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Glyn Dodd, Managing Director of Centrex Services returns to Field Service News with a new two part feature that outlines his battle plan for the service industry...

“The secret of great battles consists in knowing how to deploy and concentrate at the right time.” - Napoleon Bonaparte

Some of the most significant changes that technology has delivered over the past few years have changed the approach to most markets, but for the break-fix market, it has come to a point in its evolution that has placed it on the brink of turmoil. At the heart of the technology support industry, field engineering and the associated service supply chain is emerging as the new battlefield.

The advancement of the industry is emerging as an issue now because technology products have been simplified, the need for traditional, high-end engineering skills required in the field is diminishing - almost to the point of extinction. The result is that continued market pressures are pushing the legacy fragmented technology support - the service supply chains - into a non-competitive position.

This has come to a head as customers no longer require high-end expertise to repair retail, hospitality or print technology; the priority is to replace the unit in the shortest time possible, ensuring an immediate return to productivity at the lowest possible cost.

When compared to wider innovative technology development, the break fix market remains fragmented and stagnant, having progressed over the years into silos which have operated in ivory towers. Evidence of this is seen in major contracts where the supply chain for a single IT hardware call involved one service provider sub-contracting to three different repairers, three individual logistics loops, two technical couriers and three parts providers.  These businesses are refusing to modernise the outdated service supply chain model currently plaguing the industry.

Where’s the battle?

This reluctance to change the way businesses operate and think is harming the technology support industry, and I'm afraid to say that I believe the worst is yet to come.

Hardware technology is always evolving yet the support business is stuck using an antiquated supply chain which hasn’t offered true value or innovation to the customer for years.

There is a distinctive, yet variable change in the approach and structure to the service supply chain.  The level of skilled expertise required to service complex technology is still necessary, while the traditional ‘swap’ services can continue to be handled by a technical courier. Between these two skill sets is where he I see the true battle – the middle ground.

The middle ground’s effect on service

So what is shaping this battle and what are the components that have put this service provision into a state of flux?

Well, the first major component of the battle lies in the price structure of hardware maintenance support.  We’ve seen hardware technology commoditise, which has changed the perceived value of product hardware and the way that it is serviced. This has increased the price pressure within the middle ground.

The second component (and possibly a result of the price pressure) is the accelerated silos of multiple suppliers throughout the supply chain, increasing the number of ivory towers and the chasms that exist between them. The number of suppliers and subcontractors involved in a single IT hardware support has culminated in fragmented, confused and complex supply chains.

The third and probably one of the most key constituents of the middle ground is the price of engineers, as service suppliers can no longer afford skilled field service engineers to respond to low level incidents.

As the nature of field service is changing, it’s rendering the current field service model outdated and expensive. Using technical couriers is the favoured method of replacement rather than a traditional engineer; however, using the full potential of field service engineers within the emerging middle ground activity is now becoming a waste of skilled resources and fails to offer true value to the customer.

As highlighted, end-user pricing associated with field services is decreasing, but price-pressure in the legacy model, including the deployment of engineers isn’t. The average engineer’s salary is currently reaching £34,000, substantially higher than the emerging middle ground technician who earns £20/25,000. The industry simply can’t afford to support field service engineers working at this level, despite their vast expertise. As price-pressure rates continue to fall, this issue is only going to get worse.

 

 

Alison Brindley, Operations Director of Bespoke Distribution Aviation, outlines what we should be demanding from our logistics partners to ensure field service divisions run smoothly...

In increasingly competitive markets, businesses that supply and fit parts as part of their service contracts have had to up their game and the successful ones are achieving this and reducing cost, whilst adding value to their customer proposition by paying particular attention to their aftersales service.

As part of the aftersales process, field service engineers need to make sure that they have all the tools and spares parts they need to respond when a customer needs them. Operating a lean supply chain can add value to your business with a logistics partnership and keep field service operations efficient by ensuring reduced inventory levels and stock holding. The dynamics of the delivery requirements within the supply chain range from a requirement to move freight quickly in the case of urgent requirements for immediate repair, and not so quickly for slower moving stock for regular services. The challenge is to streamline the supply chain into a simpler process while continuing to provide customers with a simple and efficient next day delivery. Moving the outline of your supply chain to a multi level, more dynamic solution, which utilises air and road express movements can achieve a slicker supply chain needed to make field service engineers more responsive.

