The Advantage of Innovation in Last-Mile Delivery

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Apr 04, 2023

The Advantage of Innovation in Last-Mile Delivery

Will robots lose my package?

Amazon has had great success automating its fulfillment centers. But, operating on a closed warehouse floor in a highly controlled environment is much different from operating in the wild. Amazon’s Kiva robots move through fixed lanes where traffic patterns are predictable, and there are no undeliverable addresses, secure apartment buildings, or gated communities to navigate. There are no small children chasing balls or pets, no dead-ends, and no wrong turns. There’s a reason it’s called ‘the wild’…

A dozen or more companies build and deploy ‘robot delivery vehicles’ for last-mile delivery applications. Most share a few common characteristics:

  • Small storage bins – picture a cooler on wheels
  • Semi-autonomous, mostly
  • AI-enabled to become more autonomous and efficient over time
  • Operates in a small delivery radius (usually 1-2 miles max)
  • Requires recipient to retrieve their goods from the device

Autonomous vehicles provide the obvious benefit of contactless delivery, emphasized during the pandemic. The early market opportunity seems to be delivering items like groceries, medications, or restaurant food – think Doordash or Instacart without the drivers.

There are some limiting factors, though. First, the customer usually needs to meet the vehicle at the sidewalk or street level – an inconvenience in lousy weather or less secure neighborhoods. Second, robots can’t drop packages at the door of apartment 322 in a secure building. That still takes a driver. Third, robots add to street/sidewalk traffic. Imagine hundreds or thousands of rolling coolers trying to navigate the sidewalks of New York City (pre-pandemic) during rush hour. Finally, the delivery radius is small, and current capacity limitations limit the usefulness of e-commerce retail deliveries.



Robots are growing

Still, Fact & Factors expects the market for delivery robots to grow by 20% or more per year through 2025. Over time, the manufacturers of autonomous vehicles will overcome at least some of the obstacles that currently limit the usefulness of these vehicles for e-commerce last-mile delivery. The technology is exciting and represents a critical element of the future of last-mile delivery, and continued challenges in the labor market may accelerate its adoption. Last-mile providers with the agility to pivot when this technology makes sense for a given application and location will have a distinct advantage.

An area that’s getting less attention currently but may be more promising for eCommerce is larger autonomous vehicles in dense urban environments for next-to-last mile deliveries. In this scenario, a carrier would use an autonomous truck or van to get a load of packages from a sorting center to a ‘micro hub’, where packages are loaded onto green vehicles like a URB-E bicycle carrier to reduce the carbon footprint of the last mile.

What about drones?

Drones have the advantage of not navigating city streets or sidewalks, so they don’t create additional street traffic. They don’t require wages, benefits, or breaks. They move exponentially faster than delivery robots and have a much larger delivery radius (10-12 miles). Order something small, and you can have it on your doorstep later that day with a near-zero carbon footprint.

Sounds great, but drones also come with their own set of challenges – the greatest of which is regulatory:

  • The China factor – Chinese manufacturers dominate the drone market. The U.S. government imposes significant restrictions on the use of drone operating systems designed in China.
  • Noise pollution – FAA recommends that aircraft noise in residential areas stay below an average of 65db. A commercial delivery drone creates 75-90db of noise. Constant or even intermittent drone delivery traffic would exceed FAA recommendations.

These are significant obstacles. In addition, like most current autonomous robots, they can only deliver one package at a time. For comparison, the typical UPS truck drops 120 packages a day.

A Forbes Technology Council update back in 2018 concluded, among other things, that drones are ideal for last-mile connectivity in rural areas and may be helpful there. Still, the noise factor will limit the spread of drone-only delivery. That’s pretty much in line with our current thinking on drones.

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Last-mile advantage

While the media buzz continues over robots, autonomous vehicles, and drones, the technology that will differentiate last-mile carriers from legacy national carriers and each other are a little less newsworthy. How carriers capture and use data to manage today and predict tomorrow is the key to getting the last mile right.

For asset-light carriers covering the last mile, the ability to analyze data – to predict capacity needs, understand where operations need to flex or scale up or down each day, to optimize driver routing, and to predict and prevent exceptions before they occur – provides a level of agility that the legacy carriers can’t match.

We’ll have more to say in the future about AI and predictive analytics and how they are changing the way last-mile carriers operate. For now, suffice to suggest that it may be the case that the most strategic investment that any last-mile carrier can make in technology is to go all-in on predictive analytics. Carriers with the ability to mine the gold from the hill of data collected from every delivery may well end up with a significant advantage in optimizing the last mile.

Download Quick Guide: Choosing a Last-Mile Provider