Imagine placing an order online and receiving it within 30 mins. This is not a futuristic order fulfillment pipedream. The technology to do this is already here. It comes in the form of delivery drones.
On December 7th, 2016, Amazon Prime Air made its first delivery to a customer using a GPS-guided flying drone. The customer received his order in just 13 minutes.
The implications are far-reaching.
Drone delivery is coming, and it’s about to revolutionize the supply chain industry.
Drone Delivery is Coming
Amazon is currently capturing the headlines with its drones, but other organizations are developing their own drone delivery program. This includes global corporations like Google, Walmart, and DHL. Drones are being tested for delivering consumer goods, medical supplies, and (inevitably) pizza.
“It’s gotten incredibly easy to fly,” explains Roger Sollenberger of 3D Robotics. 3D Robotics produce free, open source software for delivery drones. Their software makes it so easy to program flight paths that anyone can use it.
Consumers Will Choose Drone Delivery
Consumers are fully on board with drone delivery. According to The Walker Sands Future of Retail 2016 Study, 79% of US consumers said they would be “very likely” or “somewhat likely” to request drone delivery if their package could be delivered within an hour. And 73% of respondents said that they would pay up to $10 for a drone delivery.
26% of the respondents expected order their first drone-delivered package within the next two years.
Benefits of Drone Delivery
Drone delivery has many advantages that position it as the future of distribution:
● Fast delivery: Drones can travel “as the crow flies.” They can fly in a straight line to their destination. Unlike delivery trucks or motorcycle couriers, they do not have to navigate curvy roads which may be congested with traffic.
● Delivery to difficult-to-access areas: Drones are ideal for delivery of medicine and healthcare supplies to remote or undeveloped areas. These areas often suffer from poor infrastructure or damaged roads.
● Reduced costs: Automated drones significantly reduce the human labor costs for delivering packages.
● Increased competitiveness: Companies who offer speedy drone deliveries will have a vital edge on their competitors.
● Environmental friendliness: Drone deliveries have minimal environmental impact compared with traditional deliveries by road, rail, or air. This will be valuable for companies who want to enhance their ‘green’ credentials.
Markets That Will Benefit From Drone Delivery
Drone delivery will benefit a wide range of markets. In summer 2016 Packaging Digest carried out a survey of its audience of packaging professionals. According to the respondents, the markets that would benefit the most from drone delivery were (in order): pharmaceutical/medical, non-perishable consumer goods, shelf-stable food/beverage, and fresh food/beverage.
One of the respondents took a more light-hearted view: “If they can’t deliver cold beer, I’m not interested.”
The Economics of Drone Delivery
Packages are currently delivered via delivery trucks. At UPS, their delivery trucks make an average of 120 stops per day to deliver hundreds, even thousands of packages.
With drones, only one package can be delivered before returning to base. At first glance, this may seem like a disadvantage. However, drones can be economical if you fulfill two criteria:
● You’re delivering light packages
● You’re delivering over short distances
Amazon has stated that 86% of their deliveries weigh less than five pounds. They have over 75 fulfillment centers in the US. Amazon intends to offer drone deliveries to customers within 10 miles of a fulfillment center.
A report by ARK Invest estimates the economics behind Amazon’s Prime Air drone delivery program:
● Each drone will cost $1000-$3000.
● Amazon will need 30,000-40,000 drones making 30 deliveries a day to serve their customers.
● Roughly 6,000 human operators will be needed to pilot the drones (to comply with regulations). Their salaries will be $50,000 per year.
● Additional costs will be spare batteries ($200 each), maintenance ($15 million per year) and fuel ($4 million per year).
According to ARK’s calculations, Amazon’s cost per package for delivery would be roughly 88 cents. That means it could profitably offer its customers delivery by drone for $1. This compares very favorably with current delivery options.
Delivery Drones From Leading Companies
Delivery drones have been developed and successfully tested by a number of leading companies.
