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BUSINESS REPORT

__________________________DeSimone Drones___________________

7601 Penn Ave. S Richfield, MN 55432

Phone: 1 (888) 237-8289 Fax: 1 (888) 237-8194

www.desimonedrones.com

 

April 11, 2017

 

Mr. Hubert Joly, CEO

Best Buy, Co.

101 Main Street

New York, New York 10118

 

Dear Mr. Joly,

 

 

 

DeSimone Drones appreciates you for the opportunity to present the following proposal. We would also like to thank Asheesh Saksena, Chief Strategic Growth Officer, for his invaluable contributions to the study of your operations before we prepared our proposal. By working with him he has made a clear understanding to D.D of your philosophy and needs.

 

Our proposal describes DeSimone Drones delivery model and how it is designed to meet Best Buys manufacturing needs. It will provide details from the moment a Best Buy manager contacts a D.D representative to the integration of the delivery model.  Because of D.D tailored fit, Best Buys productivity of manufacturing will be more efficient and effective. When implemented Best Buy will be seen as one of the most innovative companies in the world.

 

Thank you for the opportunity to present this proposal. We will use all the resources available to DeSimone Drones to ensure the successful implementation of this new model and to make sure it run flawlessly.

 

 

Sincerely yours,

 

Christopher J. DeSimone

Chief executive officer

DeSimone Drones

cdesimone@desimone.drones.com

 

 

Table of Contents

Executive summary. 3

Introduction. 5

Why do we need drones?. 5

Proof of concept 8

Other delivery methods. 10

What problems could drone delivery solve?. 11

Proposed timeline and costs. 12

Risks. 13

Conclusion. 13

 

 

 

 

 

 

Executive summary

 

Drones for commercial use is an industry that is booming globally. DeSimone Drones INC (D.D) manufactures drones and supplies it to corporations and not-for-profit organizations to increase the efficiency of their production/projects. Throughout this report, Best Buy will see why they should use D.D services. I will show Best Buy a proof of concept by showing how successful other business have been with using this model of delivery. I will be presenting this information through articles, charts, and graphs. The purpose of this report is to:

• Show how D.D will increase the efficiency of Best Buy delivery service

• Explain how D.D will expand Best Buys production

• Show the technology and statistical data D.D has to decrease shipping costs

• And show how D.D services will result in an increase in customer satisfaction

 

In addition to DeSimone Drones; Amazon, Google, UPS, and Walmart are also getting involved. “In a report by ARK Invest, Tasha Keeney suggests that Prime Air could cost Amazon only 88 cents per delivery. If Amazon charged customers $1 per delivery, Keeney estimates, the company could earn a 50% return on its investment in drone infrastructure while offering same-day delivery that is significantly cheaper than current alternatives.” And according to cnn.com, “If every UPS driver had to cover one less mile per day, The company said it would save up to $50 million per year.” This cut of cost will please the stockholders. Many large corporations are transitioning to this delivery model. If allowed D.D will do the same for Best Buy.

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Through this report, Best Buy will see every step it needs to take to implement D.D services, any liabilities, fees, and costs. This report will also concentrate on D.D technology. Specifically, how it is self-driving. Through my research, I have found that the Best Buy Foundation supports numerous not-for-profit organizations. Besides using D.D for a delivery service Best Buy can use D.D services to help organizations such as Mouse to help “solve real-world problems.” One example may be for Best Buy to use D.D to help deliver medicine to people who they cannot reach.

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DeSimone Drones will complement Best Buy well based on the delivery structure they current have. D.D will not replace any sector of Best Buy. It is just a mere expansion of production. The effectiveness that D.D will have on Best Buy is extraordinary. After D.D services are implemented it will increase the overall value of the company while saving millions. In addition to this, Best Buy will also be recognized as a company that innovatively contributes to charities.

