by Jennifer Hart Yim | May 16, 2017 | Blog, Current Events, Manufacturing & Distribution, Supply Chain, Warehousing & Materials Handling
Despite significant technological advancement, drones may have a limited impact on supply chain optimization in the near future.
This article is part of a series of articles written by MBA students and graduates from the University of New Hampshire Peter T. Paul College of Business and Economics.
From the military designs of the early 20th century to modern commercial development in 2017, drones have been making their presence widely known in the market. While military drones may have paved the way for commercial drone development, they have quite different purposes.
Drones provide much value, where traditional alternatives (such as helicopters or planes) fall short. Drone usage in supply chain optimization is still in its infancy. However, I am not convinced that drones are the solution going forward.
Note: For my analysis, I will be focusing on commercial drone usage in the supply chain.
A Timeline of Major Military Drone Development
- 1918: Kettering Bug. First modern drone concept used as a “flying bomb.”
- 1935: DH82B Queen Bee. Used as target practice for anti-aircraft weapon training.
- 1964: Lightning Bug 147SC. Used for surveillance.
- 2001: MQ-9 Reaper. Used as a hunter predator.
Source
Drones provide many advantages, such as mobility, cost effectiveness, ability to move goods, and camera technology. Although drone development is rapidly advancing, many challenges currently exist. Limited battery life, constrained operational range, collision liability, proneness to hacking, and even invasion of privacy are all legitimate challenges.
Commercial Drone Fast Facts
- Made of light composite materials.
- Typically have two to five rotors.
- Controlled by either remote control or GPS.
- Flight time ranges, but generally falls between 12-27 minutes.
- Battery powered.
- Operational range varies from 200 meters to 7 kilometers.
Current Drone Usage in the Supply Chain
Large retailers such as Walmart and Amazon are already investing significant capital in drone technology. On December 6, 2016, Amazon successfully completed its first beta trial of drone package delivery, called Prime Air, in Cambridge, U.K.
Here’s how it works:
- Customers place their orders online as usual.
- The package is prepped at the regional fulfillment center.
- Drones are then dispatched from the center with the package.
- Customers place QR codes on their property to indicate the drop-off point.
- The package is delivered at the customer’s address within 30 minutes.
- The drone is operated by GPS and handles up to five pounds of cargo.
To reinforce this effort, Amazon is currently expanding Prime Air in other parts of the U.K., France, Germany, and Italy. In addition, the company is seeking up to 1,300 small warehouse locations across Europe, with a prioritization for facilities near urban areas.
Walmart, on the other hand, is taking a different approach to managing their supply chain. Instead of focusing on package delivery, Walmart is testing the use of drones to monitor inventory in their warehouses.
Employees currently catalog merchandise with hand-held scanning devices and often need to use forklifts in the warehouse. Instead, the drone could move up and down the shelves cataloging inventory at a much quicker rate. Walmart claims that the drones “could help catalog in as little as a day what now takes employees about a month.” This program is expected to begin in at least one distribution center in 2017.
What about Legal Issues?
In the United States, commercial drone usage is still pretty limited. Below is a highlight of Federal Aviation Administration (FAA) commercial drone regulations.
- Must have a Remote Pilot (no GPS allowed).
- Must be less than 55 lbs.
- Must undergo pre-flight check.
- Must keep aircraft in sight.*
- Must fly under 400 feet.*
- Must fly during the day.*
- Must not fly over people.*
- Must not fly from a moving vehicle.*
*Indicates that these regulations can be waived.
Supply chain drone usage in the United States is currently limited due to these regulations. In the future, I expect many of these regulations to ease or change outright with advancements in drone technology. When this will occur is unknown.
However, other countries such as the United Kingdom are quicker to enact regulations by virtue of the Civil Aviation Authority (CAA). As a result, companies like Amazon have already been testing drones for supply chain optimization there.
Significant Hurdles
Although drone technology is gaining much media attention, there are legitimate challenges to drone commercialization in the supply chain.
While many legislative bodies attempt to develop drone regulations, concrete legislation is lacking in many countries due to fluid technological changes. In order for the market to fully develop, a legislative framework needs to be established. Companies will be reluctant to invest significantly in drone technology until legal parameters are established.
