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ASCM Insights

How Drones, Evs and ADV are advancing last-mile-delivery

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Ordering items for delivery has become an integral part of everyday life. Whether a multi-day delivery of products from an e-commerce site, next-day groceries from a local supermarket, or a quick Uber Eats for lunch when you’re stuck at your desk, these fulfillment options save consumers time and give them access to a wider array of products. Pitney Bowes forecasts that home-delivery volumes across all segments will continue to increase, from 20.2 billion parcels delivered in 2020 to 32-39 billion in 2026.

But this convenience comes at a cost. Most times, a person has to drive around an internal combustion engine (ICE) vehicle to make the last-mile deliveries. This not only creates emissions but also adds to traffic and congestion, thus having a ripple effect on other vehicles’ emissions. Plus, more deliveries mean more trucks, further compounding the environmental effects and boosting the labor requirements of the industry.

Last Mile Delivery Challenges

The World Economic Forum forecasts that in Tokyo, last-mile deliveries will increase by 85% by 2030. This would require a 71% rise in delivery vehicles that would be traveling 25% more. The percentages are slightly lower for suburban areas, but the distances between deliveries are greater and so are the total emissions. If no action is taken, the authors believe the world will see a 35% rise in carbon dioxide emissions by 2030 as a direct result of increasing urban deliveries.

In addition, last-mile deliveries are estimated to make up more than half of total supply chain delivery costs, with labor representing 50-60% of those. Drivers can cost anywhere from $16 an hour to $100,000 per year — that is, when drivers are available for hire.

To combat these impacts and lower costs, major retailers and delivery services are testing new ways to complete last-mile deliveries via drones, electric vehicles (EVs) and automated delivery vehicles (ADVs).

Last-mile delivery with drones

There are many benefits for companies adopting drone delivery. Drones can reduce both emissions and human labor. Drones are technically well established for limited applications. Walmart — a current leader in the drone delivery space — first announced its drone delivery service in 2021 and has since been expanding and tweaking its network. In partnership with DroneUp, Flytrex and Zipline, 36 Walmart stores in seven states now have drone delivery hubs. In 2022, Walmart completed more than 6,000 drone deliveries, with favorite items including cookies, rotisserie chicken, energy drinks and paper towels. The retail giant and its partners currently offer 20,000 items for drone delivery in 30 minutes or less. Walmart believes it is uniquely positioned to offer drone delivery at scale because 4,700 of its U.S. stores together are located within 90% of the U.S. population. Walmart partner Zipline also is delivering blood and vaccinations to rural Rwanda in partnership with The UPS Foundation.

Drones have as much as 94% lower energy consumption per package compared with other vehicles, making them an environmentally friendly option. However, drones are limited by the size and weight of items they can deliver, and some require special landing pads. In addition, their usage may be limited near airports to avoid interference with air traffic or in densely populated areas because of safety, security and noise concerns. They also require a human pilot, but a flying drone should be able to make a delivery faster than a walking human. For now, drones make the most sense in less-populated, remote and difficult-to-access areas.

Last mile delivery with EVs

EVs, which will be a viable delivery strategy within the next five years, have the potential to reduce emissions and even be less costly to operate than ICE vehicles. However, they will not reduce the need for more drivers.

Amazon has demonstrated its commitment to move forward with EVs. The company has more than 3,000 Rivian zero-emissions delivery vans now delivering packages in more than 500 cities and regions across the country. The vans offer industry-leading safety, navigation and design features, including 360-degree visibility, automatic emergency braking, and adaptive cruise control and collision warnings. They also have embedded technology that fully integrates the delivery workflow, enabling seamless access to routing, navigation and driver support. And the EVs include Alexa integration that provides hands-free access to route information and weather updates. These EVs have delivered more than 75 million packages since they rolled out in the summer of 2022.

A challenge with switching to EVs is their relatively limited availability. Most automobile manufacturers agree that the market transition to EVs is inevitable, but they’re not sure how fast to transition their models to electric. They don’t want to be left out of the market, but they don’t want to move faster than consumer desires for fear that they will inflate the cost of EVs and hurt sales of gas-powered vehicles, which will in turn reduce profits needed for investing in electrification.

