Droids and drones are just two of the methods set to disrupt parcel delivery
Package delivery has long been the sole responsibility of a carrier such as FedEx or UPS who would send a driver and a truck to your house and leave a package. That is changing, though, as retailers are taking a more proactive approach to the supply chain, hoping to reduce cost and improve the delivery experience. The result is innovation that promises to dramatically alter last-mile delivery.
In a Convoy survey, 70.1% of consumers said that a single poor delivery experience would cause them to no longer shop with that retailer. That same survey noted that 67% of retailers said that gaining greater control of the consumer experience was crucial or very important to delivery. A UPS survey last year noted that 46% of shoppers had rejected an online purchase because the delivery timeframe was not acceptable.
That is pretty strong motivation for more retailers to be involved in the last-mile delivery process.
The model of goods shipped from vendor to distribution center (DC), DC to store, and store to customer doesn’t exist anymore. Thanks to e-commerce, it has been replaced by a model that allows goods to be shipped from anywhere in the supply chain to the customer, and in some cases, anytime.
The belief has been that last-mile delivery will someday give way to drone delivery. But what if the future of last-mile delivery is not aerial drones, but rather droids, or autonomous community parcel vehicles, or even bike couriers?
Watch UPS demonstrate how drone delivery works
A McKinsey & Company report, “Parcel delivery: the future of last mile,” notes that the future of delivery features 80% of all products delivered by autonomous vehicles or drones. By 2020, the report notes, 15% of all last-mile delivery will be same-day or instant delivery.
Walmart is taking this revolution in consumer experience and delivery so seriously that last week it announced Store No. 8, an incubator that will work with start-ups seeking to disrupt the consumer experience, including e-commerce delivery. The incubator, based in Silicon Valley, will pay particular attention to those companies that are seeking solutions using virtual reality, autonomous vehicles, drone delivery, and personalized shopping.
“We're getting back to the heart and soul of those early days where passion fueled innovation, where ‘crazy ideas’ were the norm and the only rule was to pay no attention to the way things were supposed to be done,” the Store No. 8 website announces.
But while Walmart seeks big ideas, several companies have been testing drone deliveries. The latest is parcel giant UPS. UPS conducted the test in February in Lithia, FL, with Workhorse Group, an Ohio-based battery-electric truck and drone developer. Workhorse built the drone and the electric UPS package car used in the test.
“This test is different than anything we’ve done with drones so far. It has implications for future deliveries, especially in rural locations where our package cars often have to travel miles to make a single delivery,” said Mark Wallace, UPS senior vice president of global engineering and sustainability. “Imagine a triangular delivery route where the stops are miles apart by road. Sending a drone from a package car to make just one of those deliveries can reduce costly miles driven. This is a big step toward bolstering efficiency in our network and reducing our emissions at the same time.”
Amazon, of course, is known for its vision for drone deliveries. The e-commerce retailer has envisioned a scenario where a drone pickups up a package at a warehouse and makes the delivery to your front door.
“Drones turned out to be surprisingly cost-competitive in rural areas, at only approximately 10% above the cost of today’s delivery model,” McKinsey notes. “With their higher speeds they are even better suited for same-day and time-window delivery of smaller items in rural areas.”
A recent Princeton Consultants survey of carriers and shippers, though, found that respondents are doubtful of drones ultimate impact on the industry.
“People were the most skeptical about drones having a big impact on our industry,” Steve Sashihara, CEO of Princeton Consultants, says. The survey found only 35% of respondents believe drones will have a moderate or large impact on the industry.
McKinsey agrees, noting that the size of a drone needed to deliver a package has drawbacks in terms of landing space, costs to operate and range limitations. While operating costs could come down, McKinsey estimates the U.S. would need approximately 250,000 such drones to meet current demand.
Drones, though, are not the only option on the table for delivering last mile. Could droids make those final mile deliveries?
R2D2 might knock on your door
There are several companies currently working on droid delivery concepts. These include Gita and Starship Technologies, which is already testing deliveries in markets such as Washington, DC, and several European cities.
Gita’s robot can follow a person, learning how to navigate the neighborhood by creating a 3D map of its surroundings. In areas it has previously explored, Gita can operate in autonomous mode. Gita can carry up to 40 lbs. of cargo.
Starship’s droid has been in testing since 2016 with expected production and delivery available this year. According to the company, the robot acts just like a pedestrian and while it can climb curbs, it prefers to be on sidewalks.
“It merges with pedestrians [and] it matches pedestrian speeds,” the company says. “The only place for the robot is on the sidewalks. It is much safer.”
The robot uses a combination of GPS and computer vision to pinpoint its exact location to the nearest inch. It makes a 3D map of its surroundings and can carry the equivalent of 3 grocery bags.
McKinsey envisions AGVs – automated ground vehicles – with parcel lockers becoming part of the last-mile delivery process. AGVs would drive into a community loaded with packages and customers would travel to the vehicle, enter a code, and retrieve their packages.
Amazon already utilizes parcel lockers in some locations, although these are currently fixed locations, usually located in high traffic areas such as a mall.
McKinsey believes mobile parcel lockers may be a solution for overnight and off-hour deliveries. “AGVs loaded with parcels that could not be delivered during the day could park in their delivery districts and serve as regular parcel lockers, from where customers could pick up their items overnight. That would also allow parcel service providers to save on the high real estate cost of today’s parcel lockers,” it says.
“Generally, we believe that most economic prerequisites are already in place for the outlined future of the last mile to become reality, but the speed at which different countries will adapt depends fundamentally on three factors,” McKinsey says, noting opportunity cost, regulation and public acceptance.
In some cases, McKinsey went on to note, if the cost of drone or droid delivery does not come down sufficiently, urban centers may turn to an old-fashioned way of parcel delivery – bike courier.
Whether it’s droids, drones or some other delivery method that becomes a preferred last-mile delivery solution, McKinsey believes the segment is ripe for new entries.
“The relative infancy of this segment also makes it a good target for new players who would face relatively low barriers to entry – only a small number of potentially automated depots would be needed from an infrastructure perspective,” McKinsey surmises. “It remains to be seen whether incumbents can leverage their existing size, infrastructure, and market knowledge to defend this promising segment or whether e-commerce players will capture this opportunity to enter the delivery market on a larger scale.”