News • 08.09.2020

How retail drone delivery may change logistics networks

Chance for retailers: best-possible delivery-time guarantee zones

A drone in front of a dark city skyline
Source: Goh Rhy Yan / Unsplash

Researchers at The University of Texas at Dallas say drone technology has the potential to be a genuine game changer in the retail industry, with its promise to enable retailers to offer unheard-of delivery lead times and near-perfect delivery-time customization adaptability.

In a new study, three faculty members from the Naveen Jindal School of Management explored how drone delivery could change retail logistics networks. The paper focuses on the use of customer-facing delivery centers, also known as last-mile warehouses.

Dr. Milind Dawande, professor of operations management and one of the paper's co-authors, said last-mile retail delivery via drones is being viewed as a truly disruptive technology. Retailers worldwide are pursuing approaches to enable faster delivery, and drones arguably represent the most encouraging technological innovation toward this goal, he said.

The study found that both the number of last-mile warehouses and the delivery speed of the drones will increase as technology matures. In other words, last-mile delivery networks will become more decentralized, with drones operating at increasingly faster speeds.

The analysis also showed that while perfect customization of delivery-time guarantees is more profitable, retailers can capture a sizeable portion of the profit by partitioning their market into a few zones and offering the best-possible delivery-time guarantee for each zone.

"If a retailer promises each customer a different delivery time based on the customer's location, that would be perfect customization," Dawande said. "For example, a retailer could give any customer who is 1 mile away a delivery-time guarantee of five minutes and a customer 1.5 miles away a delivery-time guarantee of seven minutes. While perfect customization is theoretically best for the retailer, it is impractical. Instead, the retailer might offer all customers less than 5 miles away a guaranteed delivery time of 15 minutes. "In other words, limited customization is good enough."

Faster delivery times are more profitable because it implies more demand, Dawande said. Customers' needs are time-sensitive. For example, if a retailer promises delivery of a book in 15 minutes, the demand is likely to go up, as compared to a three-day delivery promise.

The researchers note that increasing delivery speed of drones can help improve profitability only if it is accompanied by an increase in the number of last-mile warehouses. Therefore, in congested markets, where the number of warehouses cannot be increased, the retailer may find it best to offer a delivery speed that is lower than the highest-possible speed.

Before drone technology can become widely adopted, however, privacy and safety issues need to be solved, Dawande said, as well as regulations coordinating drone travel and the public perception of fleets of drones flying overhead. The paper points to pilot programs testing the technology.

"It would be reasonable to assume that drone technology is maturing quickly, and we should see a commercial rollout on a larger scale in the not-too-distant future. The COVID-19 pandemic will perhaps hasten this process," said Dawande, who is also the Mike Redeker Distinguished Professor in Management.

Source: University of Texas at Dallas

related articles:

popular articles:

Thumbnail-Photo: Contactless robotic grocery delivery service...
06.10.2020   #delivery #robotics

Contactless robotic grocery delivery service

Save Mart’s flagship store in partnership with Starship Technologies

Save Mart has announced the launch of an on-demand grocery delivery service to its guests at the flagship store in Modesto, California in partnership with robot delivery company Starship Technologies. Marking the one-year anniversary of its opening ...

Thumbnail-Photo: Same-day delivery from 76 Costco warehouses across Canada...
03.08.2020   #food retail #delivery

Same-day delivery from 76 Costco warehouses across Canada

Partnership between Instacart and Costco

Instacart and Costco announced the companies have partnered to launch same-day delivery from 76 Costco warehouses across Canada. Following a successful two-month pilot in select Ontario warehouses, the nationwide collaboration brings Costco's ...

Thumbnail-Photo: Recycling packaging materials for the sake of the environment...
20.07.2020   #sustainability #packaging

Recycling packaging materials for the sake of the environment

What the German Packaging Act (“Verpackungsgesetz") means for retailers and manufacturers

Images of plastic accumulation zones in the world's oceans, dying animals, ice melting at the poles and extreme drought – as climate change intensifies, so too does public discourse. Garbage and packaging waste are top issues and play ...

Thumbnail-Photo: Warehouse management: optimized, automated, product-oriented...
15.10.2020   #logistic systems #logistics

Warehouse management: optimized, automated, product-oriented

Tips on how to ensure warehouse optimization

Digitization, e-commerce, increasing customer demands, and expectations – factors that not only impact retailers but also affect the way warehouses are organized. In this interview, Johannes Tress, Co-Founder and Managing Director at everstox ...

Thumbnail-Photo: Online retailers need to better inform customers about the status of...
21.07.2020   #online trading #e-commerce

Online retailers need to better inform customers about the status of their orders

E-Commerce Shipping Study 2020 by parcelLab

parcelLab has analysed for the second time the shipping services of 100 of the largest German online shops (according to EHI). The results show that 1 in 4 retailers in Germany only send a single email to their customers after their checkout. This ...

Thumbnail-Photo: Spotlight on ... packing
20.07.2020  

Spotlight on ... packing

Find out everything about packaging in our current iXtenso spotlight

Thumbnail-Photo: Door-to-door delivery and returns service
13.08.2020   #online trading #fashion

Door-to-door delivery and returns service

Asda trials George parcel returns via home shopping deliveries

Starting last week, Asda has launched a two-store trial allowing customers to conveniently return George parcels at the same time as they receive their weekly shop.Customers in York and Milton Keynes can now return George online purchases for free ...

Thumbnail-Photo: Spotlight on ... deliveries
14.08.2020  

Spotlight on ... deliveries

Learn more about the latest delivery trends in our focus topic

Im Versand wie im Verkauf - mit Verpackungen hat der Einzelhändler tagtäglich zu tun. Doch was macht eine gute Verpackung aus? Welche Vorschriften müssen Einzelhändler kennen? Und warum sollte eine Verpackung smart sein?Das und ...

Thumbnail-Photo: Getting a taste for grocery deliveries
14.08.2020   #e-commerce #customer satisfaction

Getting a taste for grocery deliveries

What are the best online grocery delivery options?

Bread, cucumbers, tomatoes, pasta, butter ... Brick-and-mortar stores are no longer the only place where consumers turn to for their groceries. The COVID-19 crisis has spurred a boom in food delivery services. So how do groceries end up in your ...

Thumbnail-Photo: Delivery services: consumer and climate benefits...
14.08.2020   #e-commerce #customer satisfaction

Delivery services: consumer and climate benefits

Sustainable logistics solutions for last mile delivery

Convenient, fast, and affordable. By now, "sustainable" has also been added to the list of what makes for the perfect online ordering process. That’s why retailers and delivery services must rethink their ...

Supplier

Axis Communications GmbH
Axis Communications GmbH
Adalperostraße 86
85737 Ismaning