WHEN WILL IT MAKE SENSE TO USE DRONES IN LOGISTICS?

Amazon’s move to use drones as e-commerce delivery tools has set new expectations for the future of online shipping.

Among predictive analytics, targeted marketing and personalized product offers exists the prospect of thousands of flying unmanned aerial vehicles traversing the skies carrying small, individual packages to various destinations. While this scenario is quite attractive to futurists, there are a number of considerations both retailers and logistics experts need to make before utilizing drones.

LegalitiesWhile many companies are currently testing UAVs to optimize their operability, they still need permission from certain authorities before ubiquity is achieved, The Associated Press reported. The source acknowledged that Amazon approached the U.S. Federal Aviation Administration to obtain permission to expand its experimentation with drones.

Yet, UAVs can be found for sale on numerous e-commerce websites. If the average consumer can buy a drone and fly it without government permission, why would supply chain servicesand retailers need to contact the FAA in the first place? SDCExec maintained hobbyists and model aircraft developers are allowed to fly drones, but commercial use requires special approval. There are likely two main considerations organizations such as the FAA are taking into account.

1.    People aren’t all that thrilled: One of the main concerns the public has expressed over drone usage is a presumed lack of privacy. Arming drones with high-definition cameras to take astounding pictures from 400 meters in the air is any photographer’s dream, but how these professionals are using this capability has come under scrutiny.
2.    Traffic control: It takes highly-trained specialists to organize air travel between commercial aircraft, so what happens when a city has thousands, or possibly tens of thousands, of drones flying through a cluster of skyscrapers and apartment buildings? Motion sensors and other implementations will need to be installed to prevent collisions between UAVs from occurring.

Expenses
Another big question weighing on the minds of supply chain executives and other professionals is whether it’s feasible to implement UAVs in the first place. Forbes contributor and technology critic Roger Kay made an estimate in 2013 that it would cost Amazon and other companies about $50,000 per machine.

However, MIT Technology Review referenced one instance in which Palo Alto, California,-based startup Matternet used drones to supply Haitian refugee camps with much needed amenities. The seed company discovered it costs about 10 to 70 cents to deliver a 4.4-pound package 6.2 miles – about five times cheaper than a conventional truck delivery.

What about bulk shipments from coast to coast? Supply Management noted a survey conducted by the national Aeronautical Centre, which found 42 percent of logistics entities asserted they will use UAVs to transport cargo in the future. Obviously, these drones will have constructs modeled after aircraft such as the U.S. military’s MQ-9 Reaper, which is said to cost upwards of $12 million.

With costs considered, the equation will need to include weight, dimensions, distance and shipment value; very much the same as all other transportation modes. A smaller UAV, delivering retail orders, may have weight and dimension restrictions. Aircraft sized drones would only be feasible for bulk shipments of items of high value. MIT Professor of Aeronautics John Hansman noted the service may not be worth it for some consumers.

“[Businesses] will have to charge a significant premium for this kind of delivery, so the products would need to be worth a $100 to $200 delivery fee for a five-pound or so package,” Hansman told MIT Technology Review.

Development and competition
With every technological advancement comes a number of companies striving to make a better version of it in order to appeal to market share. As basic economics shows, when two entities offer the same service or product to identical target audiences, price wars occur in which one business tries to outbid the other, and vice versa.

Drones will always be complex machines, but that doesn’t mean they won’t become affordable as more enterprises develop them. The Associated Press noted Google is seeking to develop superior logistics drones with its latest endeavor, “Project Wing.” The initiative is being supervised by the search engine giant’s “X” lab, which has previously developed Google Glass and self-driving cars.

Google released a pamphlet detailing the intent behind Project Wing, asserting the company intends to improve logistics through environmentally friendly delivery options. It takes less fuel for drones to travel than it does for conventional aircraft.

How will it change customer service?Some enterprises have asserted UAVs will enable them to deliver packages to customer doorsteps 30 minutes after an order is submitted. This capability in itself appears to be a tall order (no pun intended), but it’s certainly going to affect customer expectations in an incredibly profound manner. Faster and easier; good for the environment.