. A staff with HIT staff card came out and self-introduce herself. She came from Human Resouces Team and she would guide our visit for the visit. She firstly introduced the background information of HIT. HIT was a member of HTH Trust and regarded as the largest international container port in Hong Kong. 

At this moment, the screen showed a timeline of HIT history. The staff explained what happened at each year and pointed out some significant event of HIT, like HIT handled its 100 millionth TEU in 2006 and developed Yantian International Container Terminals in Shenzhen since 2009. 

In this picture, it showed that the general information of the Ports Yantian. The total area of Ports Yantian is 373 HA, the berth length is 8212 metre and the deep alongside is 14 to 17.6 metre. 

Yantian International Container Terminals (YICT) is a natural deep-water port and the leading gateway serving import and export container traffic generated by its immediate cargo hinterlands. 

After that, we came in front of a model that displayed the complete container terminal. The staff continue described the basic facilities and route of the terminal. 

Here was an earth model showed the old pictures of the terminal. 

Next Generation Terminal Management System (nGen)  controls the entire scope of terminal operations, including ship and yard planning, gate operations, and vessel operations; plus overall operations monitoring, equipment utilisation, productivity, and costs optimisation.

The Operations Monitoring System (OMS) helps operators visualise terminal operations and container stacking information. Graphic overviews cover the entire container yard down to the details of an individual container, and this predicts yard congestion so that operators can take pre-emptive action.

There are a lot of containers at the port. 

Container ship carried the hugr amount of cargo and was waiting to unload on the port. 

The container-lifter was ready to lift the cargo. 

The container truck was used to carry the containers. Finally, we ended this visit.

HIT has introduced a lot of new technologies in its operations to improve efficiency and customer satisfaction. How does HIT help its front-line staff adapt to these new practices?

In order to help front-line staffs adapting the new practices due to introducing new technologies in daily operation, HIT provides job training to the staff for them to familiar with new practices. Since on job training is conducted at the job site, this will also minimize the influences to the productivity.

Moreover, there is a remote operation system in HIT. This system can help to provide a better working environment and at the same time provide help to the front-line staff if they need.

Question and Answers

Q. How far is it until HIT reaches its freight handling capacity and is there any consequent plan in response to this issue?

The capacity of freight handling in HIT is almost full. So, HIT should improve the inventory management to maximize the use of capacity.  For example, it developed a demand strategy to calculate the  expected demand more accurately.

Apart from controlling the inventory, HIT fighting for more space and land from the government for containing more containers.

Q. There are many ports located in Mainland China and some of them such as Shanghai, Dalian and Qingdao contain superior geographic advantages. How can HIT overcome the challenges brought by main ports in the mainland?

HIT, the port in Hong Kong, usually acts as an intermediate destination of the shipment. After combining small shipments into a large one or dividing the large shipment at the other end, the shipment will then be transferred to another destination.

Although it is cheaper to handle the containers in the mainland, there are still some characteristics of HIT which make the company remains competitive. The most important one is the free trade policy of Hong Kong. Most of the containers are not required to perform random checking while arriving Hong Kong unless HIT receiving notification from the Customs, suspecting the shipment is violating the law. With the aid of high productivity of HIT, the ports in Hong Kong is known as the world’s leading “catch-up port”, where time lost on the route is assured to be made-up at the facilities. This enviable reputation can help HIT overcome some of the challenges brought by the mainland. ​

Q. HIT has introduced a lot of new technologies in its operations to improve efficiency and customer satisfaction. How does HIT help its front-line staff adapt to these new practices?

HIT used the Next Generation Terminal Management System(nGen) to increase their operations efficiency. 40% harbours in the global are using this system. nGen can control the entire scope of terminal operations, including ship and yard planning, gate operations and vessel operations.

For adapting these new technologies, HIT will provide a set of on-site training for staff to improve their capability of using these softwares. With using these new technologies, the controllers are allowed remote operation in operation centre. It can improve the working condition.  

Q. What are your competitive advantages over your competitors in the logistic industry?

The major competitive advantage of HIT over the competitors in the logistic industry is the infrastructure and technology introduced to the operation. HIT has already been using an eProcurement system and an eFinance system for back-office automation. Moreover, using the nGen operation system, developed by HIT in-house, to run its fleet of automatic stacking carriers and quay cranes will also increase both efficiency and productivity at the port.

In terms of customer service, the commercial team of HIT will also provide extra help on request by the customer. For example, HIT can provide extra equipment if it is needed for the ship parking at the port.

Q. What role does HIT hope to play in the Chinese Government’s One Belt One Road Initiative?

HIT plays an important role under the policy as HIT has more than 20 harbours, which are the transportation points in the One Belt One Road. It is important to import and export products between different countries. Thus, HIT has more opportunities to provide service in this new channel and expand new customer base.

Q. Asian shipping industry has been suffering from sharp declines in recent years due to more and more factories have been moving to Africa, how will HIT react to this unfavorable trend?

Although we saw that more factories have been moving to Africa, it did not directly impact in the operation aspect of HIT. However, it should point out that the decline of shipping industry can be contributed to the dropped of global trading. It is a challenge for HIT as it will directly affect the demand for service of the container terminal.

Q. How HIT can achieve the highest operating efficiency of the immediate

transhipment with the lowest operating costs?

HIT has a transportation team especially for internal transshipment. The transportation team is needed to transport merchandise between harbour and warehouse. In order to reduce the cost of inbond transportation, HIT developed a system that it will calculate the distance between harbour and the trucks. Then, it will arrange the most nearest and available truck to take the transport order. Under this strategy, HIT can reduce the delivery time and the operating cost.

Q. What are the major challenges faced by HIT in their daily operation?

As HIT applied some advanced system for operation and monitored by professional teams, it can perform stable and effective daily operation. However, it would has exception during some special situation such as the  extremely bad weather. The impact of  the special case is unpredictable so HIT have to formulate some emergency plan to response it.

Q. What exact measures does HIT incorporate into its daily operations to align with its corporate value of environmental protection?

HIT has implemented some environmental plans. For example, 90% of the diesel-driven RTGCS converted into hybrid RTGCs. The change of fuel is environmental-friendly as Hybrid RTGCs consume 30-50 % less fuel than diesel-driven RTGCs, produce 50% less carbon emissions.

Also, HIT keen on developing renewable energy in response to sustainable development. For example, the has developed the shore power in Yantian, one of the container terminal of HIT.

Shore power or shore supply is the provision of shoreside electrical power to a ship at berth while its main and auxiliary engines are shut down. When vessels use shore power, they tap landside electricity for their power needs at berth instead of running diesel-fuelled auxiliary on-board engines. Using shore power reduces noise and emissions, including CO2 and SO2.