Is the US Grounded in the Race to Develop Drone Delivery?

Amazon’s widely publicized program to develop a drone delivery service might give the impression that the online giant is spurring the technology’s advance in the US.

The reality is very different, says Dr. Mary (Missy) Cummings, Associate Professor, Mechanical Engineering & Materials Science, Duke University. Dr. Cummings will give a talk on the commercial potential of drones at MIT CTL’s Annual Partner Meeting, March 25th, 2015, on the MIT campus.

For a number of reasons other countries are leading this particular race. By comparison, the US has barely moved out of the blocks as regards practical commercial applications of the technology, believes Cummings.

“We tend to get myopic in this country about what’s going on in the rest of the world,” she says, and drone technology offers a good example.

The US Federal Aviation Authority (FAA) is “moving towards more commercial applications, but these are small steps and are not scalable.”  Some companies in the US have been granted permission to operate unmanned aerial vehicles in limited circumstances. New regulations are in the works, but are not expected to emerge until 2017, says Cummings.

Meanwhile, other countries are actively supporting the growth of commercial drones. Australia is one of the leaders, and it is notable that Amazon has carried out much of its initial development work in the United Kingdom. France is using drones in its national postal system, points out Cummings. Canada has a more drone-friendly regulatory framework than its neighbor to the south.

She believes that the FAA is so heavily committed to piloted aircraft that drone technology “is not on their radar.” Companies that want to test aerial drones in the United States have to provide proprietary data if they use designated test sites, and this can be a deterrent.

In addition, these vehicles are generally perceived as a threat to privacy, and are vulnerable to vandalism. The high-profile use of drones by the military has reinforced worries about the security dangers posed by aerial vehicles if they fall into the wrong hands. “But if we can’t employ them on a larger scale it is hard to get positive media around drones and to change perceptions,” Cummings says.

There are some technology problems to overcome, but these are solvable, she maintains. Researchers at the Massachusetts Institute of Technology are exploring ways to make the vehicles more robust in severe weather conditions, for example. At Duke, Cummings is researching a multi-layered approach to air traffic control that could be used to manage the movement of drones. “Rather than one person controlling a dozen planes or a single lane, a person could oversee hundreds of drones and intervene when there are problems,” she explains.

In a supply chain context, drones could be used to deliver packages over the last mile, an application that Amazon is developing. But vehicles can be designed to carry heavier payloads, and this is already being done in Afghanistan. “It’s simply a case of developing the business model,” says Cummings.

The MIT CTL partner day on March 25, 2015, follows MIT CTL’s annual conference Crossroads 2015 which takes place on March 24. Exchange partners can make the most of their time at MIT by attending both events. For more information contact Nancy Martin at: NLMartin@mit.edu

Cargo Flight Launches a Vital Link in the Ebola Response Effort

Jarrod Goentzel, Director of the MIT Humanitarian Response Lab, during loading operations in Miami.

Jarrod Goentzel, Director of the MIT Humanitarian Response Lab, during loading operations in Miami.

A shipment of medical equipment that arrived on January 12, 2015, in Monrovia, Liberia, from Miami, US, will enable 25 government hospitals to receive infection control training, helping the facilities which were partially or fully closed owing to the Ebola crisis to recommence regular operations.

Many resources in the Ebola response effort have appropriately focused on Ebola treatment; this flight launches an important new step in the response by providing training and supplies for health workers to safely resume vital services.

The delivery was organized by the Academic Consortium to Combat Ebola in Liberia (ACCEL), a network of academic centers with technical expertise in emergency medicine and logistics systems. Consortium leadership combines extensive experience in both supporting the Liberian health system and emergency response operations, a unique mix that enables it to respond rapidly to the humanitarian crisis in Liberia.

“Our team of medical and supply chain experts with years of field work experience quickly assessed both the healthcare and logistics capacities in Liberia and planned a rapid response to support service providers on the ground,” said Dr. Jarrod Goentzel, founder and Director of the MIT Humanitarian Response Lab, a member of ACCEL. The Lab is part of the MIT Center for Transportation & Logistics.

