Tag Archives: supply chain

Amazon Drones get U.S. Approval for Delivering Packages

Drones seem to be ready to take over the skies, but are they really ready for prime time? Can they deliver the goods? And how does this change delivery services around the globe? We may soon find out the answers to some of those questions.

Amazon is the latest company to receive FAA approval to operate a fleet of delivery drones. The approval gives Amazon Prime Air broad privileges to “safely and efficiently deliver packages to customers.” Amazon will test its drones with the goal of achieving 30-minute deliveries for packages of up to five pounds within a 15-mile radius of a warehouse. The company has been working on using drones for deliveries since 2013, continually innovating the drone models. The FAA approval gives Amazon permission to operate a fleet and is not tied to a specific model of drone.

Amazon isn’t the only game in town though. Last April, Wing (owned by Alphabet) received FAA approval for commercial deliveries. UPS also received approval to operate a fleet of drones as an airline last year. However, in all these cases, widespread use is likely still years in the future as the FAA needs to establish new, automated air-traffic systems as drone operations will exceed what human air controllers can handle.

Ready for your drone delivery?

Group Activities and Discussion Questions:

  1. Review key aspects of developing a product positioning map, including determining the axis labels for positioning.
  2. Show Amazon drone video: https://youtu.be/3HJtmx5f1Fc
  3. Optional: Here is an older version of the Amazon drone model: https://youtu.be/MR9PoBAssw0
  4. Show competing drone services:
  1. Discuss which industries and services will be most impacted by drones. Why these?
  2. Will drones benefit consumers? How?
  3. Divide students into teams and have each team develop a positioning map for drone delivery services. What will be most important to consumers?

Sources: Associated Press; CNBC; New York Times; Wall Street Journal; other news sources

 

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Fresh Food Vending Machines

Consider the humble vending machines. They are virtually everywhere, and we do mean everywhere! We see them in stores, hallways, offices, subway stations, laundry mats, gas stations, and more. Not only are the vending machines convenient, but they are easy to use, can take cash or cards, and consumers do not have to interact with a cashier or sales person. Easy. Fast. Convenient. And, usually not very good eating.

Yes, the common vending machines as just that – common. They have been around so long that they no longer excite consumers. There is nothing particularly interesting, and virtually little food that is healthy for us. When was the last time you looked forward to eating a meal or snack dispensed by a vending machine?

That may be about to change with the advent of new machines that dispense fresh, healthy food in high density locations. Instead of soda, candy bars, and chips, today’s machines carry salads, yogurt parfaits, pudding, specialty coffee drinks, and much more satisfying fare. Not only are the foods better, the service is faster than stopping at a fast-food joint and waiting in long lines. And, as an added bonus, some of the machines will even recycle the packaging to reduce waste.

Here are few of the new alternatives:

  • Farmer’s Fridge – 400+ machines in office buildings and food courts in six states
  • Fresh Bowl – Seven locations in New York
  • Chowbotics – 100 salad robots that build orders from touchscreens
  • Le Bread Xpress – Five bake machines that cook croissants, pizza, and quiche
  • Briggo – High-end coffee cars that make 100 custom drinks per hour

Hungry and in a rush? Let’s meet at the vending machine.

Group Activities and Discussion Questions:

  1. Poll students: Where are vending machines? What do they buy form vending machines? Why do they buy from vending machines?
  2. Divide students into groups. Have each group take an existing vending machine and work out an update for today’s consumers.
  3. Alternative: Show Web sites of new vending machines dispensing fresh food and have a team of students analyze each vending machine and company.
  4. For each company, determine the target market, where it should be located, and the messaging.

Source: Black, J. (13 February 2020). The machine that lets you skip the salad bar. Wall Street Journal.

 

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Costco and Chicken

Pricing can be a confusing topic – and not just for marketers. Consumers can also be confused, but one thing they always recognize is when they get a good deal on a product. Such is the case for Costco’s $4.99 rotisserie chickens. At that price the product is less than poultry from competing grocers. So, how does Costco make a profit on the chickens? Well, the short answer is that the company does not make a profit on this item – in fact, it loses money every time one is sold.

The Kirkland Signature rotisserie chicken is probably one of the most popular items the company sells; last year Costco sold more than 90 million of the item. And, yes, it lost money on each and every bird. Estimates are that the loss amounts to between $30 million and $40 million each year. This is known in the industry as a “loss leader.” The reason for a loss leader product is to get consumers in the store in order to sell additional products at which the retailer does make a profit. The chickens are at the very back of the warehouses, meaning if consumers want the bird they have to navigate a tempting array of other low-cost foods and products. It’s tough to leave Costco with only a single item!

Costco is trying to get its costs lower by opening a $450 million poultry complex in Nebraska. In this case, the company will control the supply chain, starting from the grain the chickens eat to grow out and slaughter, eventually to the Costco’s kitchen, and finally to consumers’ homes. The new poultry complex will provide Costco with roughly 40% of the chickens it needs and reduce its purchasing costs. It will also provide a more standard-sized chicken of around six pounds to fit on its rotisserie line.

How much will Costco save with the new complex? Estimates are that savings will be around 35 cents per chicken. Not a lot in a single bird, but multiple it by 90 million and the savings will add up.

What’s for dinner?

Group Activities and Discussion Questions:

  1. Discuss the six steps for pricing (determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments).
  2. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  3. Discuss when companies should use loss-leader pricing.
  4. Show a video about Costco chicken: https://youtu.be/MSvCK_xH84s
  5. What strategy is Costco using to price its rotisserie chickens?
  6. For Costco chicken, divide students into groups and have each group work on any/all of the six steps.
  7. When setting the price level, assign each team a different model to use (demand-oriented, cost- oriented, etc.).
  8. Debrief the exercise. Compare the various pricing models and discuss advantages/disadvantages of each.

Source: Meyersohn, N. (11 October 2019). It’s only $4.99. but Costco’s rotisserie chicken comes at a huge price. CNN Business.

 

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