An article in CNN.com titled “Amazon patent hints at floating warehouses in the sky” (December 29, 2016) describes a plan to carry anticipated inventory in a blimp located close to customers, with drone delivery in minutes to a customer. Example applications described include sports venues and others. But such deliveries would compete with concessions within sports arenas and thus may not be welcome. Would an increased variety of inventory from Amazon create an opportunity to earn a margin from sales for sports stadium operators ? What other locations might be suitable for such floating warehouses – would new product introductions with quick delivery on location create a marketing buzz for manufacturers ? How might such a system be economically justified ?
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Meta
Global Supply Chain Musings 
I found this blog so interesting that I couldn’t help but do more research on the subject. Amazon has termed these floating warehouses “Aerial Fulfillment Centre” which may be positioned above metropolitan areas, hold inventory and be used to deliver items using drones or an “unmanned aerial vehicle” as the company calls it. Putting the complications and timeline aside, I feel this is an absolutely brilliant idea. Given that the AFC can remain airborne for a long time, it is not limited to a fixed location such as traditional facilities. Several of them need to be placed that can move according to factors such as weather, forecasted and actual demand. Their forecasting accuracy would improve further as they will be so close to the customer demand and can fulfill their needs immediately. Again, just like the previous blog, it is still at a conceptual and drone testing phase and has several downsides and risks as well.
Looking at sports venues specifically, I feel the operators would certainly benefit from the new competition that Amazon can bring in. Currently, concessions at sports arenas are incredibly expensive and with more competition especially from a company such as Amazon, they would be forced to compete harder and drive prices down. For the operators, because there is a new player, they may try to get a better deal on margins. In fact, simply being tied up with Amazon for its venues could increase the footfalls due to Amazon’s reputation & loyalty and help them earn more.
Location wise, as mentioned earlier, there has to be a large number of AFCs placed over metropolitan areas as well as disparate areas. I understand that this would make Amazon incur more costs, however, we also have to account for the huge improvement in customer reach and higher sales. There will certainly be huge costs incurred to set-up the system at this scale, but it will certainly bring about a revolution in the warehouse and logistics industry.
Peeyush,
I think a point for discussion is could Amazon deliver without prior approval by the land owner. Dominoes now offers delivery locations in parks and public places. Could Amazon replicate this and even deliver to parking lots to resupply tailgaters? I think the legality of who has the right to deliver a good in a public or private place needs to be debated including if the delivery vehicle never comes in contact with the ground. Do you think this debate could spill over to other industries that use public spaces for business transactions like Dominoes, Facebook marketplace, Craigslist, etc?
Mark you raise a great point about legal issues. Certainly, I feel prior approval by the land owners is required as its their property. But it could be a one-time approval rather than having to approve each time there is a shipment to that location. Another way Amazon could deal with this would be to have a general agreement online that all land owners could agree/disagree to without having to individually get approvals. If its a public space with a public event happening, there should be no issues as that is still currently taking place as you mentioned. For me, public spaces should be open to use for business transactions whereas more stringent laws need to be applied for private spaces.
Peeyush, I think you make a great point on prices being driven down in sports arenas due to the revolution this delivery model will bring. Like Mark points out, the legal aspects are definitely important. Even if they find ways to resolve these legal concerns and the infrastructural issues, I believe there is one factor that’s too much of an unknown here – will the model fetch enough business to cover the operating costs?
For example, the article talks about using a shuttle to take the drone back to the blimp. There will also be the costs incurred for operating the blimps in air for extended periods of time. Though stadiums draw huge crowds, will they generate enough sales to cover these costs? Therefore, on your point of customer reach, I think volume plays a critical role here.
When Amazon hit the $1 trillion mark yesterday, it showed the company’s progression in moving towards new innovative and disruptive technologies and market strategies. The aerial fulfillment centers, although may not be very cost effective in the earlier stages, would provide a great opportunity to capitalize on lost sales when a new product is launched on Amazon such as the OnePlus phones back in India.
Hovering around sports venues, i believe is a great plan to cater to on-demand customer needs but may comply with the brick and mortar fan shops around. One way to counter this is to possible advertise or promote the brand image of the sports team and share inventory variety with the fan shops.
Such a system can be economically justified in the long run given the terms and conditions of the contracts are met, however one has to see the customer insights of having them buy online instead of a consistent trend of buying them from fan shops.
Having these around an area with corporate offices in metropolitan cities would be more of an economical advantage.
