Would Drones Give a Cheaper Delivery Alternative?
Benchmarking Drone Delivery with Conventional Delivery Systems

ABSTRACT

Unmanned aerial vehicles (UAVs), called as “drones” in the mainstream media, are envisioned as a tool for last-mile delivery and a new way of transportation. Although many retailer giants and other companies launched their test flights all over the world, it is still unknown when we will get our first deliveries by a drone. This paper aims to lay down every possible prospects of having drone fleets for last mile delivery from a supply chain management perspective.

 

1. INTRODUCTION

In today’s ever-evolving and dynamically changing environment, traditional business models can no longer be taken for granted. The exponential growth of technology forces businesses change their mindset to succeed or even to survive.

Technology has blurred the lines and created a retail industry open for business anytime, anywhere and in any way the customer prefers to shop. The possibilities for effectively engaging consumers are limited only by imagination, and each advance in new technology brings excitement and anticipation of a brighter future for the retail industry.

According to the Accenture’s Retail Technology Vision 2014 report; the next five years will bring more change to retail than the last 100 years. Think about that; the stores, websites, and applications we recognize today could go through some radical changes that would’ve been the stuff of sci-fi just a generation ago.

Over the last few months we have seen how drones will slowly enter our lives in the coming years. Google launched Project Wing for goods deliveries, Amazon continues its plea with the FAA to test its Prime Air delivery service, the United Arab Emirates Government has launched a $1million Drones for Good Award, DIYdrones.com has over 56,000 members, and you can now buy drones for less than $100.

There are numerous applications for drones along the supply chain. For example, drones can deliver freight. Drones carrying freight payloads will significantly reduce air transportation charges, speed up transit times, and enable cost-effective delivery to remote, sparsely populated locations.

Moreover, drones are not adversely affected by certain trucking-specific industry issues such as Hours of Service regulations, or by over-the-road variables affecting timely delivery such as automobile accidents, inclement weather and highway construction. Further, drones can escort tractor-trailers carrying high-value pharmaceuticals or electronics which may deter theft or, alternatively, provide forensic evidence to law enforcement in the event of theft.

Besides its advantages, there are numerous ambiguities inherent. As all these drones take to the sky, what new vertical and digital infrastructure will cities need? What sort of legal frameworks will need to develop, and what digital forms will they take? This is already a contentious issue, which will only become messier unless some careful systems design is not done immediately.

The installation will explore the new infrastructures, such as charging stations, landing perches, nests and data feedback systems, that will emerge as our cities evolve to embrace a new era of ‘smart’ technologies from drones.

But for all the Tomorrow-land wonder of a potential delivery-by-drone service, plenty of issues will be tricky to solve. Drone technology has not been thoroughly tested in populated areas, and commercial use of drones is not allowed in the United States. Even if it were, it is not clear that companies could make a profit using advanced, helicopter-like vehicles to deliver whatever a modern family might need.

The aim of this paper is to provide a comprehensive analysis for utilization of drones as a last mile delivery tool.

In section 2, we give brief information about some of the current implementations of drone delivery by emphasizing the differences among them. In section 3, we analyze the need for drone delivery by stating the current difficulties of the last mile delivery. In section 4, we present security and safety aspects of drone delivery, including public’s perception about drones. In section 5, we will mention the technological restraints of drone delivery. In section 6, we will benchmark the cost of drone delivery with truck delivery. In section 7, we will present how much drone delivery could contribute to the carbon emission prevention efforts. In section 8, we will discuss pros and cons about drone delivery.

 

2. CURRENT EXPERIMENTS

Amazon is working on a new project called “Amazon Prime Air” and trying to use unmanned aerial vehicles as a last-mile delivery solution that could make ultra-fast same-day delivery a reality. Amazon says it wants to offer 30-minute drone delivery for packages of up to five pounds. Top-selling products such as mobiles and books will likely be delivered within 30 minutes.

