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Why Drone Delivery is Just Getting Started

June 03, 2022
Perspectives on Continuing Growth in the Drone Delivery Industry
Scott Howe, Editorial Analyst, Commercial UAV News

Recent reports estimate that the drone delivery industry will grow by 20% annually over the next five or six years. Other studies are even more optimistic, projecting a yearly growth rate of more than 50%.

Although predictions vary, most experts are certain that the drone delivery sector will continue to expand.

Why are they optimistic?

First, customer demand for faster deliveries has been growing steadily in recent years. More and more, businesses and everyday consumers are demanding fast, even same-day, delivery of products. To meet the demand, large retailers like Amazon and Walmart have made major investments in drone delivery. UPS and other leading delivery services have added drone delivery to their offerings. E-commerce operations have been quick to embrace drone delivery, and smaller businesses, such as convenience stores and restaurants, have begun investigating and investing in drones for deliveries.

These reasons alone led to high growth rates in the drone delivery sector. But the COVID-19 pandemic greatly accelerated adoption of the technology, causing industry leaders to become more confident in the future of drone delivery.

Since the pandemic began in early 2020, millions and millions of people went into lockdown, making it next to impossible for them to safely shop in-person for their daily needs. And many businesses could not rely on their longstanding delivery procedures to maintain operations.

As a result, delivery services, both small and large, were forced to adapt to increased demand. Not surprisingly, many businesses and organizations looked to low-cost, fuel-efficient, and flexible drones as an alternative to cars, trucks, and planes for their delivery needs.

Another driver of drone delivery adoption has been the need to quickly transport needed medical supplies to individuals living in isolation during the pandemic. Around the world, drones have been deployed to carry medicines and essential equipment to isolated individuals, doctors, and medical facilities in small towns and remote villages.

The success of these operations and others has spurred increased public acceptance of drones and inspired many regulatory bodies to shape policies to advance the use of the technology.

In fact, the US Federal Aviation Administration’s Advisory Rulemaking Committee (ARC) published its long-awaited recommendations regarding flight beyond visual line of sight (BVLOS) in March 2022. Many believe that this document will provide much-needed clarity and direction to the industry and encourage further expansion.

So, given recent progress and change, will the drone delivery industry hit its lofty growth projections?

To explore the keys for sustainable growth in the drone delivery industry, Commercial UAV News spoke to four experts in the field:

Pharns Genece, CEO, Unmanned Systems Operations Group, Inc.

Genece founded Unmanned Systems Operations Group, Inc. (USOG) following a career of service as US Air Force Medevac flight nurse and a stint as an audio engineer for Disney. Drawing on his background in flight rescue operations and systems integration work in the entertainment industry, Genece created USOG to provide medical logistics solutions that would accelerate and improve the transportation of crucial medical supplies. In addition to finding ways to use drones and robotics to enhance healthcare transportation services, Genece is committed to technology education and training, particularly in underserved communities.

Grant Guillot, President, Grant Guillot, LLC

Guillot is the host of “Drones in America,” a weekly podcast that brings together industry leaders, government officials, pilots, and others involved in the unmanned aircraft systems (UAS) community. An attorney, Guillot advises UAS service providers, drone manufacturers, and others investing in the industry. He works with companies from industries such as construction, energy, agriculture, public safety, telecommunications, and more to promote and advance the use of drones, and he engages with public officials and regulatory bodies to craft policies around the use of the technology. A strong advocate for drones in commercial environments, Guillot believes encouraging participation in the industry by more women and members of minority groups will accelerate the growth and success of the UAS sector.

Carl Smit, Chief Strategy Officer, DroneUp

Carl Smit is the Chief Strategy Officer for DroneUp, a drone services provider offering flight services, data analysis, program development, regulatory consulting, training, Part 107 drone delivery, and more. Before coming to DroneUp, Smit managed Apple’s global retail iPhone business, helped Under Armour develop its worldwide retail and wholesale go-to-market strategy, and served as Vice President of Retail Experience at Verizon. He has also worked as an independent consultant focused on consumer electronics and retail.

Ken Stewart, President and CEO, NUAIR

Ken Stewart is the president and CEO of NUAIR, a New York-based nonprofit organization focused on UAS operations, research, safety, and consulting. NUAIR, one of seven FAA-designated UAS test sites in the US, works with the FAA and NASA to conduct operations for UAS and advanced air mobility (AAM) eVTOL testing. The organization is focused on the development of New York’s AAM Proving Grounds and 50-mile UAS corridor between Syracuse and Rome, facilitating beyond visual line of sight (BVLOS) testing, commercial operations, and the integration of UAS and eVTOLS into the national airspace. Widely regarded as an innovator and leader in the UAS field, Stewart previously held the position of CEO of AiRXOS, part of GE Aviation.

 

Will the industry continue to grow?

