Apple Inc., is a highly successful firm. Inventory management is argued to have played an important role in that success by ensuring the goods get to the consumers in the right manner in a highly efficient and cost effective manner (Berka, 2009). To appreciate the inventories system it is necessary to look at the way in which inventory is accounted for, as well as the underlying inventory management systems.
Apple Inc., account for inventory using the first in first out system (FIFO). This is one of the most common methods of inventory valuation, calculated based on the assumption that inventory will all be utilized in date order. As inventories received into the company, it is assumed that the older stock will be utilized to fill the incoming orders (Elliott and Elliott, 2011). Therefore, valuation is relatively simple, using the most recent deliveries in reverse order to account for any inventory which remains the property of the company when the value is calculated. The FIFO is a theoretical approach, as the valuation will not always reflect the actual flow of the stock, although it will usually be rotated in line with the FIFO principles. The actual valuation given to the inventorying on hand will be based on the lowest of actual cost, or market value, whichever is lower (Apple, 2012).
The current inventory system was developed by the current CEO, and former COO, Tim Cook. Cook was brought in when Bill Gates return to Apple, at a time when the company was facing a large number of challenges (Nui, 2012). The Apple inventory system was a mess, and a great deal capital was tied up in the stock. The primary motivation in the changes created in the inventory management system were to eliminate the in-house manufacturing which would significantly reduce the amount of working capital tied up in stock. Furthermore, the systems were developed in order to streamline the inventories system to reduce the amount of goods that had to be held by the company. Tim adopted the view that "in the employee is evil," a term that has subsequently been widely cited (Nui, 2012). In order to hold minimal levels of inventory that still ensure there is sufficient to meet consumer demand, a perpetual inventory system had to be adopted. At any point in time the company can refer to the inventory system in order to know exactly what stock is held and where,
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