Google, the lord of searching engine, could be a duke in logistics as well?

Written by MIN, Jung Ung, Ph.D. 

INHA UNIVERSITY Assistant Professor

[CLO] "Search for information about (someone or something) on the Internet using the search engine Google.”

That is the definition of 'Google' in Oxford dictionary. 'Xeros' has been used as not a proper noun but a general verb due to renovation brought about by Xerox copying machine, likewise, Google is known to be a pronoun of searching engine. However, it won't be long before we need to redefine Google after its definition was registered in the dictionary just a few years ago.

◈ Google's patents including container tracking technology

Frankly, this sort of technology is not conspicuous enough to completely change our lives. The thing is that such technology is developed and possessed under license by GoogleUS Patent and Trademark Office announced in Oct. 2012 that Google had achieved patent on container cargo tracking and monitoring technology, which provides real time monitoring and positioning of containers by using electronic seal and network gateway. It is hard to know if this patent used Google's Android OS, however, the access to information through mobile devices like smart phone is being emphasized.

◈ Reckless business diversification?

Google has repeated some eccentric actions over the past few years. They produced unmanned vehicle that seems have nothing to do with internet searching engine company and took over Motorola. Particularly it is hard to make out why they set up a joint venture company related to spaceship development.

Google's patent this year was actually applied for in 2009. Even back then, it was long before acquisition of Motorola's Mobility as well as launch of Nexus series.

Google has been interested in how to activate E-Seal, though not known to the ordinary people, along with acceleration of interest in logistics security since 2009, that is earlier than the US government.

Prior to this year's patent, Google was ever granted a patent for cargo information pooling technology in August 2011. A series of their actions are considered not accidental but elaborately planned, which has been transformed into consistent business strategy for logistics.

Google has multiple contents and functions including Google Map's location base information, GPS & communication functions loaded on Motorola's smart phone and Nexus tablet, Barcode, NFC, RFID tag reading function and further, hardware function that can exploit these contents and functions.

Once their competences are combined, Google would be provided with service environments in logistics area.

Google took out a patent for logistics information processing technology while having hardware product line in addition to their competitive searching software, which intimates the company's business model will probably expand to logistics area.

◈ Logistics warfare 'Google vs. Amazon & Ebay'

Such hypothesis is becoming a reality. Google is now implementing some tests, though it is off the record, on same day delivery service emerging as a new battlefield in distribution industry starting with Amazon, Walmart and Ebay.

Purportedly Google is testing the service with Macy's, the biggest department store group in US, GAP and OfficeMax etc.

Google is supposed to keep track of available inventory of every store in real time by using their internet data infrastructure. Based on this, Google will be able to provide delivery option for the next day or same day service through their system when the customer places an order for the product to the distributor.

Google has declined to comment on the test so far. It is reported that they are not carrying out practical logistics operation like warehouse management but just testing the feasibility in cooperation with distributors and logistics companies.

Then what has made Google get interested in logistics field so long? The ostensible reason could be identified via industry's recent stance related with same day delivery service.

The first is Google's advertising revenue. The company's revenues mainly come from advertisement and the sale of searching algorithm. As for ads, distributors like Walmart and Macy's account for a great part of revenues. The thing is that such traditional distributors are heavily damaged due to the encroached market by on-line distributors such as Amazon and Ebay touting shopping convenience. The only competitiveness of conventional distributors is to let the buyer bring things home without waiting.

But if on-line distributors started running same day service, the existing distributors would certainly be vulnerable to competition, which means their sales loss as a result. And if that continued, their declining sales could also lead to the drop in Google's ad revenue. That's why Googles is going to provide that service preemptively in cooperation with their customer distributors.

Secondly, Google has become aware of crisis situations which internet traffic gradually leaned towards online distributors as online purchase increased.

According to the survey of Forrester Research, 25% of online purchasers used Google to search for a product in 2009 whereas Amazon was 18%.

In a survey of 2011, however, such pattern reversed in that more than 30% of the customers relied on Amazon while only 13% on Google. 

The third reason is to block a discontinuity of information tracing to comprehend the customers' purchase related behaviors. In case of electronic commerce, analysis and trace of their behaviors are feasible until the customers search for a product through internet but not any more in the process of their visiting and purchasing at the store. That is why Google is interested in logistics technology like cargo tracing and monitoring.

◈ Google's 'Big Data' destroys logistics ecosystem

Then what is the real reason for Google's interest in logistics area. Apart from the surface reasons mentioned above, their real intention is to create '3rd industrial revolution' through combination of Bits and Atoms.

The 1st industrial revolution which began in the 18th century brought about manufacturing industry. Industrial revolution defined manufacturing and production as an industry and this brought material affluence to the human society. The progress of internet and IT touched off 2nd industrial revolution and facilitated new life pattern using digital information, which was never experienced before.

In this context, Google came into being from the 2nd industrial revolution. But they are trying to go further by bringing together manufacturing paradigm(Atoms) and internet(Bits)-driven business from dialectic perspective and logistics is regarded as a vehicle for the compound.

In some ways, a simple thesis of 'Link between logistics flow and information flow', which is shrugged off when the logistics men first learn SCM, is now being put into practice by Google from a new angle.

As were all the innovations and discoveries in the history, Google's strategy for logistics, which has been originated from the common theory of SCM, is likely to be a trigger for the another new revolution.

Google lays stress on cooperative network pooling resources and ideas based on 'Open Source' and they are moving in the direction of providing a new paradigm for the suppliers, customers, logistics companies and even competitors and probably  cornering the market as well.

Truly Google, armed with 'big data', is encroaching on the logistics area which is emerging as a core network in the whole industry.