DHL will use an autonomous quadcopter to deliver small parcels to the German island of Juist. Deliveries will include medication and other goods that may be urgently needed. Flying under 50 meters to avoid entering regulated air traffic corridors, the drone takes a fully automated route to a dedicated landing area on Juist. From there, a DHL courier will then deliver the goods to the recipient. To optimally secure the goods during transport, DHL Parcel developed a special air-transport container that is extremely lightweight as well as weather- and waterproof. Although the flight is automated, the parcelcopter will be constantly monitored by a ground station on the German mainland for safety reasons, and to ensure compliance with the nation’s regulations. The ground station will also liaise with air traffic control. The company has overcome several of the difficulties that Amazon faces in launching its own service: the copters do not have to navigate complex urban and suburban environments, nor do they have to deal with the possibility of vandalism or theft once they land. It is the first time an unmanned aircraft has been authorized to deliver goods in Europe. The test flights to the North Sea Island, home to around 1,700 people, will start from Friday, weather permitting, and will continue until the middle or end of October.

Google Project Wing demonstrated its own drone-based delivery service, using a tail-sitting aircraft design, which combines elements of a helicopter and a fixed-wing airplane to deliver packages including chocolate bars, dog treats and cattle vaccines to farmers in the Australian outback. Google, with its own prototype drone delivery service, may have settled on the ideal design for drone delivery. Rotors are mounted toward the front of the plane, which lift the plane from the ground since it sits with its tail pointed downward. Once it’s in the air, it can reorient itself to fly like a plane, which lets it fly faster than a typical copter design. Using a fixed-wing aircraft, the drone can fly large distances, and has the ability to hover so it doesn’t land at all to deliver the package, instead lowering the items on a tether while it hovers. A fixed-wing drone is more efficient and doesn’t require as much battery power.

In Sydney, Australia, a textbook seller called Zookal plans to use six drones to drop off books at outdoor locations.

A startup called Matternet in Palo Alto, California, launched from Singularity University with $500,000 in seed funding from investors like Andreessen Horowitz, Scott and Cyan Banister and Winklevoss Capital. Matternet, develops transportation networks using unmanned aerial vehicles to delivery of medicines and other supplies to hard-to-access places. The company tested prototypes in the Dominican Republic and Haiti.

CyPhy Works is possibly the leader in this drone technology with their tethered drones having already developed high payload, high wind, and environmentally sealed systems.

Kiva Systems built an entire company on software algorithms and robots for distribution center operations in two dimensions.

 

3. WHY THE NEED FOR DRONES

The last mile delivery plays a crucial role in the supply chain. To ensure cost-effective, last-mile delivery that provides high-quality service for customers is a very difficult task to accomplish flawlessly.

Currently, the global civilian UAV market is worth US$100 billion, given the trend of developing much smaller and smarter drones.

The development of UAVs has driven down the cost of air transportation and the market for UAV applications in the logistics industry is expected to grow significantly.

With the sharp reduction in the manufacturing costs of UAVs in recent years, more and more companies have started using UAVs for business use.

Controlling the last mile is more important than ever. The last mile is the last chance retailers get to influence the final leg of the customer experience. Offering same day delivery to customers is one more way to leave them with a good taste in their mouth about the experience as a whole. The rise of drones for the last mile delivery is the next logical step in ensuring quick, efficient deliveries.

 

 4. SECURITY AND SAFETY ASPECTS

4.1. FAA Regulations

The FAA regulates the National Airspace System (NAS), generally covering up to 60,000 feet. To fly manned aircraft, the FAA has established sets of rules for protecting human life and will probably adopt and apply many of the same principles used for manned aircraft to drones. The FAA is currently working on drone safety and usage rules that are supposed to take effect in 2015.

A package delivery service utilizing drones will likely fall under a type of regulatory framework which generally applies to commercial planes and may require an Air Traffic Control Systems (ATCS) for drones. A drone will have to log into the ATCS and register the operator, drone type, flight path, maintenance records etc. To fly, the drone will also have to comply with fail safe systems that dictate what happens if it loses power, sensors or communications links. In turn, the ATCS provides services such as no fly zone enforcement, flight plan/takeoff approvals, and potential air traffic congestion warnings.

Drones currently fall within a grey area of U.S. law. The FAA has claimed regulatory control over them and given private pilots and hobbyists many of the same freedoms they enjoy with model aircraft while prohibiting businesses from using drones for commercial use. The first change in that policy recently occurred when the FAA, after lobbying from the Motion Picture Association of America, allowed a handful of movie and TV production companies to use drones in a controlled manner on movie sets for filming purposes.