Amazing Amazon..!
Amazon air deliveries, though in the nascent stage, has been an innovative mark of promise in customer service. And now AFCs (Airborne Fulfillment Centers) using UAVs is just an incredible design of futuristic supply chain magnificence. However, any possibility of implementing such a system currently, is very thin, probably not before 5-6 years at least.
Reference to its system design details: https://tinyurl.com/j7n4l3q
Being aerial, these warehouses can act as fulfillment centers for surge demand needs during public events, shows, matches, festivals, etc. or for product advertisements, releases. (when descended to lower altitudes). Being at a height of almost 45000 ft, an AFC could easily cater a large metropolitan area, delivering an item in just 20-30 minutes would be a strategic marketing push for new product releases. Imagine if we could someday get our favorite cell phone after its immediate launch, within 30 minutes in a city like Chicago.
More this gets wishful, higher would be the premium a customer will pay. Increased product variety will make the price war tough, to compete with local retail. Why would a customer use this service for a product if its easily available at a nearby retail, such as food products, sports jerseys in a stadium or other miscellaneous items?? The distribution of AFCs, coordination with on ground centers, and availability of a sustained demand will be important for deciding the capacity of this supply chain. The economic viability of the system would depend on the demand, no: of SKUs, pin codes, product type, sale duration etc. on the front end, and fulfillment automation, inventory management, regulation compliances etc. would govern the backend feasibility of implementing this system.
Hi Ashish, indeed, this system would be a game changer and would add a whole new level to customer service. I feel that even if there are nearby retail stores or shops at sports arenas, customers would still prefer to buy from Amazon as long as the prices are very competitive. I am excited to see how the “delivery fee” would be applied in this case. If there are group orders where a drone can carry items for customers in the same region, especially like a sports arenas, even though it might take more time, the cost for customer could be brought down. I agree with all your factors for economic viability and am actually interested to see how Amazon carries out it’s inventory management in this system and whether it would be any different it would be from a traditional system.
Ashish,
I agree with your point of why a customer would use this service beyond the novelty aspect. I can see this for large events with specialized merchandise such as a championship shirt, but even would it be reasonably cost effective. I speculate it has a greater potential when the local retailers are closed and normal distribution networks are unable to operate. Specifically, immediately following intense weather events or disasters. But, in these situations would Amazon be wise to charge a premium? Is it possible for Amazon to have an agreement to provide this aid with compensation from the government or a NGO. What are your thoughts on this potential use for the technology?
I is amazing that a technology once though to be outdated and behind us, may unlock the next chapter in the warehousing and distribution industry. I think delivery by drone at sporting and public events has a “novelty” value that would entice customers despite the cost. I don’t see this putting concession stands out of business, but it may increase the amount of merchandise available at events. Perhaps this could add to the fans experience before or during the game, by delivering a jersey or other team apparel.
I think a large benefit for amazon is that this concept allows for a new way of getting products close to customers without committing to the expense of a warehouse. This perhaps could bring up a great debate of airspace ownership. I would suspect most homeowners would be upset if an Amazon Aerial Fulfillment Center floated above them for an extended time. While it would not be at a low altitude it may make locals worry about what would happen if it had an issue.
I think the logistics of getting the drones and supplies to the AFC’s would be possible at their existing warehouses as they could provide a large landing area, especially if the roof could be utilized.
With the continued growth of cities and diminishing areas to store goods close to customers combined with the strain on our transportation network, the AFC offers flexibility and added capability. Perhaps this could be a cost effective and efficient way of moving supplies between ground locations as well.
I think the largest hurdle much like driver-less trucks is for the government and public willingness to except and live with the risks associated with AFCs and drone delivery. I think this has possible applications in the reaction phase days after a disaster occurs. Of course this would not be a great profit opportunity and would be more humanitarian.
I believe that an increased variety of inventory from Amazon would reap benefits for sports stadium operators. Amazon’s mere presence in sports stadiums would have an overall positive impact because of its company image of innovation. In addition, I think that Amazon would prove to be serious competition for the current suppliers of food and sports apparel within stadiums, and the current suppliers would need to significantly decrease their prices in order to remain competitive.
Theoretically, I believe that any outdoor public event could be suitable for these floating warehouses, such as certain concert venues and festivals. However, the idea of floating warehouses raises personal concerns in the long-term. If this idea reached full fruition, the thought of a large amount of floating warehouses in crowded public areas such as sports stadiums is not an appealing image for me in relation to safety.