Over the past two years, several widely cited reports were released predicting impressive growth in the drone delivery industry. A 2021 study from Emergen Research said that the size of the worldwide drone package delivery market would achieve a consistent compound annual growth rate of 54.5% and hit $18.65 billion in 2028. Also in 2021, a study from Facts and Factors on the global same-day delivery market stated that size and share revenue would grow from USD 5.86 Billion in 2020 to USD 17.25 Billion by 2026, at 19.7% annual CAGR growth during forecast period of 2019-2027. Will the industry hit these targets? And, if so, why?

Ken Stewart: I think it’s very sustainable. You have to remember that we’re an emerging industry. So, 50% growth may seem like a lot, but if you have a company that did 100 deliveries the first year and 150 the next year, you have 50% growth. Those numbers, I think, are going to continue to be high. It seems highly doable.

Carl Smit: I feel the drone industry on the delivery side is just getting started. With the exception of a few companies, you have a number of players that are still doing proof-of-concepts, and they haven’t really committed to a full plan yet. They’re still kind of dipping their toe in and trying to figure out how quickly they can grow. But I will say that when regulations really, truly unlock, you’re talking triple-digit growth in a five-year time horizon—maybe more.

Grant Guillot: I certainly hope that it’s true, and I believe it could be, but I am also cautious due to the fact that we still have issues with BVLOS and other regulations. I think once these issues are addressed and the regulatory environment becomes more favorable for advanced UAS operations, it will be more feasible for the industry to hit such ambitious targets.

Pharns Genece: It depends on who you talk to in the industry, and it’s such a wide range. In our company’s experience, we have investors who are really excited about investing in the technology, they see where it’s going. But what a lot of people are looking for is a complete end-to-end delivery system, and that’s what we do.

Ken Stewart: Investors look for predictable outcomes, and we’ve seen, in recent years, multiple facets come together that appeal to investors. Many are starting to invest in a lot of OEMs, a lot of vehicle manufacturers, but also large drones, unmanned aerial mobility, and large taxis or cargoes. Investors know that in two to three years their investment should have pay off. That’s why you’re seeing the investors come back to this space full throttle with $3 billion in the last two years, which is more than the first wave we saw in this industry five or six years ago.

Pharns Genece: To be sustainable, we have to come up with systems that are economically viable. Part of that means having the ability to make multiple deliveries in one mission. Just like the Postal Service—your postman doesn’t deliver your mail and then return to the Post Office to get your next-door neighbors mail and then deliver it them, that’s inefficient and it just doesn’t happen. So, we have to have multi-package delivery systems. When you can deliver three medium-sized boxes in one flight, you have the ability to make a profit. Now we’re talking about making money and creating a sustainable business model.

How much of an impact did the pandemic have on the drone delivery industry?

Throughout the COVID-19 pandemic, delivery services in general experienced dramatic increases in customer demand. Supply chain and logistical operations worldwide faced slowdowns and breakdowns. Shipments by air, sea, and freight were delayed or cancelled. Travel bans and quarantines increased demand, but they also slowed the movement of goods. For long stretches, storage and distribution operations stood still.

To what extend did drones fill the gaps in delivery services? Did businesses, governments, and regulatory agencies respond to the transportation crisis with new policies? Overall, how much of an effect did the pandemic have on the drone delivery sector?

Carl Smit: The pandemic exploded delivery in general. What we saw with the pandemic was an acceptance of automation and, in many cases, a preference of automation versus the human touch.

Pharns Genece: Prior to the pandemic, your typical, average citizen would see a drone in the air, and their first thought would be, “Who’s the peeping tom?” And every article that you saw had a picture of a DJI Phantom—the little white one—and people would ask “Who screwed up today? Why is that where it isn’t supposed to be?” But when the pandemic hit, perceptions began to change. For example, our company was able to do some demonstrations of COVID care package deliveries by drone. When that occurred, we started to see people have more acceptance of drones in general and a greater understanding of how drones could be used as a tool during the pandemic.

Ken Stewart: Until COVID, I don’t think the typical American realized how much we rely on truckers to deliver everything. So now we have the whole supply chain issue, and the supply chain isn’t resilient. That’s the problem. We need roads and infrastructure to support it. Airspace, though, doesn’t take cement, it doesn’t take asphalt. It’s a far more cost-effective alternative, and it’s far more transformational than I think people realize. You wouldn’t have the Amazons or Walmarts of the world looking at drone delivery and putting investment in it if they didn’t see it as a much more cost-effective and efficient way to deliver products.

