Assignment TakenAirway Delivery: A New Business Opportunity

Case UnderstandingAirway Delivery is primarily a courier company with its operations spread across India, i.e. PAN India presence. It has multiple branches spread across the country and it provides delivery services to the most pin-codes. The company’s board has recently decided to enter into ‘Hyper-Local Delivery Space’ whereby the delivery would be made through the use of drones. The company has already secured all the necessary permissions for starting its venture of drone-based delivery. As the drone-based delivery market has a lot of growth potential (CAGR – 44% from 2023 to 2030), the decision to enter this service domain is viable and worth pursuing. The business case requires the strategies to break even in year 1 and scale the business going forward so that this division becomes the market leader in drone-based delivery services space.

BCS Solution SummaryIn order to provide a seamless drone-based delivery service, the company has enough budget in hand and the challenge is 'how to utilize the budget' optimally in order to break even and then to scale the business in the coming years. The company has to create new and specialized job positions requiring a talented pool pf people to make this project a successful venture. The company requires a robust IT infrastructure to address the technical requirements of the system and to overcome the logistics challenges on-field. Moreover, legal counsel has to be employed to take care of the regulatory norms and requirements. Apart from this, a sound marketing strategy is required to create a premium image in the market and to attract consumers and businesses on the key selling points - namely cost, speed, and sophistication of the delivery mechanism. However, there are certain exceptional situations that also need to be addressed apart from fulfilling the scalability strategies of the business in the forthcoming years.

Solution

Business Plan: Scaling up the Drone-Based Delivery Business

Industry Overview:

The Global Drone Package Delivery Market is anticipated to be USD 2.1 billion in 2023 and is projected to reach USD 27.4 billion by 2030, at a CAGR of 44.7% from 2023 to 2030. The rise in demand for faster delivery and favourable changes in the regulatory framework are major factors that are expected to drive the market growth in the forthcoming years. ‘Retail’ and ‘E-Commerce’ are the most dominant applications for the drone package delivery market in the Asia-Pacific region, followed by healthcare and pharmacy. According to a study conducted by UnearthInsight, it is forecasted that the market for the end-use of drones in India will hit the USD 1 billion mark soon.

The global drone package delivery market is expected to grow substantially owing to the increasing demand for speedier and instant delivery across the globe. Other major factors impacting the growth of the market include increased use of low-cost and light payload drones for product delivery, incorporation of advanced sense and avoid systems in aerial delivery drones, and rising demand for lowering carbon emissions. Hence, entering the business of drone-based delivery has good future prospects and it seems a sound decision to introduce delivery and dispatch of goods through the use of drones.

Company Details

Airway Delivery: Airway Delivery is primarily a courier company with its operations spread across India, i.e. PAN India presence. It has multiple branches spread across the country and it provides delivery services to the most pin-codes. The company’s board has recently decided to enter into ‘Hyper Local Delivery Space’ whereby the delivery would be made through the use of drones. The company has already secured all the necessary permissions for starting its venture of drone-based delivery. As the drone-based delivery market has a lot of growth potential (CAGR – 44% from 2023 to 2030), the decision to enter this service domain is viable and worth pursuing.

Products and Services

• Courier Services (PAN India) - Traditional
• Drone-based Delivery Services (Hyper Local Delivery Space) - Novel

Mission and Vision Statement

• Mission: The mission is offer convenient and reliable delivery services to businesses and consumers across India. The newly framed objective of the company is to provide speedier, cheaper, and reliable means of delivering packages/products through the use of drones. The aim is to build a commercially sound drone-delivery system and provide better offerings when compared to the ones offered by the competitors in the same industry.
• Vision: The vision is to establish a strong brand in the sphere of delivery services through deploying constant product and process innovation, and become the market leader within the drone-based delivery services line of business across all parts of India. The management principle used here is the ‘Going Concern’ Concept that states that a business should always be seen from a long-tern perspective.

