Last mile delivery is the final leg of the supply chain and, more than often, it’s the most painful part of the walk for retailers.
It’s time-consuming and expensive: 30 percent to 40 percent of the cost of delivery comes in the last mile. But by 2017, online retail will make up 10 percent of all purchases — so this issue is too important for online retailers to ignore.
That’s specifically why giants of the online business who possess strong economic and technological muscles are burning their midnight oil to come up with a solution that is feasible, durable and economical.
Recreating Delivery Options
Amazon is trying to break away from the traditional parcel system. To make proper use of its massive distribution network, it started out with its own private fleet of trucks to make deliveries.
This helped in two ways. One, it gave Amazon much needed flexibility in delivery time. Second, it resulted in the waning of their overall shipping cost as they were not paying UPS, FedEx or the Postal Service.
But soon Amazon realized that it needed something more innovative and path-breaking. That’s when it came up with an idea which is still considered more fantasy than reality: the use of drones for deliveries.
Gur Kimchi, the Amazon executive in charge of its Prime Air drone project, claims the move is logical. Drones take highway congestion out of the equation. Drones will expand Amazon’s boundaries, enabling it to explore and penetrate untapped ones.
Plus, to ensure security, drones are equipped with the “sense and avoid” technology which will (theoretically) keep obstacles or potential threats at bay.
Drones can easily carry weight of five pounds for 15 miles at speeds of up to 60 mph. Amazon estimates it can transfer almost 80 percent to 90 percent of its deliveries via drones, reducing its delivery costs to less than $1 per package, or as little as 10 cents per mile.
Google, Walmart and More
It’s not just Amazon working on this technology. Google is a big player, too, and Walmart has already filed documents with regulators.
A startup called Matternet has been performing drone deliveries of medical supplies and specimens in places like Switzerland, Haiti, and the Dominican Republic since 2011.
The Swiss and French governments, meanwhile, are testing delivering mail by drone. Australian company Flirtey made history last July by making the first drone delivery in the US approved by the Federal Aviation Administration (FAA).
Challenges to Drone Delivery
Drones are efficient, but their future doesn’t exactly look rosy. There are too many hurdles in their implementation, the biggest of which is regulation. The FAA, which supervises American airspace, is taking a lot of time in chalking out unambiguous guidelines for the commercial use of drones.
But even if those guidelines come into existence, drones are not allowed to fly inside five miles of an airport without special permission. It means that certain shoppers in cities with relatively central airports, like New York City or Los Angeles, will not have the luxury of drone delivery.
Amazon has a proposal to allow certain designated airspace for low- and high-speed drones, but this is not very helpful as it would still violate the above-mentioned law.
Digging deeper, concerns regarding drone’s feasibility are even more complex. There are questions regarding its technology: Many experts are whispering in hushed voices that lithium ion batteries, which are commonly used in commercial drones, may struggle to provide enough power.
This concern is particularly relevant when the weight of the parcel is high and the distance to be travelled is fairly long.
Another point, perhaps the most important one, is pricing. It’s quite possible that companies like Amazon or Walmart may charge a premium for this near-instant delivery style. Or they may offer a trial version of drone delivery for free or at discounted rates until their drone systems emerge from infancy.
Drone delivery faces a turbulent and cloudy future. But commercial airflight took time to become mainstream, too.
Who knows? Drone delivery may one day be as common as a package from FedEx or UPS.