Grant Guillot: Before 2020, there was a lot more skepticism about drone deliveries ever becoming commonplace. But with COVID, you started to see shifts in public acceptance of drones. People began to adhere to social distancing recommendations, and they took advantage of contactless delivery. In response, one of the companies I work with, DroneUp, started testing out COVID-19 test kit deliveries with Walmart, and that pretty much opened people’s eyes and changed a lot in the industry. For me, I saw firsthand how vulnerable populations—the elderly and the sick—reacted to being able to receive a test kit without having to go into a hospital or pharmacy or convenience store to get it. I think many in the industry began to realize that drones were a lot more capable of being accepted by the public at a quicker rate than we thought. With DroneUp, we worked with the FAA and with state and local regulators to tell a positive story. Stories like these maximized our chance of success.

Ken Stewart: In some ways, I don’t think the opportunity to fully realize the benefits of drones during the pandemic was as impactful as it could have been. I think that, quite frankly, the FAA had a real opportunity to really seize that moment, and it could have done more. My personal perception is that the thing that keeps drones from doing deliveries are policies and regulations that don’t exist or are in development. They primarily don’t exist because we don’t have enough historical data from drone operations to be able to say they’re safe enough for to perform certain advanced operations beyond visual line of site. The safety levels with drones in many cases have not proven to the level that the FAA looks at to authorize these types of activities with scale. So, I think we had a real opportunity to seize on something, and we could have done a better job as an industry and as a as a regulatory body to come out with policies for more drone capabilities around medical-related and other medical related use cases.

Is the technology where it needs to be to move the industry ahead? Are regulations holding it back?

Advances in drone technology happen every day. In the delivery sector, drones can now do more than ever before—longer flying times, bigger payloads, better command and control. However, for a long time, many in the industry felt that regulations have not kept pace with technological change, especially in the US.

The FAA’s March 2022 ARC recommendations on BVLOS, however, may provide the clarity and direction the industry has been waiting for. Will these recommendations allow the industry to deploy new technologies to meet consumer demand?

Pharns Genece: I think the biggest thing that’s going to need to happen will be the regulatory side of things. Without having the regulations ironed out on what we can and can’t do, it’s going to be a challenge to grow the industry.

Carl Smit: I think the FAA has an incredible challenge when you consider that one of the busiest airports in the US, Chicago O’Hare, does 852 flights a day, and we may be flying that many out of a Walmart soon as part of our partnership. And that’s just one customer. I don’t think the FAA ever fathomed the kind of volume that we were going to have.

Ken Stewart: With technology, I don’t think that we’re where we need to be for the scale that could happen. The reason I say that is that a majority of drones are under 55 pounds and fly for about 30 minutes. From a delivery perspective, that limits how far you can fly and how much you can carry. Also, some of the drone’s processing power is used for detection and avoidance and communicating vehicle-to-vehicle. All of that puts more demand on the battery draw, so the battery technologies still need to be improved. Sensor technology and high-performance edge computers also need to be improved before you can have the large-scale type of delivery that I think people are looking for.

Pharns Genece: The technology is moving faster than regulations, but that’s always been true in novel industries. The FAA clamped down on anything that you can do before there were any major accidents or mishaps, but that’s what regulatory bodies do. They’re all about safety, and currently there’s not enough data for them to really understand the efficacy and safety margins of drones, and drone delivery in particular. Things are moving slow, but their moving. All of us wish we could move faster, obviously. Safety is priority one, and as long as we focus on that and exercise a little patience, the industry will flourish.

Grant Guillot: Ultimately, until the regulatory environment becomes more favorable for advanced UAS operations, you’re going to have a slew of legal hurdles to deal with. The industry can work together to improve the regulatory environment by earning the public’s trust through safe and effective drone operations. When the regulators see how public perception of UAS technology has improved, I believe they will be more inclined to remove some of the hurdles that are preventing widescale advanced drone operations.

Ken Stewart: The technology validation needs to evolve in parallel with policy, particularly with BVLOS. Part of those technologies will be things like unmanned traffic management systems and detect and avoid. Today, a lot of people focus on command and control, but in my opinion detect and avoid may be even more important. Drones are robots and can go from point A to B. However, you don’t want to collide with something while in flight, so DAA or detect and avoid, to me is actually one of the more critical technology issues that we need to solve out there. ASTM is working on standards for detect and avoid, but those standards haven’t necessarily been accepted by the FAA. There’s no technology that meets the standard today that lets the FAA can say it can embrace this technology. So, it’s a combination of technology with regulations that needs to happen.

Grant Guillot: Technology is always going to be the farthest ahead. Although we may have the technology in place to perform advanced drone operations, the regulatory environment, which is shaped by public perception, can present impediments that prevent the industry from reaching its ultimate potential. The more the FAA and the state and local regulators believe that the public is willing to take a chance on more advanced operations, I think the more likely it is that they will allow those operations to take place.