Give your field service engineers greater flexibility

A streamlined supply chain supports field service operations at all times and ensures engineers are equipped with the spare parts they need to complete repairs to your customer’s service levels. Make sure when selecting a logistics company that they offer a flexible and rapid service, the best levels of IT reporting and inclusive client support.  One way of achieving this is through In-Night, same day delivery of parts, which ensures that spares are readily available from point of order through to final mile delivery in the shortest time frame possible.  Whether your main supply comes from a European Distribution Centre (EDC) or from a local regional parts centre, supply chain management is key to final mile delivery and therefore a successful Service Level to your customer.

Eliminate the need for multiple regional warehouses

A streamlined supply chain that connects mainland Europe into the UK and Ireland, provide early morning deliveries into service engineers and dealerships pre7 and reduce levels of inventory, provides an improved first time pick rate and speeds up the delivery of spare parts. Faster in-night air movement and bespoke ‘final mile’ solution means that they can access spares early morning the very next day giving a greater number of daily engineer fixes, improving Service Level Agreements and delivering benefits to your customer’s clients.

Think about reverse logistics and spare part returns

A company that offers a streamlined reverse logistics and returns solution can provide additional value for field service operations. The priority for field service engineers is having the repair made before considering a quick return. A reverse logistics service delivered as part of the wider supply chain delivery ensures that field service engineers have their repair made quickly on site, before returning the defect part back through the supply chain in the opposite direction. For customers who have an issue after the repair has been made where a resolve is required due to a warranty defect, your field service team will want to organise for the defect product to be shipped back to the manufacturer under warranty, tested, dismantled and repaired or recycled. By having the repair made first as part of a reverse logistics service, engineers save valuable time out in the field. Closing the returns loop, the return of spare parts is achieved whether under warranty or just as part of the recycling of parts, is as much a feature of a good supply chain management as the initial delivery.

Transparency of the supply chain enhances customer communication

After sales service managers need to be confident that spare parts will be with their field engineers when they need them. They require complete visibility of the supply chain and a strong communication from the logistics company, so they can be frequently updated as soon as the next status of their shipment is available. By having access to this information platform, and a pro-active customer service in the logistics company, they can maintain effective communication with the customer, keeping them up-to-date during every part of the service process. The ability to communicate with confidence makes all the difference to your customer’s perception of your business.

Getting the geographical coverage you need

Working in partnership with a good supply chain provider that can provide a strong geographical delivery presence is key to reducing inventory costs and yet still provides you with quick and easy access to spares.  A supply chain provider that has strategically positioned operating gateways across a broad area, and that enables you to benefit from both air freight and road express services, delivers a seamless distribution service straight into the field.

There are a lot of tools available to help make field service operations more streamlined, responsive and effective. The industry is benefitting from new mobile technology all the time but often the greatest advantage to a business operating in the field service arena is getting the right level of a lean supply chain. Complete visibility throughout the supply chain and same day, final mile delivery of spares are key to responsive field service and satisfied, happy customers.

The delivery of services and products today has changed beyond recognition, whether a consumer or a business user. The internet has created new ways of engaging with customers, with social media continuing to rise in stature as a customer support platform.  Such changes have created new heights in customer expectation levels across the whole supply chain.

The key to retaining the loyalty of a customer depends not only on the initial buying experience, but with after sales support this is equally as critical, if not more so.

Perception of after sales support

In many cases after sales support is seen as a cost to a manufacturer rather than the forefront of the customer experience. Such businesses therefore spend as little capital as possible to support any product failures within a warranty period, much to the anger of the consumer.

Such issues increase in severity when failures occur after the product warranty has expired, Manufacturers who don’t value the importance of after sales service absolve themselves of all responsibility, despite the fact that it’s their branding.

This approach to after sales support is unacceptable as the requirement of the customer is disregarded as meaningless, which in turn negatively affects brand recognition as word of such poor customer care spreads among the target audience.

This is of course the traditional way that manufacturers have set up after sales support for their products; a disparate, siloed service supply chain created as an afterthought, to support this limited process.

Setting an example

There are of course brands which are marvels at customer service, offering after sales support even once a warranty has expired, refusing to leave their valued customers out of pocket.

These customers often become advocates even when their product breaks based purely on their experience with a business’ after sales support and repair process. Companies that rely on hardware to offer services could risk losing clients if they are without machines for a lengthy time period so efficient resolution is a necessity.