The other members of the consortium are the University of Massachusetts Medical School, which leads the current initiative, the Boston Children’s Hospital, Avenir Analytics, and the Icahn School of Medicine at Mount Sinai. A $7.5 million grant from Paul G. Allen funds this effort, which is part of the broader #TackleEbola initiative.

The 63 metric ton air shipment of personal protective equipment (PPE) and sanitation supplies valued at some $1.8 million, combined with procurement of locally available commodities, will meet two critical needs in the country’s constrained health care system.

First, hospital personnel will be able to train with proper protective supplies, which is critical since safety protocols incorporate unique equipment designs. Traditional health care facilities in Liberia treat a wide range of patients from pregnant women to malaria victims. Lack of training on infection protection and control (IPC) has severely disrupted hospital operations. Now staff can receive the training they need to perform in this stressful environment while protecting themselves against Ebola.

Second, the supplies will provide a three-month stock of IPC equipment for the hospitals. This is a vital resource in a situation where supply of critical items such as protective coveralls has been constrained and demand for the right equipment fluctuates wildly.

The consortium has developed a supply chain that is specially designed to support the relief operation, and flexes with changing conditions. Here are some of the main features of the supply chain.

  • Items in this shipment were sourced in the United States, and the logistics team led by Dr. Goentzel worked with a commercial distributor to access manufacturing capacity for products such as Ebola suits that are relatively scarce. Some manufacturers have increased their output as demand has soared.
  • A major challenge is procuring equipment in large quantities so that the items are standardized. This is important since variations in the specifications – suits that come with or without hoods, for instance – make it much more difficult to effectively train medical staff in Liberia.
  • Airlink, the NGO that provided the air transportation, collaborated with the ACCEL logistics team to secure cargo space. Most of the space was taken up by the ACCEL shipment, but spare capacity was made available to other humanitarian organizations. Airlink has received a grant from the Paul G. Allen Family Foundation to establish an air bridge to West Africa.
  • Distributing the goods to hospitals that are scattered across Liberia is another logistics challenge. ACCEL is working with the United Nations Logistics Cluster in Liberia to facilitate distribution. The Logistics Cluster hub in Monrovia received the shipment and offers handling space to create the kits for each hospital. This facility feeds forward logistics bases throughout the country and provides transportation capacity where there are gaps.
  • ACCEL is sourcing products locally where possible. Using local companies supports the Liberian economy, reduces costs, and streamlines the supply chain. Manufacturers of chlorine and storage containers have already been identified
  • The planning capabilities of the combined medical and logistics team provide a foundation for all response activities. It is essential to have a clear supply plan that is updated in response to shifting demands. For example, the initial plan in late November 2014 was revised as the forward team arrived in Monrovia, and subsequently corrected again as the number of hospitals covered increased based on new assessments of the situation on the ground.

Importantly, the consortium is working to ensure that the supply chain for critical supplies will continue to operate as long as it is needed.

“A critical part of the project is making sure that the systems we put in place are aligned with those developed and used by the Liberian Ministry of Health and Social Welfare, so the PPE supply chain can be sustained for the country’s hospital system,” said Goentzel.

“Infrastructure Deficit” Getting Worse

US Secretary of Transportation Anthony Foxx acknowledges the funding gap for transportation projects

US Secretary of Transportation Anthony Foxx acknowledges the funding gap for transportation projects

The supply chain community has long argued that America’s transportation infrastructure is in dire need of new investment. It is encouraging therefore that US Secretary of Transportation Anthony Foxx expressed a similar view during a visit to MIT on January 5, 2015.

Foxx said that the country’s “infrastructure deficit” is growing and without more investment and long-term planning will worsen. Moreover, the situation on the ground is probably much worse than that depicted in paper calculations of the deficit, given the uncertainty over funding mechanisms for infrastructure projects.

Speaking in MIT’s Wong Auditorium, Foxx was interviewed by Yossi Sheffi, Director of the MIT Center for Transportation & Logistics and Elisha Gray II Professor of Engineering at MIT. The forum that hosted Foxx is part of MIT CTL’s Global Leadership Speaker series.