Pharns Genece: I know people on some of the boards and rules committees, and I know many people in the industry. We talk all the time about technology and regulations. Companies are now getting BVLOS waivers to fly and do certain things they couldn’t do before. It’s only a few companies, but it’s happening. You’re seeing this acceptance, and just like with anything else, there’ll be a great boom and then a leveling out. But things are moving forward. I can see it.

Carl Smit: We’re going to see the publishing of the aviation regulatory committee (ARC) recommendations shortly, and we’re hopeful that this is going to define the standards and that will let us be able to move forward. If so, we’re going to see tremendous progress in the next 24 months or so—more so than we’ve seen in the past decade.

Where does the drone delivery industry go from here?

If technology continues to improve, regulators institute new policies, consumer demand stays strong, and investors keep investing, what happens next? Will the industry produce the time savings, cost reductions, and positive environmental impacts that many have predicted? Will the industry be able to attract and train a new generation of employees, employees who will enable drone delivery to grow and continue to change the way products are delivered?

Carl Smit: From our perspective, the next chapter of ecommerce is going to be same day delivery, or 30-minute delivery, and there is a huge push now on “how quickly you can get it to me?” So, the role that drones will play is in increasing speed in last-mile delivery. Think of it in terms of delivering an average UPS or FedEx package, where a truck is on a route delivering about 150 packages in a day and there is a lot of human labor involved. Or compare it to the DoorDash or Instacart model, where a driver is driving about 30 miles an hour, and they’ve got red lights and stop signs. These gig economy drivers are incentivized to try and do multi-unit shipments, which is going to delay the delivery of product. If they’re delivering food, it’s going to get there cold or late, which are the biggest customer complaints. Drone delivery is going to be about speed. It’s going to be about beating that 30-mile-an hour travel time.

Ken Stewart: A lot of people focus on B2C: Is there a Target or Walmart that’s going to deliver a product to me? Does Amazon deliver a product? But I think a broader focus might be B2B. I think about distribution centers, pharmacies, and medical deliveries. Those are high-value, on-demand, urgently needed things that are impacted by congestion, and we already have problems with the normal transportation. If you could create a corridor between a distribution center and assisted care facility and fly a drone along that corridor, you could be doing the job that cars and trucks do today. Also, we have a shortage of truck drivers and a shortage of medical personnel. So, with a drone, we’re not displacing people. We’re supporting a different technology to transform what we already do. Focusing on B2B can get us a lot closer to scale faster and help facilitate B2C.

Grant Guillot: Is drone delivery for everyone? Perhaps not at this moment, but it will become more widespread and will be increasingly utilized in transportation and logistics services once more favorable regulations have been put into place.

Carl Smit: We by no means think that drones are going to replace other last-mile delivery mechanisms. We believe that we have a role to play in a broader ecosystem of last mile delivery. Walmart made a significant strategic investment in us, and we’re fortunate to have the biggest retailer in the world working with us to solve these delivery problems.

Ken Stewart: From what we see in New York State, drone delivery could be transformational in a lot of ways, including cost savings and helping the environment. New York has a $28 billion traffic congestion problem, and $14 billion of that is congestion primarily from unexpected lane closures. There’s a big impact from cars and semi tractors idling from lane closures during bridge inspections or auto accidents. If you could lower congestion problems by using drones for accident recreation or for bridge inspections, you could have an impact of billions of dollars. That’s the kind of transformation with drones that a lot of people fail to recognize.

Pharns Genece: As the delivery industry gets bigger, we have a challenge in finding qualified people. As a company, we reach out to the youth who are interested in STEM. We do local events, we provide basic electronic kits, teach kids electronics, do drone demos, and send kids home with a basic drone kit. To develop our workforce, we need to start now, and the younger, the better. We’re going to need coders. We’re going to need some pilots. We’re going to need technicians that know and understand how to build, take apart, and fix drones. We’re going to need people who know how to do CAD, 3d printing, programming, Python, GIS—we’re going to need all these skill sets. There are so many disciplines that are involved in drones that there’s a place for almost everyone in the industry.

Carl Smit: Some people worry that automation is going to displace jobs, but I actually think this is going to be an opportunity for tremendous job growth. It’s something we think about a lot at DroneUp— how are we going to train, onboard, and retain talent and build a culture where people are excited to come to work every day? It’s top of mind for us in terms of building a fantastic culture and figuring out what kind of training and career path people will need for these new roles.

Grant Guillot: I believe any industry thrives when you have maximum input from all key groups and from people from different walks of life. I think, at this point when we’re trying to build this industry, now is the time to include women and minorities in those discussions. The more backgrounds you allow for, the more stories you hear, the more walks of life you consider, the more avenues you have to create something really special. And that benefits everyone.

Pharns Genece: The educational events that we do are typically in underserved communities. It’s important to us and our industry. I’m a minority myself, and kids don’t see tech CEOs that look like me very often. It’s very unique. We’re in an industry right now that’s wide open, and I love that.

 


 

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