However, examples of such exceptional after sales support are sadly few and far between, with many businesses simply outsourcing the repair service to a third party; washing their hands of the customer at the first possible opportunity.

Using this approach creates an assumptive supply chain where multiple suppliers rely on other businesses performing the action they are contracted to do. Each part of this siloed approach has no real affinity or connection to a customer, it is simply a process.

This is a perfect example of the small-minded attitude some companies have towards after sales support. Businesses now look only for a low cost, rapid solution without considering how customer experience and harm to brand reputation can last years beyond the product warranty.

The time to modernise is now

It is clear that traditional thinking within the services supply chain is flawed and must be challenged. Simply outsourcing after sales support to numerous third parties doesn’t take customer satisfaction into account. This is unacceptable.

The solution therefore is to streamline after sales service, eradicating the disparate elements of after sales support and offering a customer first, demand driven service. I see this as the future of after sales; guaranteeing correctly skilled field engineers with the required parts to resolve any issues will be on site within the service level agreement.

Like all concepts, traditionalist resistance will be ferocious, but inevitably futile. The current system is not fit for purpose and I challenge anyone to demonstrate it is.

Customers will profit from such an evolving service supply chain moving away from the cost process mentality, which has impaired customer satisfaction, towards a whole lifecycle product support strategy.

No longer will consumers find themselves forced to replace broken hardware once its warranty has expired. An innovative, forward thinking structure within the service supply chain should offer lifetime support.

Modernisation is long overdue and businesses must change the way they approach after sales support, or risk being left behind by companies willing to accept that the traditional service supply chain continues to fail on all counts.

Time critical logistics provider Bespoke Distribution Aviation (BDA) have made a flying start to 2014 with a focus on their wider international distribution service, and the recruitment of a new European Managing Director to spearhead the operation.

The company who are based at Coventry Airport is going through a period of extended growth, which has seen the significant expansion of its night Air and Road operations with increased levels of distribution business over the past six months.

The newly appointed European Managing Director Kevin Turner, who is responsible for leading the continued growth of the logistics provider ,brings with him 25 years’ of experience in the Same Day and Next Day delivery markets.

With expertise in European Air and Road express services as well as Warehousing Solutions, the appointment of Turner aims to further strengthen the BDA team as they aspire to continue building their  international footprint across the next 12 months.

With a network of airport based hubs throughout the UK, Ireland and mainland Europe, BDA already operate an extensive end-to-end supply chain which allows for pan-European, time critical daily deliveries.

Turner will be based in the company’s Maastricht Air-Hub in The Netherlands, with the intention of developing the company’s overseas market presence. His  experience, having previously worked in European and UK distribution, logistics warehousing and air freight, will be a key advantage as he spearheads BDA’s strategy of increasing market share and growth across both European and International markets.

Turner commented:

“BDA has a great structure in place to allow it to grow its capacity throughout its UK, Ireland and European divisions. The company’s service offering is unique and tailored to every customer and this is why it is an international market leader for bespoke distribution services and supply chain solutions. The company has plans to increase its market presence further and I am excited to become an integral part of this.”

The appointment arrives at a particularly exciting time for BDA. The company are currently undergoing a period of unprecedented  growth with the purchase German Airline and In-night freight specialist NightExpress last year, as well as moving into new geographical markets and also a move into the B2C sector as a result of a new partnership with an established  e-commerce organisation.

BDA operate nightly cargo flights, which are then supplemented by daily road express linehaul routes, between its Coventry hub, Dublin, and Frankfurt in Germany. With flights five nights a week allowing them to offer a guarantee for overnight and early morning delivery for time-critical cargo. As a result they are particularly strong in sectors such as hi-tech IT and printing, materials handling equipment, automotive industries, medical equipment and agricultural machinery as well as more recently, direct selling e-commerce businesses.

BDA sales director, Steve Court stated:

“Last year was a fantastic year, during which we further established our infrastructure and platform for growth, and we are looking forward to continued growth and success in 2014.  He continued: “We’re growing all the time and with Kevin heading up our European division, we will continue to offer an unrivalled service throughout Europe and add value to the supply chain markets. We are prepared for a very exciting year ahead.”

