Drone Delivery and Its Effect on Reverse Supply Chain

12 Ways Drone Delivery Will Transform Logistics

Unmanned aerial vehicles, more popularly known as drones, are expected to generate $82 billion in economic growth by 2025 along with 100,000 jobs. Despite recent regulations, the Federal Aviation Administration (FAA) has already issued hundreds of waivers to companies interested in commercial drone use. While it’s easy to see how drones will impact a number of industries, they will have the greatest impact on supply chain and logistics.

Here, we take a look at 12 ways we can expect the logistics industry to be transformed with warehouse robotics in supply chain.

Retailers Will Begin to Supplement Carrier Relationships With In-House Capabilities

In 2013, Jeff Bezos unveiled Amazon’s drone delivery ambitions on “60 Minutes.” Rather than completely eliminating third-party contracts, the company intends to supplement its existing delivery options with drone delivery capabilities. It’s already started expanding control of its logistics by investing in its own fleet of trucks, rolling out a crowdsourced delivery service with a network of third-party drivers, and purchasing its own Amazon-branded Boeing 767.

In short, Amazon wants to limit its reliance on external companies and even challenges like congested roads. According to industry experts, we’re closer to a world with drone delivery than we are to a world with self-driving cars. In fact, according to some, there would already be package delivery by drones right to U.S. doorsteps if it weren’t for regulatory hurdles.

Once these regulatory hurdles are overcome, retailers already leveraging automation within their warehouses will extend automation outside of their warehouses. Automated storage and retrieval systems, conveyor belts, and other warehouse automation tools will be coupled with an automated inbound outbound logistics system that delivers products to customers by drone.

The Ecommerce Industry Will Be More Environmentally Friendly

In 2016, transportation beat power plants for the title of top carbon dioxide producer in the United States. Notably, there’s been a significant increase in the volume of last mile deliveries, which is the trip between the warehouse or distribution center and the recipient. In the past, the majority of last mile deliveries were bulk shipments to stores in concentrated areas. As a result, carriers could fulfill these deliveries with large trucks. Today, individual deliveries reign supreme. In 2020, global parcel volumes are expected to exceed the 100 billion mark.

A 2018 study found that electric drone delivery was more efficient than trucks, vans, passenger cars, and gasoline drones. And, while the researchers conceded that the environmental impact of electric drone delivery would go up once recharging costs were factored in, they would still be more environmentally friendly than one-off deliveries using other methods.

Electric drones and other warehouse robotics in supply chain are part of Amazon’s plan to make all Amazon shipments net zero carbon, a goal it intends to have 50% complete by 2030.

Customer Expectations Will Soar and Same-Day Deliveries Will Become the New Normal

During the 2019 Re:Mars conference in Las Vegas, Amazon showcased a new drone it planned to use as part of its Prime Air service. The device, which can carry packages weighing 5 pounds or less for 15 miles, is part of the company’s anticipated rollout of drones in the near future. While Amazon didn’t provide an exact date, the company does have a permit from the FAA to “establish a package delivery operation in the United States”.

Once Amazon establishes a widespread drone delivery program, it will once again raise the bar for other retailers who have already bemoaned the “Amazon effect,” which has raised customer expectations and turned things like free shipping and two-day delivery into the standard as opposed to a luxury.

In addition, drone delivery will also revolutionize customer expectations around what can be delivered. Everything from medicine to coffee to blood is already being transported by drones in locations around the world.

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Warehouses and 3PLs Will Need to Speed Up Their Operations

Warehouse managers are familiar with supply chain time crunches and the importance of efficient processes like directed putaway, picking, and packing. The longer it takes to process an inbound shipment, the longer it takes for products to be entered into inventory and the fewer items are available for purchase and picking.

These demands on warehouses will only increase once drone delivery becomes the standard delivery method and as timelines move from same-day to same-hour. Warehouse owners will need to optimize and streamline their operations through rigorous processes, automated tools, and more sophisticated 3PL warehouse management systems.

For instance, during the putaway stage warehouses may need to embrace cross-docking operations. During the picking stage, advanced pick processes like wave picking or batch picking may be called for. And the packing process may need to be sped up with taping machines, 3D packing screens to help quickly fit packages into the right sized boxes, shipping label printers, and more. Using the right WMS, all of these processes can be centrally managed and even automated.

The Layout of Warehouses Distribution Centers Centers Will Dramatically Change

Delivery via drone will impact more than the transportation of goods. It will also impact how warehouses and distribution centers are designed and laid out. Today’s warehouses have large docks that determine how quickly goods are entered into inventory or shipped out to customers. Excellent dock management ensures incoming shipments, outgoing shipments, and labor scheduling are properly coordinated to avoid long wait times.

The obvious change will be the size of docks. Warehouse managers will no longer need extremely large docks to accommodate fleets of trucks. But more interestingly, drones may completely transform the concept of warehouses and distribution centers.

How? Take the case of Amazon’s awarded patent for an airborne fulfillment center utilizing unmanned aerial vehicles for item delivery, also known as a “floating warehouse”. In short, a helium-filled blimp would drift above airline traffic, storing inventory in they sky and air dropping lightweight packages using drones. While this may be a while away, it does demonstrate how drone technology could reinvent the entire warehouse industry.