The US Department of Transportation is working on a 30-year plan that focuses on the future of transportation, explained Foxx. New technology is a key part of the work, and Foxx noted specific areas of interest including freight hubs, high-speed rail links, air safety systems, and technology that automates vehicle operation.

A contentious issue is the US Department of Transportation’s reliance on gasoline taxes for its revenue. In a recent Linkedin Influencer blog post Sheffi advocated a “hefty” gas tax on Americans of the order of 50% to 70% and a different money allocation mechanism for the funds generated by the tax. A higher tax would stimulate demand for fuel-efficient cars, promote energy independence, reduce traffic congestion by discouraging unnecessary driving, and reduce the regulatory load on drivers, argued Sheffi.

Sheffi asked how the department’s reliance on these taxes impacts transportation spending. Foxx said that revenues from the gas tax are declining in part because vehicles are becoming more fuel efficient. The fall in revenue exacerbates the “infrastructure deficit” and adds to the general uncertainty over how building projects are to be funded.

But there are some positive developments too. Foxx supports high-speed rail, and pointed to the start of construction on a line that links San Francisco and Los Angeles. New transportation technology continues to emerge, notably the prospect of automated vehicles, although Foxx said that driverless cars are still some way off, and a number of safety and liability issues have to be resolved before the technology becomes a reality.

 

 

 

 

The Rise of Networks as Market Goliaths

 

Airport hubs

Airport hubs an example of network economics in action

Many of the large companies that dominate world markets owe their strength and continuing growth to their underlying structure: a formidable network. Such networks have special economic characteristics which provide competitive advantage.

We are surrounded by networks: social networks, airline networks, highway networks, wireless networks, and numerous others. These entities contain points (“nodes”) connected by “links or “edges.”

Networks derive their strength from an interesting economic phenomenon known as the “network effect.” This is created when the addition of one element to the network (say a node or a member) improves the utility of all the network participants (nodes/members). In other words, any new element joining the community benefits the connectivity of the network as well as its member organizations.

Examples of the multiplier effect

Consider a telephone. By itself it has more value as a door stopper than a communications device; there is not much else you can do with it. However, if your significant other has a telephone and you are connected, both parties benefit from this two-way communication channel. The utility of the telephone comes from the fact that if it is ubiquitous, every person in the network can talk to each other (and teenagers do). In other words, every additional telephone connected to the network increases the ability of people to communicate.

Social networks are an obvious example of this effect. The first users of Facebook could possibly get some benefit from recording what they did that morning. But the real benefits come from the (still unexplained) deeply-rooted desire to inform others about mundane comings and goings, as more and more people join the network. As the community evolves, the next phase involves the creation of a political movement based on Facebook communications. Twitter and LinkedIn show similar growth trajectories; their value grows as the number of members increases.

Furthermore, networks create a competitive advantage and a barrier to entry. A competitor has to have a lot of money and time to build one. And the entity offers little value to users during its nascent development stage because the number of members is relatively low.

Other examples of networks include exchanges such as Match.com. In this case, as more men join the network more women become members, which attracts more men, etc. A growing population of sellers on eBay pulls in more buyers, which attracts more sellers, etc. Large networks grow because they are large. This basic network law even applies to college football. Despite its prowess, the University of Michigan football team would not attract a large following if there were no other teams to play against.

Finally, airlines provide an example of network economics. Not only do airlines try to serve multiple destinations thereby boosting the number of cities they cover, they also enter into mergers with other carriers to enlarge their networks and capture the benefits of scale and scope. Airlines also create alliances to extend their geographic reach.

The hub strategy

While the benefits of adding nodes (e.g. a city served by an airline, a person joining Facebook , an extra person with a telephone) strengthen a network, it is expensive to connect each node directly to all other nodes. To connect N telephones to each other directly, one would need ½∙N∙(N-1) connections. For, say, a million telephones, the number of connections will have to be some trillion lines. This is clearly not practical for the billions of phones in the world. Instead, the telephone system uses central exchanges to foster consolidation. Instead of ½∙N∙(N-1) connections between N phones, the central exchange needs to connect only to N nodes and thus the number of connections is only N+1.