Another challenge is in regard to insurance and liability. With potentially thousands of (unmanned) drones flying only hundreds feet above the ground, insurance will surely be required. In the event of a drone collision with individuals, property, aircraft, or other drones, who then is liable? If the drone is piloted by a human, would he/she be liable? On the other hand, if the drone is GPS-enabled, would the technology be to blame? Surely some of these questions will be answered in contracts between insurance companies and suppliers, but with such uncertainty, premiums will undoubtedly be high.
Then there’s the question of rural vs. urban delivery. Amazon Prime Air is predominately testing drone delivery in rural areas. However, 80.7% of U.S. and 90.1% of the U.K. population live in urban areas.
Package deliveries in urban areas are via mailbox, left by the door, or hidden (to avoid theft). In other words, human judgement is used to deliver the package most appropriately. For customers in large apartment buildings, drone delivery is very limited. Perhaps these limitations could be offset with designated landing areas on rooftops, despite the fact that additional effort by the customer may be needed to retrieve the package.
Last, but certainly not least, is the impact of weather conditions. Wind, rain, snow, and extreme cold/heat all impact drone performance. Since current drones are not very heavy, any significant wind will 1) blow the drone around making it harder to control, and 2) use additional battery life to remain stable. Since drones incorporate many electronic components, rain and snow increase the chance of malfunction.
Furthermore, most drones utilize Lithium Polymer batteries — these batteries are prone to weaker performance in extreme cold and heat. According to Batteryuniversity.com, most Li-ion batteries stop functioning below -4°F. Additionally, battery performance is reduced 40% at 104°F and 50% at 113°F. The combination of all these weather conditions certainly provides logistical challenges for drone delivery and supply chain usage.
Is There Any Hope for Drones in the Supply Chain?
The short answer is yes, but in a limited manner.
With the logistical and technological challenges regarding drone delivery, I just can’t see e-commerce firms effectively managing the process outside of rural areas with optimal weather conditions. In the future, this could change, but it would require significant legal, technological, and customer adjustment for the process to be superior over the current state.
However, drones open other opportunities for supply chain optimization, such as warehouse inventory management (as with Walmart), infrastructure monitoring, surveying, or even security. For example, shipping firms such as FedEx or UPS could utilize drones to monitor traffic and optimize drivers’ routes based on real-time data. Additionally, energy companies could use drones — as opposed to helicopters or planes — to monitor pipelines. Finally, engineers could use drones to inspect dams, highways, and buildings more efficiently.
I have no doubt that the drone market will continue to expand. According to Visualcapitalist.com, by 2025, the U.S. economy is expected to see an increase of $82 billion and creation of at least 100,000 jobs. However, their impact to supply chain optimization remains vague to me.
About the Author
Matt Steckowych graduated from the University of New Hampshire in 2011, with a B.S. in Business Administration and is currently enrolled in the part-time M.B.A. program. He is a Salesforce.com Administrator at John Hancock in Portsmouth, NH.
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by Jennifer Hart Yim | Feb 13, 2017 | Blog, Logistics, Strategy, Supply Chain
Supply chains must accept that they cannot equal the power of Amazon’s supply chain without embracing these new trends.
This guest post comes to us from Adam Robinson, marketing manager at Cerasis, a top freight logistics company and truckload freight broker.
Amazon’s supply chain continued push deeper into new and existing markets will define additional trends in the supply chain throughout the coming year. While supply chain entities struggle to stay competitive with the e-commerce giant, more organizations will look for ways to eliminate inefficiencies and boost operations. Fortunately, these five trends may alleviate some of the strains of competition by giving supply chain partners an advantage in the global market.
Top 5 Trends to Know to Compete with Amazon’s Supply Chain
1. Robotics Will Grow More Versatile.
Amazon’s purchase of Kiva Robots changed the landscape of robotics in the supply chain. However, new companies are being created and developed to fill the void. The robotics company Starship released a robot that delivers meals and groceries to people in Euro metro markets. Meanwhile, Lowe’s has created the LoweBot, which boosts customer service, explains Dan Gilmore of Supply Chain Digest.
More companies are turning to robotics to find new ways to bridge the divide between a dwindling number of customer service representatives, including store associates, and maintaining around-the-clock operations. Across the spectrum, robotics will become more versatile and accessible. In other words, robots will gain new movements, capable of picking items from shelves in warehouses and storefronts.
