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DOT CLUB-IBS HYDERABAD
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Sunday, June 24, 2018

Sky is not the limit anymore !

Logistics is not trucks and trailers anymore, it’s the computer aided complex algorithms that rule the supply chain these days. The basics say there are two kinds of supply chains, the efficient supply chain system and the   responsive supply chain system. Moreover, the competitive strategy of the firm determines the nature of the supply chain the firm adapts. Let’s make ourselves clear by citing two examples:

 Zara the clothing brand that encourages occasional stock outs in its retail outlets has a responsive supply chain.The point here is Zara has responsiveness as its competitive strategy i.e. it differentiates itself by responding to its customer’s needs in the least possible time. It doesn’t mind spending,investing on solutions that increase the degree of responsiveness. Hence Zara has a supply chain where everything from information to finished goods flows in the least possible time. ZARA’s retail stores get new stocks every fifteen days and the information from the retail outlets flows to the headquarters in real time.Hence the definition goes “Responsiveness can be defined as the ability of the supply chain to respond purposefully and within an appropriate time frame to customer requests or changes in the marketplace.

Walmart is in news after it brought 77% stake in Flipkart for $16 billion. Its tagline “Everyday low prices” is self-explanatory. Walmart with efficiency as its competitive strategy aims to do the best in the least possible cost so as to pass the benefits to its customers. Walmart tries to cut costs in each & every stage of its process flow and hence it adopts an efficient supply chain system that aims to get maximum outputs at minimal costs. Hence the definition goes “An efficient supply chain gets your products to their destinations in the most cost-effective way.

It is we the customers who decide the companies supply chain strategy, a company with a responsive supply chain will definitely charge a premium for its responsiveness and the customers are ready to pay the premium whereas you can get your products at the lowest possible cost but have to wait for the products to reach you. Now can a supply chain be both efficient and responsive at the same time. Here we a have a firm that is both efficient, effective and responsive at the same time.

 Amazon has its supply chain designed in such a way that it’s the customers who decide the nature of the supply chain to be followed by a firm. As we are already aware of its efficiency i.e. amazon.com and its responsiveness i.e. amazon prime here is the amazon prime air that will shift the paradigms of the existing supply chain systems.

What is amazon prime air?
Amazon to speed up its shipping services by using drones that could deliver your products within hours of ordering has announced the launch of its experimental delivery system amazon prime air in the year 2013. Despite of the skepticism & criticism the top management continued to invest in its R&D activities. Following the negligent behaviour of the FAA (Federal Aviation Administration) amazon set up its new R&D center in the UK which became operational in 2014.

The challenge that amazon had to face initially was this super speed delivery would only be possible if the recipient stays nearby an amazon warehouse, this would rather limit the number of users who can use this facility and also puts a limit on the type of products for which this facility could be used. Secondly, FAA set up new drone regulations in the year 2015 which stated UAV’s would only be allowed if they are in the sight of the pilot and banned the flying of drones over people who had no connections with the drone’s purpose.

Amazon on the other hand came up with a solution for the first challenge by setting up of “Airborne fulfillment centers” which will act as airports kind of warehouses for the drones and it patented the above mentioned concept. It also decided to use high-lofted mountings such as street lights and cell-towers as “docking centers” where the drones will rest when not in use & delivery would be carried out by the parachutes. The second challenge was neutralized with FAA allowing amazon to test its drones at a distance 20,000 feet from USA’s border in Canada.

After the challenges and FAA loosening its rules for UAV’s and allowing the use of drones for commercial purpose even if it is not in the sight of the pilot Amazon Prime Air served its first customer in the United Kingdom in December 2016 when a customer at Cambridge was delivered a product by a drone. It took around 13 minutes for the delivery. 
This decade where the supply chain systems have undergone a transformation with the help of technology is really an interesting subject of study. This ultimate concept which will soon be a part of the existing supply chain will create a new degree of responsiveness for firms. The major question here is like quality, responsiveness also comes with price and will the customers ready to pay the super-premium prices?? Will this concept be feasible for every location and how will amazon overcome the loopholes and possibilities of secure delivery? Nevertheless, necessity is the mother of invention and this applaudable transformation of the supply chains do have the potential to act as a competitive advantage and increasing revenues of the firms substantially. In the Indian context this transformation will happen not immediately but definitely.


Note: The views expressed here are those of the author’s and not necessarily represent or reflect the views of DoT Club as a whole.

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