 

 

Introduction

 

Drone delivery is the future of delivering packages. With my company, you can rent a commercial drone to expand the production of Best Buy. In addition to using drones to deliver everyday packages such as Amazon does, you can rent a personal drone for charities/not-for-profit organizations that are part of the Best Buy Foundation such as Mouse to help “solve real world problems” such as to deliver medical supplies to people you cannot reach. If you use my company Best Buy will become more efficient, productive, and will result in increased profits. Through my research, I have found sources that are interrelated by either showing a proof of concept or how major companies are transitioning to this delivery model. One of the biggest misconceptions of using this delivery model is that it will take away jobs. But these articles quickly debunked this by showing that it won’t take away any jobs. It’s just a mere expansion of production. All of the major corporations using drones are just worried about their production and how they are going to save money. But my company is worried about your production efficiency and profits.

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Why do we need drones?

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By the year 2020, the American Federal Aviation Authority (FAA) said there would be around 15,000 drones in the country. The FAA made this claim in 2010. They were wrong. There are more than 15,000 sold per month now. Drones are contributing billions to the economy each year (as can be seen in the chart below). Scholars have been saying that what is happening to drones right now is similar to what happened when Apple launched the Macintosh. It went from a hobby to a business necessity.

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The usefulness use of this miniature aircraft is rapidly increasing. In August 2016, the FAA has allowed more than 1,000 commercial drones to take flight. “These involved areas as diverse as agriculture (farmers use drones to monitor crop growth, insect infestations, and areas in need of watering at a fraction of the cost of manned aerial surveys); land-surveying; film-making” and security are being affected my drones. Drones are also making an impact in the academic world. Geographers are now using it to track erosion, inspect glaciers, and changes in river sources. Drones can also go places where manned aircraft cannot such as craters of active volcanoes. Historians and archaeologist are using drones with integrated cameras to create 3D models of ancient ruins.

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But why are all of these cool thing drones can do are pertinent to Best Buy? The answer is the Best Buy Foundation. One sector of the foundation is the Geek Squad Academy. Here is where kids/teens come become “Junior Agents.” The program consists of 3D design, photography, and film production. Through renting a personal drone Best Buy could expand their academy and make it more interesting. Some of the thing I have previously mentioned such as using drones to make 3D models of ancient ruins and taking photos/videos of glaciers and active volcanoes could definitely expand the 3D modeling and film/photography course work. Another not-for-profit that is part of the foundation is mouse. Their mission is to “use technology as a force of good” and to “solve real problems.” If Best Buy used D.D then they could use the drones to deliver medicine to people they could not reach and maybe find a way drones could be used to enhance security.

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The Michigan police are using drones to look at car accidents to see if the roads can be opened quicker. “In June, for example, Frank Roma, a fireman, rescued two boys from a river in Maine with the help of a drone. The boys were stuck on a rock in the middle of a powerful current. Mr. Roma employed a drone to carry a line out to them, along which he passed life jackets that they were able to put on before an inflatable boat went out to perform the tricky maneuvers of picking them up.” This shows the importance of drones in our communities. The higher end models of Drones such as the Phantom can be controlled by your phones.  Similar to ours the personal drone rental will be able to be controlled by your phone by downloading the D.D app in your Apple Store or the Google Play Store.

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But what about a self-flying drone? How will it know to avoid obstacles and no-fly zones? One technology company in Boise, Idaho is working on this problem. They are constructing a software that is good at learning and remembering things. “This can, the firm’s engineers believe, be trained to recognize and avoid aerial obstacles.” One of the more advanced drones is the SkyProwler made by Krossblade. It can fly 60 MPH and has a flying time of 40 minutes. The main difference between the SkyProwler and the D.D commercial version is that it is powered by Google Maps. Because of this our drones don’t need to “remember things.” It is already intergraded in its memory. In addition to its capability of flying 62 MPH it can fly for 42.4 minutes before needing to recharge. D.D drones are the best drones on the market.

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Drones are only becoming more popular each year. Drones are being considered the new trend since the computer. The versatility of a drone is ever growing. With more and more people using them people are finding a new way to use them which makes drones more valuable. Now, the FAA has given many companies authority to test their drones in production including DeSimone Drones.