Per IDC Manufacturing Insights, the use of robotics will become more platform based through robot-as-a-service, reducing costs of deployment and maintenance. Furthermore, the speed of operation of robots will increase more than 30 percent by the end of 2017. Clearly, robotics will become more important in 2017 than during any previous year.
2. Technology Will Reshape Procurement Practices.
Better procurement practices translate into better overall sales, but the role of procurement in driving sales’ statistics will change throughout 2017. Today, procurement drives up to 67 percent of sales, explains Johnathan Webb of Forbes magazine, as procurement professionals look for innovative ways to produce effective, superior products.
For example, Johnson & Johnson procurement professionals actively review market trends before making purchases. Upon identifying these trends, a correct forecast of supply demands can be generated. Thus, the role of procurement has become more focused on being physically involved in market news and research, not just signing purchase orders in an office.
3. More Businesses Will Create E-Commerce Platforms.
Amazon’s supply chain empowered the e-commerce market by giving everyone an opportunity to sell their goods online, which has made competing with Amazon difficult at best. Amazon’s supply chain expansion culminated in more companies looking to enter e-commerce without giving shares to Amazon. Companies expanded e-commerce and omnichannel solutions simultaneously as well, reports Steve Banker of Logistics Viewpoints.
For example, Walmart and Kmart redesigned their mobile e-commerce interface for consumers, making shopping and purchasing online easier and integrated with major companies. A simple search for a product on Walmart.com reveals partnered listings with Wayfair and third-party sellers, much like Amazon’s current vendor options. Moreover, customers can make purchases online and have them shipped to the store or their home. At Walmart, customers can even pick up orders without ever getting out of the car now. Ultimately, more businesses will seek out partnerships with bigger companies to stay competitive with Amazon’s bare price points and ease of use.
4. User Preferences Will Enhance Mobile Management Systems.
Traditional warehouse management systems (WMS) lacked integration with other systems. Procurement strategy was not always evident. Accessibility of systems depended on in-house IT departments, and upgrading access terminals could cause extreme delays and problems in operations. However, newer management systems, such as a comprehensive transportation management system (TMS) that integrates warehouse management with transportation management, are starting to offer more accessibility and personalization options.
In other words, accessibility and personalization allow warehouse managers and staff members to define metrics relevant to new products and current operations, test new processes, and effectively manage the flow of goods. Similarly, new mobile options, ranging from Android tablets to compact barcode scanners, will reduce inconsistencies and errors across the supply chain, explains IRMS 360. Paired with the advancements of predictive analytics and the Industrial Internet of Things (IIoT), more data will result in more efficient processes, creating a positive feedback loop throughout an organization.
5. Contingency Planning Will Become a Standard Practice.
Amazon’s supply chain has proven that not planning will result in the failure of small and medium-sized businesses. Furthermore, natural disasters reap $211 billion from the global supply chain annually. Having a larger global footprint is how Amazon’s supply chain has been able to maintain operations in the face of natural or man-made disasters. This is contingency planning.
The IIoT empowers contingency planning by giving supply chain entities real-time data from an endless number of sources, which range from online browsing data to point-of-sale data. Consequently, supply chains can react appropriately and divert resources to maintain operations. But, the key to utilizing this information lies in knowing what to do and how to do it when an event occurs. In other words, more companies will diversify distribution, supplier and storage networks throughout 2017 to prepare for what might happen in the future.
The Big Picture.
Supply chains must accept that they cannot equal the power of Amazon’s supply chain without embracing these new trends. New technologies are great, but chances are Amazon has already implemented them. Rather than falling into despair, you can use these trends to re-evaluate processes and practices in your organization, which will help you stay competitive with Amazon.
The complexities of the global supply chain rely on your willingness to take advantage of new trends and technologies today, as well as tomorrow, so do not squander this opportunity.
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by Elizabeth Hines | Dec 1, 2016 | Blog, Logistics, Strategy, Supply Chain
Consumer expectations of expedited, free shipping come at a cost to e-commerce businesses — but is it worth it?
The race to deliver orders at an ever-increasing pace — free of charge — is raising the stakes for shippers and retailers. Everything from the size of packaging to the selection of the right carrier has to be examined to prevent e-commerce ventures from becoming financially unviable.
