Supply chain management at Google.
Supply Chain innovation at Google - Developing a Smart and Responsible Supply Chain
Google is one of the tech leaders whose business empire extends globally to every corner of the world. Its parent company is Alphabet and CEO Sunder Pichai. The growing use of internet throughout the world has helped Google grow its business empire and serve its customers with innovative technological solutions. While the main products made by Google are internet based, the company also makes and sells some hardware products. Its core source of revenue is online advertising. However, making its products and services available throughout the world also requires a lot of investment into technological infrastructure. The company needs hardware components to run its data centers as well as for its consumer devices and other related products. The consumer devices of Google include Google Home, Chromecast, Google Pixel and Pixel XL and the Nest Learning Thermostat. There are around 500 suppliers or supply chain partners of Google that the company works with for the manufacturing of its hardware products and consumer devices and to enable the delivery of its online and offline products and services.
Technological innovation has helped Google find faster growth. However, the company also focussed on managing its supply chain responsibly to create higher growth for itself as well as its supply chain partners. Since the company is not a hardware company like Apple, its number of suppliers is also comparatively much limited. There are around 500 suppliers in its supply chain located in more than 60 countries. Google does not focus just on its own growth but also works to empower its suppliers and to help them find superior growth through the right tools and techniques. Its main focus is to create a responsible and smart supply chain for the future. Most technological hardware companies work with thousands of suppliers from around the world. Handling just around 500 suppliers should not be a difficult task for Google. However, that does not mean Google ignores any aspect of its supply chain in any case. It applies innovative thinking and tools to manage its supplier network so that it has the least environmental impact, is highly efficient, ethical and responsible in every aspect including product quality and labour. Achieving supply chain excellence requires a firm focus on several minute points. This article explains how Google has achieved supply chain excellence by focusing on each one.
Key aspects of Google’s supply chain management strategy :
Sourcing responsibly :-
Google works proactively on responsible sourcing. To ensure that it is sourcing only from the best suppliers who handle their business responsibly, it makes a detailed assessment of the individual suppliers or group of suppliers. It has an extensive supplier risk assessment process in place. This process ensures that the company takes a detailed assessment of the environmental, social and ethical risks of working with a particular supplier or group of suppliers. A detailed assessment of the risks involved in partnering with new suppliers is a crucial initial step. It helps the supplier managers at Google ensure that they make well informed sourcing decisions and manage their supplier relationships effectively. There are a variety of risks involved in working with new suppliers. Google therefore, makes a detailed assessment based on a variety of factors. Some of the main factors based upon which Google assesses prospective suppliers are as follows:
- Country specific risks : -
The risks of child labour, corruption and water scarcity are higher in certain countries. Google considers these factors during supplier assessment. Google also takes steps to prevent these problems in its supply chain.
- Product specific risks :
There are also some problems related to specific products including their chemical composition and the kind of labour required to manufacture these products. Google assesses the suppliers’ processes to know if their manufacturing processes are chemically intensive. Apart from that, the company also checks how labour intensive creating a product is.
- Supplier convictions or fines :
The company also considers any previous criminal record of the suppliers in the assessment process. It checks if the supplier has ever been convicted or fined in cases related to environment, corruption or violation of human rights.
- Company’s supplier engagement efforts :
Google’s supplier engagement efforts are also a part of its assessment process. The company checks if the supplier has previously been audited by the company. It checks if the supplier has submitted a self assessment and if there has been a previous audit of the supplier. In case an audit was carried out in the past and issues were identified, it checks if the supplier has taken the right measures to eliminate the issues.
- Supplier relationship :
The strategic importance of the supplier is also an important factor that Google supplier managers consider while assessing the risks of working with a specific supply chain partner. The supplier managers check how strategically important a particular supplier is to Google’s business. They also check if the supplier is the sole source of specific products or services. Google checks if the company has influence over the selection of components or designing of the product.
