Google (Alphabet): Inventory Management

Google Alphabet inventory management types, roles, financial, performance measures, supply chain, bullwhip effect information technology business
Google Street View camera in Bratislava, Slovakia. Google’s (Alphabet’s) inventory management involves different types of inventories, performance measures that address the bullwhip effect, and roles that support the information technology and online services business. (Photo: Public Domain)

Google’s (Alphabet’s) inventory management involves diverse activities, as the technology 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 (Alphabet’s) large organizational structure and size, diverse product lines, and prominent position in the global market, the company’s inventory management strategies and practices effectively minimize expenditure. As Alphabet grows and diversifies, its inventory management also expands to include a larger inventory, with different types and roles. Alphabet’s inventory management reflects successful inventory design and strategic choices.

Alphabet’s inventory management involves different types and roles, as well as methods and performance measures that suit the business and its strategic objectives in counteracting competition. Notable competitors include information technology, online services, and consumer electronics companies, like Apple, Microsoft, Samsung, and Sony; online advertising service providers, such as Facebook and eBay; firms with video streaming services, like Amazon, Disney, and Netflix; and Internet service providers, like Verizon and Comcast. The inventory strategies and operations management of Intel and IBM also affect the competitive situation and the strategies of Google in its efforts for semiconductor development and artificial intelligence.

Inventory at Google: Types and Roles

Even though Google has different products, some types of inventories are more significant in the business. Each type fulfills a role in the business and contributes to the achievement of goals based on the mission statement and vision statement of Google (Alphabet). The following are the inventory types and their roles in the technology firm’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 or equipment, such as components for its data centers, and fiber optic cables for the Google Fiber Internet and cable television service. In managing inventory, the role or function of this type of inventory is to support the production processes at Alphabet.

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 production are completed. The role of this type of inventory is to enable Alphabet 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 Pixel 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 consumer electronics.

Transit Inventory. Alphabet’s inventory management uses transit inventory for some of its goods. For example, Chromecast 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 used for supporting operations management at Google (Alphabet), particularly maintenance, repair, and operating (MRO) goods in all areas of the technology and online services 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 or function of this type of inventory is to support Alphabet’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 Pixel 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 Pixel smartphones and Chromecast units are managed through the FIFO method. This inventory management method enables Google to minimize the accumulation of old items in storage.

Financial Impact of Alphabet’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 smartphone 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 inventories also helps reinforce business competencies, such as high capacity for innovation and other strengths enumerated in the SWOT analysis of Google (Alphabet). These factors lead to operational efficiency and optimized spending for inventory management.

Google’s Metrics for Inventory Performance

Google uses different metrics representing inventory performance, considering that the firm has different types of inventories. For some of the company’s physical goods, like Chromecast and Pixel devices, the following are the most relevant metrics for inventory performance:

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

Inventory turnover measures the rate of sale of Google’s products. The average inventory level measures the average size of the inventory. An increase in the average inventory level corresponds to an increase in Alphabet’s spending on 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 Pixel 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 moderately valuable contributions to the business. The Class C inventory includes office supplies, food and beverages, and janitorial supplies. These items have the least valuable contribution to Alphabet’s business.

Inventory Information Systems. As a technology company, Google uses advanced information systems for managing its inventory. These inventory information systems are customized to specifically suit the needs of the firm. Different inventory information systems are used for the different areas of Alphabet’s 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 proactively maximizes 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 Pixel. In digital products and online advertising, the company virtually does not experience the bullwhip effect. Even so, Alphabet’s inventory management involves information systems to identify and minimize errors, delays, and deficiencies in the supply chain.