Future regulation of unmanned aerial vehicles will continue to develop at both the state and federal level in the years to come. The FAA is still working on standards for operation and certification, requiring drones to be equipped with “sense and avoid” capabilities, determining operator requirements, and establishing methods to enhance technology and maintain safety. In addition, the Secretary of Transportation is required to publish a final rule on small UAVs, as well as a “notice of proposed rulemaking to implement the recommendations” of the integration plan. The FAA is also responsible for developing and implementing a pilot project, and integrating drones into the national airspace at six test ranges.

4.2. Sense and Avoid Technology: Collision Detection and Avoidance

The FAA has mandated that anyone flying in NAS must have collision detection technology onboard by 2020.

Collision detection algorithms have to figure out if a drone is in danger of hitting something and collision avoidance software has to figure out what to do next. There will be software developed to solve this problem leveraging onboard cameras and sensors to detect potential collisions with onboard processors capable of taking evasive action.

They will be blocked from operating near airports by creating an electronic ‘geo-fence’ around airports to reduce the risk of collision between unmanned and manned aircraft.

4.3. Fleet Management: Air Traffic Control for Drones

If you are going to provide a commercial package delivery service you will have to manage a fleet or a fleet of fleets for drones.

Researchers at NASA are working on ways to manage that menagerie of low-flying aircraft. The agency has been developing a drone traffic management program that would in effect be a separate air traffic control system for things that fly low to the ground – around 400 to 500 feet for most drones.

Just like the air traffic control systems for normal aircrafts, the system that NASA is developing will be able to monitor the air space for traffic and weather conditions. This is particularly important because, due to the light weight of drones, strong winds pose as a hazard to the machines. NASA’s system will also ensure that the drones will not collide into structures or other low-flying things such as news helicopters. The system will also enforce no-fly areas, such as locations near major airports. In addition, similar to the unmanned flights of the drones, the air traffic control center that NASA is developing will also have no people managing it. Instead, the center will be run entirely by computers and human-generated algorithms.

4.4. Safety of the Drone

We are talking about all different weather conditions, over very difficult terrain and winds. It requires quite a bit of testing to execute on those things.

This time DHL had the drone deliver medical supplies from the city of Norden to Juist, a remote island off the country’s coast. Not only is this a 12-kilometer trip, but the area around the island has harsher weather conditions. In fact, the first flight scheduled for September 25 was postponed due to wind, and another mission was canceled today for the same reason. Of the 10 missions to Juist so far, two were postponed. What can this 20 percent cancellation rate due to wind mean for widespread use of delivery drones?

The weather conditions always play an important role and the technology has to be adapted and somehow developed so that the drones can fly longer, especially in heavy winds.”

These things are proposing to fly at low altitudes.  Low-level airspace may at first appear to be something equivalent to unregulated spectrum, the type that’s used for WiFi signals in hotspots at Starbucks.  But in fact, the Federal Aviation Administration (FAA) is quite interested in this hotly contested layer, which must be shared with all sorts of things: birds, wind farms, flagpoles, buildings, kites, and power lines, not to mention the hot-air balloons of Albuquerque and Phoenix.

Given the fact that these things have spinning blades, could be stolen, shot at or batted like piñatas.

4.5. Safety of the Package Delivered

The ability to stop and hover is in no way unique to Project Wing, but it is the key feature for delivering packages, and it’s why most drones feature a helicopter or ducted-fan design. After all, most customers won’t have room for a runway for a drone to land on, and parachuting packages from above isn’t really an option. Google tried it and found that wind affected precise targeting too much.

Google apparently agrees, which is why it decided to add a winch to the drone to perform the actual delivery. The tail-sitting design allows the drone to hover over the delivery target, then drop the item, attached to a fishing line, letting gravity pull it down at 10 meters per second (m/s). When it gets close to the ground, it slows things down to 2 m/s.

Once it gets to Earth, it releases the package and retracts the cable, leaving the drone high in the air and away from any potentially meddling hands. Conversely, Amazon’s drop-ship approach isn’t inherently unsafe, but it does introduce a wild card that Project Wing doesn’t.

Only, Mr. Jones lives in a dicey neighborhood, where many fathers of family have been out of work since 2008, and the economy has turned rather “informal.”  He’s concerned that his delivery might not make it.  He lives on the fifth floor of a walkup.  The octocopter is not going to land on his fire escape; it’s going to come to earth somewhere near the front stoop.

