Surging Package Volume Explains Why Drones Make Sense

 Source: Amazon

Source: Amazon

The continued rise of eCommerce coupled with the growth of urban populations has put increased strain on last mile delivery in cities. Added to this, is the fact that a growing number of people in large cities expect to get their orders quickly - next day, same-day, or within an hour or two. And, by the way, delivery should be cheap too! Amazon recently released that they shipped more than one billion items through Amazon Prime and Fulfillment by Amazon this holiday season which is five times more than what was shipped the previous year over the same period.

To try to understand how many boxes that equates to, let’s assume that each Amazon order contains three items and each order ships in an average of 1.4 boxes. This may be inaccurate, as order lines would vary from order to order and some orders contain many small items that are packaged in a single box while other orders need to be split across multiple boxes. At any rate, no matter which direction the assumption is incorrect, the number of boxes shipped in a compressed time-frame would still be astounding::

(1 Billion / 3) * 1.4 = 434 million packages

By one company that does not yet have a fully global presence.

UPS and other package delivery companies have benefited from the rise of eCommerce. Between Thanksgiving and Christmas in 2016 it has been estimated that UPS shipped 700 million packages - an increase of 70% since 2010.

In addition, eCommerce as a percent of total retail sales is steadily growing - about 7.5% globally and 9% in the U.S. And, according to a recent Deloitte study, 30 percent of all U.S. retail sales will be via e-commerce by 2030. That's going to translate to a lot of packages to deliver in cities that were not designed with eCommerce in mind - that is cities that require trucks accessing pick-up and delivery locations in densely populated areas with minimal interference to passenger cars, bikes, buses, and pedestrian traffic.

All of these packages that need to be delivered also put a major strain on our road infrastructure. Roads and bridges are falling apart and not enough money is being set aside to keep pace with the surging package volumes that will travel over the road. The US Secretary of Transportation Anthony Fox, via Wired, has acknowledged the strain on infrastructure and the need to find alternative delivery methods:

The stress on our freight system is increasing…the DOT is is looking at the potential commercial uses of drones as a reliever of the surface transportation system.

When eCommerce goes from 8-9% to 30-40% of retail, will it make sense to deliver all those packages over the road in urban environments?

I cover forward-looking topics that are relevant for everyone that will be part of the future logistics industry. You can read more articles here or sign-up for a free monthly newsletter here.