The highly-respected research company, McKinsey, asked four of its top air mobility analysts, led by Robin Riedel, Head of the Disruptive Aerospace sector, to analyse the future of drone delivery and its importance for last mile delivery. The results are both fascinating and encouraging.
By early 2022, there were already 2,000 global commercial drone deliveries occurring each day with the number growing by the month. The report states, “As the technology matures, regulation evolves, and business models emerge, drones could become as cost-effective for package delivery as traditional transport modes.”
It continues, “Drone technology has the potential to meet a range of last-mile consumer use cases, such as prepared food, convenience products, and other small packages, as well as B2B needs, such as moving medical samples to labs.”
While taking the usual environmental-friendly tack, the report points out, “Companies will be much more likely to reach their emissions goals if they do not have to deliver a one-pound burrito with a two-ton vehicle.”
(credit: McKinsey)
McKinsey focuses on labour costs incurred.
Until BVLOS is allowed by air regulators and becomes normal practice, the present business is not economically viable due to the need of a visual observer and the short flight distances this creates. The researchers say, “As a result, labour represents up to 95 percent of the total cost of drone delivery. Our bottom-up model estimates that a single-package delivery has a direct operating cost of around USD13.50. These costs are not yet competitive with electric cars and vans, or any type of vehicle doing multiple deliveries in a single run.”
Once BVLOS becomes a widespread reality, then labour costs can shift “from observing airspace to operating drones, where the number of craft per operator will need to increase significantly. These advances would include autonomous drone flight in which craft fly with limited human intervention, unmanned traffic management systems and sense-and-avoid solutions.”
It goes on, “Once these innovations are in place, regulations will need to evolve, enabling larger numbers of drones per operator. As those shifts begin to happen, the potential cost advantage will grow.”
The McKinsey analysis suggests that if drone operators can manage up to 20 craft simultaneously, this may mean a single package delivery will cost no-more than USD1.50 to USD2. At present, other forms of transport delivery provided via current food delivery apps and services cost more, although these fees may also cover additional expenses, such as managing the ordering platform and coordinating delivery drivers, “which can make direct comparisons difficult.”
The company states, “With Uber Eats, Wolt, Foodpanda, and Grubhub, for example, fees to customers can range from USD0.49 to USD7.99 and costs for restaurants can be anywhere from 10 percent to 30 percent of the order, alongside the usual customer gratuity.”
The researchers then say those businesses using drone delivery “would do well to build a clear strategy for their use… balancing the difficulties of drone operations with the potential benefits.”
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The report offers six questions to ponder:-
1. What products can feasibly be delivered by drone and how receptive will customers be to this option?
2. What regions will have the greatest demand for drone delivery?
3. Can existing stores and warehouses be modified to accommodate drone deliveries, and will additional infrastructure or facilities be required?
4. How well can drone operations be integrated into broader delivery operations using other modes?
5. Are there any natural partners for drone delivery operations?
6. How can drones help contribute to the company’s sustainability goals?
McKinsey points out, “Developing drone delivery capabilities will not be simple, especially at a smaller scale. However, as companies reach full drone delivery capabilities, they will begin to see expanded benefits in their transport strategies.”
The report concludes, “Economic and environmental advantages suggest that drone delivery could become an important part of the delivery ecosystem. Forward-thinking companies will plan today for a drone-enabled future. As they do so, they should prepare to evolve their drone strategy over time, in line with regulatory changes, technological advancements, shifts in customer preference, and their own capabilities.”
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(Top image: thehustle.co/Zachary Crockett)