Drones have the potential to play a significant role in the future of the logistics industry, but whether they become the dominant mode of transportation depends on several factors, including technological advancements, regulatory changes, and economic considerations.
How Drones are Being Used
Drones or unmanned aerial vehicles (UAVs) are attracting increasing amounts of attention, with the global drone logistics and transport market set to grow exponentially in the next few years. Highly versatile, they have multiple areas of application from crop spraying and livestock tracking to defence and security but for almost a decade they have been seen as a potential new mode of delivery for logistics organisations.
Most of us are familiar with lighter drones used for sport, tourism and filmmaking but they come in all shapes and sizes with drone technology applications expanding rapidly in terms of range, propulsion type, infrastructure requirements and load/seat capacity.
Cargo drones, those used for commercial purposes, come in small, mid- and large sizes and they are used in several ways:
- Hub-to-hub within warehouses
- Last mile supply chain delivery, which involves slightly longer distances where packages are transported from a distribution centre to the final destination, often in urban areas. Drones can also be launched off the back of a delivery truck
- Truck, rail and ship loading/offloading (especially useful in congested areas)
- Intra/intercity delivery, which involves longer distances.
Whilst particularly well suited for last-mile delivery, intercity delivery is still in its infancy due to the challenge of range limitations, economics and regulatory hurdles. Cracking this could prove to be the game changer for the industry.
Efficiency and Cost Savings
Drones have the potential to be more cost-effective and efficient for certain types of deliveries:
- Minimising labour costs and reducing a company’s reliance on human availability, which could be particularly appealing in an era of chronic driver shortages.
- Drastically reducing shipping costs and transportation expenses related to trucks, such as, maintenance costs, fuel and insurance. (As an example, Amazon’s Prime Air delivery drones could be expected to ship out parcels directly from warehouses to the customer within 30 minutes for a minimal price of USD 1.00, much cheaper than Amazon Prime delivery costs at USD 5.99 and with a much longer delivery.
- Eliminating issues pertaining to returns of delivered goods, aiding a decrease in return time cycles with faster turnaround time translating to rapid return claims and better customer experience.
- Ability to reach remote or hard to access locations where traditional transportation methods might be impractical or expensive.
- Drones having a much smaller carbon footprint compared to traditional delivery vehicles, which aligns well with the growing emphasis on sustainability in logistic.
- Time saved loading trucks and on roads with drones being able to pick the order, load it up and head directly to the customer and avoiding worsening traffic congestion.
- Drones can also be used to conduct real-time stock checks and help with inventory management when used with AI.
Economic Viability and Attractiveness for Market Participants
So, what is making the use of drones economically viable and attractive for market participants?
Batteries
The falling price of lithium-ion batteries has helped to optimise drone cost and performance. Advances are leading to lighter, more powerful batteries and smaller drones with a higher lifting capacity. This will allow drones to fly further for longer leading to many new use cases and applications.
Autonomous and AI Technology (sense and avoid systems along with cloud computing)
Data collection is done via electronic components, such as sensors, and then the AI decides and controls the response to that data without the need for human intervention. The drones are getting smarter.
Growth and Investment
The global drone logistics and transportation market was worth $7.5bn in 2020. According to Emergen Research, that figure will reach $32bn by 2028. This growth can be attributed to rising demand for on-site, on-time industrial delivery and emergency supplies combined with changes to the regulatory framework in some countries that allows drones to operate beyond visual line of sight. The continued development of disruptive technologies such as autonomous and AI will further contribute to this growth. This growth has in turn attracted investors.
Current Restraints
Batteries
Despite advancements, drone flight time remains a major concern and lithium batteries offer limited back-up during flight. Battery manufacturers use smart programming to extend battery service life meaning these batteries discharge until power reaches 30% of storage capacity, thus preventing drones achieving full flight time.
Regulation
Policy makers must establish a clear set of guidelines for their safe and efficient use, especially beyond visual line of sight. Rules and guidelines are needed on how to navigate drones within designated air space and on technical standards, such as 5G, for communications with drone operators.
To date, regulatory bodies around the world have cautiously permitted limited commercial drone operations.
- Bulgarian start-up Dronamics has developed a fixed-wing cargo drone capable of carrying a 350kg payload, enabling same day delivery over a distance up to 1,553 miles. They have recently signed a partnership agreement with DHL and received an EU licence to self-authorize flights.
- In the US, drone delivery service company Zipline received federal certification in 2022 to operate as a small air carrier, allowing it to expand existing e-commerce and pharmaceutical delivery operations.
- South African start-up Cloudline was recently granted permission by the Kenyan government to test its autonomous blimp-like airships to deliver 100kg payloads carbon free to less accessible regions.
Public Acceptance
In order to integrate drones into our daily lives, the industry needs clear guidance on the safe and practical flight of drones over people and their houses. Consideration will need to be given to visual and noise pollution. Another legal area that needs time to develop is where the liability falls regarding drone delivery. If a drone crashes, who is responsible for the cost of replacing the product and what about a drone falling out of the sky and hurting somebody because of a technical or operational glitch?
Capacity
One of the main challenges facing companies wanting to use drones to reduce shipping costs is capacity. Small drones currently in use in the logistics sector do not have the capacity to carry increased goods volumes.
Californian start-up Natilus is working on fuel-powered, large-scale drones to address this issue. The planned cargo planes will cost about one-tenth of a crewed freight aircraft and transoceanic trips would cost about half as much as standard air freight. The company hopes to balance speed with cost, shipping time sensitive freight that isn’t valuable enough to fly, for example perishable food. The craft would carry 100 tonnes in freight containers and unit load devices. It would be towed from a seaport outside of territorial waters to take-off. It would fly across the Pacific Ocean in 30 hours at 20,000 ft, well below passenger air traffic and would be towed to a seaport after landing.
The production cost would be much lower than jetliners due to fewer onboard systems and no pilots. It would be powered by jet engines. As of March 2023, the product range consisted of three variants capable of carrying from 3.8 tonnes to 100 tonnes with ranges from 900 nautical miles to 5,400 nautical miles. The aircraft would have an autopilot, with a ground based human pilot able to control up to three vehicles.
Security
Drones are very much like flying computers. They have operating systems, network connections and hardware which all have programmed code. It can be just as easy to hack into as a computer and cybersecurity is an area of real concern.
Drone Corridors
The UK government has been developing the idea of drone corridors to be rolled out across the country to make the delivery of goods smoother and faster and bringing more certainty to supply chains. In mid-2022 it gave approval for Project Skyway, the creation of a 265km unmanned aerial vehicle (UAV) or drone corridor. Whilst not visible, it can be thought of as an actual corridor in the air with a ceiling, sides and floor. According to PwC’s Skies Without Limits v2.0 report, adopting these corridors could result in £22bn of net cost saving in the UK up until 2030, a reduction in carbon emissions of 2.4 million tonnes in that time and the creation of 650,000 jobs. The report estimates that more than 900,000 drones could operate in the UK skies.
Conclusion
Drone technology is still in its infancy and the full implementation of drones and drone corridors faces many challenges. Drones have the potential to revolutionize the logistics industry, especially in the context of last-mile delivery and remote access. However, their widespread adoption will depend on overcoming regulatory challenges, technological advancements, and economic viability. It’s likely that drones will be a part of the future logistics ecosystem alongside other emerging technologies, such as, autonomous vehicles and robotics, which will also compete for a share of the market. It’s certainly getting the attention of investors and industry leaders like Amazon and DHL are already experimenting to see where it might take them.