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Implementing Delivery Drones in Logistics Business Process: Case of Pharmaceutical Industry Nikola Vlahovic, Blazenka Knezevic, Petra Batalic

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Implementing Delivery Drones in Logistics Business Process: Case of Pharmaceutical Industry Nikola Vlahovic, Blazenka Knezevic, Petra Batalic World Academy of Science, Engineering and Technology International Journal of Mechanical and Industrial Engineering Vol:10, No:12, 2016 Implementing Delivery Drones in Logistics Business Process: Case of Pharmaceutical Industry Nikola Vlahovic, Blazenka Knezevic, Petra Batalic economic opportunities and possible restrictions of business Abstract—In this paper, we will present a research about models and business environment. In this paper, we will try to feasibility of implementing unmanned aerial vehicles, also known as address at least some of these issues. 'drones', in logistics. Research is based on available information Structure of the rest of this paper is as follows: In Section II about current incentives and experiments in application of delivery a background of implementing business process perspectives drones in commercial use. Overview of current pilot projects and literature, as well as an overview of detected challenges, will be in logistics is given. Short background on the development compiled and presented. Based on these findings, we will present a and applications of unmanned aerial vehicles in business conceptual model of business process that implements delivery processes and their potential for the future is also discusses. In drones in business to business logistic operations. Business scenario Section III goals of this research are presented as well as is based on a pharmaceutical supply chain. Simulation modeling will methodologies used. Discrete-event simulation is explained be used to create models for running experiments and collecting and the developed models are presented. These models are performance data. Comparative study of the presented conceptual model will be given. The work will outline the main advantages and used for simulation experiments that are also presented along disadvantages of implementing unmanned aerial vehicles in delivery with their results. Section IV presents additional qualitative services as a supplementary distribution channel along the supply and quantitative analysis based on the obtained results from chain. simulation experiments. Here main findings on the technical and economic feasibility are presented as well as the future Keywords—Business process, delivery drones, logistics, potential of implementing logistic delivery processes based on simulation modelling, unmanned aerial vehicles. unmanned aerial vehicles. Finally, in Section V conclusions of work are given with remarks on future work. I. INTRODUCTION N recent years, there has been growing interest in II. BACKGROUND introducing unmanned aerial vehicles i.e. flying drones in I A. Business Process Perspective and Logistics the delivery of packaged goods. Number of companies have initiated pilot projects of commercial applications that are Many weaknesses of the functional organization of business intended to be offered as delivery options to their customers in operations have been addressed by new approaches to the following years. Some of these include DHL, UPS, business organization. Lack of coordination and transparency Deutsche Post, etc., but also e-commerce companies such as over functional units in traditional organizations were the Amazon.com or AliExpress. There are also projects that aim at source of many business inefficiencies [3]. Shifting focus from using this technology to better connect organization’s inner functional units to process view has proven to be an important logistic between various subsidiaries. There are good catalyst of efficient re-organization of business operations indications that drones have substantial economic potential in over the past two and half decades [7], [9]. Business process delivering goods, but there is a lack of comparative studies on orientation is based on the idea of considering organizations in this subject. terms of customer-focused and value-creating sets of activities The main goal of this paper is to provide insight into - business processes which provide better understanding of economic feasibility of this type of logistics organization in business [2]. As managing a business means managing its relation to current trends in business organization – business processes [6] so does managing any part of these activities that process perspective. There is valuable information regarding may be concerned with specific issues related to product or the technical feasibility of delivery drones with issue that still service. needs to be solved. There is less information available about Logistics is one such specific area that pertains to most of International Science Index, Mechanical and Industrial Engineering Vol:10, No:12, 2016 waset.org/Publication/10006715 economics aspects in terms of costs, investment, accuracy, the core business processes. Logistic can be defined as service value and business process automation, possible fundamental principles of movement of material and information in the function of satisfying customer demands N. Vlahovic is with the Faculty of Economics and Business, University of [1]. Customer satisfaction is therefore the common Zagreb, Trg J. F. Kennedyja 6, 10000 Zagreb, Croatia (phone: 385-98-160- denominator for business process orientation and business 3963; fax: 385-1-5555; e-mail: [email protected]). B. Knezevic is with the Faculty of Economics and Business, University of logistic or even more specifically retail logistic in final stages Zagreb, Trg J. F. Kennedyja 6, 10000 Zagreb, Croatia (e-mail: of supply chains. Well documented business processes carry [email protected]). high potential effective implementation of various P. Batalic was with Faculty of Economics and Business, University of Zagreb, Trg J. F. Kennedyja 6, 10000 Zagreb. She is now with INsig2, technological innovation increasing overall business process Buzinska cesta 58, 10010 Zagreb, Croatia (e-mail: [email protected]). efficiency [14]. Many companies have already reached International Scholarly and Scientific Research & Innovation 10(12) 2016 4016 scholar.waset.org/1307-6892/10006715 World Academy of Science, Engineering and Technology International Journal of Mechanical and Industrial Engineering Vol:10, No:12, 2016 sufficient level of business process maturity to be able to feasibility of implementing UAVs in logistics. Scenario is implement innovative approaches in logistics business process based on current literature and exact administrative such as unmanned aerial vehicles in the delivery of their information, legislation and economic values currently applied products and services. To better understand the issues and in Croatia. challenges of this technology we will take a closer look at this We will employ experimentation using simulation modeling type of innovative technology and its background. to collect performance data. Later, the data will be used to perform comparative analysis and draw conclusions. B. Innovative Technologies and Unmanned Aerial Vehicles In the rest of this section, we will first present main features in Logistics of the scenario and define research goals. After that, two In order to retain or increase their market share businesses models will be created: (1) Delivery business process model are constantly trying to redefine themselves achieving ever using pickup van and (2) Delivery business process model higher level of efficiency. Technology and technological based on a concept that replaces delivery van with delivery advancement have always been primary source of reaching drone. Next simulation experiments will be documented with higher level of competitiveness. First applications of new an overview of main results. technologies are usually groundbreaking and innovative even though they may not always prove to be successful. These A. Research Goals solutions can generally be either a product innovation or Goal of this research is to examine the effects of employing business innovation [15]. Product innovation focuses on an alternative approach to organizing the internal logistics of achieving better business process efficiency in terms of pharmaceutical product delivery using drones. operations optimization, improved control and management as There is a number of specific situations and application well as increased customer value of the offering. Business areas that may benefit from this approach. Due to strict and innovation change business models and approach to customers inadequate regulations, currently, possible scenarios are [12]. focused on the internal operations logistics and subsidiary From the logistics point of view implementing new type of deliveries. Most appropriate situations include deliveries to transporting products to final stages of supply chain or end- hard-to-reach places with challenging geography. Critical and customers presents all the characteristics of a product high priority deliveries of specific goods are also justifiable innovation as it directly increases customer satisfaction while examples of employing this type of technology. embracing and upgrading current business model. For the purpose of comparing currently common Unmanned aerial vehicles (or UAVs) are vehicles that can transportation methods and delivery drones, a scenario is complete continuous flight without onboard pilot. They have developed. Scenario includes all of the circumstances that may been first used in military purposes with the first civil use on justify the implementation of delivery drones. Firstly, delivery the turn from 1970s to 1980s. Further sophistication of various product group are medications that require
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