 

 

In the first part of this feature we looked at why a successful customer interaction strategy should be at the heart of every field service organisation as well as why companies shouldn’t be afraid of failure.

Now in the concluding part we see why you should think of bringing your customer service department and all other business divisions of the service supply chain, under one roof and why putting the customer first always is the key to ongoing customer satisfaction.  

 

Applying intelligence: the control centre & the service supply chain

Bringing your customer support service under the same roof as the other divisions of your business including field service dispatch, logistics and operations and other elements of the after service supply chain, is essential and needs to become the regular way of working across all industries if companies are to drive brand loyalty forward. This is the belief of Carolyn Wilson, services director of technology support specialist Centrex Services.

Carolyn comments:

“The current approach to after sales is a siloed one, contact centres often pass the customer onto the next silo if they are unable to resolve the problem themselves; washing their hands of the problem at the first opportunity.

“A control centre provides true added value to the customer, utilising a legitimate knowledge-base to not only resolve a high quantity of issues during triage, but controlling each step of the process from opening the call to booking the correct engineer, with the right part or loan product. The result; the SLA failure is eradicated.”

A good example of such a 'controlled service supply chain' approach in action is in the repair centre that Centrex Services provide for Fellowes, a manufacturer and marketer of business machines, shredders and office accessories, with a global presence. The business aim for Fellowes is to enhance the quality, efficiency and productivity of the workplace. Therefore it is key that their own after sales service meets the very highest standards and there service supply chain needs to be efficient and effective.

The Centrex representative responsible for the Fellowes service supply chain oversees calls from clients whose devices are both in and out of warranty. He is responsible from the outset in determining the type of call and then controlling the entire process. From the very beginning of the process he liaises directly with the client, confirming of the level and type of support required, identifying the correct engineer is allocated to the request and ensuring either a new machine (if the client is in warranty) or a loan machine (if the machine is out of warranty) is then available for the next day.

He will then personally telephone the customer to confirm the engineer’s call time and has responsibility for ensuring the engineer is on site at the agreed time. The whole process is only considered complete after a replacement or loan machine has been installed on the customer site and the customer has indicated that the issue has been resolved satisfactorily.

By adopting this type of approach where the customer is at the front of the solution, the entire way that after sales service calls are resolved is completely changed. Fellowes are certainly seeing the benefits of such an approach already, as EU after sales manager, Neil Cosgrove attests:

“Our partnership with Centrex Services ensures our consumers receive a seamless experience from the second a Fellowes shredder is purchased, and offers them total peace of mind through industry leading support service in the unlikely event they should require hassle free in and out of warranty support,” he says.

“On the occasions when it is not possible to source a replacement part the next day, Centrex has implemented a system which enables loan equipment to be made available the next day.”

 

The customer must truly come first in the service supply chain

By thinking out of the box and offering a loan service that is combined with dedicated control centre representative, Centrex and Fellowes are together treading a new path and it is this new way of thinking and approach to the service supply chain and service delivery that is yielding such positive results. By asking the right questions, the control centre is able to give  clients realistic expectations, while guaranteeing that whatever the problem is, the consumer will not be left stranded without an important piece of hardware overnight which could impact their business continuity.

Carolyn adds:

 “The loan service we offer shows the importance of listening to the needs of our customers. After an issue has been resolved following the deployment of a field engineer, the control centre sends a short questionnaire to gain an insight into how service can be improved.

“We found that supplying loan machinery during those periods where the malfunctioning machine is in need of in-depth maintenance was a highly sought after service. We have improved our after sales service due to the intelligence of the control centre and there is no reason why other businesses can not follow suit.”

 

Creating ongoing customer satisfaction

By creating a system where the customer’s needs are viewed as the most important factor of after sales support, it is clear that control centres can continue to offer high customer service levels on an on-going basis.

Ensuring triage is effective and efficient allows for the issue to be resolved as swiftly as possible, and by offering short-term hardware loans where required, a supply chain is created in which the customer’s satisfaction is assured and as a result both brand loyalty and reputation continue to be enhanced.

 

 

Setting out the aim to make your company more environmentally friendly is not only healthy for the planet but also very healthy for a logistics and transportation business as well

Reducing your fuel costs for example obviously makes great financial sense and it also has the benefit of helping to differentiate you from other field based companies in what are becoming increasingly competitive markets across the board. For example, image conscious high street retailers are much more likely to partner with an e-commerce deliver partner that shares their (often very public) environmental values, and in fact this is a trend that is mirrored by consumer behaviour also.