Airlines use similar logistic in their hub-and-spoke systems. Instead of connecting every one of their origins with every destination via a non-stop flight, they use hubs. Airline travelers are painfully aware of this technique. The outcome is summed up in the well known saying about the world’s busiest airport: “When I die, I don’t know if I’ll go to heaven or hell, but for sure I’ll be changing planes in Atlanta.”

The more a network depends on physical connections the more it will use hubs to connect all the nodes in the network. For airlines, the result is higher utilization (higher load factors), better service as flight frequency increases, and the ability to serve small communities that cannot support point-to-point services.

Additional services

Once the network is in place, it can be exploited and monetized. Facebook created a revenue stream when it began accepting adverts, and LinkedIn followed a similar course when it introduced charges for job searches. Airlines charge for everything they possibly can, and, in particular, charge high fares for flights in and out of their hubs (where the frequency is high and the competition non-existent).

Microsoft Windows is an example of the direct network effects as well as the potential for additional services or indirect network effects. Once the organization became a standard across the corporate world, applications such as spreadsheets (Excel), word processing (Word), and presentation software (Power Point) became standard features with their own network effects “riding” on Windows. Similarly, once a smartphone operating system – be it iOS or Android – achieves a high enough number of users, developers write apps making the system more useful and persuading more people to use the system.

As mentioned, it is very difficult to compete with an established network by creating an alternative service. The Android operating system was successful only because Google distributed it for free to phone makers. Yet even Google with all its financial resources could not dethrone Facebook with the Google+ social network.

Physical networks exhibit the same degree of competitive strength. Take, for example, the UPS network. After building its worldwide network for over 100 years, UPS is offering logistics and supply chain management services on the back of its creation. The difficulty of competing with an existing network was clearly demonstrated when DHL entered the US domestic market in 2003 in an attempt to compete with the UPS (and FedEx) networks, only to exit in 2008 after suffering heavy losses.

Globe-spanning networks are here to stay. Having reshaped the markets in which they operate, these entities will surely continue to redefine the rules of competition.

This article can also be seen as a LinkedIn Influencer blog post.

Photo: J. Petersen, Wikimedia

A Real World Humanitarian Logistics Model

 

Floods in Colombia caused widespread damage

Floods in Colombia caused widespread damage

When a disaster such as a flood strikes, the response can be chaotic as various agencies and sources of supply converge on the stricken area. A humanitarian logistics model developed by the Center for Latin American Logistics Innovation (CLI) improves the efficiency of response efforts by taking a holistic view of these operations.

CLI researchers are now refining the model by allowing for social factors such as the influence of activist groups on relief operations. The new work is being carried out in collaboration with Antioquia University, Colombia, University of California, Davis, US, and an independent field expert in Colombian conflict zones.

The current model is driven by the need to minimize three critical features of relief operations: evacuation flow-time, distribution flow-time, and total cost.

“These elements are often managed separately rather than holistically, which gives sub-optimal results. We can use the model to take all relevant factors into account, and help relief agencies to respond more effectively to frequent disasters such as floods,” explains Christopher Mejia, Postdoctoral Associate at CLI. He worked with researchers from Tecnologico de Monterrey, Mexico, Malaga University, Spain, and Complutense University at Madrid, Spain, to develop the model.

Each essential component of a relief effort is built into the model. These activities include aid distribution, evacuation procedures, locations of emergency facilities such as distribution centers, meeting points and shelters, and pre-positioned stocks of supplies.

Another key component taken into account – and one that can be overlooked by aid agencies – is the vulnerability of specific locations. This is especially important in floods where low points in a city, for example, are more prone to flooding than locations on higher ground. Logistics networks can be severely disrupted if critical facilities such as hospitals, shelters, and infrastructure are located in these high-risk areas. The model incorporates a geographic information system that simulates outcomes like these.

A case study based on a catastrophic flood that struck the city of Villahermosa, Mexico in 2007 provides a real-world application of the model. The waters reached a height of some four meters in low-lying parts of the city, affected 160,000 people, and caused $700 million worth of damage.
A total of 129 disaster zones were evacuated during the crisis, and the operation utilized 244 shelters and one distribution center. There were 500 nodes in the logistics network.

Other characteristics of the operation that were used to test the model include the following.

