3 Aug 2015
Is Airborne Drone Pizza Delivery Really Just a Pie in the Sky Idea?
While legal and safety concerns may rule out plans for flying drone deliveries, other areas of logistics are clearly being revolutionised by automation, according to many exhibitors at the 12th American Supply Chain and Logistics Summit.
Although increasing automation in product handling is driving efficiencies in the logistics sector, aerial product delivery systems are a long way off, according to attendees at the 12th American Supply Chain and Logistics Summit. While some saw outsourcing and Cloud-based solutions as 'quick wins' for companies seeking time and money savings from their logistics efforts, others warned of the dangers of viewing suppliers solely as a commodity. There was also a distinct emphasis on the importance of the collaborative approach – an area in which Asia seems to have much to teach the West.
Michael Buscher, Chief Executive Officer for Vanguard Defence Industries, a Texas-based drone manufacturer, sees the idea of drone deliveries – such as the mooted Amazon PrimeAir – as technically feasible, but socially unacceptable. He said: "Amazon Prime? We've all seen it on the news, but will it happen? No.
"It's not that the technology isn't there – it's the issues surrounding it. If you are drone-delivering a book to a driveway, what's going to keep a kid or an animal from stepping in front of the blades? Then you have air space. You have aircraft flying all over the place. How are you going to avoid conflict with those aircraft?
"When it comes to warehouse automation, that's a different prospect. In 2012, Amazon purchased a company called Kiva [a manufacturer of mobile robot fulfilment systems] and it is now automating all its warehouses and distribution facilities. People were askance when Amazon paid US$750 million for Kiva, but what a lot of people don't realise is that, over five years, the savings in staff costs is going to be triple that."
While airborne consumer delivery may be unlikely to happen, other crewless systems may radically rewrite the logistics rulebook. Buscher said: "Mercedes-Benz Future Truck 2025 – I think that's realistic. They've demonstrated this multiple times, with convoys that can follow about 24 inches apart. When the lead vehicle starts braking, it sends a signal in about an eighth of a second to the trailer vehicle, so they can go from 60mph to zero simultaneously. It's far more reactive than any human driver.
"At the same time, the Rolls-Royce cargo vessel, in my humble opinion, is going to revolutionise sea transport. It has transatlantic capabilities and is fully autonomous – you don't need a single person on board. My guess is that, within about 25 years, it's going to replace the vast majority of conventional shipping lines."
As well as robotic technology, the internet is also having a major impact on supply chain and logistics efficiency. Tegrin Bridgeforth, Director of National Sales for EShip Global, a Texas-based transport management company, said: "I would say the biggest trend right now relates to the Cloud. Nobody wants to do anything or maintain anything on their own site. They prefer to offsite the costs of those activities to someone else.
"The flipside is you do lose control. You can think of it as 'I'm free to do other things', but you do lose that emotional attachment to the success of the business if you offload it to someone else."
Outsourcing logistics functions to specialists is seen as a 'quick win', especially for those small- to medium-sized companies lacking the personnel or spending power to invest in a large-scale systems overhaul. Ray McGuire, Global Supply Chain Director for Metabolix, a Massachusetts-based bio plastics company, said: "What's key for the small- to medium-sized companies is to partner with a 3PL [third party logistics] supplier who has excellent systems. They can then avail themselves of that in order to control their supply chain.
"Kuehne & Nagel, for example, should be familiar to people doing business in Asia, as should DHL and UPS Supply Chain elsewhere in the world. These are the big guys, but there are certainly other, smaller companies that have excellent IT, excellent systems and excellent visibility tools that you're able to access through their web portal, either as a part of your contract or at a small fee.
"It's certainly better to pay US$100 a month for that service and have 3PL management and 3PL visibility – some go as far as into the shop floor at the supplier, all the way up to delivery – than invest US$500,000 on software to do that. In a 50 or 100 person company, there may not be anyone who knows how to use such a system, at least to its full extent. So why are you going to pay for software that you are only going to use 10% of?"
Looking deeper into the supply chain and understanding more about suppliers' business – particularly how outside factors impact on supply security – was seen as vital by many when it comes to anticipating and preventing supply problems. Michael Galluzzi, Lead Business Strategist for Additive and Manufacturing and Supply Chain Management for NASA, said: "From the program manager's point of view, who are my critical sole-source suppliers down at the lower tier? Where are they getting their materials from and so on? Will my design change impact on the liquidity of these suppliers?
"When the space shuttle programme was terminated, for instance, there was a very long gap before the next purchase order. How is that impacting the SLS [Space Launch System], which is the successor vehicle? If you don't have visibility you're not going to know.
"Taking another example, there is the case of natural disasters. When the tsunami struck Japan back in 2011, our system knew within seconds we had a problem with a supplier in the country. We were able to mitigate that and come up with an alternate solution."
Some delegates believe that western businesses have a lot to learn from Asian companies when it comes to customer/supplier partnerships. Addressing the challenges, this represents, McGuire said: "Americans are focussed on what they want to pay and when they want it. The Asians want to build a partnership – they want to know about you.
"Asian businesses shouldn't get discouraged that Americans and, to a great extent, Europeans, are focussed on the end results first rather than on building relationships. Luckily, many forward-looking companies are looking past just trying to screw the suppliers for every penny. They are more interested in building a relationship that's going to last for years. I think the best way to approach this is almost in a mentoring capacity – 'We need to build a relationship and you're going to have excellent product from us, but we're not going to do it for the lowest price.'"
McGuire's belief that Asian businesses have an edge over their western counterparts was echoed by Carl Loubser, Supply Chain Vice-President for CCI, a London-based management consultancy. He said: "We're a small company but we have very big global clients. A lot of them will put forward facilities or organisations within Latin America or Asia as examples of what 'good' looks like. There is an execution mind-set – they get stuff done.
"The US has a very different approach and I think there's a much greater need for leadership alignment. In the Asian economies, there's a lot more loyal people – people are prepared to just be soldiers and just follow direction."
The 12th Annual American Supply Chain and Logistics Summit was held at the Hyatt Regency in Dallas. More than 200 delegates took part in 30 seminars and workshops, all dedicated to best practice in supply chain and logistics management.
James O'Donnell, Special Correspondent, Dallas