Amazon case study: Amazon prime air - A delivery by aerial drone project

Amazon Prime Air is a drone-based delivery service that aims to deliver packages to customers in under 30 minutes using autonomous flying vehicles. Here is a case study on the project:

Overview:
Amazon Prime Air was launched in 2013 with the goal of providing faster delivery times to customers using unmanned aerial vehicles (UAVs). The project has faced numerous regulatory and technical challenges, but Amazon remains committed to the project and continues to invest in its development.

Challenges:
One of the primary challenges facing Amazon Prime Air is regulatory approval. The Federal Aviation Administration (FAA) has strict rules governing the use of drones for commercial purposes, including restrictions on flying beyond the line of sight of the operator and flying over people. Amazon has been working with the FAA to gain approval for the service and has conducted numerous tests to demonstrate the safety and reliability of its drones.

Another challenge facing the project is the technical complexity of developing and operating a fleet of drones. The drones must be able to navigate complex urban environments, avoid obstacles, and deliver packages safely and accurately. Additionally, the drones must be able to communicate with each other and with ground-based systems to ensure that they are flying safely and efficiently.

Solution:
To address the challenges facing Amazon Prime Air, the company has invested heavily in research and development to create a fleet of drones that are safe, reliable, and efficient. The drones are equipped with a range of sensors, including GPS, cameras, and sonar, that enable them to navigate and avoid obstacles.

Amazon has also developed a sophisticated logistics system to manage the delivery process. Packages are loaded onto the drones at fulfillment centers and then flown to delivery locations using pre-determined flight paths. The drones are equipped with software that enables them to adjust their flight paths in real-time based on weather conditions and other factors.

Results:
Although Amazon Prime Air has not yet been fully launched, the company has conducted numerous successful tests of its drone technology. In December 2016, Amazon completed its first drone delivery to a customer in Cambridge, England. Since then, the company has continued to refine its technology and conduct additional tests.

Amazon Prime Air has the potential to revolutionize the delivery industry by providing faster, more efficient, and more environmentally-friendly delivery services. However, the project still faces numerous challenges, including regulatory approval and technical complexity. Amazon continues to invest in the project, and it is likely that we will see further developments in the coming years.

1. Ops-Essentia Operations Case Study Challenge Amazon Prime Air, A Delivery-By-Aerial-Drone Project Mayank Kumar Tabassum Irfan Harender Singh Team: MTH

2. Case Analysis 86 % of Amazon’s orders are of the under five-pound variety orders Drones could fulfil the delivery of forementioned products in less than 30 minutes. In India approx. 88% consumers are willing to pay for same-day (or faster) delivery services. Automated drones have been around for as computational power becomes lighter and smaller, and as batteries gain longer lives Key Players Value Preposition Delivery Quality Convenience Competitive Pricing Cost & Time Savings Key Activities Technical team: R/D on drones and Sensors Supply chain Management :Fulfilment centres, Order delivery Traffic Control Unit : Handling Drone Government Approvals Key Partners Engineers: R&D on drone service and providing tracking solution Technical Team: Organize and expedite the flow of Drone and Monitoring status Customer: Delivering Customer + Adaptability + Loyalty points Key Resources Logistics Team Technical Team Marketing Team Air Traffic Control Vendor Management Drivers First mover advantage Technological Innovation Increase in digital literacy Challenges Developing delivery mechanism allows Real-time tracking of the package. Weather constraints affect drone deliveries. High cost of infrastructure for maintenance and maintain capacity Values in Billion USD Dollar Market size of e-commerce across India from 2017 with forecast until 2027

