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Will Google really acquire a 3PL?

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Guest Contributor, Joe Fitzpatrick, considers Google's future in the logistics industry.

Firms in last-mile delivery recognise online shopping as the insatiable paymaster. Meanwhile, for device manufacturers, a microchip shortage could prove fatal. As for the world of multimodal freight, the caprices of the fuel market are producing a thirst for data comparable to that in high finance. 

All of this is to say, tech and logistics know they have to dance. 

But as of yet, the only blue chip companies that have a serious position in both industries are Uber and Amazon. In 2021, Uber acquired Transplace, a 3PL provider that develops its own software, for $2.25 billion. Companies built on this model seem to be the likely winners of the decade, and have been attractive targets for the likes of Maersk and CEVA.

Software and its corresponding expertise are crucial to the rejuvenation of any legacy business. Naturally, tech conglomerates have an enormous list of options for expansion.

Google is no exception. Over the years it has digressed from being a pure software company, and today makes consumer products, conducts life sciences and owns a network of broadband infrastructure. 

A series of patents and partnerships have indicated Google’s interest in the supply chain space. That the giant will soon acquire a 3PL has been predicted by some commentators since 2014.

Why is Google interested in logistics?

One of Google’s strategic imperatives is to counter Amazon. 

The two companies compete head-to-head on cloud IT services, and even Amazon’s dominance in shopping is a threat to Google’s biggest money-maker: pay-per-click advertising in search results. Advertisers pay more to come up for ‘product searches’, especially those with ‘purchase intent’ - but today the majority of online shoppers start their search on Amazon instead.

As a result, Google has a vested interest in the success of e-commerce businesses that rely on their own websites rather than marketplace platforms like Amazon. Any slowdown in global shipping pushes consumers more and more towards relying on the shopping giant, which makes use of an enormous and resilient distribution network.

Another reason why supply chain chaos piques the interest of decision-makers in Silicon Valley is the opportunity to sell more software and IT services to 3PLs and shippers. In tech circles, any industry that appears to be reacting slowly to changes in business conditions tends to be seen as ‘ripe for disruption.’

What’s the evidence Google is planning a 3PL acquisition?

Google often launches expeditionary adventures into other industries, from home security devices to video games and augmented reality.

But logistics isn’t a space that tech companies can casually step into and expect to succeed. As a fundamentally physical industry, there’s a world of expertise and networks of relationships that it depends on. Therefore if Google did intend to acquire a position in this market, its best bet would be to do so via acquisition.

Looking at it from the opposite angle, some of the biggest weaknesses of modern supply chains are related to the transfer of data. This is precisely the area where companies like Google perform best.

What is Google’s business strategy?

Many of Google’s horizontal expansions have been successful enough to become integral to the business. Today their own laptops and smartphones are serious contenders in their respective markets. But many others have turned into short-lived experiments.

Even many of Google’s acquisitions have later closed down, been gutted or sold off to new owners. The robotics company Boston Dynamics was a Google property from 2013 to 2017. If Google did acquire a 3PL, it wouldn’t necessarily indicate a long-term strategic commitment to the industry.

The vast majority of Google’s historical acquisitions have been related to software, computing infrastructure, or consumer products. The company has a clear preference not to own and manage too much physical infrastructure - the exception being when doing so directly helps it expand the online experiences it can offer to users.

Acquiring a 3PL would be a huge departure for Google’s overarching business strategy. It would be far more likely to acquire a startup that aims to disrupt the industry through software - in the vein of Uber or Airbnb.

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If not a 3PL acquisition, what else might be Google’s next steps in the supply chain space?

Google is publicly enthusiastic about its Supply Chain Twin solution on the cloud. This is a product it sells to 3PLs and shippers alike to help them consolidate and analyse logistics data.

If Google sees major growth potential in this market, it may look to work more closely with the industry to develop more products around end-to-end visibility. Connecting multiple data sources together is something the company does well, and many supply chain organisations struggle with getting their transport, warehouse and business systems to talk to each other.

Because of the importance of shopping to Google, the most likely area to dive into deeply would be last mile delivery. The strength of the brand lies in its ability to deliver good experiences to users, and the last mile is the face of logistics for consumers.

One promising area is B2C delivery apps for food and groceries, particularly young startups in developing markets where there is resistance or disinterest from the likes of Uber and Delivery Hero. This is a market that doesn’t directly interact with the world of supply chains at large, but remains a logical starting point if Google were to become seriously interested in transportation.

In short, it seems very unlikely that Google would really acquire a 3PL. It has numerous far safer opportunities to explore, selling services from outside the industry instead of becoming a direct participant in the logistics marketplace.

 

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