The breaking news late last week that Walmart is preparing to test a delivery program using ride-sharing models such as Uber and Lyft for “last mile” delivery, brought to the forefront once again the many ways that retailers are looking at a broad range of models for delivery of online purchases to consumers. The Walmart concept will test a grocery delivery service that would allow online shoppers to purchase groceries through the Walmart web site and then Walmart would prepare the items and request delivery through Uber or Lyft to the end consumer. And if the tests are successful, who says it will be limited to groceries?
This latest news is just one more development in the fast-changing “last mile” delivery space. With the continued growth in ecommerce and resulting parcel delivery, the actual delivery of purchased goods is a space ripe for innovation, new technology, non-traditional partnerships, and “co-opetition.”
Our recent PostalVision 2020 event held in the Washington DC area included much discussion around what delivery will look like in the future, including the physical delivery “vehicle” of the future. Whether ecommerce purchases in the future will be delivered by drones, autonomous vehicles, ride-share services, or some other “vehicle” is an exciting topic which many are exploring. Our event featured a panel led by Brian Bowers, Chief Technology Officer at Bell and Howell, and included a diverse group of panelists discussing new innovations and inventions in the delivery leg of the “B2Me” journey. Panelists included Steve Burns, co-founder and CEO of Workhorse; Keith Cornell, Chief Commercial Officer at self-driving delivery robots provider Starship Technologies; and Robbie Diamond, founder, President and CEO of policy advocate group SAFE (Securing America’s Future Energy).
USPS’ Next Generation Delivery Fleet
Our panel discussion began with a look at the more “traditional” delivery vehicle fleet – in this case, that used by the U.S. Postal Service (USPS). But even the tried and true USPS “long life vehicle (LLV)” fleet is due for replacement and upgrade and the process of determining what the “next generation” USPS fleet will look like has begun. Robbie Diamond, founder and president/CEO of policy advocate group SAFE (Securing America’s Future Energy), kicked off the panel discussion at PostalVision’s event talking about why his group feels the USPS’ choices around its next generation delivery vehicle fleet are so critical.
“Our one mission at SAFE,” he told the PostalVision audience, “is to reduce the United States’ oil dependence, for economic and security reasons.” He said the need for oil is the cause of many world conflicts, and should not have only one main fuel source powering its transportation sector. He noted that the group in 2004 recruited FedEx Chairman Fred Smith to be one of its chairmen, as well as General Kelly, 20th Commandant of the Marine Corps. “They got engaged on this issue,” he said, “to argue that it was time for the United States to have a strategy.”
Diamond explained that his group became involved with the USPS’ next generation fleet proposal process because the USPS has the largest private vehicle fleet in the world, with 180,000 vehicles, with most of today’s having been on the road since the 1980s. He said the USPS’ first RFI (request for information) in its proposal process was “kind of horrifying to us” because the USPS wanted to do the same thing again, with little innovation. “For us, this is the perfect opportunity,” he said, “for a part of the U.S. government to lead this effort.”
Diamond said his group conducted an economic analysis on the USPS’ fleet replacement and it showed $2 billion could be saved through a different type of RFI. “We joked that the new USPS vehicles from the way its RFI was constructed would still be on the road in 2045 and the USPS would be the only one on the road driving vehicles in 2045 because everyone else will be in autonomous vehicles,” he told the PV2020 audience. Diamond re-capped the automotive technology changes that have occurred since the 1980s that were missing from the USPS fleet today, and said the coming automotive technology advancements will be even more radical.
Diamond said the USPS has made some changes in its actual RFP (request for proposal) , but “it still fails to meet this challenge for innovation.” He said every other delivery carrier has been able to purchase off the shelf vehicles, tailor them to their needs, and his group has shown that USPS could do the same thing to have innovation and turn over the vehicles every 10-12 years and save on the total cost while embracing innovation.
Autonomous Robot Delivery?
From discussion around more traditional delivery “vehicle” fleets, the PostalVision panel moved into more futurist-seeming options, but autonomous robotic delivery is already a reality in some places, as the audience heard from Starship Technologies.