  • The spatial distribution of facilities. This has a major impact on evacuation and supply operations.
  • The number of facilities and extent of available relief resources, both of which tend to be lacking in a disaster of this magnitude.
  • Costs in terms of what resources were required on the ground and the assigned budget for the response program.

The model significantly outperformed the government response program across all of the factors considered. There were also a number of important findings from the analysis. For example, as spatial distribution increases, shelter utilization rates and the number of active meeting points increases. Also, maximum evacuation and distribution flow times decrease as the number of facilities increases.

The next step is to incorporate social factors into the initial generic model to align it even more closely with real-world crisis situations.  Existing research on how social environments can shape logistics networks will be used, says Mejia.

For example, when a disaster alert is issued, people in some communities tend to ignore evacuation measures, preferring instead to stay and rely on their social networks to survive the crisis. This behavior pattern affects the extent to which shelters and other amenities are needed as well as evacuation flows. In order to counter these choices, responders need to build trust and perhaps educate local populations on the wider implications of their decisions.

The presence of political extremist or criminal groups is another social factor that can be taken into account in some countries. In Colombia, for example, FARC (Revolutionary Armed Forces of Colombia) is such a group. Extremists can impede the flow of relief supplies by stealing goods and stopping trucks. But their actions vary according to each group’s mission and strategy. In cases where they have strong local links they might actually assist in relief efforts, particularly if recognized organizations such as the United Nations and the Red Cross are involved.

Social influences like these affect important logistics decisions, including where to locate large distribution centers and how to deliver urgently needed supplies to end users. “And the flow of aid can change according to the nature of local conflicts and the way activist groups behave,” says Mejia.

The research team plans to complete the conceptual phase of the project in about six months, and if funding is in place, will begin collecting data in the field.

For more information on the project contact Christopher Meija at cmejia@logyca.org.

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How Superior Sales Samples Can Unlock Supply Chain Gains

The process for creating product sales samples can be something of an afterthought in the consumer packaged goods (CPG) industry. Yet improving this specialized supply chain can streamline new product introductions; a significant competitive advantage given the sheer number of product launches in the industry.

The MIT CTL researchers developed a method for using 3D printing technology to produce plastic injection molds quicker and at a lower cost. These molds can then generate a small number (up to 100) of high-quality sales samples much sooner than traditional steel or aluminum molds thus speeding up time to market.

In response to competitive pressures, a leading consumer packaged goods (CPG) manufacturer increased the number of product launches threefold and halved the amount of time taken to get the products to market. A year before each launch, the company would present sales samples (product mock-ups) to their largest retail customers in order to estimate demand and explore the shelf configurations required for the new items.

Capturing more accurate demand data and reducing the time spent in consumer testing represents a huge opportunity for CPG firms. Also, more reliable information on the potential for new products helps to persuade executives to support these projects.

Sales samples are usually made by an injection molding process that has long lead times and high costs, particularly when multiple iterations of the product are needed. Also, the 2D samples produced do not always provide a good representation of the final product.

The researchers devised a “pre-unit tooling process” which is an intermediate phase introduced between the primary package design and initial consumer feedback stages of the production process. Using 3D printing to make the initial molds, the new process supplied 10 to 100 shelf-quality product samples.

These high-quality sales samples lead to more accurate demand predictions, and offer more flexibility by enabling the company to solve design issues earlier in the overall launch process. Some of the test steps can be completed sooner or in parallel with other activities on the critical launch path. The 3D-generated molds can handle injected plastics that are already being used in production, thus qualifying the samples as test subjects. Streamlining the sequence of tasks in this way shaved 14% to 26% off product development timelines. The CPG firm was able to launch a product one full sales season earlier than planned by using samples from 3D-generated molds.

More accurate consumer feedback also reassures executives, and helps companies to avoid costly design freezes caused when senior managers lose faith in a new product and stall its development.

As 3D printing technology advances, the benefits of the new process will increase. For example, future printers will create more durable molds with the capacity to supply thousands of high-quality samples.

For further information on the research contact Dr. Bruce Arntzen, Executive Direcbtor, MIT Supply Chain Management Program, at: barntzen@mit.edu.

