Drones for Deliveries

1 Drones for Deliveries Abstract Withadvancingdronetechnologiesandincreas ingcommercialusage,webelievethelast delivery of most lightweight packages. Number: Date: November 8, 2015 Authors: Simran Brar Ralph Rabbat Vishal Raithatha George Runcie Andrew Yu 2 Sutardja Center for Entrepreneurship & Technology Technical Report Thispaperwascreatedinanopenclassroomenvi ronmentaspartofaprogramwithintheSutardja Centerfor Entrepreneurship& University of California Berkeley. 2 3 Sutardja Center for Entrepreneurship & Technology Technical Report Project I Industry Strategy Example Outline Section I Introduction/Observation of a change and a hypothesis of what effect it will have in the industry Section II Existing market : Map relevant firms in the industry/space (today s players with data and strategies on each) Section III Technology: The technical factors or technology changes market limits, network effects, new technological capabilities, key components, limitations Section IV Broad Contextual Factors: Any political environment, regulatory or societal factors to consider Section V Today vs.

2 Future: Of the existing firms in the area, who will win and lose and why. Indicate new opportunities, what are the likely strategies and responses (potential acquisitions Section VI Summarize and Predict Opportunity: Where is the optimal white space, align abstract, hypothesis and summary 3 4 Sutardja Center for Entrepreneurship & Technology Technical Report Section I: Introduction: Main Hypothesis and Topic ,orderingfood,buyinggifts, groceryruns,shippingofficialorpersonalpa ckagestheconsumerspaceisincreasingly Shipping,Logistics,Onlineshoppingbusines sesareinvestingheavilyintheentiresupply ,thereare accelerateddeliverytimes,improvedaccurac yandreducehumancostassociatedwith delivery. Which leads us to believe Drones will handle last mile delivery of most lightweight packages.)

3 Section II: Existing market Introduction to Unmanned Aerial Vehicle (UAV) Drone is an aircraft without a human pilot onboard. Its flight is either controlled autonomously or by the remote control of a pilot/operator on the ground. Currently there are two kinds of UAVs aka Drones : aircraft Piloted aircraft Droneshavebeentraditionallyusedbymilitar yandspecialmilitaryoperationsbutarebeing exploredforincreasingnumberofcivilapplic ationssuchaspolicing,firefighting,nonmil itary security work, inspection of power pipelines and other applications. AccordingtoaresearchreportfromRadiantIns ight, Unmannedaerialsystems(UAS) marketsat$609millionin2014areforecasttor each$ ,worldwideby2021. Thisisasizablemarketgrowthwithoilandgasm apping,utilitylineinspection,package delivery, providemoreinformationatlesscostthanahum aninspectionteamcan (RadiantInsight 2015).

4 4 5 Sutardja Center for Entrepreneurship & Technology Technical Report Current players Retailers Amazon proposed AmazonPrimeAir andisworkingwithFAAforregulatoryandsafet ystandards. heelsofgettingFAApermissionforexperiment altestflightsintheUnitedStatesinMarch, 'spatentapplicationforits dronedeliverysystem(USPatent20150120094) .Amazonisthinkingbeyondjusthome deliveryandalreadyhasdesignforfeaturesli ke BringittoMe ,whichwouldcapturesa customer slocationbyGPSdatareceivedthroughmobiled evices(Marsh2015).Amazon hasbeengrantedexperimentalrightsbyFAAinM arch2015:Dronescanonlybeflownat 5 6 Sutardja Center for Entrepreneurship & Technology Technical Report 400feetorbelowduringthedayinclearweather conditions,andmustremaininthe line of sightoftheiroperators,whomustholdatleast aprivatepilot'scertificateandmedical certification.

5 (Keeney 2015). Source: Keeney, Tasha. "How can Amazon Charge $1 for Drone Delivery?" Ark Invest, May 5, 2015. Google InAug2014 Googlerevealedthatithasbeenworkingondron edeliveryforthelast2yrs. TheprojectiscalledProjectWingandisrunbyG oogleX,thecompany beenrunningexperimentsinAustraliaastheir regulationsaroundUAVsismuchmore ,Googlelandedonan unusualdesigncalledatailsitter,ahybridof aplaneandahelicopterthattakesoffvertical ly, ,ithoversandwinches ,there salittlebundleofelectronics theycallthe egg, whichdetectsthatthepackagehashitthegroun d,detachesfromthe delivery, and is pulled back up into the body of the vehicle. Other Retailers: Therearemanyotheronlineretailerswhomayno tbeexperimentingwithdronesdirectly, they could partner with a logistics company that provides drone Deliveries .

