Thought Leadership


Drones Won’t Help With Your Distribution Management

Amazon has sent a letter to the Federal Aviation Administration requesting the ability to test drones. This would require the FAA to change its current stance where drones can only be used by hobbyists for non-commercial operation.

The company says it already has the ability to deliver packages under 5 pounds at speeds of 50 miles per hour. It’s first requesting the FAA allow it to practice test flights above the land it already owns, with future extensions to nearby areas for deliveries to consumer homes and businesses.

Amazon is pressing the FAA to use some of the exceptions it is allowed for companies that innovate in the space of small aircrafts and unmanned aircrafts. The plea has been largely public, and each major push by Amazon has resulted in a rise in its stock price, even if just for a little while.

With Amazon’s request, many other companies are expressing interest in the drone space, including some manufacturers and logistics service providers. Unfortunately for these companies, pushing ahead into the space may be a case of following of panning for fool’s gold.

There are a number of considerations you need to make when realistically putting a drone program on the table. 

Mapping and Controls

The most expensive aspect of a drone program will likely be the mapping and GPS sensors and programs required to make proper deliveries, whether you’re copying Amazon’s proposed 10-mile delivery radius or just moving goods around your warehouse or campus.

Drones will need the ability to match an address with a specific GPS coordinates and use advanced optics and recognition to determine a safe delivery location. They also need the ability to visually verify that the location is clear of obstructions.

Amazon plans to develop its own geo-fencing technology that will keep its drones below an altitude of 400 feet and moving along a specified route. It’s an improvement on existing software that hobbyists use to keep drones away from power lines and airports.

Does your distribution management or overall distribution operation have a consistent budget for this investment and for the team to manage both drones and their software? Is there any need for this advanced GPS system outside of your drones or is the heavy investment just for a single mode that can’t be applied to multi-modal moves?

Neither Snow Nor Rain

The most essential piece of distribution management is getting your goods from point A to B. Logistics and manufacturing companies are prioritizing shipping by streamlining operations and running a leaner distribution channel.

Drones can negate that lean operation very quickly once clouds forms overhead.

Amazon says its drones will need to fly at an altitude of at least 300 feet, making them susceptible to lightning and high, shifting winds. Drones also struggle with other inclement weather, especially sleet and snow. Even heavy precipitation can ground drone delivery.

This will introduce a significant cost into Amazon’s processing because it’s touting the drone delivery service as a quick delivery option. Weather that grounds these drones means packages will need to move to a van that can’t have otherwise dedicated cargo.

The contingency plans needed mean you’ll have excess equipment that can’t be fully utilized: either the vans when drones are in flight or the drones when weather grounds them. Add in the space you’ll need for drones to return cargo and the workers to move goods from drones to vans, and it’s one costly logistics headache. 

Proper Understanding

How much do you know about Class G airspace?

That’s where Amazon plans to fly its drones and it’ll need new employees with proper licenses to operate in that space. Does your lean distribution management have room for that training cost or to hire professionals with a skillset you can only apply in one new case?

What about loss prevention in the field? 

Modern distribution management focuses on having as little extra inventory as possible. Amazon and other drone delivery services will need to increase their inventory to address coming customer complaints of mislaid packages as well as a new round of theft that may be hard to deter.

The company has said it’s working on protections and the ability to drop packages to avoid significant damage to the drone. However, if this occurs during a delivery, how is the end customer affected? 

If theft is common, Amazon may have to pass on some of that cost to the customers of its new service. How much are customers willing to pay for something that’s “cool” but not potentially as practical?

Getting in to the drone business comes with a lot of new understanding and application of human understanding in a new space. The business case for drones means developing this level of understanding and finding it all worthwhile; a potential problem with the thin margins that often exist in the logistics and manufacturing space.

Do Your Customers Want It?

Drones only work when the customer is willing to receive it and the drone makes the process more convenient.

Russian drone company CopterExpress has outfitted a Russian pizza company with a set of test drones that can deliver a pizza in a single market. These drones offer no communication with those outside and feature no payment options, so they’re being used for pre-paid pies. 

This means the current generation of drones doesn’t have strong interaction capabilities, so your customer will need to have people receiving your goods and communicating with you in real-time through another medium, such as the phone. Is this more convenient? If this becomes standard, are you going to ask customer to make an investment in RFID gateways or other technology to confirm receipt of goods?

According to Dodo Pizza, drones haven’t cut down its delivery time but they have allowed it to create great marketing events such as delivering pizzas en-masse to university campuses. And that’s exactly what you need to look past.

Establish Their Value

Drones may provide some very significant real-time savings or delivery benefits, but these have to exist beyond marketing and they have to give your customer a tangible benefit. If you provide parts for a telecom company who lays cable near railroad tracks, it may be much quicker to deliver an emergency part via drone than finding a proper route that usually starts miles out of the way.

These cases are limited and, even if the FAA reduces some restrictions, they’ll come with a hefty cost from equipment, licensing, training and staff. You need to judge the value proposition and determine why this model would actually provide a benefit.

Amazon’s case is relatively simple because costs are greatly reduced through local deliveries and 86% of its shipped products adhere to its 5-pound limit for drones. Is that the same for you?

 

By Philip Odette