In this way, there are several factors that Google supplier managers consider while making an assessment of suppliers for adding to its supply chain network. So, to become a Google supplier, an individual or a group would need to meet several criteria including the ones outlined above. This risk assessment makes it easier for the Google supplier managers to make the right choices when looking for new suppliers for any component, product or service. This also reduces the risk of having irresponsible suppliers in its supply chain.
Code of Conduct for suppliers :
Google expects its suppliers to manage a socially and environmentally responsible work environment and adopt fair labour practices. Its suppliers are expected to maintain a safe working environment and treat their workforce with respect and dignity. To ensure that its suppliers conduct their business operations responsibly, it has prescribed a code of conduct that the suppliers are required to follow. These are the main points included in its suppliers’ code of conduct with a central focus upon ethics as well as social and environmental responsibility.
Conformation with the code of conduct :
To remain in compliance with the code of conduct, the Google suppliers must follow some important steps. Apart from the other factors, the suppliers must follow all applicable laws and regulations, directives, guidelines and all such other obligations which are a part of their contract with Google. The suppliers using Google properties or facilities must comply with all applicable policies and requirements. In case, Google requests any additional certifications of its suppliers like ISO 50001, 14001, or OHSAS 18001, they must make efforts to acquire these certificates at the soonest possible. The suppliers should also disclose accurate information regarding their labor, health and safety, environmental practices, business activities, structure, financial situation, and performance according to the industry best practices.
Taking care of labor rights and human rights :
Google ensures that its suppliers follow the right standards of labour and human rights. It ensures that the suppliers use no forced, bonded or endentured labour. Workers must be free to choose and terminate their employment as they like. Moreover, the suppliers should not hold their identity papers or work permits for longer than necessary. There should not be any recruitment fees or any unreasonable restrictions on their movement inside or out of their work facility. The employers should also provide the workers an agreement specifying the terms of their employment in a language that the workers can understand. Moreover, the suppliers are not allowed to hire workers under 15 years of age. If hiring workers below eighteen years, they must not be allowed to do the kind of work which can jeopardize their health. The suppliers must also comply with the wage laws and pay the wages as legally mandated. Working hours for workers should not exceed 60 hours and the suppliers should also care for non discrimination as well as diversity and inclusion. Among other things, the suppliers should allow their workers freedom of association and collective bargaining.
Managing the health and safety of workers :
It is equally important for the suppliers to manage a healthy and safe work environment for the health and safety of their workers. To achieve this, Google requires its suppliers to adopt some crucial health and safety management practices. Apart from complying with all health and safety related laws, the suppliers are also required to identify, evaluate and control workers’ exposure to health and safety hazards including biological, chemical, physical and ergonomic. Moreover, they must adopt procedures for preventing, managing, tracking and reporting occupational injuries and illnesses. They should also plan for potential emergencies. The suppliers should also provide the workers with clean toilet facilities as well as potable water and food. Overall, Google expects its suppliers to take good care of the health and safety of its workers.
Environmental Responsibility of Suppliers :
Google also recognizes the importance of environmentally safe products and production processes. Its suppliers are required to minimize the effects of their manufacturing processes on the environment and the community. The suppliers should keep all current environmental permits and registrations and follow their reporting procedures. Apart from it, their focus must be on the minimization of consumption of resources including raw materials, water and energy. Moreover, they should work to minimize energy consumption, emission of greenhouse gases as well as work at improving energy efficiency and grow their use of clean energy.
Ethics and compliance by suppliers :
Another important factor that the Google suppliers are required to keep focus upon is business integrity and honesty. They should not engage in any form of bribery, embezzlement, corruption or extortion. Neither are they expected to make any form of illegal payment, whether directly or indirectly. The Google suppliers should also respect intellectual property rights. Any transfer of technology or technological knowhow must not be done in violation of these rights. Suppliers are also required to source their raw materials responsibly. If they use tantalum, tin, tungsten or gold in their products, then its purchase must not benefit the armed groups in and near the Democratic Republic of Congo in any manner directly or indirectly. They should make available the source and chain of custody of these minerals to Google when asked for. Another important consideration for the suppliers is the privacy and information security of the people, groups or businesses they deal with in the course of business.
