Operations Management at Apple Inc.: Quality and Facility Planning

Six Sigma as a Quality Management Framework

Six Sigma was created in the 1980s at Motorola as a strategy to measure and enhance high-volume processing procedures. Its overall objective was to measure and eliminate waste by striving to achieve nearly perfect outcomes. The term "Six Sigma" refers to a statistical technique of measuring quality with a maximum of 3.4 defects per million opportunities. Various organizations such as General Electric, Ford, and Apple Inc. have used Six Sigma in their operations and have been able to save billions of dollars (Hubbard, 2009).

Six Sigma is a statistically grounded strategy for process improvement that employs many tools to guarantee success. These tools include total quality management, statistical process control, and experimental design. It may be combined with other vital activities and frameworks such as new product development, material requirements planning, and just-in-time inventory control. Initially, Six Sigma was considered a framework applicable only within production operations (Merchant, 2010). However, it has since proven effective in non-manufacturing operations such as billing, accounts payable, marketing, and information systems. At first glance, Six Sigma may appear too rigid and ill-suited for breaking down non-standard or repetitive methods similar to assembly-line scenarios. Nevertheless, the Six Sigma methodology is flexible enough to suit virtually any process. Many lessons learned on manufacturing lines are equally valuable in other operational contexts (Hubbard, 2009).

The essential steps that must be followed in a Six Sigma-guided process are:

1. Break down the flow of business processes into distinct steps
2. Define existing defects
3. Measure the number of defects
4. Investigate the root causes of the defects
5. Implement improvements
6. Re-measure results
7. Maintain a long-term perspective on objectives

Apple's Global Facility Locations

The global headquarters of Apple Inc. are located in Silicon Valley at 1 Infinite Loop, Cupertino, California. This facility comprises six buildings totaling 850,000 square feet and was developed in 1993 by Sobrato Development. In 2006, Apple announced plans to establish a second facility on a fifty-acre parcel assembled from adjacent plots. Later acquisitions expanded this to 175 acres. The new facility in Cupertino was situated approximately 1.6 km east of the existing campus. Norman Foster designed the new building (Hubbard, 2009).

On June 7, 2011, Steve Jobs presented the architectural plans for the new building to the Cupertino City Council. The new facility was intended to house 13,000 workers in a single four-story circular building, with a restaurant accommodating 3,000 people. The design featured extensive landscaping, predominantly underground parking, and a consolidated parking structure. Additional facilities included research and development spaces, an auditorium, a fitness center, and a dedicated power-generating plant as the primary energy source (Hubbard, 2009).

Apple's headquarters for Europe, Africa, and the Middle East are located in Cork, in the south of Ireland. That office, which opened in 1980, was Apple's first location outside the United States. Apple Markets International, which manages all of Apple's worldwide sales outside the U.S., is housed at Apple's campus in Cork, along with Apple Distribution International, which handles Apple's global distribution network. Recently, the company announced plans to expand its European campus. Apple will create 500 new jobs at its European headquarters in the next financial year (Merchant, 2010), shifting the total workforce from approximately 3,000 to 4,300 employees. The organization will construct an additional administration block at its Hollyhill facility to accommodate the expanded workforce.

When industrial engineers or field managers seek to enhance manufacturing productivity, a common starting point is to ask: "How do I advance this process across its first, second, and third stages?" Based on a broad review of the literature, many manufacturers implement operational changes informally or delegate the change process to end users. In this analysis, Apple follows a three-step approach to determining the optimal location and configuration for a new facility (Hubbard, 2009).

Three-Step Procedure for Facility and Labor Planning

Production decisions typically involve a combination of machinery, unskilled labor, and skilled labor. Challenges arise when a choice must be made about which option best serves the work at hand in terms of viability and cost-effectiveness. Two questions guide this determination: whether skilled labor is the only viable option, and whether it is the most cost-effective option. In Apple's case, the new facility will employ skilled labor, and the process therefore moves to Step 2 (Lussier, 2012).

Once skilled labor has been selected, it is essential to understand how to deploy it so as to achieve the maximum rate of output at minimum manufacturing cost. Accordingly, Apple's management must define the most suitable specifications for utilizing skilled labor. This step is examined under two themes: assessing the maximum potential performance gain and determining the ideal operational specifications (Hubbard, 2009).

Assessing maximum potential performance involves establishing the theoretical maximum improvement while minimizing losses under planned operating conditions. This assessment relies on operations designers experienced in deploying skilled labor in production settings. In Apple's case, four general principles guide loss minimization: optimizing asset utilization, minimizing process time, minimizing error occurrence, and maximizing a safe working environment (Merchant, 2010).

Determining the most suitable specifications requires that the general structure and methods of the operation be worked out before the operation is formally evaluated against its specifications and expectations. For complex operations utilizing skilled specialists, a central concern is reducing operational errors and enabling smooth recovery when errors do occur (Hubbard, 2009). Where adjustments are needed, an iterative cycle of refinement and testing is used until a satisfactory result is achieved. The techniques Apple applies include: (1) analyzing the flow of production, (2) establishing measurable components, (3) identifying weaknesses in the production design along with possible solutions, and (4) cost estimation.

After selecting skilled labor and defining the appropriate specifications, the next challenge is achieving and sustaining the defined profit margin. This step is supported by three sub-steps: (1) determine the productivity level, (2) locate the causes of underperformance, and (3) find a solution.

Sub-Step 1: Determine the Productivity Level. To improve profitability — understood as the inverse of expenditure — it is essential first to understand the current performance level and identify whether waste exists. The term "waste" is a relative concept: what constitutes waste for one enterprise may represent primary value for another. For example, recovered paper is waste for most businesses but the core input for a recycling operation (Hubbard, 2009). In general terms, waste is any undesired material or output remaining after a conversion process. In Apple's context, "waste" is defined as any unplanned loss in quantity, quality, or time during production. Under this definition, unintended idle time counts as waste, whereas planned idle time does not. In some contexts, this type of loss may be called "pure waste."

This sub-step is supported by four further stages: (1) analyzing the flow of production, (2) determining measurable components, (3) identifying waste, and (4) estimating cost. These stages parallel those in Step 1, with the key distinction being a focus on waste identification rather than defect identification. Data are gathered through interviews with operators and supervisors and through reliable production information systems. In Apple's operations, waste is characterized by unplanned losses such as excess capacity, excess availability, and unplanned procurement (Kasilingam, 2010).