I think this system is economically justifiable in the sense that customers would have even easier access to products than they do now. Additionally, considering that they have a patent for this idea, Amazon is the first company to possibly implement this idea on a wide scale (at least to my knowledge), which would give them somewhat of a first-mover advantage within the logistics and transportation industry.
Amazon is creating a revolution in the realm of last mile delivery. The last mile makes up more than a quarter of the total delivery price not to mention about the biggest problem of unattended home deliveries(AHD). Therefore, any innovation that can save money for retailers is always welcome. But given the operational flow of the system, the costs of maintaining such flying warehouses and picking back drones via shuttle does not sound cost effective. Moreover, when the target delivery location is a sports venue, the system has to handle with the challenge of hitting a tiny target. The package needs to be released via a specially designed parachute which incurs additional costs of operations. Unless the scale of operations is large enough to achieve economies of scale, this may not be economically viable.
To begin with, drone delivery by Amazon is an innovative attempt which helps to shorten lead time, improve flexibility of the system and satisfies customers’ diverse demands. While, the problem lies in the cost control and application scenarios determined. Amazon tries to apply drone delivery to deliver goods to audiences in stadiums, however, that may lead to stadiums’ discontent because of “stealing” profits from merchants. Moreover, the costs caused by this mode of delivery may exceed the value of goods itself. The increase of costs may boost products’ prices further, which in turn reduces customers’ demands. Therefore, it’s quite important to explore the application scenarios of such mode. Another problem faced by Prime Air is that where to park such floating warehouses. Areas big enough are required. While, how to convince those areas to provide temporary parking places and how to build profits sharing contracts are both difficulties to be solved.
Drone delivery is possibly one of the most amazing technologies developed in recent years, technology that customers would love to see being implemented on a large scale. Although Floating Warehouses, especially for sports arenas seem to be a stretch. This technology would challenge the status quo that clubs representing different sports have set for decades. Buying merchandise at sports arenas is an experience and this magical experience is what has allowed such establishments to charge a high fee. Amazon would have to create a whole new experience that is just as good or even better than the traditional way to purchase items at sports arenas to make the new concept a success and I would love to see how Jeff Bezos and his team would tackle this problem.
I feel that drone delivery in sports arenas is too dangerous and people in the places don’t really need the delivery in a minute. Of course, waiting in a long line during sports games is frustrating. However, do you really want drones to deliver your snacks or beers at a baseball stadium? In that case, you have to care not only about the balls frying to you but also drone…
I think there are many more efficient ways to use drone delivery. In Japan, Amazon is testing drone delivery for the tall apartments, usually over 30 floors, because of the huge needs. The residents have to come down to the first floor to get products they ordered so that it takes a few minutes after delivering. Drones can deliver the products direct to the resident floor and save the time of delivery as well as the residents’ precious lifetime. I think this situation is often happening in the urban cities all around the world. Another way is to use the drone to deliver products in the areas which don’t have good transportation infrastructures. For example, a delivery company uses drones to deliver medicines and medical products to the rural sites in Africa. Compare to driving a long way on off roads, the drones are more cost efficient in this situation.
Hi Nobu,
I completely agree with your concern about flying drones in a baseball stadium.
I was thinking along your lines of utilizing this technology for situations like disaster relief including floods, earthquakes, fire etc. e.g. Recently, there was massive damages due to flooding in the Indian state of Kerala. Using such a technology to deliver the basic needs such as food, medicines, clothing etc to the people affected would have been a blessing. Also supply of medical needs to rural areas and during emergencies where EMT’s and ambulances can’t reach easily. Many a times physicians can’t provide quality treatment to patients in rural areas not due to lack of their expertise but lack of available resources. This technology could be utilized to help address this issue.
Kobayashi perfectly talks about the applications of drones to other industries where it can be put to better usage as there are lot of infrastructural constraint for transportation for essentials such as medical facilities, basic needs to higher terrains, and also tall buildings .
But when we talk about stadiums, then it depends primarily on the whether customer would want it. Long lines in stadium,where certain section of the people are not price sensitive, may incline towards preferring drone.
Its basically about the risk associated with any first mover. The concept , if solely looked from application part of view, is useful in innumerable areas- high traffic, disaster management, emergencies, apart from requirements in day to day activities. With time, it depends on cost, competitors, demands, legality, technical and many more aspects.
