With the coronavirus drastically altering lives across the globe this year, the door has opened for drone delivery companies to play an increasing role in supply chain and distribution. Tech players – both giants and startups – are expanding the industry’s reach, using drone equipment to aid the COVID-19 health and economic recovery. Drones, also known as unmanned aircraft systems, or UAS, may eventually help fill in the holes within delivery infrastructure.
Drone makers and operators, such as German manufacturer Wingcopter, are playing an increasing role in delivering medical specimens and supplies. In Silicon Valley, a new company, Hubvery, has emerged to create software and provide infrastructure support to help drones carry items to hard-to-reach rural corners – the proverbial last mile. And in Fayetteville, N.C. and Grand Forks, N.D., Walmart quietly launched a drone delivery trial with Israeli company Flytrex dropping orders into suburban backyards. Regulatory and safety obstacles remain — but Amazon and Alphabet, meanwhile, recently received key FAA approvals allowing them to launch trials with their subsidiary drone operations.
“Basically, we’ve designed the system that’s really focused on backyard deliveries, so we’re talking mostly about the U.S. suburbs,” said Yariv Bash, co-founder and CEO of Flytrex. “We’ve had people ordering Colgate toothpaste, all kinds of snacks, eggs.” Like North Dakota, North Carolina is another state that has actively studied and encouraged drone operations.
Depending on the size of an aircraft and its battery life, a delivery drone could potentially carry a small package of between three to eight pounds dozens of miles – if regulations permitted – and bring everything from small household goods to hot food orders to consumers, or PPE equipment and emergency blood supplies to medical facilities.
“You’ve got more than 70 million backyards across the US, just waiting to be serviced. And that’s incredible opportunity. You’ve got more than 120,000 shopping centers,” said Bash, who founded Flytrex in 2013. “So you can start deploying stations all over the U.S. working with different restaurants, retailers.”
Drone Use Rises Sharply
Commercial usage of drones is already prevalent for business purposes, such as surveillance, photography and farming, to name a few. The number of commercial drones registered in the U.S. increased sharply in 2019 to 385,450, up 39% from the previous year according to the Federal Aviation Administration. In the agency’s 20-year aerospace forecast released this past summer, the FAA predicted that the commercial UAS fleet will likely more than double by 2024, with the purchase cost for a drone expected to decrease as the industry develops. The average price of a consumer-grade drone is $2,500, although higher-end models can run as high as $10,000, and professional-grade products can exceed $25,000.
But while the forecast seems bright, drone delivery is still in its earliest days. As with any new enterprise, it has growing pains to address before it can truly take off and become a viable game changer.
Drones In The Consumer Supply Chain
Previously rarely heard terms like “social distancing” and “contactless delivery” quickly entered the vocabulary in 2020, when businesses and customers realized how easily the coronavirus was transmitted. With attention turning to ways of avoiding person-to-person contact when shopping, drones have been floated as a safer option among virus-wary consumers who once may have relegated the idea to science fiction.
In the midst of the pandemic, in August, the FAA designated Amazon’s drone service, Prime Air, an “air carrier,” permitting the online giant to embark on commercial drone trial projects. It was seven years after CEO Jeff Bezos’s announcement in 2013 of his plans to introduce delivery by drone.
Alphabet’s Wing had already earned that same designation and begun its own retail delivery trial in Christiansburg, Va., in late 2019, joining forces with Fedex. Deliveries “soared” during the pandemic, Alphabet told the local news outlet Channel 10.
In the spring, Flytrex started transporting items from a local Walmart in Grand Forks, N.D., to nearby neighborhoods, taking advantage of a business climate in a city and state that sees commercial drone usage as a possible economic boon. The state of North Dakota has already invested tens of millions of dollars to support the local drone industry in the last few years, including constructing a business park that allows airspace access exclusively for UAS-related businesses.
“We as a region have been very focused on unmanned aerial systems for more than a decade, and the market is just catching up to some of that,” said Brandon Baumbach, business development manager at Grand Forks Region Economic Development Corp
“We have been pursuing more commercial endeavors as a state and a region for some time now, and at my office, we’ve prioritized this. We’ve actually had a full-time business developer on the UAS front for as long as I’m talking about – 10 years or so.”
Before dipping its toe in the U.S. market, Flytrex had previously found success in retail drone deliveries elsewhere. The Israeli company has been shuttling everything from hot meals to electronics in Reykjavik, Iceland, since 2017.
Bash and his team understood the geography of U.S. communities well enough to figure that their efforts in Iceland could be replicated to satisfy American consumers’ tastes and wishes to have their groceries and fresh sushi delivered. In September, Flytrex spread its wings a little bit further, this time entering into an official partnership with Walmart to deliver purchases from the retail giant’s store in Fayetteville, N.C..