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Proof of concept

 

In November, Amazon released a video demo of Prime Air, where drones deliver packages to you “in thirty minutes or less.” Google is also using drones to deliver packages. Google’s form of Prime Air is Google’s Project Wing. In addition, Walmart is also getting involved with drone deliveries. There has been skepticism with the efficiency of using drones to deliver packages. In Amazons demo, it shows a drone flying fifteen miles to deliver a pair of soccer shoes. But the question of “what if you don’t live within 7.5 miles of Amazons warehouse? And will Amazon keep drones on standby for when you order fifty pounds of diapers?”  But a few statics show that weight and distance may not be a problem. In documents produced by Amazon, it shows that eighty-six percent of its packages weigh five pounds or less. And the same goes for Best Buy. They sell phones, phone cases, cameras, SD cards, wires, and many other products that weigh less than five pounds. Now for distance, Walmart said seventy percent of Americans live within a five-mile radius of a Walmart. Amazon “has shown willingness aplenty to move its products and warehouses closer to the consumer.” With RadioShack going bankrupt this has opened an opportunity for Best Buy to buy a lot of stores. Which they have done. Best Buy will be in a better situation than Amazon because Best Buy will just open more stores and not have to forcefully move warehouses to where there are no stores. So being in a certain mile radius will not be a problem.

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There have been analyses of Amazon drone’s air freight costs. It shows drones have the ability to be faster and cheaper than regular delivery costs. “In a report by ARK Invest, Tasha Keeney suggests that Prime Air could cost Amazon only 88 cents per delivery. If Amazon charged customers $1 per delivery (as can be seen in the graph below), Keeney estimates, the company could earn a 50% return on its investment in drone infrastructure while offering same-day delivery that is significantly cheaper than current alternatives.” With D.D drones being faster and having longer air times we can get the cost per delivery down to 64 cents. Also, because Best Buy is not paying for the manufacturing of the drones and just renting it, it is saving Best Buys millions.

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Other delivery methods

 

               According to Forbes.com, there are four reasons why the future of self-navigating technologies is in drones, and not driverless cars. 1) “We can design low-altitude airspace for drones, not humans.” The layout of our highways, bridges, and roads has been built on the "premise" of human drivers. The layout of the roads is primarily the same layout when the roads were dirt. If we were to redesign our cities we would use a totally different structure. “An onboard driverless navigation system isn’t enough to make a car autonomous; these vehicles will also need help from high definition maps, real-time road capture via computer vision, an integrated network that connects each car with other driverless vehicles, and a constant flow of information about obstacles, hazards, and traffic.” Due to human error, driverless cars will not be safe until all cars are driverless. But low-altitude airspace is untouched. We have the opportunity to build a network that is efficient, digital, and data driven. 2) “Traveling in three-dimensions offers more flexibility than two.”  Even though a car may drive in a simpler path than a drone may fly in, cars lack one important thing; flexibility. A car can go right, left, forward, and backward. But, “drones have more degrees of freedom.” It is far easier for something small like a drone to avoid an obstacle than a car or truck. When there is a car accident there are delays for hours. But a drone can fly right over that accident and avoid all of the delays. 3) “An open platform accelerates innovation.” Car companies such as General Motors and Honda compete with each other. Driverless technology is a closed system meaning it makes it hard for a third party or second party developers “to leverage autonomous vehicle platforms to scale.” Open platforms can increase innovation. Some examples of open platforms are Apple's app store and the internet. Drones are an open platform. “There is tremendous collaboration across platforms and between hardware manufacturers, software developers, and service providers.” This will enable innovation throughout the industry. Because drones are an open platform drones will become better and more advanced. Every D.D drone upgrade is no cost to Best Buy. 4) “An affordable technology is an accessible one.” Buying any automotive vehicle is expensive. But anyone can buy a drone from very expensive to cheap. This opens the door for entrepreneurs and innovators. As you can see the drone delivery model is more effective than the self-driving car model in the long run.