I don’t think the operators of arenas will allow amazon to fly drones in their stadiums in short term, firstly, Amazon’s service will threaten their own original stores and secondly, having drones flying around the crowded stadium can easily raise chaos and potential risk such as falling. However, I still think this floating warehouse can be a good idea. I think some types of roof top can be well utilized, such as the top of some office buildings. They won’t occupy the condensed land area and drones can land and take off from these places easily. Same reason for the top floor and garage complexes. For the quick delivery issue, I think it may stimulate some kinds of increase in sales but the effect won’t be much too big since I think most of the clients are demand- based, shipping speed can be a minor consideration. To become economically feasible, Amazon need to first make the costs of operating the warehouse as low as possible, and the drones need to be cheap and reliable enough.
The floating warehouses or the airborne fulfillment centers are yet another feathers added to the world’s largest e-commerce retail giant. Acquiring Whole Foods to improve its bottom line and now these floating warehouse operational marvel shows, Amazon is ready set its own rules in the e-commerce market.
It has been evident that the e-commerce retail industry works on the wafer thin profit margin particularly due to the last mile delivery and return of purchases. The core challenge of the last mile is moving through the traffic, and moving to large distance in cities or remote location in rural parts. The floating warehouses collaborated with the flying drones not only saves the ordeal of the above mentioned problems, it also brings in greater customer service and larger reach of Amazon.
The use of floating warehouses and drones may be debatable for now as it concerns not just the risk of goods but puts innocent lives in danger too. But, time tested they would eventually become the part and parcel of our future lifestyle. The sport’s arena, cultural festivals and music concerts would become targeted zones for floating warehouses. The possibilities of even smallest items (like food parcels or sports gears) which were deemed unprofitable for direct customer delivery would start to make mark.
Amazon’s presence in the sporting complex will lead to price competition with the sports stadium operators, from which the end consumer will be benefited with. A floating warehouse can be a good idea, unless until there aren’t any safety concerns. Usage of drones and Aerial Fulfillment Centres will not only allow Amazon to have items “delivered within minutes of a user placing an order,” but also will theoretically decrease operations costs while improving the purchasing experience for its customers. Even companies such as UPS and Dominos are exploring the usage of drones for efficient last mile delivery. With the right kind of regulation, governmental legislation, and luck, Amazon can have warehouses stationed above major cities, ready to deliver to its customers from the sky.
Question to be answered is: Will the demand be enough to overcome the operating costs?
To justify the system economically, obviously there has to be volume, which can only come if it is rightly targeted. But thinking about the scope of it and other places it might be used, it’s huge. One example could be any large University like ours (Purdue) where thousands of students and faculty are staying in a close vicinity, who are one of the major share of their sales. Delivery in minutes with drones in such areas could be used for quick trial and return also (Not wasting much time and extra logistics cost too.).
Definitely it would do a great impact for new product deliveries. People will get to buy these new products as soon as they are launched, within minutes. From the recent patterns we see, that new products as soon as they are launched, gets out of stock within minutes from these online websites. These kinds of floating warehouses with drone deliveries will definitely add to that.
But there are concerns for sure like, safe use of airspace, legal aspects, safety aspects, etc. but nothing which couldn’t be taken care of with time and proper thinking.
Hi Mitesh. I agree that with right target population the volume can be achieved, but achieving the economies of scale to bring down the last mile delivery delivery cost is a question which totally depends on the capacity and hardware capability of drone. There is a direct trade-off between cost and delivery time which makes it not suitable for commoditized products. The use of drones can be seen in several other areas as well like food delivery service where the customer is willing to pay something extra to get the food as quickly as possible or such similar places. Though this sounds interesting but the question above cost and hardware capabilities is the safety aspects and the formulation of regulatory policies.
We all certainly know that amazon is an innovator in all of its businesses and it will not be new to the transportation business that a company like amazon evolves and establishes a new revolutionary drone-delivery system. This new method of delivery, as said in the article, is far from being a reality due to the amount of security issues and permits it’ll need. For the amount of customers amazon has, there is no such “ideal” location where this warehouses should be. Strategically they should be in open fields that could receive and launch enough of them at the same time without violating any airspace.
Amazon prime could justify these costs also, by aggregating another service with the drones. It will serve the same purpose of 1 day delivery but it might also give and extra service of within the next 5 hours delivery or something like that. With the amount of money amazon prime is making and justifying the transportation and delivery cost, this system could be justified.