But Amazon is clever and has played out this scenario in development labs, allowing Mr. Jones to click a box on his order that says to text him five minutes before the order is set to arrive.  Thus, he has time to get downstairs before one of his neighbors makes off with his goodies.  And Amazon gets to harvest his cell phone number.

4.6. Safety of the People

In Amazon’s teaser video for Prime Air, a drone first lands in front of a house, drops its payload, then flies off a few seconds later. It’s very simple, although some people criticized the depiction, saying that anything with rotating blades will be tempting to kids and curious onlookers, which represents a safety risk.

For home delivery to work safely and ubiquitously, it would mean avoiding every power line on a suburban street, deciphering satellite maps to decide what precise spot on a property to land, and making sure a drone didn’t hit an errant child or dog.

 

4.7. Privacy Concerns

Clear rules must be set that protect the privacy and safety of the public.

Critics of the Act fear that it will allow the government and private parties to trample the privacy rights of individuals. Most of these concerns center around increased warrantless arrests and advances in spying capabilities. The two main potential claims that could arise due to drone usage are either: (1) violation of the Fourth Amendment or (2) invasion of the common law right of privacy.

Under the Fourth Amendment to the U.S. Constitution, citizens have the right “to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures.” The Fourth Amendment also requires probable cause before a search warrant may be issued.

As law enforcement agencies continue to purchase drones, citizens fear overuse by the government and possible mass surveillance. In a line of cases decided by the U.S. Supreme Court, the Fourth Amendment has been construed to allow law enforcement to use aircraft and aerial photography to gather evidence without a warrant so long as sense-enhancing equipment is not used to peer into the otherwise private confines of homes and structures. The rationale is that if the police could drive by and see something in plain view in a citizen’s front yard or even through a window, then there is no expectation of privacy in such areas; and, therefore, since aircraft have become ubiquitous, views from the sky are analogous to views from the street. Gauging constitutional privacy rights by the ubiquity of the surveillance method does not bode well for privacy advocates in the face of the mushrooming interest in and availability of drones.

Indeed, surveillance drones are not much different from satellites, store security and traffic cameras, and smartphone GPS tracking devices. The only Supreme Court case mentioning privacy issues related to satellite surveillance is Dow and the Court’s dicta merely says “that surveillance of private property by using highly sophisticated surveillance equipment not generally available to the public, such as satellite technology, might be constitutionally proscribed absent a warrant.” This language leaves unanswered the question of whether such surveillance would be legal if generally available to the public. The legal world as it relates to drones is a wide-open frontier, and exactly how drones will affect Fourth Amendment and privacy rights is yet to be seen.

Apart from privacy concerns relating to potential government spying, the prospect of high-tech nosy neighbors, employers, and private investigators has raised concern. The scope of privacy rights has historically been both ill-defined and constantly evolving. Different states have different privacy protections established by statute or common law. In addition to criminal wire-tapping, eavesdropping and surveillance statutes, private common law claims of invasion of privacy can encompass four loosely related but distinct torts:

1) intrusion upon another’s seclusion or solitude, or into his private affairs;

2) public disclosure of embarrassing private facts about another;

3) publicity which places another in a false light in the public eye; and

4) appropriation of another’s name and likeness.

Of course, there is a fair bit of irony in the fact that someone damaged by another’s invasion of privacy or intrusion upon seclusion is forced to file a very public lawsuit in court to vindicate their privacy rights.

But the government, represented by the FAA, ought to be all in favor of Bezos’s plan because, once the citizenry is used to seeing these things in the sky, it’s that much easier for the National Security Agency (NSA) to put one up there that mimics the Amazon drone.  After all, mimicry is established kit for the NSA.  Field agents mimic journalists and diplomats every day.

 

5. RESTRAINTS

5.1. Speed Limits

Google’s drone would theoretically have a longer range than Amazon’s Prime Air drone, which uses a typical octocopter design. Amazon CEO Jeff Bezos has said the current range of the company’s test drones is 10 miles, although that program is in the early stages as well. Google declined to give any kind of range spec for the Project Wing drones, but a spokesperson did say one of the reasons it picked a tail-sitting design was the increased range.

Amazon’s model was a 10-mile radius – five pounds within 30 minutes – which they estimate that is about 80% of the things they deliver. Google plans to deliver to the places like the Outback, where you’ve got 100 miles to deliver something, where it’s very costly to deliver a five-pound package and also when  this is the way to get those long distances.