Business Structure

Airway Delivery aims to start its drone-based delivery business with a robust business structure at place. It has a notion that the business structure should be such that it helps the company to establish its brand equity in the market and to become a market leader through introducing innovative processes and products.

Its business structure would primarily have four major departments – namely Finance, HR, Marketing, and IT/Business Analysis. The ‘Logistics’ work will be undertaken by the IT department and ‘Client Success’ related work will be taken up by the Marketing department. The HR department is to ensure that qualified, experienced, honest, and customer-centric personnel are hired by the company so that the best value-addition can take place within the organization. There are special job positions that will be created exclusively for the drone-based delivery service line. There is a separate budget allocated for this new delivery mechanism. The same budget is intended to be utilized over a number of subsequent years to address the scalability and expansion requirements of the business. The management principle used here is the ‘Going Concern’ Concept that states that a business should always be seen from a long-tern perspective. Furthermore, specialized IT personnel will be required to address the technical specifications, issues, and advancements in the drone system and its related processes. A dedicated marketing team will be hired specifically for the drone-based delivery service line in order to make this business a profitable proposition. There will be a sound balance that will be maintained between the traditional courier services and the new drone-based delivery model having their own pros and cons and also their own service-based price-points.

The Business Models followed by the company include – B2B, B2C, as well as C2C. As per the recent research reports, a delivery company maximizes its earnings by executing its services through all the mentioned business models simultaneously. The drone-based delivery services will be offered in as a part of all the above-mentioned business models.

Major Objectives of Drone-based Delivery Business

• To achieve Break-Even within first year of operations
• To establish strong Brand Equity
• To become a market leader through introducing innovation in processes and products

Marketing Plan

The key marketing mix strategies for drone-based delivery services are as under:

Product:  Service for other Businesses: Airway Delivery will equip small business with not only the ability to deliver their product at the doorstep of the customer but also have a presence on the Airway Delivery app from where our customer can easily buy their products. We will initially start with empowering small businesses and then offer our services to larger businesses which already have the traditional time-consuming delivery services.

Service for Consumer: The consumer will be able to use Airway Delivery website or app to order products from nearby businesses and also use our courier and return services from the comfort of their home. Customer will get an easy instructional manual on how to safely pack the product so that minimum human contact is made during the delivery/ return process. In order to promote accountability and transparency both the customer and the business will be able to track the delivery process live.

Price: For other Businesses: A subscription-based model will be introduced for the businesses which will be using our services for home delivery. In order to offer higher flexibility, the model will have different pricing depending on the number of orders that the business plans to receive during the month and the time within which it wants the product to be delivered.

For Customers: Customers will be able to order from both Airway Delivery’s app and website. For the businesses in collaboration with us, the customer will be able to enjoy either free or discounted delivery prices (the delivery fee will be paid by the business either completely or partially according to the plan chosen). If the customer wants to buy from a business not yet in collaboration with Airway Delivery, the customer will have to pay the delivery charges. Customer can also use Airway courier delivery services by ordering the service from our app or website and getting their package picked directly from home instead of visiting our courier office.

Promotion: All Airway Delivery drones will have luminescent logos and adequate lighting as stated under the government directive. This will not only address the safety issues regarding delivery at night but also increase brand recall.

 

For other Businesses: Omni-channel marketing strategies will be used ranging from both online marketing to offline marketing. Omni-channel marketing gives the best marketing outcomes in today’s scenario. Digital marketing strategies such as social media ad campaigns, coupled with offline marketing techniques such as billboards, posters, brochures, guerrilla marketing, etc. tend to give the best marketing outcomes. The other marketing strategy from B2B perspective is ‘Co-branding’. Airway Delivery will start providing branding rights for its drone to businesses which will allow them to put their logos with that of Airway Delivery. This drone fleet will be majorly financed by these businesses but will rely on Airway Delivery technology and software.

For customers: Awareness campaigns, reward systems, promotional activities, research competitions, and robotics workshops are some of the prominent marketing strategies from B2C and C2C business models perspective.