This is a very cool concept and regardless if it is fully implemented will get people talking about the future of logistics and how companies will innovate in the future. It sounds like a ridiculous idea, but I think there is a potential for the idea, once some vetting of the finite details is carried out. These would make sense not only at sporting areas, but large areas of commercial traffic such as: shopping centers, malls, universities, and festivals. The main sources of concern would be the cost of maintaining a blimp in the sky, if it would be available 24/7 or certain times of the day, how to handle inclement weather, and ensuring drones could function properly by safely delivering the correct items to the correct location. If Amazon decides to go through with the plan, having a lead time of only hours for a product that is delivered from a sky would be a game changer in the industry and leave others scrambling to match their innovation. I think the air delivery center could even operate at a loss because the concept would generate enough interest from new customers to more than make up for the difference.
Considering the initial challenges in drone delivery such as the regulatory approvals, safety, and dropping the package at the right location, delivery of low value items at sports arenas would come with an added cost to the customers. However, once the technology matures, it is expected to be economically profitable for Amazon. Rather than entering into a price war with Amazon, the sports stadium operators can leverage Amazon’s increased variety of inventory to create a better game experience for its customers and in turn earn margin on each purchase. These drones can be best used for grocery delivery that requires shorter delivery time. Moreover, considering these drones can talk to each other, they can be a huge add on to the connected home and connected car technology space, where Amazon is already leading with its Alexa ecosystem. Imagine Alexa instructing the drone to drop the package at a specific location. The cost of technology looks enormous, but once the initial infrastructure is setup, there can be cost benefits associated with economies of scale.
First of all, I think that Amazon’s idea of being able to deliver with drones is really a brave move, dare to challenge unknown areas and dare to innovate. But I think there are still many challenges in realizing a drone delivery. The first point is that drones must have different designs to meet the needs of different scenarios. For example, delivery to the stadium must have a very large carrying capacity.The second point is the regulatory issue, who will supervise the drone. For example, if there is no supervision, there will be a phenomenon that there will be drones over the city. I think it should be proposed to the regulatory authorities to allocate a certain height of airspace for the delivery of drones. The safety of drones is also a very important aspect. Amazon must ensure the safety of drones flying over the crowd so that the public can accept unmanned delivery.
Whatever, I believe that the development of drone logistics is one of the trends of mechanization and automation, with broad market space, great economic value and social value. From the perspective of overall planning, autonomous driving is a routine logistics delivery. The goal of the drones deliver project is more in terms of high efficiency, low cost and accessibility. The two should complement and integrate each other. Improve the automation of logistics and operations.
I think that the Floating warehouses and drone delivery is a very unique and innovative idea with a great potential. With this Amazon will take its business to the next level. There are multiple venues where this idea can be successful. However I am not sure whether the coordinators/organizers of such events will be happy with this idea, as all the other smaller vendors will be pushed out of the market and Amazon will gain a significant bargaining power over the terms of revenue sharing margins. Thus, the organizers will only come on-board if they see a value addition by allowing Amazon to sell during such events. Manufacturers on the other hand would definitely be happy as they will get a perfect platform to sell their products. However Amazon needs to ensure highest levels of safety as even a small incident could affect the perception of people towards this new-gen quick delivery system. Apart from sports venues, Amazon can also provide such services during concerts, at famous tourist spot, in universities etc. I believe that safety, low Cost, accurate forecasting and right revenue sharing models will be the important factors to ensure success for floating warehouses and drone delivery system. Successful implementation will take the whole logistics industry to a new level, otherwise this will turn out to be an another bubble that will soon burst and all its potential will remain untapped.
Of course, floating warehouses is a creative idea, and it is a concept that includes the future development of logistics. General transportation of goods are moved up, roads are free. However, one specific question comes out. How to keeps the privacy while at the same time shipping goods across above people’s house. It’s definitely sure that, quick delivery on location creates a marketing buzz for manufacturers. To fully promote this system, Amazon needs to first deal with the privacy issue and set a model to avoid that the goods won’t be shipped by the military base or any government-regulated institutions. One more important thing is that Amazon needs to do forecasting more precisely to really make the floating warehouse an economically efficient transportation approach.