Flytrex’s drone-delivery originated as a tracking system, a device that compiled, organized and sent drone data from an autonomous aircraft to its user, a “Strava for drones,” as Bash described it. Seeing a chance to expand beyond a tracking tool, Bash and cofounder Amit Regev decided to pivot to a drone delivery enterprise and began fundraising for their new venture. Flytrex received $3 million in Series A funding in 2017 from Armada Investment Group, and in 2019, landed an additional $7.5 million venture capital Series B funding from the coffers of btov Partners and Benhamou Global Ventures. Flytrex employs about 30 people.
Federal Regulations In The United States
Currently, federal regulations in the United States require drones to remain in the line of sight of ground observers at all times to avoid interference with other aircraft, severely restricting the coverage area for retailers. Waivers are sometimes granted for medical and agricultural projects, but thus far, have not been given for pure commercial purposes.
“The drone delivery manufacturers and the operators – the retail establishments – have to figure out a way in the longer term to be able to deliver without having these human visual operators that have to be the safety mitigators on the ground,” said Joel Roberson, public policy and regulatory attorney at Holland & Knight in Washington, D.C
And while rural households would likely benefit enormously from the expansion of drone delivery networks, service is costly and limited to the range an aircraft has, making it challenging to reach more remote areas.
Enter Felipe Castro Quilles and his startup, Hubvery. The Silicon Valley-based enterprise aims to create a hub system for drones and autonomous vehicles, similar to airline networks, that can reach underserved communities, along with tracking software that would keep the skies safe.
The Effect Of Hurricane Maria In Puerto Rico
Castro Quilles started developing the concept alongside fellow technology innovators at Singularity University, where Hubvery was incubated. His company, which also received support from Nvidia Inception incubator program in 2019, currently has a leadership team of four with plans to hire after an initial round of funding.
The inspiration for Hubvery (a mashup of the words “hub” and “delivery”) came to Castro Quilles in 2018 after Hurricane Maria ravaged his native Puerto Rico. Ensuing landslides left many communities isolated and cut off from relief for days.
“I thought, ‘Well, if this happens in a small island in the Caribbean that belongs to the U.S., what do you think happens in the rest of the world, people that are way less fortunate? They die waiting for their stuff, right?’ And that’s how, eventually, that idea turned into a project, then turned into a service, and then turned into a product,” Castro Quilles said.
Castro Quilles sees Hubvery as filling an essential gap that currently exists in the supply chain, particularly when it comes to serving hard-to-reach areas that suffer from a paucity of retail or shipping options. If customers need a product right away, they wouldn’t find themselves out of luck if the nearest merchant open for business was too far away or if a courier or shipper was unavailable.
“That’s part of our expedition. You can order a drone right away. And in real time, track it, know where it is, when it’s going to arrive. As simple as that,” Castro Quilles said.
While drone companies and the FAA realize that American shoppers and businesses might now be more receptive to the benefits of delivery due to the realities of the current pandemic, further adoption and expansion of these services require proof that the technology is safe and reliable. Detect-and-avoid sensors that can be placed on drones and scan the horizon to avoid collisions with other aircraft exist but have not yet passed muster.
“The FAA is trying to work with companies to say, ‘If you can prove that drone technology would allow those beyond visual line-of-sight operations to happen as safely as if it was a human pilot, then we could certify the whole lot of you to go out there and do these drone deliveries without these visual observers on the ground and these very restrictive limitations on the geography where you could fly,’” Roberson said.
Drone industry leaders hope the pandemic speeds safety innovation and regulatory acceptance.
“The aviation system is the one that has to really consider the fact that this is very much needed and will happen eventually, as fast as we bring things together,” Castro Quilles said.
“And no matter what we’re looking for, it would be very nice for the U.S. to be the leading country in having in having drones moving all around and distributing stuff and having no jams in the air space. That can easily be done.”
Drones In Medical Use
Drone operators had already shown their effectiveness in medical missions well before COVID-19, and they have proven to be invaluable in 2020 as the pandemic has spread. Operators, such as Silicon Valley-based Zipline and Matternet helped pave the way for the use of autonomous aircraft in medicine as early as 2014. Zipline, whose investors include Sequoia, A16Z, GV, Temasek, TPG, Baillie Gifford, and Katalyst Ventures, was valued at more than $1 billion in 2019, CNBC reported.
Carrying medicine and equipment to hard-to-reach areas has been a key part of the strategy of Frankfurt, Germany-based Wingcopter since it was founded in 2017. The company was initially bootstrapped in its early days by its founders, Jonathan Hesselbarth, Tom Plümmer and Ansgar Kadura. Since late 2019, it has received two rounds of undisclosed seed investment funding from Corecam Capital Partners, with locations in Zurich, Vienna, Singapore, and Ho Chi Minh City. Wingcopter currently employs 87 people.
In 2019, Wingcopter dropped vaccines and insulin to the South Pacific island of Vanuatu and the Aran Islands of Ireland. After COVID-19 hit, in collaboration with British delivery service Skyports, Wingcopter drones brought test kits and personal protective equipment to residents on Scotland’s Isle of Mull this summer in a trial project with the National Health Service. That operation is expected to expand in coming months. And Wingcopter’s other efforts continue across the world.
Next up: a locally operated delivery drone network in Malawi, to distribute tests and vaccines.