Chief Commercial Officer Keith Cornell told the PostalVision audience that Starship’s local delivery robot, which is built in Estonia, offers a low-cost alternative for last mile delivery. 20 billion packages were delivered in the E.U. and the U.S. last year, Cornell said, and the cost of delivery is a challenge many retailers, carriers and posts are looking at. The Starship robot, which can drive on sidewalks and fit in with pedestrians, drives largely autonomously, is a low-cost delivery alternative, he said, to enable delivery within a 2-mile radius within 30 minutes.
The Starship robot is a pull model vs. push (what we refer to as “B2Me”) in terms of consumers, Cornell said, with the recipient getting a notice their package is available, but then the consumer dictating the time of delivery. Customers want to know where their package is, delivery when they want it, and a low cost, he said. “Our belief is this will dramatically reduce the last mile delivery cost,” he told the PostalVision audience, “because we are reducing the cost of the asset and of the labor.” He said Starship believes about 100 of the robots around the world could be operated by a single operator, and their target is less than $1 cost per delivery (with estimates of $2-3 per delivery in 2017).
And a Different Approach with Drones
Steve Burns, co-founder/CEO of Workhorse, told the PostalVision audience about a different potential delivery solution – drones. But not just drones, but drones delivered from Workhorse electric trucks.
Burns told the group that the challenges being faced by the USPS and other posts in terms of the change in mail mix reminds him a bit of the Netflix vs. Blockbuster battle – both involve delivering movies, but in different ways. “The good news is that people are going to get goods delivered to them, that’s not going to change,” he said, “but how can we do it more effectively, and also reduce pollution.” He said if you are going to physically move packages on roads, a certain amount of physics are involved. “These vehicles, by their stop and go nature, is the hardest thing an internal combustion engine has to do,” he said, “at its worst efficiency.” “So if we are going to reinvent that space,” he said, “should we use the tools of old?” he asked. “Should a person in a diesel truck go around delivering things?”
Burns said for the foreseeable future, we need trucks. Workhorse makes trucks, including trucks for UPS, he said, and many man hours have gone into development and design of today’s trucks. But there are no more refinements to wrangle out of today’s combustion engines, he said. “Trucks account for 4% of the vehicles in the U.S.” he said, “but 20% of the pollution.” He said a USPS truck in the U.S. stops 700 times a day. He talked about the USPS’ next generation vehicle proposal, and said “imagine what will change in the next 25 years?” He said Workhorse proposed electric trucks with drones mounted on top, outfitted for autonomous use when drones are approved by the FAA in the future.
“We will save the owners of these trucks $125,000 per truck over 15 years, even if gas prices stay low,” he said, noting the maintenance costs of the vehicles are extremely low. He said that while the electric vehicles may cost a bit more up front, the savings over 10-15 years are significant, not to mention that they are nearly pollution-free. “But when you are budget constrained like many posts are,” he said, “you are tempted to go with low-cost in the short term.” But he noted that the USPS’ RFP looks at total cost of ownership over 20 years.
Burns presented a video showing how the drone can fly out of the top of the electric truck while the driver keeps going on the route. The drone delivers the package then finds the truck and re-charges its battery if needed before the next stop.
Delivery Vehicle Options: A Broad Range, Not A Single Solution
At this point in time, some solutions are better designed to work for certain delivery types but not for others. The Starship autonomous robot, for instance, right now is designed for low-rise urban delivery and would not be a good solution for high-rise or very rural spread out delivery. The USPS is not going to have an entire 180,000 fleet of electric vehicles in the short term, the group acknowledged, but it should be part of a blend of delivery vehicle solutions.
“A diesel truck costs $1 a mile to operate, our electric truck brings that down to 30-cents a mile, and a drone flies at 2-cents a mile,” Burns told the PostalVision audience. “At those economics,” he told the PostalVision group, “it’s pretty compelling.” “It’s not for every delivery,” he said, “but it’s coming.”
Save the Date for 2017!
PostalVision 2020 will continue to bring together thought leaders and posts from around the world, to discuss innovation, new technology, and other exciting industry developments. Save the Date now for our 2017 event – March 21-22, 2017 at The Ritz Carlton Pentagon City (just outside Washington DC), and stay tuned for more information.
By Kathy Siviter
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