Considering moving to a brand new business model will be a great move for Amazon as well as for the whole distribution industry. By implementing these new technics in the air, the whole concepts of warehousing should be changed to adapt to this new system. This might be the most difficult part for Amazon that they will have to redesign their distribution and inventory system. Air shipment for short distance is not yet a mature business model so far and might result in various problems such as safety issues, privacy issues, and rout designing. On top of that, it is a tremendous investment for Amazon that will not necessarily be paid off in next few years. Laws and regulations are expected to catch up as well. Overall speaking, this may lead to either huge lead for Amazon among the industry or life destroyer for this great E-commerce tycoon.
In my opinion, what Amazon did is amazing. What I mean is that if this kind of floating warehouse can guarantee the delivery time, the manufacturers and the clients are those who will get benefited. As we all know, the delivery time has impact on the inventory cost of the manufacturers and then Amazon can make us of this additional feature to bargain with the clients. In this way, both parts can additional values during this process, which is a win-win situation.
Whether the system is economic improvement, it depends on the cost and profit of the related parts. If the Amazon, retailer and manufactures can get something improved, the system can be proven to work. For example, we can judge from the service level, operation cost and sales, etc.
Drone delivery which did by Amazon is not only a new try, but a big step which means a more furious competition between local business and e-commerce. Drone deliver needs not only high-efficient executive but also accurate forecast. Normally, local business has a big contribution to data anticipation and such deliveries would put concessions into a hard way. Relatively, concessions have a higher fixed cost due to their expensive storefront fee which seem like concession spend money but help Amazon doing the market. For the customers, we cannot deny it is an amazing action which allows faster delivery and cheaper cost. However, this action may put business into silt which may hurt both Amazon and concessions as final. I think it maybe a great way to coordinate Amazon and concessions and get a win-win solution, which means they could sell different variety of products and Amazon’s products could also be sold by concessions. From coordination, they could bigger their profit pie market together, which could also benefit customers. This is also a way to economically operate the system.
The increased inventory and floating warehouses will incredibly push the sales into a new stage if delivered time could be guaranteed. Customer won’t need to shopping outside the door and get their treasure in next day, which has been done in China-JD, an e-commerce company like amazon provide such service by expanding the number of warehouses and definitely win the heart of most customer.
However, I think using sports arenas is not a suitable idea because it would cause some complaint even though it is for the benefit of customers. In my opinion, a win-win solution is seeking for customers’ personal area as many as possible and make an agreement with them about using their place as warehouse and offering them corresponding privileges.
Amazon will definitely take sales to next level by investing in flexible warehousing with drones descending and delivering door-to-door and lesser lead time. If one think that food trucks revolutionized food business, Amazon is revolutionizing the way one shop. They can literally go anywhere near mass population like concerts, sports, events etc and with more variety and proper forecasting can satisfy customers. Manufacturers will surely be happy because their products get good marketing and reach customers faster. If amazon becomes bigger this way, stadium operators bargaining power reduces.
carrying with plane and delivering with drone is definetely the new way of delivery. There are, of course, many problems need to be considered like stability of the plane and drones, security of privacy etc. However, this action will absolutely increase the efficiency of the delivery, hence increase the profit ffor amazon. The spot for the plane and drones can be selected trhough the negotiation with govenment. This action will increase the order for the fresh goods like sea food, vegetable etc. However, in doing so, the cost of delivery would be pretty expensive, will it be a success returnable invenstment will be in discussion.
Amazon plans to carry anticipated inventory in a blimp located close to customers, with drone delivery in minutes to a customer is a creative idea. However, I don’t think Amazon creates an opportunity to earn a margin from sales for sports stadium operators, because this new technology is expensive while the market for sports stadium operators is not large, and the margin from sales would not cover the cost of reseaching and developing of such technology. The most important impact of this new move is that Amazon positions itself as a high tech ecommerce company and shows a new brand image to cusotmers. What’s more, this strategy will appeal many young and high tech preferred cusmtomers, which increases its customers’ variety and loyalty. It’s a good strategy that will benefit in the long run.
Amazon has an edge over products, for which the customers don’t mind waiting a day or more for the product delivery, through competitive pricing. The only untapped market is instant delivery, in which case, customers prefer to walk into the store to get the products instantly. By introducing drone delivery, Amazon can disrupt retail stores entirely or create a very competitive market.
Such deliveries at sports arenas will have a similar result, with increased competition, though there will be a decrease in margin on a particular product, the volumes will increase tremendously.