This article was published originally by Supply Chain Management Review 

Logistics Hubs as Drivers of Innovation

A European initiative aims to foster collaboration between companies in logistics clusters. Pictured is the Grupo Carreras facility in the PLAZA logistics park near Zaragoza, Spain.

A European initiative aims to foster collaboration between companies in logistics clusters. Pictured is the Grupo Carreras facility in the PLAZA logistics park near Zaragoza, Spain.

A European Commission (EC) initiative called Horizon 2020 – 2105 Smart, Green and Integrated Transport will facilitate collaboration between logistics clusters on developing supply chain solutions, particularly projects that promote environmental sustainability. In addition to helping companies bring new ideas to fruition, the initiative gives academic centers such as the Zaragoza Logistics Center (ZLC), Zaragoza, Spain, an important supporting role in unlocking the collaborative potential of these hubs.

Key players came together at the first European Logistics Clusters Forum, on October 14 -15, 2014, in Brussels, Belgium, to explore their possible involvement in the initiative. The bidding process is expected to begin early next year and run until the last quarter of 2015. The EC is providing some €18 million (about $23 million) of funding for a single large project on pan-European logistics applications.

Much effort has already gone into developing logistics clusters in Europe. For example, the Cluster Association of Innovative Logistics of Aragón (ALIA) in Spain was created by ZLC, the Aragón Institute of Technology, Aragón’s Council of Chambers of Commerce, and the Foreign Investment Office of the Government of Aragón. ALIA’s main purpose is to build on the success of PLAZA – Europe’s largest logistics park located near Zaragoza, Spain – by identifying and developing opportunities for logistics research and new alliances, and to promote the region of Aragón (for more on ALIA see the article How to Harness the Economic Power of Logistics Clusters, Frontiers fall 2013).

The creation of clusters such as ALIA involved academia, government and industry. The EC 2015 Cluster Excellence Program is driven by industry only, explains Carolina Ciprés, ZLC Director of Research Programs.

“The aim is to continue the collaboration but at a cluster level, with the participating companies developing their own action plans,” Ciprés says.

Specific plans will emerge during the bidding phase, but an example could be a project to improve the use of synchromodal transportation in Europe (where logistics service providers choose the transportation options for delivering products on behalf of shippers) says Ciprés. Countries such as the Netherlands have well developed options for road, rail, and waterway intermodal links. In Spain, however, there are relatively fewer rail options, and the challenge is to persuade rail operators to expand the number of services for shippers. It’s a chicken-and-egg problem; shippers will not provide the cargo until operators guarantee the rail capacity, and vice versa. Perhaps regional logistics clusters can collaborate on supplying the freight volumes that justify new rail services, and convince terminal operators to supply more origins and destinations. With the capacity in place, shippers and logistics service providers would be better able to make real-time decisions on the optimum intermodal routes for their cargoes.

The sharing of carrier space – called horizontal collaboration – represents another opportunity for improving the efficiency of freight operations while also reducing transportation’s carbon footprint. This type of collaboration is very difficult since it requires companies, including competitors, to pool cargoes and exchange information on relevant freight operations, thus requiring the involvement of a neutral party (or trustee). Cooperation between companies in logistics clusters could provide a collaborative platform for sharing carrier capacity over the last mile.

Although ZLC will not be directly involved in the 2015 Cluster Excellence Program, the Center will provide critical support for the participating clusters in the Aragón region.

“We will try to involve the clusters in our applied research and also in our proposals for research projects in Europe,” says Ciprés. ZLC can also offer advice on potential projects and help to demonstrate the impacts of projects that the clusters choose to pursue.

At the same time ZLC will benefit from its exposure to real-world logistics projects, and can incorporate the lessons learned into its educational and research programs. This two-way exchange will help ZLC to identify subjects for future research.

“This market-oriented approach to collaboration across logistics clusters will benefit companies as the main participants, and give academic centers such as ZLC more visibility in our regions,” says Ciprés.

For more information on the European Commission 2015 Programs contact Carolina Ciprés at ccipres@zlc.edu.es.

This article was published in the fall 2014 issue of Supply Chain Frontiers. Subscribe for free to Frontiers here.

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