3. Existing Model Warehouse Fulfillment Center Fulfillment Center Fulfillment Center Customer Company eCommerce Existing Last mile Delivery Approach used – Top-bottom Method Used* – Weighted Average Ranking Method Weights given based on – Per Capita Income, High Demand Top 7 States – Maharashtra, Tamil Nadu, Uttar Pradesh, Haryana, Karnataka. City Selection – Where Implementation of Drone is feasible in India. Phase 3: Mumbai, Agra, Patna, Bhubaneshwar, Chennai Phase 2: Bangalore, Coimbatore, Indore, Allahabad, Delhi Phase 1: Surat, Nagpur, Nashik, Chandigarh Reasons to target Tier 2 City? Not Densely populated city Have drone landing facility Less Expenditure in Fulfillment Centre cost Selecting City – ** Nashik for Reference Calculation** Monthly Expenditure (Fuel +Delivery Executives)      Number of Pin Codes Available(in Nashik) 25 Nos Average Delivery Partner / pin code 7 Nos Total Delivery Partners 175 Nos Average Delivery Cost/month 3237500 INR Average Travelling km/day 200 Km Fuel Cost/day 350 INR Monthly Expenses On Fuels 1531250 INR       Total Monthly Expenditure in Nashik Delivery + Fuel Cost (Approximate figures) 4768750 INR Amazon is constantly striving to innovate and provide best-in-class service levels in last mile delivery space. Same-day and instant delivery are the fastest-growing segments in last-mile env, a 20% annual growth rate.

4.   Traditional Model Drone Delivery Model Operating hours/delivery guy/week 56 hrs 70 hrs Average Travelling speed 40 km/hr 56 km/hr Time taken for per delivery 35 mins 20 mins Time reduction   60% Reduction Delivery Expenditure per month 3237500 INR 2691666 INR Fuel Consumption (monthly) 1531250 INR Negligible Legal Aspect Driver license Pilot license, DGCA Approvals Comparison Table – Traditional Vs Drone Delivery Model Breakeven Analysis Traditional Expenditure – Yearly basis: Delivery Cost / month – ₹ 3237500 Fuel Consumption / month – ₹ 1531250 Delivery + Fuel Cost per month – ₹ 4768750 Yearly Expenditure – ₹ 5,72,25,000 If Replacing 50% fleet with drone – ₹ 2,86,12,500 Setting up drone capacity – ₹ 10,01,00,000 Break Even point : 10,01,00,000 / 2,86,12,500 3.49 years or 3 year 6 months Additional drone costs, such as establishing and operating drone stations, and investment in R&D have been estimated. As the commercial use of drones grows, the price of drone is projected to drop due to economies of scale in manufacturing. Cost and Benefits Warehouse Fulfillment Center Fulfillment Center Fulfillment Center Customer Company eCommerce Launch Pad Launch Pad Launch Pad Remote Pilot Center Remote Pilot Center Remote Pilot Center Ground Support Team Drone Delivery in Last mile Delivery If the drone idea officially launches, Amazon stands to gain a lot of money. Amazon will acquire a significant competitive edge . Implementation Roadmap Tier 2 City selection Land acquisition Setting up Fulfillment area Onboarding Engineers / staff Establishing launchpads Drone Delivery Initiates Drone Delivery Model

5. Implementation Challenges Rules & Regulation DGCA The Central Government on 25th August 2021 has promulgated liberalised ' The Drone Rules, 2021’,  replacing the erstwhile Unmanned Aircraft System Rules, to regulate the use and operation of Drones or Unmanned Aerial System  ("UAS")  in India. The new rules have abolished Prior Rule like certificate of conformation, certificate of maintenance, operator permits, import clearance, authorization of R&D Getting certification and proper approval from the DGCI for drone usage Registration of each drone on the UAS platform Type Certificate is required when a drone is to be operated in India. Examination by the Quality Council of India(QCI) or an authorized testing Getting permission to operate drone in the Yellow (Intermediate Zone) Getting Remote License Pilot (RCL) as it has strict restriction Problem Associated with Prime Air DGCA Approval Process Registration of Drone Obtaining Remote License Pilot(RCL) Obtaining Type Certificate and registration on UAS platform Obtaining approvals from DGCA for commercial Use of UAS Getting authorization for R&D Government Policies Rules and Regulation in major commercial air traffic in densely populated cities Privacy & Security Issue Legal Authority Political Unplanned Construction in the cities Low level power lines Air traffic Cultural Research Cost Drone Abuse/Drone Theft Customer - to pinpoint the delivery location Technological Nighttime Weather Impact Visibility Problem(e.g., Smog in Delhi) Environmental