What needs to be addressed though is the accuracy and safety when the drones move over thousands of people. People vandalizing the drones flying too low is another threat. Air traffic and safety rules for drones are being designed and re-iterated by some countries for the same reasons.
Floating warehouses will be a game changer though. A combination of floating warehouses and executives delivering the products can be implemented at stadiums or over major cities all year round and all other places that see huge demands over different seasons. This can help the implementations to be economically viable.
It is indeed an ambitious move by Amazon to develop “Air Delivery Service” with claims of delivery times less than 30 minutes. But, as they say, there are two sides to a coin. Firstly, Amazon will have to cross a great number of hurdles to turn this project into a tangible reality in the upcoming few years. I read an interesting article on this very topic, wherein, Amazon plans to deploy various sensors and artificial intelligence in responding to “Human Gestures” such as waving, thumbs-up etc. for successful delivery to customers. But the question to be asked is – Does Amazon have the technical capability, funds and right personnel for a project as magnanimous as this? Is the high R&D cost and subsequent operational costs worth taking the plunge? Secondly, a report by Business Insider and infographic from Raconteur (https://www.businessinsider.com/amazon-and-ups-are-betting-big-on-drone-delivery-2018-3), tries to factor in customer perspective. Surprisingly (or not), only a mere 16% of the public seems to be certain about using this service if it becomes a reality. This means higher marketing and PR costs for Amazon. Last but certainly not the least, will Amazon manage to clear the regulatory issues associated with the Federal and Aviation Administration (FAA)? In my opinion, it is still in the nascent stages and one can only wait and watch for the exciting developments Amazon has in store for the customers regarding Drone deliveries!
I completely agree with your comment. I feel it is too early to comment on this technology since it is still in the budding stage. The concept is brilliant. The challenge as you mentioned is to tackle the regulatory issues that may arise out of this.
Also, I am quite skeptical due to the safety concerns this may raise especially in crowded places such as a sports arena. The concern of a long wait time could be addressed through other cost-effective ways. Lastly, as mentioned in one of the comments above, this would be a great technology for disaster management and emergency management.
I think that the concept of a floating warehouse and drone delivery is in its adolescence and we cannot conclude any tangible outcomes as of now from the technology. However, I would like to point out the difficulties it can possess if the implementation is widespread. Firstly, the most critical point here is the need of the customers. Any business idea or a concept should be based on whether the customers are in need of that product or service. In my opinion, Amazon currently offers next day delivery of most of the products and that the customers generally take into consideration this kind of lead time before ordering, so I don’t think that this is required. Second is the cost component associated. Its always the end customers who bear the cost of any increment in delivery or logistics cost so this concept will increase the value of products for consumers and may not be a welcomed one. In Urban areas, anyways there is a lot of air traffic and this will exacerbate the situation and would even interfere with the environment in terms of use of energy resources to run the floating warehouse, causing environmental issues. I think this concept is better suited to places where there is currently an underdeveloped infrastructure. This will help Amazon deliver in those areas and further in these kinds of areas, there is ample space available to plan a floating warehouse.
Rightly mentioned by Yash, that If we talk only from the delivery point of aspect then it won’t contribute much and when amazon is already delivering in less than a day. The point is how is amazon going to strategically place itself- by consolidation of more warehouses, by reducing manpower, by venturing into other industries, expanding products lines, especially perishable products, or by modifying current version of idea . The answer lies in future , we can just wait and watch
Through the program, drones can be delivered at the fastest speed, and terrain and buildings are ignored, which improves distribution efficiency. But such innovative measures will also bring many problems. First, the issue of air surveillance. UAV flights in the air should be managed to prevent drones from affecting social order. Second, the safety of the cargo on the drone needs to be guaranteed, and there may be cases where the attack drone is seized to seize the cargo. Amazon can work with sports arenas, the operators of the stadium are distributed by Amazon drones, and then use some contracts for profit sharing. Other occasions such as concert halls and cinemas can be applied in a similar way. Moreover, such floating warehouses should store large quantities of goods, rather than small quantities of goods, and then cover large areas of distribution through drones. The distribution of goods with less demand is more suitable for drones. Moreover, the use of large-volume commodities can effectively reduce the costs of floating warehouses, so the principle of economies of scale still needs to be utilized.
