In the first blog in the AI transportation and logistics (T&L) series, I featured AI transformation innovations at Purolator; the second blog focused on the acceleration of smarter AI telematics in fleet management. The third blog explored AI emotion sensors and the impact that the affective computing market is having on the transportation and logistics industry. The fourth blog discussed AI revenue growth and operational optimization use cases to ensure that your T&L company is positioned for accelerated growth. This fifth blog and is looking at the impact of robotic drones.
AI : Robotic Drones – Why is this important?
First the drone logistics and transportation market is estimated by Precedence Research to surpass US$ 41.4B by 2030 and is growing at a CAGR of 21.2% from 2021 to 2030. According to Precedence Research, the drone logistics and transportation market size was valued at US$ 8.7 billion in 2020. Drones are defined as unmanned aerial vehicles that can be operated from a remote area. These unmanned aerial vehicles are used for various purposes such as in delivery services, border surveillance, combat operations and many others. The delivery services provided by the commercial drones are more cost effective and time efficient in nature. It has an accurate locating program that enables the accurate location of the consumer and this helps in delivering the packages faster. With the advancement of technologies, innovative features can be added to the drones that improves their efficiency. All these attributes of the drones is expected to drive the growth of the drone logistics and transportation market.
Unmanned aerial vehicles are expected to generate $82 billion in economic growth by 2025 along with 100,000 jobs. Despite recent regulations, the USA Federal Aviation Administration (FAA) has issued hundreds of waivers to companies interested in commercial drone use. While drones will impact a number of industries, they will have the greatest impact on supply chain and logistics. Some of the rulings require special notice and awareness on some of the go to market complexities in building drones.
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, and
· Flying with less than 3 statute miles of visibility.
Key factors driving the growth of drones and delivery services of the logistics industry are:
- wide-scale use of drone in diverse sectors such as: warehousing, manufacturing, distribution facilities and many others.
- rapid innovation in the drone technology making them work and energy efficient.
- use of drones by the defense organization for combat operations across the world.
- use of drones in in mining operations, land survey operations, agriculture land and crop inspections, and
- use of drones in consumer grocery, or package 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 very fast, and cost-effective, two disruptive value propositions to transform business last mile delivery models.
In 2013, Jeff Bezos unveiled Amazon’s drone delivery ambitions on “60 Minutes.” Clearly Bezos vision is always ahead of the market. Amazon announced Prime Air in 2016 would deliver products to customers in less than thirty minutes and be operational by 2020/2021 and that drones would take customer service to the next level. The promise was that drones would use significantly less manpower, thereby reducing long-term costs. This reality has however had a major set-back as hundreds of Prime Air employees in the UK have lost their jobs, and management has been regrouping and refining their drone launch strategy. I have no doubt Amazon will get this right as failure is a key innovation learning foundation to build more focus and resilience, and Amazon can afford a drone consumer delivery timing release set back. Not everyone has this innovation market rethink luxury. They will relaunch and I expect to see major developments in their prime drone market offerings by 2025, if not sooner.
Areas that are being very successful with drone deliveries are in modernizing warehouse operations. Warehouses are acutely aware of the supply chain time crunches and the importance of efficient processes like picking, packaging and shipping. Every second counts. 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 and more importantly revenue is not being optimized.
Drone delivery impacts more than the transportation of goods. It impacts how warehouses and distribution centers are designed and laid out.
The obvious change will be the size of docks. Warehouse managers will no longer need extremely large docks to accommodate fleets of trucks. Drones are completely transforming the concept of warehouses and distribution centers and create “dark” fulfilment centers, with limited human involvement.
How? Already Amazon has a 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 the 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.
A little history is always helpful. Drones have existed for more than two decades, with their roots dating back to World War I, when both France and The United States developed automatic, unmanned airplanes. The last few years drones have demonstrated many multiple functions. Indian drone start-ups have been able to detect mosquito breeding grounds to help eradicate blood-borne illnesses, and even deliver fast food to local communities in a safe and reliable way.
Companies like Amazon have already reduced “click to ship” time from 60-75 minutes with a human to 15 minutes with warehouse drones; additionally, Amazon’s drone enabled warehouses carry 50% more inventory per square foot and have 20% lower operating costs, a savings of $22 million per warehouse for 13 warehouses.
If you are a CEO or a Board Director of a transportation and logistics company, where do drones fit into your innovation strategy?
Are you ready for this digital end to end fully connected enterprise reality?