Drone delivery report: last-mile economics make drones desirable

Drones will deliver products within the last-mile of the shipment route someday because the economics of last-mile delivery are so compelling that existing companies will have no choice but to adopt the technology. It is a matter of when, not if, according to a new research forecast issued by a group of aviation experts, economists and one of the most respected aviation institutes in the world, Embry Riddle Aeronautical University. 

The report provides a series of conclusions that illuminate the state of drone delivery and the impact it will eventually have on the UAS industry and the product delivery market. 

The conclusions are as follows:

-The fundamental premise for autonomous vehicle economic analysis is that UAS are a disruptive technology.

-The area where commercial UAS will create the biggest disruption is in the last-mile package delivery to homes and small businesses.

-The impetus for this change is a major downward reduction of delivery costs to as little as $1 per delivery.

-Our most pessimistic forecast for package delivery estimates more than 8 million operations per day within 20 years.

-Our pessimistic forecast estimates 86 million package deliveries per day within 20 years.

-The economic annual savings to logistics companies will be at least $2 billion for our pessimistic forecast and for our midrange forecast (50 million daily operations) of $10 billion.

-Autonomous and beyond visual line of sight flight operations are necessary conditions for this disruptive technology to commence.

-If there are limitations on UAS delivery from things like airport buffers, weather, high rise apartment buildings and so forth, the potential market for UAS delivery is so large that none of these limitations will seriously impede the economic attractiveness of the business. 

The authors of the study also said that even if only 1 to 2 percent of the packages sold online are delivered by UAS, the operations will dwarf the volume of flights handled by the existing Air Traffic Management system. Roughly 86 million packages per day could be moved via drone. On a daily basis, there are currently about 100,000 daily flight operations in the U.S. 

While there are still many unresolved issues, including the issue of ATC, business models (the report suggests there could be as many as 14 different feasible business models that emerge for drone delivery), regulatory structure on beyond visual line of sight and regulations on platform requirements for certain weather and package delivery type—the authors believe all issues can be figured out and drones will deliver packages. 

Within the 38-page report, the authors provide a high-level analysis of drone delivery, but also state that future reports will follow, each of which will examine a particular issue of drone delivery in greater detail.

To view the report in its entirety, click here. 

The Workhorse Group, an electric truck and drone delivery system developer that has made headlines in the past for its drone delivery testing has added a big-name partner to its efforts. Ryder, a Fortune 500 company and fleet management and supply chain solution provider, is now the strategic partner of Workhorse Group. Workhorse is developing a truck and drone based package delivery system that it showcased earlier this year with the help of UPS. Early in the 10-year partnership, Ryder will focus on servicing Workhorse’s other offerings, including its new electric truck line.