6 Delivery and Logistics companies FedEx 6 7 Sutardja Center for Entrepreneurship & Technology Technical Report FedEx withdronemanufacturersfordronedeliverybu tdoesnotexpecttheinternationalcourier market to adopt it. UPS UPS ,sourcesfamiliarwiththecompany splanssaidit and does not think that it will catch on soon as mainstream delivery mechanism. DHL DHL ,DHLE xpresslaunchedits"parcelcopter",a helicopter styledronewhichwilldeliver"medicationsan dotherurgentlyneededgoods"to theremoteNorthSeaislandofJuist(Russon201 4).DHLwilloperatetheparcelcopterona regular basis, initially on a research basis. AMP Holdings InJune2014,AMPH oldingsannouncedthatithadsuccessfullydes ignedanddevelopeda prototypeofHorseFly,abatteryoperatedUAV( ).

7 Thesecanbe combined with the workhorse trucks to deliver packages. Drone Manufacturers Matternet Matternetisastart upinthebayareathatisfocusingonperfecting drone baseddelivery ( Drones ,landingpads,batteries,charging software,cloudsoftwareformanagementandna vigation/transportationcentricoperations ). Theyhavesuccessfullypartneredwithorganiz ationlikeSwissPosttoconductpilotsto $ Flextronics, Scott Banister, and Nas (Biggs 2015). Thefollowingmanufacturersarenotfocusedon last miledeliveriesbutonotherapplications 1fortheir annual sales. Technology is also being perfected along the way to support this adoption rate. DJI DJIisaChinesetechnologycompanyfoundedin2 006byFrankWangandheadquarteredin Shenzhen,Guangdongprovince, 7 8 Sutardja Center for Entrepreneurship & Technology Technical Report rangeofproductssuchasflyingcameras,flyin gplatforms,flyingcontrollersandother of up to billion USD in 2014 and projected to hit billion USD in 2015.

8 3DR 3 DRisaprivatelyhelddronemanufacturingcomp any,headquarteredinBerkeley, directcompetitorforDJIandfocusesoncivil makingDronecode, ,QualCommand Parrothavebecomemembersofthisopen ,3 DRhasreceived investmentsfromvariousdifferentventurefi rmsandreceiveditsmostrecentfundinginApri l 2015. Parrot Parrotmade$ ,at$300adrone(averagepriceofAR Drone~$ ~$400in2013),isabout180,000units(Booton2 014).Revenues fromdronesalesforParrottripledin2014whic h,accordinglyraisestheunitsmovedto 530, themarketwithanaveragepriceofabout$ units sold in 2015 if all of Parrots drone models sell equally. Drones for Online Delivery Factors and motivation: For online retailers, various shipping methods are available today: includesstandard(5 7day)shipping,TwodayshippingandOne shippingafterafixedcostofshopping( $50purchase).

9 Mostofthese feefor year around 2 day delivery (for Amazon prime). Storepickup:Mostoftheretailerswithbricka ndmortarpresence/storesalsooffer freein store sinventory, store sinventorythenitisshippedtothestorewithi nstandardor2 dayshipping ,retailermakesuseoftheregularfulfillment andsupply chain ,acustomercanpickit from the store. 8 9 Sutardja Center for Entrepreneurship & Technology Technical Report :Retailerssellingbiggerpackageslikeappli ancesandfurniture shiptheirmerchandisetoacustomer oftrucksmanagedandoperatedbytheretailero risthroughapartnershipwitha payextrafor shipping and delivery. :Amazonhasthisasanoptionbutishasnotbeen approved by the FAA yet.

10 Motivation to adopt Drones : Main factors that could motivate online retailers to adopt Drones are: Cost Value of fast delivery Convenience There are three possible models in which Drones can be used for delivery: Globalcourieranddeliveryservicecompanies usingdronesforlast miledelivery : parceldeliveryservicesindustryconsistsof about7,500companiesbothlargeandsmall, whichhavecombinedannualrevenueofabout$ , FedEx( FDX )andUnitedParcelServices( UPS ).Theindustryisbothcapital intensiveand labor ,pilots, operatorsofcallcentersanddrop offlocations,groundandadministrativestaf f,andloading crews. 9 10 Sutardja Center for Entrepreneurship & Technology Technical Report Source: Schmidt, Ally. A Look at the Courier Service Industry in the United States , market Realist, July 17, 2015.