Conclusion

In the face of a forecast that spelled certain death for Apple due to years of lost profits that where sure to continue, Apple invented “the next big thing”.  They were face with a few options but found the iPhone to be the less risky project. In production they run in to some quality problems, but after defining, measuring, analyzing, improving and controlling the defect problem they were able to overcome them with 6-sigma techniques.  However, the production was not reaching Apples desired goals and they had to revamp the process.  Doing this not only caused production to meet expectation but they exceeded expectations.

Process Analysis

Process Analysis:

The way Apples process was set up was to flow through 5 stations.  To be efficient each station would have to work together to produce and overall 2000 iPhones per hour.  However, station 2 was not able to keep up with the process due to the fact that workers would have to go across the plant to pick out components from station 1 and then on the other end of the plant to deliver components to station 3.

Management felt the need to reorganize this process and it in turn raised production to 2200 iPhones per day.

Six Sigma

The managers at Apple decided that they did not want more than 3.4 defects per one million iPhones produced. They measured it every 2 million iPhones produced. After analyzing the process, they found that the timing of machine K5S2 was .02 seconds off.  This caused Apple to have 5 defects per million.  They called in a repair man to fix the timing on that machine and to inspect the other machines to ensure that all the timings were correct.  They installed indicators that let them know if the timing was starting to get off, and they trained all machine workers in how to do minor repairs on the machines that they work on.  When they measured and analyze it again the defects were numbered at 1.05 defects per million.

Total Quality Control (TQC)

Apple had purposed the company to improve the its products by being innovative as they developed the iPhone.  With this being the product that either puts them into the history books or puts them in the bankruptcy courts, they were determined to deliver a quality product. Jobs now fully rooted in the company took the lead and became the true face of the company, monitoring progress at every level and push his innovators to indeed come develop the next big thing.  He sought to improve the overall process from concept to selling the products at Apple store, making necessary incremental changes to the system as he saw fit.  In the 1980s and early 90s Apple had many different suppliers for the cases of its computer lines.  However, for the iPhone they move to Jabil Circuit out of China, whom they had the closest relationship with, to be their sole supplier of iPhone cases.  The development process had to be revamped a few times as the team constantly imagined ways that consumers would use this product.  Jobs was very big on proper training as any variation of his quality standards was inacceptable. He insured that the workers were trained and cross trained in their duties and the duties of the stations adjacent to them.  He trained his managers to facilitate the workflow of both men and machine, and required managers to be experts in their field, not some much so they can inspect for errors but so they would have the knowledge to fix errors should they occur.  This resulted in more confident employees as they didn’t feel that management was there to look over their shoulders, but rather they felt confident that leadership was there to help should they need it.  Job emphasized how important of a role that teamwork played in the overall production process, how all department must work together it the product and the company would be a success.  Instead calling for defect reports and expressing how horrible making mistakes are, Job just drove home one slogan, lets produce the next big thing.  This gave workers a level of pride in the product they were developing and producing, thus cutting down on errors.  For the errors and defects that did remain Jobs had his BI team to look at the process and identify exactly what part of the process the errors and defects occurred and address that problem head on.  At times he even had to realign the whole system to make the process run smoothly.  In stead of having quotas and management objectives Jobs encourages both managers and workers to simply strive to be better that their jobs every day.  After the product was developed Jobs called a company meeting and expressed his appreciation to the whole team that put there all in to developing the product. He held and iPhone up and said, “You did this! you created the next big thing.  Regardless of whether you played what may be seen as a big or small part, your contribution was both hug and invaluable.”   Then Jobs point out that as one project end a new one must begin, and he announce that ever would be new training on the possible additions that would come in the iPhone 2.  Apple heavily invested in the betterment of their workers and once again reevaluated the process to make it more efficient before development of the iPhone 2 began.

Risk Avoidance

The only way that Apple would survive would be to come up with a revolutionary product that would increase sales.  But this would be a risky venture due to that cost and time of development.  If the forecast held true, the Apple would be losing an average of $400M per year, and there was a 64% chance that developing a new product would put them out of business.  One suggestion was for Apple to create the jPhone.  If the jPhone succeeded it would bring in an estimated $950M in net profits, however if it failed Apple would lose $900M (which includes the $400M they were forecasted to lose) in net profits.  A second suggestion was the iPhone, which was exactly like the jPhone, but it didn’t have the hologram facetiming feature.  Success if the iPhone would mean $850M in net profits while failure would mean $475M in losses.  After a risk analysis it was decided that Apple should develop the iPhone.

Alternatives	States of Nature		EMV
	Success	Failure
jPhone	$950M	-$900M	.36($950M) +.64(-$900M) = $-234M
iPhone	$850M	-$475M	.36($850M) + .64(-$475M) = $2M
No New Product	-$400	-$400	$-400M
Probability	.36	.64

Forecast Analysis

For more than three decades, Apple Computer was predominantly a manufacturer of personal computers, including the Apple II, Macintosh, and Power Mac lines, but it faced rocky sales and low market share during the 1990s.  Steve Jobs co-founded Apple in 1976 and the company went public in 1980 raising about $100 million at a split-adjusted IPO price of $2.75 per share.  After reaching roughly $8 per share in 1983 (with annual revenue near $1 billion), the stock fell to below $2 per share when Jobs left the company in 1985.  Apple’s net profits were up and down from 1985 through 1995, being as high as $530 and as low as $61M.  Apple brought Steve Jobs back in 1995, but Apple lost -$146M in 1996 followed by three years of record losses including -$1045M in 1998.  Although the forecast called for increase in profits of the next 7 years, the net profits would still be negative.