by Jennifer Hart Yim | Jan 24, 2019 | Blog, Consumer Electronics, Logistics, Supply Chain
Drones and other autonomous technology are actively being utilized in supply chains. Here’s how companies like PINC and Amazon are leveraging this new technology for inventory management.
Highlights:
- Drones and other autonomous technology are actively being utilized today in supply chains.
- PINC and Amazon are using autonomous technology for inventory management.
- By implementing new technologies, operating costs decreased by 20%, successfully boosting operating margins.
It’s been five years since Charlie Rose interviewed Amazon CEO Jeff Bezos on 60 Minutes about new innovations that Amazon was working on. Bezos revealed that Amazon was on the brink of a supply chain revolution involving octocoptor drones transporting parcels: Amazon Prime Air.
Tweets and status updates immediately conveyed consumer excitement that flying Amazon drones could deliver packages directly to doorsteps. And on the flipside, some employees of shipping carriers and brick-and-mortar retailers expressed fear that their respective industries would become obsolete.
Fast forward to the present… While advancements have been made in drone and autonomous technology, such as Amazon’s tests in the United States, Dominos’ self-driving delivery car, and Tesla’s self-driving truck, Bezos’ grand vision still remains a dream for impatient online shoppers.
That aside, drones and other autonomous technology are actively being utilized today in supply chains, and their usage extends beyond the conceived purpose of package delivery. One such use case that companies PINC and Amazon leverage this technology for is inventory management.
PINC: Aerial Inventory Robots
Less than 10% of the 250,000 warehouses and manufacturing facilities in the United States utilize automated storage and retrieval systems (AS/RS) for managing their inventories. Instead, they resort to manual human labor coupled with outdated storage solutions and antiquated inventory management measures. The need for automation in the factory setting is paramount.
PINC, a top provider of yard management systems, pioneered the use of drones in warehouses. Since 2014, PINC enacted the use of flying drone technology (PINC AIR, Aerial Inventory Robots) to track assets in warehouses.
PINC AIR Hardware
These “inventory robots” leverage barcode-reader technology and roam premises in an automated fashion, ensuring efficient inventory tracking. Technically speaking, the drones are equipped with optical sensors which allows them to take pictures of barcodes and obtain information for identifying and counting inventory.
Indoor aerial drones have limited GPS capabilities compared to their outdoor counterparts, and instead rely on indoor location services software to aid in setting the devices’ “travel boundaries” within warehouses.
PINC AIR Benefits
PINC AIR saves time, money, and offers a safer alternative to traditional rolling ladders for companies wishing to upgrade their inventory management system. Businesses spend less on workers’ compensation claims by reducing on-job injury rates. Their robots operate at the leisure of the company, are 300 times faster than a human performing the same work, and possess high accuracy levels. Even a daily inventory check provides a company a plethora of data.
PINC’s aerial drones replace the clipboards and spreadsheets of inventory counts by giving companies a platform that automatically displays the needed information in real time. Businesses could use this data to answer a variety of questions such as, “How many days do certain television brands sit in stock at certain facilities during the holiday season?”
Amazon Robotics (Kiva): Robots
In 2012, Amazon acquired Kiva for $775 million, phased-in its technology in its warehouses a few years later, and formed the subsidiary Amazon Robotics. Kiva robots replaced forklifts, large conveyor systems, and other human-operated machines. They’re efficient at performing monotonous tasks that previously fatigued employees, such as carrying and stacking bins around all day.
[bctt tweet=”In 2012, Amazon acquired Kiva for $775 million, phased-in its technology in its warehouses, and formed the subsidiary Amazon Robotics. Kiva robots replaced forklifts, large conveyor systems, and other human-operated machines. ” username=”Fronetics”]
Amazon made the move to continue pursuing competitive advantage in the e-commerce space along with maintaining control of the thousands of products in their fulfillment centers.
Some of Amazon’s robotics are large, 6-ton “Robo Stow” mechanical arms that move and stack bins around the factory. Others are used for carrying, transporting, and storing merchandise up to 3,000 pounds in an orderly fashion. Using these robots to stack and transfer merchandise saves aisle space in warehouses, allowing facilities to carry more inventory, meaning customers will be able to receive their goods quicker.
But what happened to the human employees? Did Kiva’s technology truly destroy thousands of jobs within Amazon’s warehouses? Is this the part when we rage against the machine due to the “robot uprising” stealing jobs?
Put your pitchforks down. No layoffs occurred, and, instead, robots and humans began working together. Despite skeptics’ views that automation is a job disrupter, SVP of Operations at Amazon Dave Clark assured, “[…] automation increases productivity and, in some cases, demand from consumers, which ultimately creates more jobs […] Warehouse workers would continue to work in technologically rich environments.”
In fact, since the Kiva acquisition, Amazon increased the number of warehouse employees by nearly 200% to an upwards of 125,000 workers due to the increased volume of orders. Signs show no stopping either with the rising demand of high-skilled programming jobs, technicians, as well as those working hand-in-hand with robots.
Existing employees took on new roles and increased their skillset. For example, some employees moved to “stow” products on shelves for the robots to move away, following computer instructions to optimize where merchandise goes.
From there, the robots line up when customer orders arrive. Human “pickers” grab the products from the robots’ shelves and place them in plastic bins. At this point, merchandise is packed in cardboard boxes for customers. Warehouse jobs become less monotonous as the products that employees place on the robots vary.
