Consultant Insight: Could drones rescue the ailing air cargo industry?

It seems hardly a week goes by without news of another drone delivery trial. While these stories are fascinating, they are also polarizing, often pitting analysts against one another in terms of the viability of drones in last-mile deliveries.

A recent Wall Street Journal commentary by Matthias Winkenbach, director of the Megacity Logistics Lab at the Massachusetts Institute of Technology, put this debate into perspective by providing clarifying guidance on drones and their place in supply chains. According to Winkenbach, there are three main misconceptions around the business case for drone delivery in parcel operations:

• The cost of labor;
• The cost of propulsion; and
• Route efficiency in terms of distance and time traveled per package.

Indeed, when deciding to incorporate drone delivery into any point within the supply chain, these three key points must be considered and managed accordingly. You can bet companies such as UPS took these points and others into consideration when they established their UPS Flight Forward subsidiary. The subsidiary was created to develop and operate unmanned aerial systems for revenue-generating deliveries.

UPS is not alone among the express providers pursuing drone operations. At the recent Cargo Facts Symposium in San Diego, George Li outlined SF Express’ drone strategy – a well thought-out plan that includes cost and time savings – that is being implemented into the company’s domestic network in China.

Growing interest from airplane manufacturers Boeing and Airbus further substantiates that there is something to drones and their place in supply chains.

The cargo airplane industry is undergoing a number of changes in terms of demand and design. As supply chains become more regionalized, transportation demands will evolve and will increasingly embrace electric and autonomous vehicles as the technology further improves. Drones will also have a role in this environment whether its first, middle or last mile delivery.

Airbus and Boeing have been involved in the manufacturing of drones for a number of years. Primarily from a military perspective, both companies have also kept close watch on the potential for commercial drone deliveries.

A look at a few drone tests that Airbus and Boeing are involved in will show the opportunities that drones present to supply chains.

Airbus

• The OEM partnered with Wilhelmsen Ships Services to trial a shore-to-ship delivery in Singapore earlier this year. With a payload capability of up to 4 kg, Airbus’ Skyways drone travels 1.5 km from the shoreline of Singapore’s Marina South Pier to deliver items, including 3D-printed items. The entire process takes about 10 minutes.
• Along with Local Motors Industries, a 3D-printing start-up, a new joint venture was established called Neorizon, which will focus on manufacturing drones and self-driving cars by building a “microfactory” in Munich.
• Airbus Aerial, a division of Airbus that focuses on data collection, analysis and distribution, and Xcel Energy received an FAA waiver to conduct urban unmanned aircraft systems flight operations beyond visual line of sight and without requiring a visual observer in Grand Forks, N.D.

Boeing

• In 2008, Boeing acquired Insitu Inc., the company’s division for the manufacturing of drones. In 2014, Boeing set its sights on “capturing the biggest possible chunk of the fast-growing market for robot aircraft” when it named Ryan Hartman as president and CEO of the division.
• The OEM partnered with Porsche on building a self-driving air taxi. Maybe a bit futuristic but others are also working on air taxis. As part of the Boeing and Porsche agreement, together they will “explore the premium urban air mobility market and the extension of urban traffic into airspace.”
• Boeing acquired Aurora Flight Sciences and has developed and testing a large drone that’s capable of lifting a 500-pound payload.
• Bonus: Although perhaps this example is a bit farfetched at the moment, the possibilities are worth thinking about – drone transformers – a patent from Boeing in which a flying drone can be transformed into a submarine. From a military perspective… it’s something to consider.

Flying taxis and drone transformers aside, it’s something I constantly preach – the importance of creativity in order to not only differentiate oneself but also to move industries ahead. We’re already witnessing this in the broader supply chain.

The global air cargo market is in a decline in terms of volumes. Boeing is under fire with its 737 MAX, and Airbus has its own issues. So, where’s the next big idea for the air cargo market? Perhaps it is drones. I certainly believe they will have a major role. UPS, SF Express, Boeing, Airbus and more companies are helping to move it along further. So, next time you roll your eyes over another drone test, consider this quote from businessman James Bertrand: “Once we rid ourselves of traditional thinking, we can get on with creating the future.”