According to a recent Eurobarometer survey 55% of consumers said they take time to understand the environmental impact of the products they buy. Further to that over three quarters of consumers said they would pay a premium for greener goods. It is natural that this powerful sentiment would flow through the supply chain and impact on a retailer’s choice of transportation provider for their ecommerce offerings.

Whilst environmental issues have been a large part of the conversation for many years, it is only in today’s world with the advancement of tablets, smart phones, white boards, the cloud, including facilities such as dropbox and skydrive, which are all able to communicate openly with each other, that a truly sustainable approach can now be grasped.

Adopting transport technology and with innovations in the mobile world, greener credentials are more attainable than ever; with the ability of SatNav, job scheduling, signature capture working on new devices with NFC and RFID capabilities encased in a more consumerist look and feel than previous rugged enterprise products means greater user adoption, think Honeywell Dolphin Black to Motorola TC55.

So moving towards greener working i is now an obvious progression for the transport and logistics industry to take under serious consideration.

As well as improving productivity and cost savings, using an electronic proof of delivery system, mobile field service management or a real-time job scheduling and route optimisation system for instance, has been shown to deliver a significant improvement when reducing physical costs i.e. of consumables and labour costs. It also has a significant impact on reducing CO² emissions and the carbon footprint of logistics operators.

The following results demonstrate the savings achieved by a medium sized logistics company, “XYZ Courier Services Ltd” using actual data.

“XYZ” operates a cloud based technology system to manage its fleet of 2,000 full time drivers. Before introducing mobile data to its fleet of drivers, the company had to provide each driver with a 15 page printed manifest showing their daily workload and schedule.

Over the course of a year, this amounted to 7,800,000 individual pages, or 15,600 reams of paper. The cost of purchasing paper equates to £55,000, print toner costs amounted to £110,000, which means that over a three year period the company spent half a million just on paper and toner alone.

Although financial savings are a factor in the decision to adopt mobile data that improves greener credentials, there are also carbon costs to appreciate, due to the energy and environmental impact of the printing process. Taking into account the amount of paper produced over a three year period for the paper manifests equated to 648 tonnes of CO² emissions, which has now been saved.

The transportation of raw materials and finished products are a significant source of carbon emissions in the supply chain. For some companies, logistics can be the primary component of supply chain carbon emissions. The Department of Transport found road transport accounts for 21.7 percent of the UK’s carbon emissions; of that, 19.8 percent is attributable to heavy goods vehicles (HGVs) and 15.2 percent to vans. The government is aiming to position the UK at the global forefront of ultra-low emission vehicle (ULEV) development, manufacture and use, and has a vision for ‘almost every car and van’ to be zero-emission by 2050. Furthermore, by implementing effective route optimisation that ensures the most optimal route is taken by a driver will result in less driven miles and fuel reduction.

What this analysis highlights is that for a mid-sized logistics or delivery company, introducing mobile data technology such as ePOD to the drivers has had a significant impact not just by reducing costs, but also by improving the company’s overall carbon footprint. And these cost savings are relevant to smaller and larger organisations alike.

Not only will changing to transportation and logistics partners with greener credentials help meet a company’s corporate social responsibility and environmental policies, by utilising transport technology allows a company to get a clearer picture of deliveries, scheduling, managing peak times; reviewing carbon emissions, driver behaviour - in readable, legible reports based on date and time driven events. This means more power through real-time knowledge transference, without having to sift through volumes of paperwork.

A business can never entirely eliminate its environmental impact, but that should not be a reason to not take advantage of the technology available to reduce it. Especially when having a green approach to your transport fleet helps to achieve positive environmental and financial goals.

 

 

No matter which industry you are involved in, it is almost certain that at the very forefront of your business strategy is the goal to guarantee the very best levels of customer satisfaction.

It absolutely needs to be as in todays climate, where access to a huge array of information about you and your competitors is readily available, customer satisfaction plays an enormous role in the way consumers choose which companies get their business. 

For customers requiring after sales service, more often than not the first port of call is of course a contact centre.  Here, the initial call is logged and whenever possible, resolved.

