Apr 24

Mobile solutions in enterprises pay: #3 – Logistics/Delivery

In this third of multiple assessments of mobility and RoI, three examples from logistics/distribution are described. Logistics and distribution are obvious candidates for improvement via mobility, because by their nature they involve movement:

  • All new franchisees of a chain of gourmet stores now receive an iPad containing training materials, store management tools, the ability to connect with suppliers as well as access to the franchisor’company’s intranet and web-based tools. Franchisees are given the iPads, in a sort of ‘reverse-BYOD’ program. The iPads come fully loaded from the franchisor. They are used in the training leading up to a store opening day, as well as for the subsequent day-to-day operations. Every iPad comes with an array of customized tools for each franchise’s manager and are even set them up so there is a quick link to the franchisor’s social media channels. As a result, franchisees can see the latest on Twitter feeds, on Facebook page and on YouTube — all of which matter because the franchisor uploads photos of products, of franchisee restaurants, of employees and of customers — to give everyone promotion and a sense of culture. The iPads also offer one-click access to all of the franchisor’s web-based tools (which replaces having to go to and then sit at a PC). For the franchisor the direct savings come in eliminating printing, updating and delivering manuals — which used to amount to US$400 per franchise per year. Plus there are all the less tangible benefits delivered by being connected on a device that is mobile.
  • In a different US company its business is replenishing stores. In past years stores placed orders via some 5000 antiquated devices (many of these being gray screen one line devices) that originally cost the company over $1.5K each to buy and now cost >$5M a year a year to support (with second hand units having to be bought on eBay in order to scavenged spare parts to repair units that fail); in effect the company had become ‘acquired’ a  hardware support business (which was never its intention but was necessary in order to do business). From 2013 this logistics company has incented each store to buy its own iPad which removes the hardware support dimension (and cost).  The distribution has licensed mobile device management software (at less than US$150K/year for up to 10,000 devices) to which each store connects: this automates the installation of the order entry application(and other applications, to come). Now each store has a modern order entry interface, which is much easier to use. At the logistics company the hardware and its support disappears (saving c US$5M/year). In addition, the logistics company is finding that order accuracy, into its main applications, improves plus there are  new revenue stream opportunities — for example, by implementing special offers and even selling advertising to manufacturers (who want to attract the stores to order their goods). Finally the store owners are happy: ordering is faster, more accurate and with more choice — plus they have a mobile device for other uses in each store.
  • In the airline industry a different type of distribution problem applied, particularly in the updating of the documentation used in the cockpit. Traditionally each pilot had to carry bags weighing between 20-30Kgs and full of charts, manuals and other documentation and tools. In many airlines (for example, Alaska, American , British Airways and United to name only four) this bag is being replaced by an ‘electronic pilot bag’ (an iPad, with a weight of 1Kg) which can hold the same information and more (especially apps for, say, fuel management, diversion calculations, weather, etc). The payback comes in at least 3 ways. One airline calculates the reduced weight alone will reduce fuel consumption by 325K gallons per year, amounting to c $1M/year savings at $3/gallon. That same airline says it will no longer have to pay for the printing and logistics/distribution of 16M sheets of (often) specialty paper: at 2c/sheet this saves $320K/year. But the biggest saving comes from removing the manual effort required of each pilot to keep his or her manuals and charts up to date, which can take 2 hours/month (or more): if the average burdened pilotcost is (say) $250K and a pilot flies 1,000 hours each year this suggests a cost of $250/hour or $6K per year per pilot is saved just on removing filing (or US$6M/year for 1000 pilots). Yet, what is not covered in these calculations are first the increased safety that comes when chart/manual updating is automated, immediate and accurate (manual mistakes are avoided, for one) plus the general sense of pilot happiness at no longer having to perform that ‘filing’ work.

In each of these three relatively simple examples the benefits are clear. Old technologies (in two cases, paper-based and in the other obsolete technology-based) modern, low cost mobile technologies open opportunities that were not available before. In the franchised gourmet stores there is improved management and consistency of image, plus use of integrated to the franchisee social media marketing by the franchisor. In the store replenishment company, it has been able to close a costly business function it never wanted to be in plus opened new revenue opportunities while improving its own service to its customers.  In the airline indusry taking weight out of an operating plane is worth money as is removing an overhead workload that was necessary but carried the risk of errors: with automated distribution improved accuracy also equates to improved safety.

Mobility, when introduced, does pay. In three cases positive RoI is achieved within 18 months.

[In this, and future analyses, qualified mobile technology projects with quantified benefits are grouped into the following categories, each of which warrant examination:

 – Sales (see previous blog post)

– Field Support (see previous blog post)

– Logistics/Delivery (see above)

– Local Government

– Administration (including of mobile devices)

– Changing the business model.]

(c) 2013 C3B Consulting Ltd

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