STEEP: UAV Delivery Could Change Retail, Healthcare Landscapes

This is Part 2 of the content series STEEP: Five Drivers of Change in Supply Chain. The series analyzes Social, Technological, Environmental, Economic and Political issues in the supply chain industry to gain a deeper insight. To see an overview of the series, click here.

Shopping online is a fairly normal experience these days, and if the likes of some of America’s biggest retailers are to be believed, the days of people shopping online and receiving their purchases at the doorstep in a time frame that compares with going out to the store are not that far away.

Unmanned Aerial Vehicle (UAV) delivery has long been touted as the wave of the future as major retail and shipping companies look for new ways to maximize convenience and lower labor costs. However, questions still remain over the ability of UAVs to carry significant amounts of weight, traverse long distances and protect the cargo they carry.

Companies such as Amazon, Wal-Mart and Google aren’t backing down from the challenge. All three companies have made bold projections for the near future concerning UAV delivery programs and are currently testing prototypes while pushing the Federal Aviation Administration (FAA) to create a regulatory framework that would allow them to test these systems inside the United States.

Logistical Issues

Among those expressing concern over the use of UAV technology is United Parcel Service (UPS) President of U.S. Operations Myron Gray. According to The Times-Picayune, Gray was hesitant to buy-in to the prospect of UAV delivery services during a 2015 speaking engagement in New Orleans.

Pointing to a need for density and scale to turn a profit in the business of transporting goods, Gray said he didn’t see UAVs as being viable just yet.

That is because the current capability of UAVs limits them to carrying one package at a time. From a cost and logistics perspective, that is not a realistic path forward for shippers. According to Gray, efficient delivery that would allow companies like his to replace the human labor force that currently delivers packages via truck would require thousands of UAVs to be in the air at any given time.

A simple YouTube search for UAV collisions may leave skeptics with doubts about the potential of this technology, to say nothing of what happens when the package receiver’s dog attacks a UAV or the delivery system hits a bird. What ensures safe delivery and the safety of the UAV itself, which experts believe will cost up to $3,000 per vehicle, remains to be seen.

Undoubtedly, these are all factors that these major companies are considering, but the hurdle that is still proving most difficult to clear is the FAA. Currently, all of Washington D.C. is a no fly zone for UAVs. In other places, pilots are forbidden from flying the craft at an altitude of more than 500 feet, which is likely to apply to delivery UAVs as well.

In 2016, the FAA introduced new regulations for commercial UAVs, which industry experts say should make it easier for companies to use small vehicles. Under the new rules, UAVs can carry packages as long as the combined weight of the aircraft and the package is no more than 55 pounds. In addition, anyone over 16-years old can operate a UAV, as long as they pass a background check and an aeronautical knowledge test at an FAA-approved facility. Finally, operators can fly only during the day and within visual line of sight.

UAVs are not permitted to fly higher than 400 feet above the ground and they cannot exceed 100 mph. The FAA does allow companies to apply for a waiver of certain operation restrictions so long as they can guarantee the safety of the proposal. According to The Los Angeles Times, the FAA has already approved 76 waivers, many of which involve commercial operations at night.

In attempts to clear the regulatory red tape, Google has gone as far as reaching out to NASA for help in getting its Project Wing program off the ground. The company is aiming to have deliveries take place in 2017 and along with Amazon, are in talks with the FAA to set up air traffic control for UAVs as well as a registry.

David Vos, the head of Google’s Project Wing initiative, is hoping to see a low altitude airspace carved out that will keep UAVs away from the majority of manned aircraft and allow the delivery vehicles to fly over populated areas. Companies would use wireless communication to set up flights that liaise with air traffic control for manned aircraft that could still pose a problem, such as helicopters.

The amount of traffic is a concern. It will take a sophisticated network to coordinate UAV flights and certainly, some human supervision will be required. Amazon has estimated that more than 85% of what it ships could be delivered by UAV, or roughly 400 million packages per year that could be delivered using these vehicles.

Regulating traffic is only one issue. Other questions include concerns about falling drones, package theft, concerns over ability to fly through inclement weather, and the security of the system that operates the UAVs. In order to get these programs off the ground, there is still an incredible amount of logistics questions to address and research to be done.