5.2 Battery Technology

In order to minimize the time for battery charging, we assume that there is one spare battery for each drone charged and ready. It is something like a battery pool. When drone’s battery is about to die, its battery is replaced with the spare battery which is already charged, and during its flight, the empty battery will be charged and get ready for next replacement.

Wireless charging for drones is a likely scenario, yet not announced so far. Otherwise additional labor force will be required to replace batteries for charging.

The Matternet vision includes a network of hubs where drones could recharge for longer-range flights, and provide services like medicine or farm-supplies to be delivered to people in remote parts of developing countries.

 

6. COST ANALYSIS

A delivery truck costs between $45,000 and $80,000, with 200,000 miles life expectancy, truck’s cost per mile will be $0.23 – $0.40. The truck will burn approximately 0.06 gallon fuel per mile which cost $0.18. The driver’s hourly cost is about $35 including %25 fringe benefit rate. If we assume that the driver will deliver 175 packages per day, the cost of each delivery will be around $1.69 – $1.83.

As it comes to drones, a drone costs around $3000 – $5000. With the advancement of drone technology and after the establishment of production lines, the cost of the drone will likely drop gradually in time. But a delivery drone must have capabilities to fly autonomously. Otherwise each drone carrying only one package will require a pilot and eventually this would skyrocket the price per delivery. So we assume that the average cost of a delivery drone is $5000, with 5000 hours life expectancy, drone’s cost per hour will be $1. When we add maintenance and battery charge costs to that, it will be $1.5 per hour. A drone can nearly make 2 deliveries per hour at maximum. The cost of drone delivery will be around $0.75.

The commercial viability of delivery drones would depend heavily on two things: how many people live in the area and how much people are willing to pay for the service.

From a post-operation standpoint, companies have to plan on how to maintain, repair, and store the drone.

We should keep in mind that, although some items will be delivered by drones within a 10 mile, trucks will be used also since everybody won’t order only drone deliveries they will also order for truck delivery, and also there is a size limit for drone deliveries. Moreover the number of the items delivered by truck will go down, because those items will be delivered by drones. This will decrease the efficiency of truck delivery (increase the cost of truck delivery).

Customer will likely to pay the Cost per Delivery for Truck for every item ordered for drone delivery. This item will be delivered by a drone instead of being delivered by the truck, since all costs except the fuel cost are constant, company will ask costumers to pay the cost of truck delivery in the name of drone delivery price.

 

7. GREEN SUPPLY CHAIN: CARBON EMISSIONS

The fleet emission average for delivery vans, trucks and big rigs is 10.17 kg CO2 per gallon of diesel consumed. Delivery vans and trucks average about 7.8 mpg (or 1.3 kg of CO2 per mile) while big rigs average about 5.3 mpg (or 1.92 kg of CO2 per mile).

Amazon drives a big truck to the outskirts of town, unloads the drones, and they go run a bunch of final drops. The roads will be less crowded. You’ll have less pollution.

 

8. DISCUSSIONS

8.1 Where to deliver in largely populated areas

MatterNet launched from Singularity University with $500,000 in seed funding, along with a second drone-delivery startup, Aria Logistics, which aims to build an autonomous logistics infrastructure. MatterNet envisions delivering packages to predetermined “pads”— rather than dropping them on the front walkway to a house, as was depicted in an Amazon demonstration video.

 

9. CONCLUSIONS

Drones have to be integrated with the existing NAS regulations. Flying a drone in the presence of a trained drone operator that maintains visual contact with the drone is easier to regulate and hence mostly likely to be legalized first.

One at a time you can make them work and keep them safe. But when you have a number of them in operation in the same airspace, there is no infrastructure to support it.

Over time – perhaps within five years – one can expect drones to make deliveries to sparsely populated areas, like rural Australia, where Google spent part of August delivering things like cattle vaccines and candy bars to a farmer.

• Drones currently fall within a grey area of U.S. law
• Drones must be integrated with the existing NAS regulations
• Comparative costs between truck and drone for last mile delivery must be recognized
• Deployment based on population density must be managed
• Vertical integration opportunities (film production) also exist
• Hub and spoke deployment patterns should be developed/exploited
• Maintenance infrastructure must be developed and should be scalable