It sounds a bit fantastic, with aerial distribution centers. But it would be unwise to write off or dismiss any idea that comes out of the Amazon creative process. I am curious how regulators would react to this type of facility. Would there be restrictions on the size, distance off the ground, etc. that would make them economically unfeasible for Amazon? What about the number of these facilities within a given area? I think of the resistance to the visual aspects would be great as well, such as the resistance from the public and lawmakers to wind farms. I would could see the program working if the facilities were airborne for only a short period of time and then found temporary “parking” locations from which they could set down and run operations for a short period of time and then move on.
Amazon has time and again moved supply closed to demand and continues to close the gap in terms of time and space between the buyer and seller. The AFC is definitely a cutting edge innovation to satisfy the impatient customer and I do strongly believe that there are several use cases for this. However, I do not think it will be wise for Amazon to compete with stores that sell merchandise in stadiums. The traditional setup at public venues is what makes the whole experience memorable for the customer, be it watching your favorite team at the stadium or enjoying vacation with family at a Disney theme park. Instead of competing with standalone stores at these venues, Amazon can tap the deficiencies in the present system. This can be achieved by partnering with these stores to replenish their stores if they stock-out during the game, which happens so very often.This kind of symbiotic relationship would be the best way for Amazon to enter this space of immediate location or event based delivery service.
I believe this is a great opportunity for co-ordination between Amazon, the sports stadium operators and the concessionaires, and everyone wins in this new supply chain; Amazon provides the inventory, the concessionaires do not hold any inventory and the stadium operators are sure of continued business from the more profitable concessionaires.
I noticed there was some concern of safety from other bloggers, but I am certain Amazon would ensure the blimps are located far enough from the stadium and from any human traffic to prevent any possible casualties from a malfunction. The regulatory bodies would also provide laws concerning locations where the blimps can be staged.
This concept can be replicated in any place where there is a large congregation of people and there is a demand for refreshments and memorabilia. Manufactures of products would also enjoy the benefit of the marketing buzz and the inherent speed to market that this concept would provide.
I believe that there would be some huge logistics costs to Amazon, but due to the patent it secured it should be able to recover the costs from increased sales and probably, premiums for instant delivery before other competitors enter this space. The end users benefit from the instant delivery, this is also beneficial for time conscious purchases. Retailers would also benefit with reduced or eliminated inventory holding costs.
A floating inventory warehouse would be a breakthrough if the costs and time of erecting and dismantling these temporary warehouses and storing inventory would be lower than the traditional brick and mortar warehouse. Flying drones for systematic product delivery for customers is another technology that has the potential to disrupt the logistics for delivery. Each of these innovations aims at reducing lead time for consumers, increasing variety of options available while reducing supply chain costs simultaneously. The question of how can the system be economically justified leads me to think about how much premium would the consumer be willing to pay for a shorter lead time within minutes or for a new user experience of getting delivery from drones? (the latter would soon fade out if this becomes a norm), Also, I would assume that the other popular locations for floating warehouses could be business parks, huge residential campuses, and universities. However, feasibility and success of such innovations in business operations are also subject to regulatory approvals from the government.
This is a really cool idea. I think that there are many opportunities besides sports stadiums. I believe that this could be used for any outside event like marathons or golf championships. Basically any time when a large amount of people will be standing in the same place for awhile. I worry however that this will not allow them to make the profit that stadiums can currently make. the reason they can make that margin now is because there is no competition meaning you have to spend a lot of money everywhere. If there was competition coming from the skys both would have to drop there prices to try and entice customers. This would destroy the margins enjoyed at such venues. It would also shrink Amazons margins on this project which might make it not justified. I will be interested to see if this ever happens and would like to try it some day
Amazon’s patent says, an Aerial Fulfillment center(AFC), like a blimp or airship, may be positioned at an altitude above a metropolitan area and be designed to maintain an inventory of items that may be purchased by a user and delivered to the user by an Unmanned aerial vehicle(UAV) that is deployed from the AFC.” An increased variety of inventory from Amazon would create an opportunity to earn a better margin from sales for sports stadium operators. Besides Stadium, it could also be used to deliver day-to-day products ordered by common people at the terrace of their apartments. This could ensure a faster and more efficient delivery as we could eliminate traffic from the equation. If this system is implemented at full flow, one thing that needs to be managed by Amazon is the air-borne traffic amongst the drones. Of course, new product introductions with quick delivery would create a marketing buzz for manufacturers. For the success of this system in the future, Amazon should rightly decide what type of products to be delivered, which locations to be covered by AFC-UAV delivery mode.