6. Prime Air Future of Delivery with Drones Contactless, Accurate and High Speed Join Prime Air at ₹289 per month to eligible addresses FREE !!!! Express Delivery 2-hours of placing order Scheduled Delivery: 2-hour delivery slot between 08 am and 10 pm No Contact Delivery with limited human intervention Accurate Deliveries Easier to reach remote areas and harsh terrains like jungles, hills, or mountains. Greater Privacy Reduces carbon footprint due to a decrease in consumption of energy Quicker Returns and Refunds Trouble-free Service Message to General Public Real time Tracking Low operational charges, compared to vehicle delivery services, reduce costs. Delivery failure/thefts eliminated from conventional process Proof of delivery Message to General Public Benefits for Seller:

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8. Annexure - I Approx deliver Person requirement in Tier 2 city     Demand /Day 1500 Nos. No of Pin codes Available 25 Nos. No of Deliveries /Day 15 Average Orders / Pin Code 60 Nos. No. of Delivery executives/Pin code 7 Average Approx. Delivery executive in Nashik 175 Nos. Total distance covered / day 350 km Shift time 8 hrs Average Speed 40 km/hr Travel Time per Delivery     Avg. Travelling Speed 40 km/hr Avg. distance from Home to Store 6 km Avg. time for travel from Home to store 8 mins Order Picking time at Store 4 mins Avg. distance from store to customer 6 km Avg. time to travel from store to customer 8 mins Order delivery time 3 mins Buffer time Total time 12 mins Total time 35 mins Wages Paid to Delivery Executives       Incentive per Delivery after 12 deliveries 30 per day 750 Incentive per Day 30 per day 750 Salary per Day(Time Component) 500 per month   Total wage per Month (Approx)     16500 Total Wage/labour (including incentive)     18500 No. of Delivery Partners for Nashik 175     Total Expense in wages to Delivery Executive per month(approximately ) per month   INR 3237500 Cost Associated with normal delivery

9. Annexure - II Travel Time per Delivery     Avg. Travelling Speed 56 km/hr Avg. distance from Home to Store 6 km Avg. time for travel from Home to store 6.5 min Order Picking time at Store/Warehouse 3 mins Avg. distance from store to customer 6 km Avg. time to travel from store to customer 6.5 mins Order delivery time 3 mins Buffer time Total time 2 mins Total time 21 mins Drones Acquiring capacity     Number of Drones required 70 Nos Drones Acquiring cost 150000 INR   10500000 INR Fulfillment centre Requirement 3 Nos Approx cost to set up Fullfillment centre 20000000 INR   60000000 INR Drone Maintenance and EV unit charge 2100000 INR Technical Staff- R&D 17500000 INR Approx Support staff salary 10000000 INR Total yearly expenditure 100100000 INR Cost Associated with Drone delivery

10. References https://www.business-standard.com/article/companies/amazon-expands-fulfillment-network-in-india-across-an-area-of-10-mn-sq-feet-121071500671_1.html https://www.quora.com/Where-are-Amazon-Fulfillment-centres-located-in-India Welch, Adrienne, "A cost-benefit analysis of Amazon Prime Air" (2015). Honors Theses. https://scholar.utc.edu/cgi/viewcontent.cgi?article=1051&context=honors-theses https://marketresearchtelecast.com/amazon-drone-delivery-is-in-danger-prime-air-has-problems/121401/ https://www.slideshare.net/tirthnkr/amazon-india-distribution-strategy-50900552 https://www.fostec.com/en/competences/e-commerce-strategy/e-commerce-distribution-strategy/b2c-e-commerce-distribution-strategy-2/ https://ecommercedb.com/en/markets/in/all https://www.business2community.com/brandviews/xsellco/how-the-amazon-supply-chain-works-02359957#:~:text=This%20wide%20network%20of%20warehouses,storage%20areas%20for%20maximum%20productivity . https://www.wipro.com/business-process/the-future-of-delivery-with-drones-contactless-accurate-and-high-speed/ https://www.gartner.com/smarterwithgartner/why-flying-drones-could-disrupt-mobility-and-transportation-beyond-covid-19 https://www.toptal.com/finance/market-research-analysts/drone-market https://www.wboc.com/story/44179990/global-drone-package-delivery-market-2020-ndash-production-revenue-average-product-price-and-industry-analysis-to-2027 https://www.gartner.com/smarterwithgartner/why-flying-drones-could-disrupt-mobility-and-transportation-beyond-covid-19/