Brick-and-Mortar Stores Will Face a Mortal Threat

Presently, the biggest advantage brick-and-mortar stores have over online stores is immediacy. A customer can walk into a store and walk out with what they want within an hour. They also have the ability to try on items, feel materials, and manipulate objects to inspect them from different angles. For all of its convenience, the best online retailers can offer is next-day shipping – and even that comes with a steep price tag.

The use of a drone delivery system could shrink delivery times from a matter of days to a matter of minutes. This has huge ramifications on the physical shopping experience since customers could have products delivered to them in less time than it takes to drive to the mall. The final frontier will be the unique customers experience retailers can offer shoppers.

Retailers Will Have To Contend With a Whole New Range of Regulations

The Federal Aviation Administration (FAA) has created rules around what drone owners can and can’t do. For recreational users, regulations like registering their drones and flying below a certain altitude are not a big deal.

For companies interested in commercial drone usage like drone delivery, several rules stand in their way. Most notably, the “line of sight” rule which requires drone owners to keep their drones within eye shot at all times. For other limitations, businesses can apply for waivers to circumvent the regulations, including:

• Flying a drone from a moving aircraft or a vehicle in a populated area
• Flying at night
• Flying multiple drones with only one remote pilot
• Flying over people
• Flying over 400 feet above ground level
• Flying over 100 miles per hour groundspeed
• Flying with less than 3 statute miles of visibility

Drones Will Increase Efficiency Within Warehouses

Beyond delivery, drones will change how warehouses approach key operations. For instance, drones can be used to circle the perimeter of a warehouse and conduct safety inspections to ensure a better workplace. They can support the inspection, preventative maintenance, and repair of complex machinery within a manufacturing plant.

Drones could also be used to speed up the pick and putaway processes, which are expensive, labor-intensive activities. Lightweight drones could be used as an alternative to conveyor belts or forklifts for retrieving and putting away orders. Warehouse workers could be re-trained to become warehouse drone operators.

Retailers Will Need to Account For Theft, Damage, and Cybercrime

In theory, drone delivery offers speedier delivery, but that doesn’t mean consumers are entirely comfortable with the technology. 33% of consumers believe drone shipping will make their shopping faster and 21% believe it will be comparatively cheaper. However, there are some concerns about possible theft or damage. 20% of consumers in one survey reported concern about damage when products are delivered via drone. Another 19% are worried about their drones being stolen or hacked.

Yes, that’s right. Drones have become a headache for cybersecurity professionals and law enforcement officials. A drone can cost anywhere from $30 to $10,000 and be used for illicit purposes like surveillance, data theft, or network disruption.

In addition, damage to consumers’ deliveries won’t be the only damage retailers will have to think about. Damage to property in general (e.g., if a drone crashes into someone’s house or car) will be another element retailers will have to manage. Not surprisingly, the insurance industry is stepping up with coverage options to prepare for widespread commercial drone delivery.

Drone Deliveries Will Start a Bigger Conversation About Privacy

If a drone flies above your house while en route to deliver a package to your neighbor, is that trespassing? What will the law say about drones taking pictures of people and buildings on the ground? Can a drone delivering a package snap a photo of the customer’s shabby roof while its there and use that data to suggest roof repair services?

Drone delivery will open a legal can of worms with tough questions companies and regulators will need to answer.

Retailers’ Reverse Supply Chain Management Will Transform

The cost of return deliveries, worldwide, is $642 billion USD. The reverse supply chain is an incredibly costly process and in need of innovation. While conversations about commercial drone delivery tend to focus on the initial shipment, widespread usage of drones could also transform the reverse supply chain.

The reverse supply chain is unpredictable, partly because goods are returned to retailers in a range of conditions. Returns throw off inventory counts and retailers grapple with overstock. Then, they lead to bottlenecks in cases where the retailer has to decide between putting the item back in stock or sending it back to the manufacturer.

Drone deliveries could potentially streamline this process by allowing individual products to go to the correct location the first time, whether it’s for repairs or resale. It would also limit the amount of fuel used to transport goods, creating a more sustainable supply chain.

Drone Delivery Costs Will Revolutionize Last Mile Delivery

According to Deutsche Bank, using drones and robots for delivery automation could present significant cost savings, with 80% of those cost savings showing up in the last mile. Consider the cost of a shoebox delivery across the last mile: a shoebox delivery with a premium carrier like FedEx UPS can cost $6 to $6.50 while USPS can cost $2. A drone delivery would cost less than $0.05 per mile.

Drone deliveries would introduce shipping that is both cheap and fast, two things that have been considered mutually exclusive in the past.

Drove Delivery Will Have a Transformative Effect On The Entire Supply Chain

Drone delivery will revolutionize how retailers fulfill orders, warehouses manage their operations, manufacturers handle inspections, and more. While we are still a long way from a widespread drone shipping company, the number of waivers issued by the FAA suggests companies are working hard to make it a reality sooner rather than later.