How to beat Amazon?
Or “How to organize the transportation for home delivery?”
By Simon Drews
Dear reader,
this blog post is not at all about how great Amazon is! They were praised enough in the last couple of lessons we had in university. From now on, I would like to look at them from a different perspective then before. A rival. I want to beat Amazon! Finding a way to outdo this e-commerce giant, is a challenge worthy for us students.
True. That is not a task that can by archived by a simple blog post like this. If I would really think that, it would mean I finally lost it completely. But this document is supposed to broaden your minds. Start to think like an entrepreneur.
So, let’s get started.
As a short warm-up, I want to review very shortly what we have seen in the last lectures. We now know that our warehouses have a strong significance in our logistics network. Moreover, a carefully planned combination of Demand Management, Forecasting and Inventory Management is needed to prevent stock-outs and to maximize customer satisfaction. And now, we will finally have a look at that part of logistics that many (me included) associate with business logistics in the first place.
Transportation.
Until now, we always just assumed that transporting was done somehow. From warehouse to the stores. From the factory to the warehouse. Or also from the warehouse directly to the customer. We want to focus on the latter, as covering every option would just go beyond the scope of this posting.
Why is transporting goods to the customer/consumer that important? Well. Think about it. What is for example Amazon trying to do? I it is right there – written down in their mission statement.
"Our vision is to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online."
In my opinion, they just try to make the customer as happy as possible. Something that every company should aim for anyway. Transportation immediately affects customer satisfaction.
Therefore, let us have a look at one way how we can achieve this: Reducing the times for delivery to a minimum. The faster, the better. With a timing as specific as possible.
For us, as rising entrepreneurs, that means we must reflect on two major points.
Some words about optimization
This topic can be very technical and that is not what we want to focus on. But still, bear with me for a moment, because that topic is very important!
As we want to reduce the delivery time we must have a look at our vehicle routing. How must our vehicle, normally a truck, travel from warehouse (depot) to the different destinations to be most efficient.
Since some time now we can use powerful information technology and more recently also big data concepts to find a solution those problems. In combination with special algorithms we can, for example, find the shortest path from one node to another (something that your smartphone does when you use google maps – it finds your current location via gps and provides you with a fast way to get somewhere else).
Another algorithm is especially useful in business logistics to resolve routing problems that occur when thinking about transportation. The so called “Vehicle Routing Problem”.
That is a generalization of the “Traveling Salesman Problem” with the goal “to find the optimal set of routes for a fleet of vehicles delivering goods or services to various locations.”
To keep it short. Without a computer finding the optimal solutions under real life conditions, with hundreds of streets, highways and traffic jams, would take a very long time if not “forever”. I am not saying it could not be done. But algorithms can be translated into a language a computer can understand. And a computer is a lot faster when it comes to algorithms. So why should we bother doing the boring tasks ourselves? We should not! But still, understanding is essential.
Mode of Transportation
The second major point, is a very interesting one.
In general, the mode of transportation refers to the transportation of goods via road, rail, water or air. In other words, via truck, train, ship and airplane. But just talking about those would be boring. So, let us also take into account future modes of transportation and innovative vehicles.
For one, it could be that the airspace in the city of the near future will be full of buzzing sounds. And I am not talking about genetically modified bees here, but about Drones.
Those unmanned aircrafts, often constructed from light composite materials to reduce weight, possess very smooth flight capabilities and high maneuverability. Meaning they are not only very useful for ambitious cinematographers and people like me, but also for serious businesses.
According to businessinsider.com one of the hottest topics regarding drones is, at the moment, the possibility they pose for future business operations. Especially when it comes to delivering packages to the consumers’ homes. More specific: How they will allow companies to “bypass the many challenges involved with the ‘last mile’ of delivery - the last leg of the journey when a package arrives at the customer’s doorstep”.
Furthermore, Businessinsider.com states that the “last mile” is the “most expensive and inefficient part of parcel delivery”.
So, it makes perfect sense to explore how drones can help to speed up the transportation and to cut costs. By the way, also retailers like Walmart and ecommerce giant Amazon (“Prime Air”) are exploring how they can use those technologies to their advantages.
And let us not forget! Who is steering those drones? Right. Artificial Intelligence. In short, an “intelligent” machine. No human interaction at all. Sounds amazing? Yes, it does. It is actually a very amazing topic, but I cannot get into any details here.
However, in my personal opinion, Drones still have a long way to go until they can be used as an effective way for transportation. Not necessarily because of the technology itself, but simply for the fact what drones would mean for our surroundings.
Remember? Drones are indeed a Buzz(ing)word at the moment. Try to imagine hundreds and hundreds of drones buzzing through the air. So, before this Buzzword can become a buzzing reality some important obstacles still need to be overcome. Especially relating drone regulations, the development of autonomous flight and traffic control systems for drones as well as consumer acceptance. I guess, drones will come eventually, but not too soon.
Until then, I want to present you another very promising approach. I am talking about a “modular-vehicle” called “Next”. This autonomous driving mode of transportation has a lot of potential. Originally it was created for transportation of people (see image), but you can easily transfer the ideas to logistics and transportation of consumer goods.
You will have to go to their website http://www.next-future-mobility.com to learn more. But still, let me tell you why I think this is also a great approach.
First. A self-driving “car” will be easier to implement into our society. The needed infrastructure (streets, streetlights) and the necessary regulations (laws) are already available. We of cause have to “train” the AI that drives the self-driving vehicle, so that it actually follows our rules. This sounds easier than it is, but it is a manageable challenge.
Furthermore, the society will accept thousands of self-driving vehicle faster than self-flying vehicles. As for those that think that autonomous driving is just “wishful thinking”, have a look at the following quote from a DHL Trend Research (DHL is a division of the German logistics company Deutsche Post DHL):
“There is no doubt that self-driving vehicles will change the world of logistics, as well as many aspects of our personal and business lives. The question is no longer ‘if’ but rather ‘when’ autonomous vehicles will appear on our streets and highways”
Second. I just do believe that drones will only be capable of doing as much as transporting small packages in more rural areas (maybe a pizza or a book). Also, the distance a drone can cover is too small in my opinion.
However, that being said, what I really would like to see, and I haven’t really started to think this through to the end, is a combination of both. Drones and “Next-Vehicle” together would open exciting opportunities.
In conclusion, I think both, “next-vehicle” as well as drones, are fascinating new technologies. And every company that has to think about those innovative modes of transportation, as they will surely recreate the way businesses transport goods from location A to location B. Be it from factory to warehouse or from warehouse to customer.
What do you think?
Thank you so much for reading
Simon Drews
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