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What will be the future, self-driving cars or drones? The answer is undoubtedly drones. The network of our roads is old. But low-altitude airspace is brand new and breaths efficiency.  Drones are safer and more flexible than self-driving cars. There is no traffic in the air. Also, with drones being an open platform and cheap there is more room for innovation and potential.

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What problems could drone delivery solve?

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Amazon is not trying to replace third party shippers such as UPS and FedEx but just expand its operations. Amazon has spent loads of money on planes and trucks to add to its efficiency and capacity. But why would they do that when they could use drones? Amazon discovered this too late. Luckily, Best Buy did not do this and throw millions away. One expert said, “that a future populated with autonomous drones is closer at hand than one populated with self-driving cars.” An analyst at Deutsche Bank said, “drones would reduce the unit cost of each Amazon delivery by half.” This is a significant cut of costs. During a holiday season Amazon got so many orders that UPS was overwhelmed which resulted in missed deliveries. Other than problems like that the United States has horrible infrastructure. In fact, “the Department of Transportation has warned that unless urgent and expensive fixes are made, roads, waterways, airports, and other systems will become alarmingly clogged by the 2040s.” Pretty much all of Amazon investments in shipping depends on infrastructure. So, who can blame them for investing in drones? And this is why Best Buy should consider doing business with D.D. Amazon has an idea of using a truck as a mobile warehouse. The truck would be “prestocked with items Amazon has determined a given neighborhood might need, could roam around towns. When an order comes in, a drone might fly from the truck to a customer’s house.” There are certain areas that are not in range of Best Buys stores. Best Buy should consider doing this also.

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Bringing drones to Best Buy will not mean that you will never use UPS again. As you can see from Amazon bringing drones to any company is going to expand your business and not necessarily replace a sector of your business. In addition to expanding your business it will also cut costs. Bringing drones to a company could create more jobs because you would need people to maintain them.  With drones delivering packages Best Buy will not have to worry about misplacing packages do to human error especially during holiday season. With the US infrastructure crumbling, drones will be vital to Best Buy.

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Proposed timeline and costs

 

DeSimone Drones does not sell drones we only offer rentals. The cost to rent one commercial drone for the use of helping shipments will cost one thousand dollars per month. The cost to rent one personal drone for not-for-profit projects is five hundred forty-five dollars per month. DD will cut costs for Best Buy dramatically. This will make the shareholders happy. The cost to implement DD into the production of Best Buy is little compared to the amount of money it will save Best Buy. This is because as I stated before drones do not replace any part of a company they just add to its production. Once a manager of a Best Buy contacts D.D either through phone or email they will communicate and pick a convenient time to meet and discuss the matter in person. Once both parties have discussed the number of drones they will need the D.D representative will come the next day with the number of drones specified. Then, the drones will go into production. All commercial D.D drones will operate without human interaction. It is self-driven and programmed to avoid no-fly zones and obstacles. The only costs would be renting the drones and building a separate entrance so the drones can enter. The cost to build the entrance will be around one thousand to five thousand dollars per facility. And if a particular location is out of reach of a Best Buy store then a van prestocked with items will cost around eight to twelve thousand dollars.

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Risks

The biggest risk with this model is people. When a drone is delivering a package, it will be likely for a person to try to hit a drone out of the air with an object such as a rock. D.D is currently working on litigation to make such actions illegal. Another problem that might occur is a malfunction. But this is not a problem. In D.D headquarters a technician would take control over the drone and troubleshoot it to find a solution. If this does not fix the issue a technician will come onsite and fix it. But in the unfortunate case if a drone does hit someone due to a malfunction it will be covered by Best Buy’s insurance policy. There is no reason to worry about a law suit, the insurance company will cover everything.

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Conclusion

DeSimone Drones will revolutionize the way Best Buy delivers. Besides helping on the commercial side Best Buy can also give back to numerous foundations that are part of the Best Buy Foundation through D.D. In addition to saving Best Buy hundreds of millions of dollars, decreasing shipping time, and increasing customer satisfaction, They will enhance their image by being seen as one of the most innovative and advanced companies in the world.

 

 

 

 

 

References