Drone’s Delivery System
Years ago, Jeff Bezos promised that Amazon would shortly deliver bundles by drone. “I know this looks like science fiction,” the Amazon CEO informed a 60 Minutes reporter, as he stood with a few Amazon drones. “It’s not.” Bezos’s primetime announcement sparked plenty of interest–and a media consensus that it was a publicity stunt to get Christmas shoppers thinking about Amazon. After all, federal law prohibited commercial drones from flying over populated regions, and airplanes were experiencing close calls with hobbyists’ drones .But the drone community isn’t acting like the prospect of delivering bundles by drone is a pipe dream. Amazon just released an update of its Prime Air program. Executives at Google Wing claim they’ll deliver packages in 2017 via drone. Walmart has asked the Federal Aviation Administration for permission to check drone delivery, and venture capitalists have invested in drone delivery startups. So what makes the drone community believe deliveries are a fantastic idea?
The Drone’s Milk Run
Drone deliveries seem like the near future: unmanned quadcopters rapidly delivering packages to our doors, removing both wait periods and also the cost of human labor. However, from an economic perspective, it’s easy to see how drone delivery might be an elegant technological solution searching for a problem. That’s because the economics of last distance delivery are driven by two factors, path density and shed size. Route density is the number of drop offs you may create on a delivery route, frequently known as a “milk-run” in industry parlance. Drop-size is the number of parcels per stop on the milk run. If you create a great deal of deliveries within a brief time period or space, the cost per delivery will be low. Likewise, if you drop off lots of parcels at the same location, the cost per parcel will be low.
Drones perform poorly on both of these financial aspects of last-mile shipping. The recent prototypes that businesses have unveiled usually take just 1 package, and following the drone manufactures its delivery, it has to fly all of the way back to its home base to recharge its own batteries and pick up another bundle. Compare it to the present status quo: trucks. A delivery truck from UPS makes an average of 120 ceases a day to deliver hundreds or thousands of bundles. Don’t they seem to be greater than drones?
How short-distance drone deliveries work
In late November, Amazon released a slick video demo of Prime Air, a drone shipping program designed to “get packages to customers in 30 minutes or less” It comes on the heels of a similar manufacturing from Google’s Project Wing, that revealed a drone delivering dog food at Queensland, Australia. Both these companies and others say that they expect to be flying shortly. We approached these firms’ claims without doubt. But what if you don’t live within 7.5 miles of an Amazon warehouse? And will Amazon keep drones on standby for when you order 50 pounds of diapers? Drone delivery is still speculative, and Amazon and co. aren’t revealing all their plans. But a few straightforward statistics demonstrate that distance and weight may not hold back drone shipping. In official documents, Amazon has written that 86% of its packages weigh less than 5 pounds. As for distance, Walmart has noted that 70% of Americans live within 5 miles of a Walmart. This is terrific for the prospect of drone delivery. Amazon’s fulfillment centers are not as ubiquitous, but the company has shown willingness aplenty to move its products and warehouses closer to the customer. If products start close enough to consumers that drones can deliver them in 30 minutes, we may very well see drone delivery even if it costs more than the humble UPS truck. “Faster delivery has always been a goal,” says Logan Campbell, the CEO of Aerotas, a drone consultancy. “Seven day delivery was common. Now we’ve become used to Amazon Prime 2-day shipping.”There haven’t been many analyses of drone air freight costs. The ones that do exist suggestion that drones have the potential of being both faster and cheaper than delivery expenses. 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’s significantly more affordable than current alternatives.
The analysis is still mostly speculative. Keeney imagines that 6,000 operators who earn $50,000 per year will operate 30,000 to 40,000 drones. Each drone will make 30 deliveries per day. Her analysis ignores depreciation, and queries such as: “How can drones prevent airplanes and send packages in Manhattan?” And there is another core issue: $12.92 is the price UPS charges to customers, but its actual marginal cost of delivering yet another bundle along a route they’re delivering to already is probably closer to $1. When push comes to shove, will drones be in a position to compete? The rest of her investigation incorporates the costs of electricity, backup battery packs, bandwidth, updates to facilities, and so on. Keeney’s assumptions also adhere to the middle ground: She presumes that Amazon will acquire permission to fly drones out of sight, with every operator responsible for 10-12 drones, but not that Amazon will soon automate the entire process. That said, other analyses, which assume that more pilots will be needed, place the cost closer to $10-$17 per delivery.