ADVs show greatest potential as efficient couriers

The delivery method that is viewed as having the greatest potential for reducing emissions, human labor and costs is the use of ADVs. These are next-generation versions of the automated guided vehicles used in warehouses. These vehicles originally followed set paths, but as the technology evolves, they can navigate more autonomously. Because they’ve been in use for years, they also have robust safety features in place to allow them to work among humans.

ADVs for deliveries can contain multiple advanced electronic features, including cameras, GPS inertial measurement devices, ultrasonic sensors, radar and possibly other sensors. At the present time, they are expected to navigate their way along streets or sidewalks while avoiding collisions with cars and pedestrians. The vehicles can travel at 5 miles per hour, slightly faster than the normal human walking speed of 3 miles per hour, so it will be essential that they can navigate around pedestrians. Developers also are making sure the vehicles are highly visible and equipped with safety sensors to limit hazards.

There are several challenges the industry needs to address during development. First, there is the start point issue. Delivery companies will have to determine the best place to launch ADVs to avoid major traffic problems. Then there are the design and capabilities. Should these ADVs be designed to look cuddly, like a human or more robotic? Should they be able to speak or ring a doorbell? And how will they overcome gates, stairs and other obstacles?

An interim alternative would be to have a van driven by a human take a group of ADVs to a location where they can be released and directed to make individual nearby deliveries and return to the van. Then the delivery driver could return the ADVs to a fulfillment center for reloading. This alternative could reduce the cost of deliveries, emissions and human labor.

Companies leading the way

Autonomous vehicle company Nuro uses ADVs, which are essentially zero-emissions self-driving vehicles that can make curbside deliveries. Nuro’s ADVs conducted grocery delivery trials for Kroger in Arizona back in 2018, and the company has since conducted similar trials with Domino’s, Walmart and CVS. It also earned the first-ever autonomous vehicle exemption from the U.S. Department of Transportation for its R2 pod, which Nuro began testing on the streets of Houston in 2020. Last year, Nuro expanded its collaboration with Kroger in Houston and signed a 10-year contract with Uber Eats to make more autonomous deliveries.

Other companies have been testing delivery robots. In 2019, FedEx introduced its SameDay Bot a prototype battery-electric delivery pod that rolls over curbs and down sidewalks and climbs up steps to complete same-day, last-mile deliveries within five miles of a retailer. Starship Technologies rolled out its delivery robots in 2014. In April 2023, just under a decade later, the company announced that its robots have traveled more than 10 million kilometers — or more than 6 million miles — making deliveries around the world. As part of this journey, its fleet of more than 2,000 robots have made more than 4 million autonomous deliveries. Its robots now make 140,000 road crossings every day. Uber Eats also has tested Serve robots in Los Angeles, and Kiwibots deliver food on college campuses. Amazon previously launched its Scout sidewalk delivery service but has since scaled it back.

While major companies are gearing up for autonomous deliveries, the timing on this delivery method becoming a major portion of last-mile deliveries is less certain. A major concern is the financial implications. A number of startup delivery companies are not profitable, but companies continue to invest. According to Gartner, spending on the global last-mile delivery market is anticipated to reach $123.7 billion by 2030, up from $40.5 billion in 2021. Developments also will be needed within local regulations to determine where autonomous delivery vehicles can travel as well as right of way.

Once businesses and communities synchronize standards, these delivery technologies can drive business efficiencies and create a more convenient and sustainable last-mile delivery industry.

About the Author

Richard E.Crandall, PH.D., CPIM-F, CIRM, CSCP Professor Emeritus, Appalachian State University

Richard E. Crandall, Ph.D., CPIM-F, CIRM, CSCP, is a professor emeritus at Appalachian State University in Boone, North Carolina. He is the lead author of “Principles of Supply Chain Management.” Crandall may be contacted at crandllre@appstate.edu.

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