Place: As the business of drone based delivery is ‘hyper-local’, the place to start the business plays a very important role here. To decide the city where Airway delivery will start its drone delivery services, the radius, population density, availability/set-up cost of support infrastructure and eagerness of population to try new things must be taken into consideration. According to census conducted by Indian government, the population density of Bengaluru is 4378 persons per square kilometre and the city is spread over an area of 709 km2. It is the IT capital of India and garners a young population full of innovator and early adaptor customers. It will be easier to set up support infrastructure and hire skilled employees from the city itself. Bengaluru also called the aviation monopoly capital of India. It accounts for India's more than 65% aerospace business. World Aerospace giants such as Boeing, Airbus, Goodrich, Dynamatics, Honeywell, GE Aviation, UTL, others have their R&D and Engineering centres which will help our organization to maintain better quality swarm of drones and will open possibilities for future strategic relationships with such giants.

Bengaluru has a large number of businesses and has problem of high traffic thus making it difficult for businesses to deliver in time. The drone delivery service will be able to undercut the existing system in term of time and cost and will provide a high growth potential.

Going forward, the company will expand to Hyderabad and Chennai as these cities have similar characteristics to that of Bengaluru and being within 750km of each other will allow drone-driven courier service between the three cities and later in South India.

IT and Logistics Plan

• The drones will be fitted with IoT sensors that will track health of the drone while it is in flight for pickup or delivery. All parameters will be available on a live tracking dashboard in MIS tool
• The drones will be updated on the drop locations and the pickup locations. The backend algorithm will ensure that an optimized route is decided for the drop locations, and pickup locations will be arranged in reverse order, in order to make a stack of packages
• Drones shall deliver the packages at recipient's doorstep and seek payment through a QR-scanner based payment tool mounted on the drone itself. The package associated with the QR code scanned by the customer will be released
• The MIS tool will present a real-time picture of the location of drones, their in-flight health, their delays and any malfunction that may have happened. The MIS tools will also show a snapshot of customers' feedback and how long it has taken to reach customers' pin codes
• The MIS tools will also show which sources the customers are coming from – a paid social media campaign or organically through company’s website. An app will help the customers to book their orders and to track the delivery status in real time
• The IT infrastructure will also record the customer-wise data, their demographics, personal information, order size, order frequency, order recency, etc. so that sound marketing analytics tools can be applied to generate pertinent customer insights and adequate re-marketing strategies can be deployed from time-to-time
• The IT infrastructure costs have been included in the cost estimations and IT team has also prepared UX mockups for the app

The process followed by the company to deliver the orders via drones, as a part of its logistics strategy, is as under:

• Multiple senders book orders
• Within 30 minutes, whatever orders are gathered, they are segregated as per geographical zones
• One drone is assigned to one zone
• The drop locations from that zone are arranged on an optimized route
• Whatever pickups are to be done in that zone, the drone does it in the reverse order of the sequence of drop locations
• The drone picks all packages and then moves to the dropping route
• Drone drops all packages at their respective locations
• At each drop location, the recipient will scan the QR code sent to them, for releasing their packages from drone
• Once all packages are dropped, drone returns to office
• If a drone malfunctions, two spare drones will be dispatched - one to take the packages ahead and the other to carry the damaged drone back to the office premises

Financial Plan

• The company has sufficient funds to start and break even its drone-based delivery business and the remaining unutilized funds need to be strategically invested to expand, grow, modernize, diversify and scale up the business in the forthcoming years. The robust financial plan is provided by the Finance Department in a detailed excel file.