But do service calls really provide customer satisfaction?  What happens when the problem is not rectified within the agreed time or if the service supply chain is too disjointed to efficiently resolve the problem? What impact can this have on your customers overall satisfaction with your company's ability to deliver the product or service they expect?

Successful customer interaction is vital

Carolyn Wilson, services director of technology support specialist Centrex Services, believes the contact centre process is becoming both outdated and ineffective for today’s technology support.

“It is clear that the role of the contact centre within the service supply chain has evolved rapidly; moving from simply offering support to becoming the driving force behind customer satisfaction. There must be control over the entire journey of the repair, not just an automated process to raise a service ticket. Service companies are now at the forefront of customer service, this unrequited lip-service is no longer just an afterthought.” she comments

She is certainly not alone in this view either. In fact a recent study by the Aberdeen Group showed that an incredible 96% of businesses viewed improving customer service results as their primary goal[1].

Carolyn explains further, “There are two major factors which directly affect the success of customer interactions, namely triage (problem identification) and the ability of the control team to resolve any issues as efficiently as possible.

“Equipping the staff to intelligently diagnose hardware problems over the phone and enabling them to take responsibility for the entire service process results in a huge increase in satisfaction levels, as invariably customers are contacting businesses to gain resolution as quickly as possible.”

This begins with the control representative understanding not only the nature of the call, but being able to identify where the part is located and accurately outline when a correctly skilled engineer can be sent to remedy the problem. In short, they need complete visibility of the service supply chain.

An inefficient control centre, can have a knock on effect across the whole of the service supply chain and will always result ultimately in dissatisfied customers.

An alarming statistic uncovered recently by The Service Council was that less than ten percent of field engineers dispatched had the part required to fix the hardware[2]. Clear evidence of a disjointed, fragmented and simply inefficient service supply chain. Instead, businesses favoured a system where engineers operate in territories and will therefore immediately be called out if the customer’s address falls within their patch; regardless of the parts they have to hand, or the personal skill-sets at their disposal.

Addressing this issue Carolyn added, “If a customer’s problem revolves around a part being sourced and fitted by an engineer, for the traditional contact centre to dispatch an engineer closer to the customer because it is more convenient, is unacceptable. This just shows it’s vital that changes are made to the way businesses view their own contact centres and move to adopt better control throughout the process.”

Why accept failure in your service supply chain?

Technology is evolving every year, indeed at an often bewildering rate. So it comes as a huge surprise and disappointment to learn that the vast majority of organisation are failing to apply the available and required layers of intelligence and responsibility to their contact centres. Layers which can provide the level of insight into the service supply chain that is so badly needed. Instead, we see that outsourcing this process remains a highly popular solution, even though as Carolyn points out, this is an ineffective method that is all too often cited as being the major factor in why poor service is being delivered.

“When contact centres are outsourced, businesses always run the risk of providing a service where staff processing customer calls have little knowledge related to the logistics of the service supply chain. Unsurprisingly, triage is inefficient and service level agreements (SLA) are often missed.

“I remain astonished that businesses continue to offer contracts which allow for a certain level of failure when it comes to meeting SLA’s, which is often the bar used to measure customer satisfaction.

“The current systems in place across the after sales service supply chain are not fit for purpose and the time for change is upon us. There will of course be resistance from those who believe the traditionalist approach works, but accepting failure is intolerable and should not be accepted by business leaders or their customers.” she concludes. 

Centrex, who have redesigned their service processes, began with increasing responsibility within its ‘control’ centre to create a service which is both valuable to the company while offering best practice to the consumer. It put's the 'control' centre at the heart of the service supply chain not a distant cousin looking on from afar. It is a sensible yet breathtakingly simple concept that hopefully others may follow.

Look out for the second part of this feature where we look at why bringing all elements of the service supply chain , including customer support centres, all under one roof is an essential aspect of the Centrex philosophy. 

In the part one of this two-part feature we looked at the launch of Amazon Prime Air and whether Amazon’s announcement heralded a revolutionary new delivery method which could change field service as we know it, or if it was little more than a PR stunt to put the ecommerce giant in the public eye ahead of a key revenue-generating period and whether (or not) the public was ready for fleets of drones delivering their goods?

Now in the second part of the series we review how the business world has reacted to the launch, the regulatory challenges that stand in Amazon’s way and one reason why it might just work after all….

The business world poured scorn…

Whilst public opinion remained divided, in the corporate world Amazon’s competitors both current and potentially those from the future if they step into the realms of delivery and logistics.

