Consultant Insight: Can drone delivery reduce residential last-mile costs?

[caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] As we maneuver through the COVID-19 crisis, could drone delivery be the answer to contactless delivery and lower last-mile delivery costs? California-based drone delivery company Zipline recently began delivering supplies via drone to Novant Health medical center in North Carolina. Once the drones reach their destination they drop the supplies via parachute, meaning the center doesn’t need any additional infrastructure to receive deliveries. Able to carry almost 4 pounds of cargo, Zipline drones received approval from the Federal Aviation Administration (FAA) for flights over two routes with round trips of between 20 and 30 miles. In April, UPS and CVS announced a partnership that would oversee delivery of prescription medicine via drone to a retirement community in Florida. The service, which will use Matternet’s M2 drones, is being conducted with authorization from the FAA. Google’s Wing has noted its drone delivery volumes have more than doubled in Virginia since October 2019, when it began testing its service under the guidance of the FAA. There, customers can schedule drone delivery for select products from Walgreens, local retailer Sugar Magnolia, Mockingbird Cafe and FedEx. UPS, FedEx, the U.S. Postal Service and other last-mile delivery carriers have all reported staggering volumes that are stressing their networks. E-commerce daily sales, compared to the first couple of weeks in March, spiked almost 50% in April, according to Adobe Analytics . FedEx has responded by capping volumes of some customers, while the UPS management team has pitched in to help at various U.S. locations. In its first-quarter earnings, UPS reported that for March into April, 70% of its volumes were residential. However, as noted in last week’s article , businesses are looking to e-commerce for post-pandemic growth. How will they grow if delivery providers are struggling with volumes? They can, of course, increase capacity, implement surcharges as UPS announced this week on some of their Ground services, and encourage alternative pickup locations, such as lockers. Businesses can also take advantage of alternative delivery modes — like drones. Drones have the potential to lower residential delivery costs, a significant pain point for last-mile delivery providers. According to Gartner , using autonomous drones to deliver parcels can result in operational costs that are at least 70% lower than a van delivery. These cost savings come from saving fuel, cutting costs per mile and reducing the carbon footprint. Furthermore, the research firm expects 1 million drones to be making retail deliveries by 2026, compared to 20,000 today. However, weather conditions and wind speeds will need to be taken into consideration when using drones, more so than with other last-mile delivery arrangements. How to profitably incorporate drones in the last mile is still a task for many carriers. Meanwhile, the FAA still holds a tight rein on drone flying and is taking a slow, methodical approach to allowing U.S. tests. However, in China and remote areas of Europe drone delivery is already an accepted mode of last-mile delivery. Drones will eventually become a standard tool for last-mile carriers here in the U.S., alongside vans, bicycles, trucks and airplanes. Deciding which mode of transport to utilize will depend on various factors, most importantly that which offers the greatest cost savings to the carrier.

Consultant Insight: Can drone delivery reduce residential last-mile costs?

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