While Amazon, the uncontested super power of e-commerce, has been known to rack up big losses to gain market share, smaller players are battling to meet consumer expectations of two-day, next-day, or even same-day delivery. The Amazon effect also means consumers are less willing to pay anything at all for shipping.
As free shipping is becoming a prerequisite for building customer loyalty, retailers know that charging even a minimal amount to deliver the product can break the deal. If the cost of shipping is perceived to be excessive, 63% of consumers surveyed by Jupiter Media Metrix will cancel the purchase.
In addition, consumers have grown accustomed to adding on smaller items to qualify for free shipping. But those items — one-ounce face creams, eye shadow, ear plugs — frequently arrive at their destination at significant cost. Jupiter found, for example, 45% of companies lose money on shipping.
Shippers also pay the price as small items do not necessarily come packaged in small boxes, consuming valuable space at a time when U.S. trucking tonnage is at record highs. FedEx and UPS both made headlines early last year when they, despite low fuel prices, raised shipping rates, partly as a result of dimensional weight pricing.
Now standard industry practice, dimensional weight pricing is estimated to have increased parcel shipping costs by as much as 20%, an additional expense ultimately passed on to consumers as well as small business owners. And with e-commerce forecast to grow from $392 billion this year to $491 billion in 2018, according to eMarketer Projections, demand will remain high at the same time as the shortage of drivers appears to have no real solution.
Pressure is likely to mount further as Amazon seems to be preparing to launch its own global package-delivery service that could rival those of competitors such as UPS and FedEx. With space on pallets a hot commodity, Amazon kicked off the year by adding thousands of trailers to its fleet, which is transported by third-party carriers. The online giant also hopes to build its own U.S. cargo operations to guard itself against delivery delays that affected some shoppers this past holiday season.
So what is the small business owner with a burgeoning e-commerce business to do?
Since it may be nearly impossible to rival the speed of Amazon Prime, focusing on keeping shipping costs to a minimum should pay off, advise several experts interviewed by Entrepreneur.
Steve Strauss, author and founder of www.smallbiz.com, a small-business consulting site, recommends businesses offer at least one express service and one standard service. “In this competitive environment where there’s very little customer loyalty, things like shipping matters. Look at it this way: If you don’t have a store location, you’re saving on rent and employees. Eat the shipping. It’s a small cost to you, and customers will respond,” he said.
What do you think is the key to staying competitive in the e-commerce space?
This post originally appeared on EBN online.
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by Fronetics | Oct 25, 2016 | Blog, Strategy, Talent
A reduced workweek may mean better performance, talent retention, and bigger payoff for employers.
In August 2016, the Washington Post reported that Amazon plans to pilot a program in which select teams will work just 30 hours a week. The teams’ employees will be salaried and receive full benefits, as well as 75% of the pay full-time employees earn. The entire team, including managers, will work on this reduced schedule.
“We want to create a work environment that is tailored to a reduced schedule and still fosters success and career growth,” states an event posting by the company. “This initiative was created with Amazon’s diverse workforce in mind and the realization that the traditional full-time schedule may not be a ‘one size fits all’ model.”
The program comes just a year after a New York Times report depicted Amazon encouraging marathon workweeks while discouraging vacation — and even unfairly evaluating employees in the wake of personal crises like cancer or miscarriages.
Will the new part-time program help combat that image? Will the 30-hour workweek model impact Amazon’s productivity? While Amazon does not plan to roll the program beyond the select teams, research suggests that the company might reap some positive benefits from employees’ working less.
A reduced workweek benefits employees and the employer
Let’s look at how working fewer hours might result in healthier, more productive employees.
1. Shorter hours improve the physical and emotional health of the worker.
A National Bureau of Economic Research study examined manufacturing companies that experienced an unexpected spike in exports, meaning longer working hours, and the resulting toll on employees. The findings revealed that long hours on the job increase an employee’s risk for heart attack, depression, and injury. But despite more health concerns, employees took fewer sick days. The impact on productivity when a company has more sick, injured workers is self-evident.
