Monday, January 28, 2013

Ways to inventory management: Avoiding Nexus 4 disaster

Most of the us know that latest flagship smartphone from Google, Nexus 4, remained out of stock even after several weeks as of now. If this phone had potential to beat iPhone 5 market, then why Google failed to make this phone available to consumers?

Having optimal inventory level is most important and it may serve as standard to check to product health. Google Inc designed Nexus 4 and handed over responsibility to manufacturing to LG Electronics and right now both are blaming each other either for not giving correct estimate of order or not able to produce required number of units. This definitely resulted into weeks long unavailability of this phone after its launch.

In the refereed article “Ten ways to improve inventory management” few of really useful points are addressed. Even if its not very precise, calculating the inventory level in scientific way with historic data considerations is definitely great idea. Also categorizing and periodical recalculations of safety, replenishment and excess or obsolete cost is necessary. For Nexus 4 case, marketing by Google in later stages was increased and that time probably safety inventory stock calculations may not have been updated accordingly.

It is important who are decision makers who defines various inventory policies and if it is only production managers or cross functional team. Usually cross functional team considers more possibilities of factors may affecting inventory levels resulting a better estimate. For Nexus 4 example, Android being one of most widely used mobile OS, its sale is drastically low than Apple iPhones which hit mark of about 47 billion phones sold in last fiscal quarter. This example supports periodic calculations of inventory levels by experts in cross functional domain.

The given article also states if regular visibility for excess and obsolete stocks are linked to targeted action plans which may help in controlling optimal level of this inventory which may also help in creating action plan which will avoid further excess production of inventory if it is excess. And finally it is important to repeat these steps at each level of production and supply to accommodate changes, like raw material, effect of pre launch or post launch marketing of new product.

We can learn that various periodic calculations at different levels of supply by right people can definitely improve the inventory management and may avoid situations like poor supply of Nexus 4, which had potential to beat Apple in smartphone market of more than $30B.



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