Google’s Inventory Management

Google’s inventory management involves diverse activities. The company’s varied businesses require different supply chains. In inventory management, the company aims to optimize its operational capacity. Also, Google is concerned about minimizing the costs of its inventory. Theoretically, business organizations minimize their inventory because maintaining it requires funding. A larger inventory is more costly. In consideration of Google’s large organizational size, diverse product lines, and prominent position in the global market, it is realistic to assume that the company has effective inventory management strategies and practices that help minimize expenditure. As Google grows and diversifies, its inventory management also expands to include a larger inventory, with different types and roles. Google’s inventory management is a reflection of successful inventory design and strategic choices.

Google’s inventory management involves different types and roles, as well as methods and performance measures that suit the business and its strategic direction.

Types and Roles of Inventory at Google

Even though Google has different products, certain types of inventory are most significant in the business. Each type fulfills a role in the company. The following are the most significant inventory types and their roles in Google’s approaches to inventory management:

1. Raw materials inventory
2. Work-in-progress/Work-in-process inventory
3. Finished goods inventory
4. Transit inventory
5. MRO goods inventory

Raw Materials Inventory. Google’s raw materials inventory involves the input materials used to produce some of its products, such as components for Chromecast digital media players, and fiber optic cables for the Google Fiber Internet and cable television service. In managing inventory, the role of this type of inventory is to support the production processes at Google.

Work-in-Progress/Work-in-Process Inventory. Google’s inventory management uses this type of inventory in the production of some of its products. For example, in producing Chromecast digital media players, the work-in-progress inventory involves intermediary products that are stored before the last steps in the production are completed. The role of this type of inventory is to enable Google to sustain a consistent rate of production.

Finished Goods Inventory. Google’s inventory management also involves finished goods inventory of products before they are shipped to sellers. For example, Google Nexus and Chromecast units are stored before they are boxed and shipped for retail sale. The role of this type of inventory is to enable the company to keep addressing sellers’ demand for these products.

Transit Inventory. The company’s inventory management also uses transit inventory for some of its goods. For example, Chromecast digital media player units become transit inventory while they are transported from warehouses to sellers. The role of this type of inventory is also to enable Google to consistently address sellers’ demand for these products.

MRO Goods Inventory. This type of inventory refers to the items uses for supporting the firm’s operations. Google’s inventory management uses maintenance, repair and operating (MRO) goods inventory in practically all areas of its business. For example, MRO goods include office supplies like paper and pens, maintenance supplies like janitorial materials and special cleaning solutions for computer equipment, and other goods like coffee and food provided to Google’s employees. The role of this type of inventory is to support Google’s operations in direct and indirect ways.

Google’s Inventory Methods

Serialized inventory. Google uses the serialized method in managing inventory. This method involves assigning a unique serial number to each item in the inventory, instead of recording them per batch. For example, Google’s inventory management uses serialization for Chromecast and Nexus items. In online advertising, the company also uses serial numbers for advertisers and publishers.

FIFO. The first in, first out (FIFO) method is used in Google’s inventory management. In this method, the first items to arrive are also the first to be sold. For example, the firm’s Nexus smartphones and Chromecast digital media players are managed through the FIFO method. This inventory management method enables Google to minimize the accumulation of old items in storage.

Financial Impact of Google’s Inventory Management

Google’s inventory management approaches have a beneficial impact on the firm’s costs. For example, the FIFO method ensures that most old models are sold before new models are released to the market. The serialized inventory method maximizes the efficiency of tracking and monitoring materials and products. The combination of the different types of inventory also supports Google’s business operations. These benefits lead to operational efficiency and optimized spending for inventory management.

Google’s Measures of Inventory Performance

Google uses different measures of inventory performance, considering that the firm has different types of inventory. However, for the company’s physical goods like Chromecast and Nexus, the following are the most relevant measures of inventory performance:

1. Inventory turnover
2. Average inventory level
3. Cycle time

Inventory turnover measures the rate of sale of Google’s products. Average inventory level measures the average size of the inventory. An increase in the average inventory level corresponds to an increase in spending for inventory management. Cycle time is the duration of the process of filling inventory with new products or models. A shorter cycle time means higher efficiency of Google’s inventory management practices.

Managing Inventory

ABC Analysis. Google’s Class A inventory includes Nexus units, Chromecast units, servers, computers and related items. These items contribute the highest value to the company’s business. The Class B items include computer peripherals and similar items used in Google’s offices. These items have moderate value contributions to the business. The Class C inventory includes office supplies like paper, food and beverages, and janitorial supplies. These items have the least value contribution to Google’s business.

Inventory Information Systems. As a technology company, Google uses advanced information systems for managing its inventory. These inventory information systems have been customized to specifically suit the needs of the firm. Google also uses different inventory information systems for the different areas of its business.

Managing Inventory across Google’s Supply Chain: Inventory Value & Bullwhip Effect

Inventory Value in the Supply Chain. Inventory value is maintained and optimized through Google’s use of information systems to monitor items and identify potential issues. The company’s advanced information systems are used to predict possible stockouts and changes in demand. Based on such information, Google acts proactively to maximize inventory value throughout its supply chain.

Bullwhip Effect. The bullwhip effect refers to the propagation and worsening of errors, delays and deficiencies in the supply chain. This effect is likely to occur in Google’s inventory of consumer electronics, such as Chromecast and Nexus. In digital products and online advertising, the company does not experience the bullwhip effect. Even so, Google’s inventory management involves information systems to identify and minimize errors, delays and deficiencies in the supply chain.

References

• Fawcett, S. E., Ellram, L. M., & Ogden, J. A. (2014). Supply chain management: from vision to implementation. London: Pearson.
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• Google Inc. (2014). Google Inc. Form 10-K, 2014.
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• Google Inc. (2015). Manufacturing and Supply Chain – Google Careers.
• Muller, M. (2011). Essentials of inventory management. AMACOM.
• Schumann, J. H., von Wangenheim, F., & Groene, N. (2014). Targeted online advertising: Using reciprocity appeals to increase acceptance among users of free web services. Journal of Marketing, 78(1), 59-75.