Amazon
On December 7th, 2016, Amazon made its first-ever delivery to a customer using a flying drone. The delivery was a trial run of its Amazon Prime Air service and took place in Cambridge, UK. The order was delivered from Amazon’ warehouse to the customer in just 13 minutes. You can watch the whole thing on video here.
Amazon’s drones are electrically powered, autonomous and guided by GPS. They have a range of 15 miles, fly at around 400 ft at speeds of up to 55 mph and can carry packages of up to 5lb.
Amazon plans to make thousands of items available for drone delivery, ranging from personal electronics to food items.
DHL
DHL has been developing drones to deliver express and emergency items to remote and hard-to-reach areas such as islands and mountains. The Parcelcopter can take off like a helicopter and fly like a plane. It can carry its payload through wind and snow.
DHL tested its Parcelcopter 3.0 drone in the Bavarian Alps in early 2016, successfully making more than 100 deliveries between two remote villages.
Flirtey
Flirtey, a drone specialist, has partnered with Domino’s Pizza to pioneer the first commercial pizza-by-drone delivery service. The drones are constructed from carbon fiber, aluminum, and 3D-printed components. They lower their pizza cargo via a tether. Special packaging preserves the temperature and taste of the freshly cooked pizza during delivery.
In November 2016 the first deliveries to real customers were made in New Zealand.
Google plans to make commercial drone deliveries a reality by 2017 as part of their Project Wing. Google is using five-foot, single wing drones capable of vertical take-off and hovering thousands of feet in the air. Their drones can drop packages to the ground while airborne using a winch.
Google’s drones made their first successful deliveries in Queensland, Australia as early as 2014.
Walmart
Walmart is focusing on the potential of drones to track warehouse inventories. Their remotely controlled drones are equipped with a custom-built camera that takes 30 pictures a second. The drones can check products on warehouse shelves and alert users if stock is running low or placed incorrectly.
The use of drones will enhance inventory management and reduce the labor costs associated with stock checking.
Hurdles to Overcome
The technology for drone delivery is already here, but there are some hurdles to overcome:
● FAA Regulations: The FAA (Federal Aviation Administration) released rules in June 2016 which require drones to weigh less than 55 pounds with a maximum ground speed of 100 mph and a maximum altitude of 400 feet. In addition, each drone must be controlled by a certified human operator. NASA is currently in the process of formulating an air traffic management system for drones.
● Environmental Issues: Small drones cannot fly effectively through heavy wind, rain or snow. In areas like the San Francisco Bay Area, winds can reach 30 miles per hour and could cause drones to crash.
● Wildlife: Flying drones might collide with birds. Some birds may attack drones if they feel their territory is being invaded. “Sense and avoid technology” is being developed to counteract this.
● People: There’s a danger of people stealing cargo from drones, a potentially dangerous activity as their carbon fiber propellers can sever fingers. There’s also the possibility of people shooting at drones flying over their property.
● Urban Landscapes: It’s one thing delivering a package on a patch of grass for customers in rural areas . What about customers who live in high-rise apartment buildings? Solutions being touted range from 10-foot-tall mailboxes to rooftop delivery boxes.
The Future of Delivery is Coming
Delivery drones offer consumers the Holy Grail of near-instant gratification for their online purchases. There’ll certainly be a strong demand for drone deliveries as soon as they become available.
The technology is already developed and proven.
The biggest hurdle is getting regulatory approval. In the UK, Amazon has struck a deal with the Civil Aviation Authority to use drones to deliver purchases to British suburbs. In the US, additional FAA clarifications are expected in early 2017 that could open the way for drone deliveries.
Being able to offer drone delivery will give companies a significant competitive edge in their market.
Currently, the expenditure required for drone technology make it unfeasible for most small businesses. But as future advancements in technology drive costs down, this could change in as little as a year.
The future of delivery is coming.
Are you ready?