When asked if Amazon could emerge as a competitor, FedEx CEO Fred Smith commented:

“Quite frankly I don’t think I’ve seen more mythology in the press about anything than I have about the e-commerce space over the last year or so…”

He further clarified FedEx’s position by adding:

“Now that’s not to belittle UAS [unmanned aerial systems] technology because we’ve got a lot of studies underway in that area ourselves,” he said. “…but at the end of the day [most products will be delivered through] the intercity transportation networks of FedEx and UPS and to a lesser degree the Postal Service, which is designed around delivering very lightweight items.”

John Donahoe, CEO of Ebay was equally dismissive of Amazon’s plans. Not pulling his punches he commented that Ebay were “Not really focusing on long-term fantasies, we're focusing on things that will change consumers' experience today," 

Meanwhile in a fantastic parody of the Amazon announcement British book retailer Waterstones, announced they were launching a new service using specially trained Owls to deliver online purchases within 30 minutes.

A question of regulations...

In fact whilst it does seem that open season has been declared on Amazon and mischievous sniggering can be heard in corporate boardrooms around the globe, the simple fact is that the technology to make this happen is very much a reality and should Amazon be able to overcome the regulatory obstacles then they may well find themselves not only laughing last but also lughing loudest.

So what exactly is the current state of affairs in terms of the regulation Unmanned Ariel Systems (UAS) to give the drones their official moniker?

Well last year the US Congress passed a law that required the FAA to publish their final regulations that would allow certain applications of commercial UAS by September 30^th 2015 – which is the likely the source of Amazon’s own claim that Prime Air could be launched as soon as then.

Having recently published its first annual “road map” in which it laid out the necessary steps it will be taking to move forward with plans for draft legislation within the next year, the agency has already approved certain UAS for use by energy firms off the Alaska coast, as instructed by Congress.

However, both types of UAS that the FAA certified had already been approved for military use, something the Amazon drones don’t have behind them. Whilst law enforcement agencies and other public organisations have also received permission from the FAA to fly UAS in US airspace for surveillance and other purposes, corporate uses are a long way from being cleared. One un-named source at the FAA is even quoted as saying:

“We can’t even handle the simpler cases… this is taking ridiculously long. We’re hurting a lot of industries.”

In fact as the Washington Post highlighted:

"The fact that Amazon had to leave the country to make the video underscores how slowly U.S. officials have embraced the policy challenge."

In the UK the Civil Aviation Authority (CAA) are responsible for the authorization of UAS. In response to the Amazon announcement a CAA spokesman commented

“There are rules in place to make sure unmanned aircraft are operated safely and don’t pose any risk of harm to the public. A key element of this is the operator must have the aircraft within visual sight at all times during the flight. So there are a number of safety issues Amazon would need to address before this type of operation could go ahead.”

Yet it could still work…

However, there is one potential application of delivery drones which has been overlooked by the Amazon spin machine but could actually prove to be a much more viable solution in terms of both the logistics of operation and also meeting existing regulations, which was outlined by Ralph Rio, A Research Director with the ARC group in an article on Forbes Magazine.

“Instead of replacing, think about augmenting.  Jeff [Bezo] said that 80% of the packages are light enough for a drone to carry.  That means 20% of packages will need a delivery truck and person to carry the package to the destination…”

“…Consider a truck with sides that roll-up to reveal shelves with drones.  The truck stops at a home and, while the delivery person gets and delivers a package, multiple drones emerge and deliver packages within a few hundred feet, and return.  If a drone has a problem, the delivery person is there to help.  Also, the drones could be limited to a lower altitude that avoids FAA issues. “

“With the delivery augmentation approach, each stop releases a swarm of drones.  One stop delivers five packages rather than one.  This would be a huge productivity improvement for a dense, same day delivery route – like in suburbia.”

“ Of course, this approach to package delivery requires creation of complex algorithms for issues like when to use, route optimisation, sequencing, error correction, failure response, and more.  Amazon has the PhD math scientists to solve these problems.  The major impediment may be the business agreement between Amazon and the package delivery service providers.  But, this may solved with the next iteration of its agreement with the post office.”

“The technology is known, and could be deployed.  We will be watching for you to see how the application of this technology unfolds.”