Delivering blood samples in Lesotho
An experiment from the opposite side of the world provides a few validation of ARK’s rosy prognosis. The drone startup Matternet isn’t just planning a drone delivery network. Matternet has delivered critical supplies (and petroleum) through drone in Haiti following the earthquake, and when the founders needed to simulate a drone network, they turned into Maseru, the capital of Lesotho. In Lesotho, almost 1 in 4 adults has HIV, and also from the capital, paved roads are scarce, which makes it challenging to transport goods. So Matternet’s drones delivered blood samples from practices to hospitals in which they could be analyzed for HIV/AIDS. Blood samples were perfect freight: light, small, valuable, and time-sensitive. Because Maseru has little air traffic and the routes from the clinics into the hospitals did not change, most of the procedure could be automated. The drones flew with no human pilot and had obvious landing areas where they recharged automatically. It was a fantastic price point. Even though the pilot took place several decades back, Raptopoulos claims that each delivery cost only 24 cents.
The Case for Drone deliveries
The first legal delivery in America via drone took place on July 17, 2015. That day, a drone operated made three trips to transfer medicine in the Lonesome Pine Airport in Wise, Virginia, to some nearby fairgrounds. The demonstration was the result of a partnership involving the drone startup Flirty and two organizations that provide healthcare in rural, under served areas. The flight demonstrates two aspects of the future of drones and air freight: that technology isn’t the limiting factor, and this drones’ most evident appeal isn’t appropriate for private deliveries. “You see entirely autonomous flights ” for applications like surveying construction sites, farmland, and mining operations.”It’s gotten incredibly simple to fly,” adds Roger Sollenberger, spokesman of 3D Robotics, whose free, open source software powered Flirtey’s delivery drone. 3D Robotics’ drones, he says, make it so easy to program flight paths that the average parent can use it to record family moments. Instead, the actual challenge is the regulatory environment. The FAA has banned all industrial uses of drones in the U.S., and though the agency increasingly grants exemptions, the Flirtey flight is the only freight exemption that allowed a real delivery as opposed to testing in unpopulated locations. The FAA currently requires companies with exemptions, like Amazon, to have an operator with a pilot’s license keep each drone within line of sight–a mandate that makes deliveries completely uneconomical.
Can drones substitute roads?
In the meantime, the very first drone deliveries will most likely look more like Matternet’s drone network in Lesotho and Flirtey’s medicine drop in Wise, Virginia. It’s a lot easier to operate and gain legal permission to fly in open skies, and the economics are particularly compelling. As Raptopoulos of Matternet points out, Google and Amazon’s plans ignore drones’ best feature: they can go where there are not any roads.”One billion people on the planet today don’t have access to all-season roads,” Raptopoulos told a TED audience in 2013. “We cannot get medicine to them reliably, it’s impossible for them to get critical supplies, and they cannot receive their goods to market to be able to create a sustainable income.”For the Matternet team, the most interesting question was not the cost per delivery. They wanted to compare the expense of the drone network to the cost of building the roads Lesotho so badly lacks. The American Road and Transportation Builders Association estimates the cost of a “new 2-lane undivided road” at $2 million to $5 million per mile. And the drone network in Maseru? Comparing a drone network to roads that may transport buses, delivery trucks, and bulldozers isn’t an apples to apples comparison. But given that building and maintaining roads is a long and costly procedure, drones could provide a quick and affordable way to (imperfectly) connect the billion people identified by Raptopoulos as cut off from most of the world.”Many in the industry think delivery is going to take a different feel from Amazon,” says Campbell of Aerotas. “More specialized cases like delivering vaccines which will need to be refrigerated to regional hospitals. Niche deliveries where speed is crucial.”In such cases, for cargo that is small, light, valuable, and time-sensitive, cost is much less of a factor. A drone delivery may save a life by getting delicate medicine to a rural patient, or keep an oil rig running by delivering a crucial piece of machinery. Even in less extreme situations, drones are appealing because route density and drop size are less relevant. Instead, drones just have to beat the expense of private couriers, which cost at least $10 to $50, even within dense urban areas like San Francisco. Oil rigs that need replacement parts. Residents in remote Alaskan towns that need key supplies. Businesses which need timely data about their supply chains. Expect these (noncommercial) efforts to be the early adopters of drones and drone shipping.
When is the future?
Drones are in a situation much like the one faced by self-driving automobiles. Businesses have demoed the tech, so the true barrier is the regulatory and legal environment. In both cases, this implies integrating the technologies into daily life could have a very long time–or it may happen very fast. Present drone economics are great for deliveries that require less than 1 hour. Are people prepared to pay a significant premium for the ceremony? Perhaps. It might not be too late to purchase Christmas gifts on December 23, 2020.Despite the current inability of drones to coincide with the efficacy of a delivery truck’s milk operate, the economics of delivering air cargo by drone seem persuasive. That is why Matternet is analyzing drone deliveries with Swiss Post and Korean World Cargo. And that is why the drone expects deliveries to happen–even though not as fast as executives such as Bezos promise. In the meantime, drone deliveries will probably receive their start in remote areas like Lesotho, or in use cases like flying vital machine parts to oil rigs and mines, or by collecting data on shipping to make it more efficient.