HR Plan

New Job Positions: As a part of the HR plan for recruitment and training, there are several new job positions created exclusively for the drone-based delivery service business. The job opportunities are as under:

• Drone Engineer – Responsible for managing shipping and storage logistics, following equipment maintenance schedules, and completing repairs or upgrades as needed. The requisite educational qualification for this position is degree in Mechanical / Electrical / Electronics / Aeronautical / Aircraft Maintenance/Aerospace Engineering
• Drone Operations Manager – Responsible for systematizing the operations functions through process formation, implementation and adherence; Cost planning, monitoring and optimization; Tracking certifications, licenses, training, and proficiency of each pilot; assigning pilots to each job; overseeing travel schedules; ensuring rest requirements are met; and measuring on-the-job performance. The requisite educational qualification for this job position is MBA (Operations) with Certification in Drone Operations & Management and Professional DOMP Certification (provided by the Indian Institute of Drones).
• Drone Pilot - Responsible for preparing flight plans; tracking certifications and licenses of each drone; ensuring end requirements are met; Sound knowledge of navigation on unmanned flights, meteorology, flight performance and planning, and flight rules.
• Legal Counsel (Drone Services) - Drafting, reviewing, and negotiating a wide variety of agreements and contracts, including independent sales agreements and distribution, license and collaboration agreements, and supply agreements; providing high-quality, proactive, service- and business-oriented legal advice on a wide variety of legal matters and assisting with data privacy compliance and policy implementation. The educational qualification required for this position is Bachelor's degree in Law.

Apart from the above-mentioned new job positions for which external recruitment will be carried out, there are following positions that will be filled through internal recruitment:

• Management Team: This team comprises five functional heads belonging to the functions, namely – Finance, HR, Marketing, IT, and Drone Operations.
• Support Staff: There are a lot of people who will be responsible for day-to-day ad hoc work to keep the business moving on everyday basis.
• Software Development Team: This team will comprise backend engineers, UI/UX designers, product development personnel, data analysts, machine learning specialists, and data scientists.

Training Module (For Drone Pilots): The following are the areas on which the training will be conducted for the drone pilots over the period of 5 days, as per the regulatory norms:

• Basic Radio Telephonic Techniques including knowledge of Radio Frequencies
• Flight Planning and ATC Procedures
• Regulations Specific to Area Operation
• Basic Knowledge of Principles of Flight and Aerodynamics for fixed wings, Rotatory Wing and Hybrid Aircraft
• Airspace Structure, Restrictions and No Drone Zones
• Basic Aviation Meteorology
• Drone Law in India
• Communication and Presentation

Apart from the training of the drone pilots, the training for other personnel such as Legal Counsel, Drone Operations Manager, Drone Engineer, Support Staff, etc. will also be conducted to make them well-versed with the company policies and their respective job requirements.

Expansion Strategies

As the aim of ‘Airway Delivery’ is to scale up the business going forward and become a market leader in the space of drone-based delivery services, it becomes paramount to talk about the expansion and scalability strategies of the company or the forthcoming years. The budget for the year 2021-22 is Rs.10 Crores, but the same is not completely utilized in Year 1. There is a budget of ~Rs. 66721137.63 that is not utilized and the same will be used in the forthcoming years to implement the following strategies:

• Shift from “Short Range Drone Based Services” to “Long Range Drone Based Services”
• Shift from Bengaluru based hyper-local business to setting up operations at other geographical areas in the country
• Customizing the offering as per region-wise demographics of the population
• Collaborating with e-commerce organisations and digitally native companies for more business opportunities
• Creating brand positioning based on the theme of ‘Sustainability’ as drone-based delivery services is highly environmentally sensitive
• Including ‘Premium’ vs ‘Non-Premium’ version of the services going forward to cater to diverse consumer segments

Exceptional Handling

• Drone can drop multiple packages at one place accidentally
• Drone can fail to drop the package
• Drone can fail during its flight
• Drone may find recipient unavailable and may not know where to drop the box

ConclusionHence, it can be concluded that this venture has a huge growth potential to generate revenue and increase profitability in the coming years. For this, the company should work on optimizing its budget spend, infusing sustainability in its business model and marketing strategy, invest adequately in IT and technological innovation to handle the exceptional situations. The key to its success is to continuously collaborate, innovate , and retain its talented workforce!