This would certainly seem to provide a more practical application of the drones for deliveries, rather than Amazon’s initial more simplistic version drones leaving direct from the factory. Of course drones have been applied in other field service environments such as this example here as well. So whether the announcement was a perfect PR exercise or not, perhaps the idea of seeing delivery drones is the next few years is not as far fetched as it might seem…

At the beginning of this month Amazon caused a global sensation when they announced their intentions to launch a new service Amazon Prime Air.

Prime Air is a revolutionary new delivery mechanism that would see the e-commerce giant utilise small unmanned drones to deliver packages weighing under 2.3kg to consumers within 30 minutes of ordering. It is the stuff of science fiction fantasy but if the plans are real then Amazon’s plans then it could be a move that will change field service forever.

But is there any substance to Amazon’s claims or is this just a very sophisticated marketing move? Serious questions remain about the legality of such a venture with legislation unclear both in the US and the UK , whilst the timing of the announcement, with the usually secretive Amazon CEO Jeff Bezos appearing on CBS’ 60 Minutes programme the day before ‘Cyber Monday’, raised further questions also.

Yet at the same time, if Amazon can find their way around the legislative maze that stands in their way, and if they have indeed perfected the technology then the business case for such a bold move is certainly sound.

Online purchases have been reported as having increased 20% year over year over the Christmas periods.  If this figure is compounded, that equate to business doubling within just four years.  The likelihood of Amazon being able to double their delivery capacity using existing methods by 2017 is questionable at best. Add to this the increasing consumer demand for free delivery driven by a highly competitive market, then finding an improved means of delivering small packages becomes a high priority to keep their business sustainable.

What Amazon’s official statements say…

With a powerful video that outlines Amazon’s vision for future deliveries sat prominently on their official site it certainly seems that Amazon themselves see Prime Air as more than just a pipe dream but an actual viable solution they will be rolling out to customers within the medium term.

In a dedicated FAQ about the Octocopters (Amazon’s official name for their drones) they describe the technology as:

"It looks like science fiction, but it's real. From a technology point of view, we'll be ready to enter commercial operations as soon as the necessary regulations are in place. The Federal Aviation Administration (FAA) is actively working on rules for unmanned aerial vehicles”

In the same section they also claim that the “One day, Prime Air vehicles will be as normal as seeing mail trucks on the road today” and that the drones could be in action as early as 2015. They also appear to address one of the most likely objections to drone fleets taking to the skies… public safety.

Amazon’s official statement reads  “The FAA is actively working on rules and an approach for unmanned aerial vehicles that will prioritise public safety. Safety will be our top priority, and our vehicles will be built with multiple redundancies and designed to commercial aviation standards.”

But safety isn’t the public’s only objection to the drones…

A divided public reaction…

In the days following the announcement the Internet was buzzing with articles and comments about the drones. If the old cliché that there is no such thing as bad coverage is true, then this certainly was a PR masterpiece by Amazon as their brand was suddenly everywhere.

Many responses were positive, openly welcoming the announcement. Comments from a BBC online article discussing the drones included:

“The sooner the better. I'm sick of being imprisoned in my home waiting for deliveries to my online shopping mad daughters. Perhaps with this delivery system I will be able to go out and do some real shopping. You know, the type where you choose what you want and get it there and then.”

And

“Yes, I believe that this would be an effective means of parcel delivery... Eventually. Drones of this type can be easily flown and built, from as little as £100. A model aircraft can be classed as a drone. The law does not currently stop people from strapping a small GoPro camera to the front of a model aircraft, yet. Drones have many practical uses, but must be used in the correct way.”

However, whilst some greeted the prospect of drone fleets warmly many used the forum to express their misgivings about the concept.

“What about people living in apartments with no direct access to street level. I'm reckoning this will be limited to people who live in suburban detached or terraced houses - can't see this making its way to inner city areas with the technology advancing well enough to avoid substantial damage to property or life.”

And

“Amazon's aim is to get goods to customers faster and cheaper; and make more profit. Machines can put many people out of work, but we still have no plan in place to deal with it's effect, i.e.: unemployment.”

Certainly it seems that public opinion remains divided but what about the corporate world? Read the second part of this feature where we assess how Amazon’s competition has reacted, the regulatory challenges that need to be overcome if Amazon Air Prime is ever going to be realised, and one potential solution that could see drone fleets arriving sooner than you might think…