To ensure compliance with the Code of Conduct, Google requires its suppliers to establish a management system that takes care of responsible adherence to the Code. This management system should ensure compliance with all the legal regulations, as well as standards highlighted above and mitigation of operational risks and safety hazards.
What happens when suppliers don’t adhere to the code of conduct?
To ensure continuous adherence to the code of conduct, Google carries out regular on site audits at suppliers’ facilities. Independent third party audits allow Google to learn directly from the workers and have a more thorough assessment of the working conditions at a particular factory. These audits involve in-depth tours of the factories, facilities and dormitories. Apart from it they include manage meetings, on site worker interviews as well as reviews of documents and records. Audits identify the high risk manufacturers and suppliers. Between 2013 and 2017, the company performed 174 on site assessments. In 2017 alone, the company carried out 44 supplier site assessments in 8 countries through which it identified 399 non-conformances.
In cases where Google identifies non conformances, what it does is to ask the supplier for a Corrective Action Plan. Apart from identifying the root cause of the finding, the CAP also outlines how and when the company will resolve the issue as well as the steps it will take to prevent any recurrence of the problem. Google ,decides whether the CAP (Corrective Action Plan) is acceptable based on the severity of the nonconformance as well as the time and efforts required to resolve the issue. The company aims to resolve the most severe issues immediately. However, the suppliers are also required to demonstrate continuous improvement in order to continue working with Google. Once the CAp submitted by a supplier has been approved, he is required to show evidence that the issue ahs been resolved. Moreover, he must remain committed to continuous improvement which may also require follow up verification. After the supplier has demonstrated that the issue has been fully resolved by implementing the CAP, the issue is closed by Google. This is how Google keeps looking for issues down its supply chain and their resolution as well as continuous improvement of its supply chain network. This is important for running a smart and excellent supply chain.
Managing supplier diversity :
Google believes that bringing people with a wide range of perspectives and ideas together helps create products that are better for Google and its customers. It has created a small business supplier diversity program. The aim of this program is to connect more minority-, women-, veteran-, persons with disabilities-, and LGBT-owned small businesses to opportunities Google has created while also helping them flourish online. Google is also committed to building a truly inclusive supply chain. It means honoring and respecting the contribution of every person connected with its supply chain in any capacity. The company ensures that all the workers in its supply chain are treated with dignity and respect and that the suppliers maintain healthy and safe workplaces and are held to the highest ethical standards. In the longer term, Google wants to unlock the power of partnerships and change the dynamic between the company suppliers and users.
Use tools and techniques to empower suppliers:
Supplier empowerment is also a crucial part of Google’s supply chain management strategy. It works with the companies in its supply chain to help them resolve issues and improve their labour practices. The company has a ‘Responsible Supply Chain’ team which offers the suppliers in person training and elearning courses that help them understand the criteria included in the supplier code of conduct as well as other regulatory standards and industry best practices. Moreover, it is helping its suppliers adopt better energy management systems. While several of its suppliers are interested in energy management, they lack the capital, expertise and the motivation to implement energy management programs at scale. In China, Google worked with the China National Institute of Standardization for launching the Technical Pilot program that will help its suppliers based in China. During the initial phase of this program, Google and two of its supply chain partners in China saw impressive success. The main emphasis of this program is on training and coaching as well as energy savings, cost savings and improving productivity for the suppliers. Apart from that the emphasis of this program is also on continuous improvement in energy efficiency and internal recognition. In the longer run, the company aims to provide the vendors and suppliers in its supply chain access to clean and renewable energy.
In this way, you can see that Google has managed its supply chain quite efficiently. Its suppliers are located across more than 60 countries. However, apart from ensuring that they maintain the highest ethical standards and good work environments, the company also aims to help its suppliers transition to renewable energy in the long run. Google also empowers its suppliers with online tools and technical knowhow. Apart from that, it is involving them in its efforts to improve lives in the communities where they operate. The main aim of Google is to develop a smart supply chain that is an energy efficient and low carbon supply chain.