On the contrary, a shorter workweek correlates with better physical, mental, and emotional well-being. That translates to more alert, adjusted, happy employees who have more stamina to complete their jobs. In fact…
2. A reduced workweek does not decrease productivity — rather, it often increases it.
There’s a reason 43% of companies offer shorter workweeks to some employees: It has a positive impact on their bottom lines. Just how much? Tax services firm Ryan saw revenue and profits almost double and client satisfaction reach an all-time high. KPMG goes as far as to say it uses flexible work hours as a “strategic business tool” that “allows us to accomplish our business goals and become more successful.”
Well employees leading balanced lives are able to accomplish more in a shorter amount of time, and that pays off for their companies.
3. Shorter hours may increase employee engagement and decrease turnover.
All the extra hours workers are putting in actually drive disengagement. Left wholly left unchecked, the culmination of issues arising from an unbalanced work-home life can increase absenteeism and turnover. Simply put, employees logging long hours are significantly more prone to burnout.
And turnover can be costly for employers. The U.S. Department of Labor currently estimates the average cost of a bad hiring decision to be as much as 30% of an individual’s first-year potential earnings. Think about how that adds up as employees put more time with the company and earn higher salaries.
Going back to Ryan, the tax services firm, implementing a shorter workweek reduced the company’s turnover rate from 30% to 11%. That’s huge.
So, Amazon is definitely onto something with its 30-hour workweek experiment. The question is, what will happen when it succeeds? Will more businesses try reducing working hours? Could something like this work for your business?
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by Fronetics | Oct 20, 2016 | Big Data, Blog, Data/Analytics, Logistics, Manufacturing & Distribution, Strategy, Supply Chain, Warehousing & Materials Handling
These industry leaders are leveraging insights from big data to solve business problems and drive profitable customer action.
Big data is more than just a buzzword: It’s helping companies make big-impact business decisions based on customer behaviors, purchasing patterns, and preferences.
Not all organizations have the resources to invest in big data. But for those that do, the payoff can big significant. The trick, of course, is knowing which numbers to analyze, what can be predicted, how to use big data for your particular business needs.
Let’s look at five big brands that are leveraging big data successfully to drive profitable customer action.
How 5 big brands use big data
1. Amazon
Amazon’s free same-day delivery service, Prime Now, allows Prime members to shop for over 25,000 products that can be delivered to their doorsteps within two hours. How can Amazon accurately predict the specific wants of millions of people across the country at a given time to prepare local inventory for immediate delivery? Aside from efficient warehousing and logistics, the company uses data on purchase history to optimally locate and stock its warehouses. This strategy also helps to reduce the time inventory stays in stock, diminishing working capital requirement.
2. Starbucks
Have you ever wondered how two neighborhood Starbucks locations can both stay in business? The company examines data on local traffic, demographics, and customers to determine the potential success of a new location before expanding. Starbucks can then choose to open a new store where it would be most successful, even if it’s just a few blocks from one of their other locations.
3. Walmart
In preparation for Hurricane Sandy, Walmart analyzed historical sales data before expected inclement weather and found an uptick in sales of flashlights, emergency equipment, and — to everyone’s surprise — strawberry Pop-Tarts in several locations. The company has since leveraged timely analysis of real-time data to drive business performance. As Walmart Senior Statistical Analyst Naveen Peddamail told Forbes: “If you can’t get insights until you’ve analysed your sales for a week or a month, then you’ve lost sales within that time. Our goal is always to get information to our business partners as fast as we can, so they can take action and cut down the turnaround time. It is proactive and reactive analytics.”
4. Rolls-Royce
Rolls-Royce has implemented big data processes in three key areas of their operations: design, manufacture, and after-sales support. Each design simulation for one of their jet engines, for example, generates tens of terabytes of data, which computer systems analyze to determine the viability of the design. The company’s manufacturing systems are increasingly moving toward a networked, Internet of Things (IoT) industrial environment. And after-sales support is completely changed by big-data analysis. Expert engineers continually examine real-time analysis from sensors fitted to all Rolls-Royce engines and propulsion systems to diagnose faults and mitigate issues.
5. Capital One
Big data helps Capital One determine the optimal times to send particular customers certain offers. The team analyzes demographic data and spending habits of their customers to optimize their offerings, which has increased conversion rates on their offers and generated more leads from their marketing budget.
How does your business use big data?
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