Why Do Companies Want This?

Given the potential pitfalls, some may be asking why these companies are pursuing UAV delivery with such fervency. The answer is simple – economics.

Even when considering the initial costs of launching a drone delivery program, companies have realized they can quickly turn a profit on the investment.

According to a 2015 analysis of an estimated plan for Amazon’s Prime Air by ARK Invest analyst Tasha Keeney, Amazon could deliver packages via UAV for just one dollar, assuming that 25% of all the deliveries UAVs could handle occur within a 10-mile distance of an Amazon distribution facility. This requires an estimated $130 million investment for a fleet of 30,000-to-40,000 vehicles, a stockpile of extra batteries and the cost of updating current fulfillment centers with new equipment.

In addition, add a $350 million budget for operations to cover the cost of data used by UAVs when streaming video back to operators who can intervene to manually land them, as well as the labor costs of those operators. All things combined, the company would only have to deliver the estimated 400 million packages per year that it believes it can via UAV to turn a profit in just a few years’ time.

But Amazon and Google may not be the first to arrive at a viable UAV delivery service. German shipping company DHL has already used one to deliver medicine to a remote North Sea island and is considering a system in which UAVs deliver to already existing parcel lockers, where customers receive a personalized code to open a locker containing their package at a pickup station. By doing so, the company is looking to avoid the possibility of collisions or landing in locations where external factors are unknown.

Drones and Medicine

DHL’s successful delivery of medicine is part of a broader conversation about how UAVs can be used to change the supply chain of medicine.

Concerns over the ability of UAVs to delivery blood samples from collection points to testing facilities, without compromising the sample due to issues from air pressure or turbulence, have been eased after positive results in early tests. Test flights involving blood have been successful for flights up to 35 minutes.

With packaging capable of absorbing a specimen should it be compromised by a crash, there is less concern over the safety of transporting biological materials.

Currently, traffic and poor road conditions are often major concerns in the transport of medical supplies or biological material, a hurdle UAVS would essentially eliminate.

Companies are now looking at what effect UAVs could have on emergency treatment as well. For example, can a defibrillator be flown to the location of a heart attack patient quicker than an ambulance can get to them?

In the U.S., startup companies have formed to test what effect UAVs could have in the pharmaceutical space inside the United States.

QuiQui, pronounced kwi-key, is a San Francisco-based startup looking to implement a mobile app specifically for residents of San Francisco’s Mission District. The app’s purpose is to serve people in need of medicine with 24-hour access to pharmaceutical delivery. For someone too sick to go to the drug store, this could prove to be a game-changer. With a few clicks on the app, a QuiQui UAV can go to the pharmacy for them, pick up a prescription and bring it to their doorstep.

To the average person, all of this might sound like something out of an episode of The Jetsons, but UAV delivery of medical supplies is already being used in the African country of Rwanda. Silicon Valley startup Zipline International started flying in 2016 through a partnership with the Rwandan government. In a country with high infant mortality rates, the delivery of drugs and medical supplies remains one of the biggest obstacles to improving Rwanda’s burgeoning healthcare industry.

The Zipline system uses the nation’s cellular network and GPS to navigate journeys up to 75 miles long. The vehicles, called Zips, weigh approximately 22 pounds and are wind and rain resistant. They deliver blood, plasma or medicine by dropping it at low altitude and deploying a parachute. The system is set up so hospitals can order what they need via text message and have it delivered within 30 minutes, according to Zipline estimates. With such short trips, there is little need for insulation or refrigeration.

The Rwandan experience using the technology could prove important to U.S. implementation as well. The African nation’s government expects to complete a network of UAV airports to provide further infrastructure by 2020.

Back in the United States, the first fully autonomous delivery was made in 2015, when Australian startup Flirtey took small medical packages that had originally been delivered by a remote-controlled NASA aircraft in bulk, from an airport in Wise, Virginia to the Wise County Fairgrounds. The delivery is completed after the UAV lowers the packages via a cord.

Flirtey’s UAV has built-in safety features such as low battery return to safe location and auto return in the case of low GPS signals, communication loss and heavy winds. While it is still a long way from becoming an everyday reality, the day a robotic vehicle descends from the sky and delivers what you need is moving further away from being a fantasy every day.


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