Drone delivery: Real or fantasy?

For the time being, we won't see drone delivery outside of a few very specialized use cases.

prime-air_high-resolution02I read with some interest an article on the Robotenomics blog about the feasibility of drone delivery. It’s an interesting idea, and the article makes a better case than anything I’ve seen before. But I’m still skeptical.

The article quotes direct operating costs (essentially fuel) that are roughly $0.10 for a 2-kilogram payload, delivered 10 kilometers. (For US-residents, that’s 4.4 pounds and about six miles). That’s reasonable enough.

The problem comes when he compares it to Amazon’s current shipping costs, of $2 to $8. But it sounds roughly like what Amazon pays to UPS or FedEx. And that’s not for delivering four pounds within a six-mile range. And it’s not just the fuel cost: it’s the entire cost, including maintenance, administrative overhead, executive bonuses, and (oh, yes) the driver’s salary.

I am not an expert, but if you throw in the cost of a drone pilot, repairs, delays (can drones fly in bad weather? I assume not) and distance, you’re going to get a number that’s much bigger than 10 cents. I know Amazon has a lot of warehouses, but I suspect — in fact, I know, from tracking my own deliveries — that most products travel a lot more than six miles. Getting the distance down would require more warehouses, which Amazon could certainly build should they decide that drone delivery is the way forward. But that’s a significant expense and raises its own inventory management problems.

The article estimates the current salary of a drone pilot at $100,000 per year, or roughly $50 per hour, not including benefits and overhead. If it takes 20 minutes to make a delivery at a 10-kilometer range, you can make three deliveries an hour, so that’s roughly $17 in personnel cost. (Three deliveries is six one-way trips, 12.4 miles total travel each trip, so the drone has to average roughly 36 miles per hour.) If you can make 10 deliveries an hour, that’s still $5 per delivery in personnel cost, and the drones need to travel roughly 120 miles per hour.

I’m not down on drone deliveries themselves, though there are plenty of concerns about navigation, coordination, and drone traffic (as the article in Robotenomics points out). The article mentions one particular use case: delivering medicine to a small island in the North Sea. That makes eminent sense. A 2-kilo package could easily be worth thousands, so you can afford relatively high shipping costs. The destination is relatively inaccessible, and deliveries are no doubt expensive: you aren’t going to send a DHL truck there on a regular route; you’re going to have to hire a ferry or charter an aircraft. I can easily imagine that it’s more effective (and less expensive) to send a drone than to charter a ferry, or wait for the next scheduled crossing.

Drones could also be useful as a kind of high-value, conspicuous consumption delivery service. Want the neighbors to see that you’re getting something cool? Have it delivered by drone, only $200 ($150 with Prime). Let the neighbors wonder about what it is. And though part of me gags as I write that, successful businesses have been built on much slimmer value propositions.

Drone delivery may eventually become commonplace. That depends a lot on how regulation shapes up: are autonomous drones allowed? At what altitudes can they fly? What’s the liability if one crashes while carrying your gold-plated, diamond-encrusted iWatch? But for the time being, I don’t think we’ll see drone delivery outside of a few very specialized use cases.

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  • RobotEnomics

    Good thoughts Mike. Personally I think $5 seems more appropriate especially in the early days – although I know Amazon want to get below $2 per delivery (from warehouse to customer). With respect to the 10 cents – I sat on this for 3 months after discussing with the papers author, subsequently he has suggested some increases and I’ve just updated the post accordingly:

    “Via email correspondence, D’Andrea points out that the ten cent cost described in the IEEE guest editorial was for energy (including battery replacement), and not for the amortized cost of the vehicles and vehicle maintenance. Assuming a vehicle cost of $1000 per unit (this is reasonable if Amazon is buying in the thousands), adding 20% per year for maintenance, and amortizing this over 5 years, this would amount to an additional $400/per year, or roughly $1/day. If each vehicle ran 10 missions per day, that’s an additional 10 cents per package on top of the 10 cents in energy costs calculated previously, for a total cost of about 20 cents per package.

    20 cents per delivery is far less than what Amazon is currently paying!”

    Still well below my estimates and as D’Andrea says in his paper below the total cost of delivery estimated in the Kiva systems business plan.

  • Chris

    “Drone pilot”?? The whole point of such small UAVs is that they’re autonomous — they don’t need pilots. At most, one operator could monitor a fleet of drones.

    • Gary Mortimer

      Not so in airlaw, one platform one operator at the minute. They would have to change that. Expect full size aircraft between China and Australia first without the talking ballast onboard.

  • Tom Finnigan

    I think with a few small changes you could get drone deliveries affordable.

    For example, at most call centers, the individual operators don’t call up the person and wait on the phone while the phone rings. Instead an autodialer manages all of the dialing, connecting an operators who is finished with a call directly with someone who has recently picked up the phone.

    Similarly, you could probably completely automate the bulk of the drone’s travel, from the warehouse to hovering 100 feet above the destination. Each operator would then just need to perform landing after landing, which is the hardest part.