And with that said, the cost savings from this technology is astounding…
Cost Savings → Increased Efficiency
Operating costs decreased by 20% at a $22 million savings from each fulfillment center, successfully boosting operating margins. These savings are attributed to enhancing warehouse efficiency. Amazon found that cycle times decreased between 75% and 80% to just 15 minutes. As a side effect, additional space was allocated for inventory, increasing the amount of storage by 50%.
Drawbacks & Limitations of Autonomous Technology in Supply Chains
PINC: Barcodes & Drone Power Source
PINC’s optical technology requires packages to display barcode tags in plain sight for the drones to process accurately. This raises concerns for companies who do not have this ideal setup in their warehouses, potentially raising costs.
Another issue is the drone power source. AIR drones are powered with hydrogen fuel cells instead of batteries as they last longer and charge faster. PINC CEO Matt Yearling revealed that the hydrogen-powered technology can fly up to three hours, and only needs a few minutes to refuel. Companies therefore need to strategically consider when the drones are scheduled to fly and follow-up with refueling procedures when the drones’ power is depleted.
Amazon Robotics (Kiva): Robots Cost & Limitations
The robots themselves are also limited in the tasks that they can perform. For example, the “robotic arm” was designed to pick up packages of certain sizes. Amazon has been in the process of researching their flexibility to complete more advanced tasks, though for now human workers help in that regard. After all, “There are many things humans do really well that we don’t even understand yet,” says Beth Marcus, an Amazon employee who specializes in robotics.
While autonomous technology clearly has its benefits, it comes with a cost. Aside from the initial expense Amazon incurred with Kiva’s acquisition, an installation cost of $15 million per location is required, costing Amazon nearly $1.7 billion to fully deploy robots in all 115 locations. Despite this cost, Amazon nets a savings of $7 million per facility when compared with its recurring annual savings.
Conclusion
While introducing new technology into the supply chain space is sometimes deemed as “disruptive,” the ends justify the means for autonomous technology. Along with new jobs being created, modern manufacturing workers are gaining more skills by learning to operate robots. Drones and robots allow companies to effectively match their scale and flexibility with increased consumer demand.
PINC’s drones are a great way to establish an accurate representation of inventory in real time from past to present. This further strengthens a company’s promise to fulfill needs for its customers.
Amazon Robotics enables companies to maintain incredibly efficient workflows in their warehouses and fulfillment centers.
In a poll of executives by Techpro, an astonishing 64% reported that there were no plans to leverage autonomous technology in their businesses. Applying drones and robots to inventory management gives companies a competitive advantage and a head start in taking advantage of cutting-edge technology.
It just goes to show that autonomous technology further streamlines operations and supply chains by allowing companies to reach new heights.
This article was written by Spencer Black, an MBA student at the Peter T. Paul College of Business and Economics at the University of New Hampshire, specializing in Information Systems & Business Analytics. After graduating summa cum laude from UNH in Computer Science in 2015, he has been working at Pegasystems as a Software Engineer.
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by Elizabeth Hines | Nov 13, 2017 | Blog, Consumer Electronics, Current Events, Manufacturing & Distribution, Strategy, Supply Chain
As sales and consumer desire continue to increase for drones and home assistants, the second-life market has a huge opportunity for growth.
Consumers are becoming ever-more enamored with their gadgets and toys. Drones and home assistants are becoming more ubiquitous in our homes (and flying around our skies). However, when these machines run their course — either because they break, or a newer model comes out — is there still use for them?
The market for gadgets
The marketplace for drones is an ever-growing one. Last year drone sales increased by an astounding 60%, and revenue grew to $4.5 billion. The drone market can be segmented into two categories — personal and commercial. Personal drones, which many consumers use for photography, is predicted to grow 40% this year, while commercial drones, which can be used for survey maps and delivery services, are expected to grow 60%.
While personal-use drones dominate unit sales, commercial-drone sales — which make up only about 6% of the market — are projected to represent 60% of the market’s revenue. This is due to the high cost of commercial drones, some with costs that exceed $100,000.
Home assistants are another intriguing category on the rise. These products are intended to control various devices in your home, such as thermostats, lighting, and security. These products also allow an individual to shop online using voice commands.
The frontrunner for this market has been Amazon’s Echo devices. As the primary nature of Amazon’s business is e-retail, the Echo device plays perfectly into this. By making it simple and easy to make Amazon purchases through voice command, these devices have great potential to bolster Amazon’s bottom line.
While this market is still in its early stages, Gartner Research expects tremendous growth, projecting $2.1 billion in consumer spending on personal home assistants by the year 2020.
The second-life market
So what becomes of these products as we replace them with newer models? Smart phones offer a sensible comparison when looking at the second-life market for these products. In 2016, consumers sold or traded in used cell phone devices for an average of $140 per device, generating a total of $17 billion worldwide. This selling and trading doesn’t just end after one transaction. It is predicted that at least 10% of premium ($500 and up) smartphones will have at least three users before they are retired.
We can draw a parallel about second-life potential between drones/home assistants and cell phones. Advances in technology render previous models obsolete or, at best, out of date. Consumers who can afford them will gravitate toward newer products. As with cell phones, they will generally look to recoup some of the cost for the newer product by selling or trading in the old one. These can then be sold to consumers looking for less expensive, older models. Even in the case of drones that crash, parts can be salvaged and sold to individuals that are looking to build their own drones.
The markets for these products are all still in early stages, so second-life markets are still in growth stages as well. As sales and consumer desire continue to increase for drones and home assistants, their life cycle will go on long after the first owners have moved on to newer models.
This post originally appeared on EBN Online.
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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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