Drone Delivery Solutions: Next Frontier for Retail & E-commerce Businesses

Between 2016 and 2021, the number of commercial drones will grow tenfold in the USA alone and top 420 thousand units by the end of the given period. While drones are mostly used in real estate, insurance and photography, the cutting-edge technology can also have a profound impact on retail and e-commerce businesses. Now that Amazon, Domino’s and Mercedes consider implementing drones to cut the last mile delivery costs and unlock the wealth of rural markets, unmanned aerial vehicles (UAVs) might be the future of shipping. In this article, we’ll take a closer look at drone-based delivery systems, the technology’s major use cases in e-commerce and retail and the challenges preventing mainstream adoption of delivery drones.

 

Drone-based Delivery Systems & How They Work

Designed to automate short-haul deliveries (within the range of 15-20 miles), carry lightweight packages and complete trips in a quarter of an hour, delivery drones first made headlines in 2013 when Amazon’s CEO unveiled his intentions to revolutionize shipping as we knew it. Since then a plethora of companies including Google, Walmart and DHL Express have jumped on the drone bandwagon.

Before delivery drones become mass market, however, software development services providers must help businesses answer some tricky questions:

  • How to land packages safely?
  • How to ensure delivery drones won’t be hacked?
  • How to set up fulfillment centers capable of handling massive fleets of commercial drones and managing orders placed via a company’s website, mobile app and voice assistants like Amazon Echo?

Obviously, drone-based delivery systems are elaborate solutions which incorporate hardware (drones enhanced with smart sensors and video cameras), infrastructure (connectivity solutions, cloud-based and on-premises servers, customer service departments and ground support fleets) and software (back-office systems integrated with CRM, ERP and SCM applications, embedded software and firmware powering drones’ cognitive capabilities and mobile application supporting real-time data management and visualization).

Amazon, for instance, has published several drone delivery system patents in the course of five years; the complexity of the proposed solutions ranges from retrieving customer location data from their smartphones to mesh network systems where drones communicate to each other and produce video data which can be used for personalized product recommendations.

 

Drone Technology: Use Cases in Retail & E-commerce

  • Automating short-haul delivery services. Ineffective route planning, congestion and the cost of technologies enabling supply chain visibility are among the key factors driving short-haul delivery expenses – particularly the so-called last mile costs, which, according to Supply Chain Dive, can increase a product’s shipping costs by up to 28%. Prominent retailers and delivery service companies including Amazon and UPS believe UAV-based delivery systems are the silver bullet answer to the last mile problem, especially in rural areas where ground vehicle delivery is impossible or uneconomical. UPS claims cutting off a single mile off its 66 thousand drivers could save the company over $50 million annually, while McKinsey reckons autonomous vehicles will soon facilitate up to 80% of all retail and e-commerce deliveries.

  • Access to remote areas. While Amazon is not expected to roll out its drone delivery program until 2020, JD.com, one of the largest Chinese e-retailers with over 300 million customers, has already built a full-fledged drone delivery network covering over 100 villages in one of China’s rural area; JD.com’s autonomous drones facilitate same-day delivery of small goods ordered via its shopping app. According to Liu Qiangdong, JD.com executive, the cost of shipping an order to a remote area by a drone is at least 80% cheaper than by car; in the long run, the company is aiming to reduce delivery costs by up to 70% as its drone-based network scales up across the country.
  • Inventory management at large warehouse facilities. Besides streamlining outdoor goods delivery, UAVs can be part of complex warehouse inventory management solutions which also incorporate RFID tags, web-based admin consoles integrated with CRM and resource planning software and mobile applications enabling drone management. The implementation of drone-based systems could help retail businesses conduct inventories faster, localize misplaced items and equipment and reduce shrinkage which reportedly costs US companies over $45 billion per year.

