Will drones help trucks transform the final mile?

by Eric Berard

ups drone
UPS is among the companies experimenting with drones, not necessarily to replace trucks, but to support them. Will drones be part of trucking’s final mile?

MONTREAL, Que. — Consumer demand is transforming the way loads make their way to a final destination. Retailers, once the final stop in many journeys by truck, are being bypassed altogether. With a point and a click, buyers choose the goods they want and wait for the products to arrive at their doorsteps.

Look no further than the e-commerce behemoth of Amazon for an example of the way the experience has changed. Free shipping is offered in two days. Those who pay for memberships in a service known as Amazon Prime track their delivery times that are measured in hours. Truckload or LTL shipments destined for local shopping malls are losing ground to the smaller shipments that travel from distribution center to doorstep.

Toronto-based Ryan Citron, a senior research analyst at Navigant Research, says the “Uberization” of such on-demand freight is on a steep rise — to a point where the business of freight brokers is being disrupted and may even be jeopardized. Companies in the logistics sector need to swiftly adapt to a quickly evolving market, he adds.

Project44, a Chicago-based company specialized in supply chain visibility, also notes the shift. According to its recent study entitled The Delivery Economy and The New Customer Experience, consumers love on-demand delivery apps so much that 71% say they are re-shaping how they want their online purchases delivered.

The trucking industry itself is no stranger to demanding quicker deliveries for a wider variety of products. Navistar, for example, is now exploring opportunities with the Lyft ride-sharing service to deliver truck parts.

“Not every parts service emergency is going to happen during an average 9 a.m. to 5 p.m. workday. Filling the time-sensitive gap of parts delivery is our main goal,” said senior vice-president – parts, Josef Kory, when discussing distribution strategies around the OEM’s Memphis parts distribution center.

Then there are the courier companies that represent some of the most obvious investments to support e-commerce and cover the all-important final mile. Purolator, for example, just announced the creation of a $330 million Toronto “super hub” that will be part of a five-year and $1 billion investment plan. “We expect our growth trajectory to continue,” said Purolator president and CEO John Ferguson.

Meanwhile, UPS is going so far as to experiment with drone deliveries to support locations that are too remote for profitable deliveries by truck and driver. The technology would make sense on the balance sheet if it works. The company calculated that if each of its 66,000 truck drivers traveled one mile less per day, it would save US $50 million a year.

New opportunities in trucking

Many traditional fleets already recognize the emerging opportunities around the final mile, and are looking beyond traditional Class 8 tractors to tap into the market.

When asked about the most significant change they expected to make to their fleets in the upcoming year, about one in five (17%) of carriers surveyed by TD Bank said they would adjust the makeup of their fleets to support last-mile deliveries.

“For years and years, sales of Class 8 trucks far outpaced any other category of trucks, and what we’re seeing is a continuation of strong growth rate in medium-duty, whether it be Class 5, Class 6, or even Class 7,” says Anthony Sasso, who oversaw the survey. “What we see from an asset perspective also lends itself very well to a movement towards ‘last mile ‘delivery.”

While some people associate last-mile deliveries with the courier or parcel business, the shipments don’t necessarily imply e-commerce orders heading for homes, says Sasso. “Last mile has always been defined as going from the hub or a distribution center, and transporting it to the brick and mortar,” he says.

Claude Robert, the retired president but active advisor for Boucherville, Qué.-based Groupe Robert, thinks the trucking industry is at a turning point. “It’s going to be organized, integrated operations,” he says of the future business, referring to the growing role of companies like Amazon and other major online retailers that are building their own transportation networks. That will force carriers to restructure their own businesses, he says.

The drones, while interesting, are still well into the future because of challenges ranging from software to regulations and the need for a specialized workforce to fly them, he adds. But Robert expects them to be used for tasks like yard surveillance or managing inventory before making airborne deliveries.

It’s already happening in that sense. Renault Trucks, part of the Volvo Group, once relied on employees and binoculars to monitor inventory at its Lyon Saint-Priest axle center. The drone that does it now will do the work 10 times quicker than people ever could.

TD’s Sasso puts drones in the same category as autonomous vehicles, both destined to gain traction as they become more cost-effective and establish safeguards. “At some point it will be inevitable. As people look for different solutions for delivery, [drones] certainly can be a viable option,” he says.

Canadian experiments with drones

Like Robert, Michael Zahra doesn’t think drones will actually take over the role of 53-foot trailers. “If you’re talking about moving a large transport truck from Montreal to Toronto, a drone is never going to replace that,” says the president and CEO of Drone Delivery Canada (DDC), a Toronto-based integrator of drone flight systems.

Instead, he sees drones as tools to enhance trucks, much like Moffett truck-mounted forklifts are carried along routes to move loads off flatbeds.

His company’s largest drone, the Condor, can carry payloads of up to 400 lb. over 200 km at top speeds of 120 km/h, drawing on the power of a two-stroke gasoline engine. Such units already travel to the communities of Moose Factory and Moosonee in northern Ontario, just south of James Bay, where the Moose Cree First Nation uses DDC’s drone platform for delivering food or medical supplies.

“There are areas where couriers just don’t go,” Zahra says. “There are areas where it might be a 40-km gravel road and it’s in terrible condition and trucks get flat tires twice a week.”

The drone delivery business model also appeals to other remote or time-sensitive areas. The expedited delivery of a $10 hydraulic hose to a mine or oilfield could save tens of thousands of dollars in otherwise lost production costs.

Drones as complements to trucks

Drone ranges can also be extended by adopting versions that take off and land vertically, but fly with fixed wings like a regular airplane. San Francisco-based company Elroy Air claims it can hit the 500 km mark with up to 500 lb. of payload with such a configuration, using an electric-gasoline hybrid configuration.

“The wings’ lift increases the range,” says Marc Moffatt, general manager of the Centre d’excellence sur les drones in Alma, Qué.

Federal, provincial and municipal governments recently invested $2.4 million in the Alma centre for research and development of civil drone applications. There, researchers are testing the limits of drones in different “neighborhoods” that incorporate a series of planned obstacles.

It’s not alone in such research. Another drone proving ground can be found in Foremost, Alta.

Moffatt says he has spoken with a major Canadian truck carrier – a 500+ truck fleet – that showed interest towards drone deliveries. “Many companies are already thinking about it. We have to start looking at what drones can represent as a delivery tool and what the pitfalls could be,” he says, referring to regulations, certifications and air space management.

DDC’s Zahra doesn’t think truck carriers should see drone advocates as a threat to their businesses. “It’s more an extension of what they can do. There are things that a drone will do that a truck will never be able to do,” he says. “The smart ones realize that this technology is coming, whether they like it or not.”

Robert also thinks that drones can be seen as complements to last mile delivery trucking operations rather than competitors. “The message to carry is that the industry is amidst a major evolution. It’s like a new industry, related to e-commerce, is being born. Things are gonna travel in a different way.”

 

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