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Transportation And Stock Shortages Within Apple

Within the last year during COVID-19, shifts in demand has impacted transportation and stock within Apple. I will be focusing on how aspects of transportation within Apple products have changed, how the air/ocean freight has changed, and the impacts COVID-19 has had on transportation in general.

To understand the impact COVID-19 on transportation within Apple we first must understand the impacts of COVID-19 on air and ocean freight transportation. Within air transportation, we saw a 71.5% decline in domestic transportation. This decrease directly impacts air freight capacity and significantly affects air freight prices. 45-50% of all air freight is transported in the under storage of passenger planes. When there was this reduction in passenger plane flights, 75% of air freight was removed from the market.

Ocean freight and the use of cargo ships was drastically impacted due to the changing demands of consumers. During the pandemic, consumer patterns changed resulting in increased demand for ocean freight and shipping containers. It is important to note that about 80% of all goods that we consume get to us by ocean freight. This increased demand by consumers caused a shortage of shipping containers. With increased demand by consumers and a shortage in shipping, we get a massive disruption in the supply chain.

If we go by the data stated above, we can see how air and ocean freight was drastically impacted during the pandemic, but how has it affected Apple? With the decrease in passenger flights and increased demand for electronic products, Apple was forced to hire private planes. Apple hired 200 private planes to transport the newest products to the store. By doing this, they were able to increase their stock in stores and combat against future stock shortages. However, hiring private planes is something that is not new to Apple. In 2016, Apple hired 3 private planes to get the iPhone 7 into stores to keep up with demand.

As we can see, Apple noticed that they must change the way they ship their products to free up capacity for highly demanded time sensitive products. Apple realized that air must be reserved for high value items that need to get to places quickly. By placing the newest products on planes, such as the iPhone 12 and air pods, they are able to keep up with their demand along with increasing capacity for these highly demanded products.

When it comes to ocean freight, Apple decided to increase ocean freight for older products along with putting them on slower ships. This does increase ocean freight all together, but this frees up capacity for the newest products to be shipped via air. By putting older products on slower ships, there is an increase in lead times which results in stock shortages for these older products. Apples increase on ocean freight has cost the company a “more than we would like to spend” (Tim Cook) amount. 40-foot shipping containers are up 229% per container which means, for example, if Apple spent $4,366.81 per container, they are now spending $10,000.

With this increase in transportation costs apple was still able to sell their newest iPhone and report a 50% increase in sales. This 50% increase adds up to $39.57 billion in sales for this quarter. This is due to the switch in their transportation and increase private plane flights for high demand products. With the reduced number of flights along with the increase in price of shipping containers due to COVID-19, Apple was able to mitigate the effects on their products. Apples shift in logistics has contributed to increased sales and has given them the ability to keep up with demand for these new products.

Authored by: Cole Gibbs

References:

https://www.imore.com/apple-resorted-private-jets-and-sea-travel-try-fix-stock-shortages

https://www.sciencedirect.com/science/article/pii/S2590198220301883

https://www.bls.gov/opub/btn/volume-10/air-freight-prices.htm

https://unctad.org/news/covid-19-cuts-global-maritime-trade-transforms-industry

https://unctad.org/news/shipping-during-covid-19-why-container-freight-rates-have-surged

https://www.businessinsider.com/tim-cook-apple-paying-more-freight-supply-constraints-ipad-iphone-2021-7

https://markets.businessinsider.com/news/stocks/apple-inc-earnings-rise-in-q3-1030652540

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