 

Drone-based Delivery Challenges & Ways to Overcome Them

  • Lack of infrastructure & legislative framework. There are roads, traffic lights and traffic regulation to enable shipping via autonomous ground vehicles – one only has to tweak software the right way. Even if something goes out of hand, there are policemen and court to address the situation. It’s just the opposite with drone-based delivery solutions which, for instance, should be operated by a remote pilot, often require docking points and lack a unified framework to fix the broken drone regulations across the USA (not to mention global delivery).
  • High upfront investments. It will cost you at least $50 thousand to build a prototype of an IoT solution (hardware and software included); if you want to design a drone-based delivery system, you need an entirely new fleet of vehicles and embedded software and custom mobile apps facilitating its management. There are also operational costs which – in case with military drones – can exceed $2.5 thousand per hour.
  • Barriers to implementing delivery drones in urban areas. Due to legal and privacy issues, as well as urban landscape diversity, drone delivery systems do not allow for “straight to the door” shipping. Furthermore, densely populated cities usually produce enough orders over a small area to justify vehicle-based delivery expenses. There’s also the growing number of accidents between manned aircraft and land transport and drones which forced manned vehicles to maneuver to avoid collision, thus threatening the safety of city dwellers. At this point, retail and e-commerce companies eyeing the drone technology will have to create pick-up point locations, which translates into additional infrastructure costs, causes inconvenience to customers and contradicts the basic principles of IoT which fall to the elimination of human-to-computer interaction and major time savings.

What can be done about it?

The drone technology limitations won’t allow companies to replace couriers and delivery fleets with UAVs any time soon; however, it’s totally possible to use IoT-based and legacy logistics systems simultaneously!

That’s what Mercedes-Benz Vans did. The German car manufacturer partnered with Matternet, a Silicon Valley-based drone logistics start-up, to create a delivery system which uses both delivery vans and autonomous drones. The solution incorporates the Matternet cloud-based delivery platform facilitating order data management, QR codes which are placed on packages and contain pick-up and drop-off data and Mercedes-Benz vans which emit signals stronger than GPS to enable precise navigation. A drone loaded with small packages (up to 2 kilogram) reads the destination information on the QR code, flies all the way to a Mercedes delivery van and safely lands on its roof. A driver can then retrieve the package and deliver it at a receiver’s door.

 

Computer Vision as Key Enabler of the Drone Delivery Solutions

Recent studies show that 47% of Americans are interested in drone delivery; however, 72% of US consumers are concerned about possible package theft and damage associated with the service.

When talking about autonomous drone-based delivery solutions, it is the accuracy of smart algorithms which determine drones’ position in space, detect obstacles on the way and optimize routes that can make or break the whole concept.

As of today, 64% of UAV crashes are caused by technical errors including unstable GPS signal, battery drain and hardware and software failures.

Consequently, it is fault-free data acquisition and reliable hardware components (cameras and sensors pre-installed on a drone) that make UAVs ripe for commercial usage.

Coupled with Digital Elevation Maps, Heat Detector and Lidar sensors, as well as high-resolution cameras and data management solutions with deep learning capabilities, computer vision (CV) technology facilitates a wide range of operations required for sound drone performance.

These include:

  • Real-time object tracking (drones should be able to capture raw imagery during the flight, process it using built-in intelligence systems and make changes to their route with no human interference).
  • Self-navigation (the ability to plan routes based on pre-set departure and destination coordinates).
  • Collision avoidance (CV can help drones detect static and moving objects; collision avoidance techniques usually rely on obstacle detection sensors and the Simultaneous Localization and Mapping (SLAM) technology which turns 2D imagery into 3D maps and works in sync with other sensors to detect obstacles in real time).

Thanks to multiple advances in sensor technology and Artificial Intelligence, smart delivery drones are no longer a sci-fi concept – it’s the reality we live in. Your decision to invest in drone-based delivery solutions, however, should be based on a thorough market research. As long as you partner with a reliable Internet of Things software development company, choose the right hardware components and plan a business infrastructure supporting fast, safe and convenient goods delivery, drones could give you a significant competitive advantage over your rivals.

 

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