Who Owns America’s First Revenue Generating Drone Delivery System?

Drone Delivery

In March, UPS became the U.S.’s first third-party shipping carrier to generate revenue from a drone delivery system.

UPS partnered with Matternet, a drone technology company, to begin delivering medical supplies at WakeMed in Raleigh, North Carolina, on March 26.

Business Insider reported that moving medical samples — including blood and organ samples — across the enormous hospital and research campus “can sometimes take up to 30 minutes in traffic.” The drone zipped across the campus in just over three minutes, decreasing delivery time tremendously.

Bala Ganesh, the Vice President of UPS’s Advanced Technology Group, told Business Insider that this was the first revenue-generating delivery by unmanned aerial vehicles, or UAVs, in the U.S. That’s a big deal. Shipping industry players have been working to commercialize drone delivery for years now, and UPS is the first to succeed in offering this service.

After years of testing, drone delivery is here

Shipping industry leaders have been watching all the major players to see who would be the first to use commercial drones in deliveries. Amazon has been testing delivery with UAVs for several years, but has not actually brought a drone delivery system to market yet.

The primary obstacle to commercializing drone operations, delivery companies say, is government regulation. Agencies like the Federal Aviation Administration regulate commercial aviation, which includes commercial drone use.

For years, the FAA granted some exemptions to companies that wanted to test drone delivery, but no long-term permission to operate UAVs.

Then, in May 2018, the U.S. Department of Transportation approved 10 public-private partnerships to test commercial drone technology as part of its Drone Integrated Pilot Program. One of those partnerships was between the North Carolina Department of Transportation and Matternet. The FAA oversaw the project.

At the time, what most headlines pointed out was that Amazon was not selected for any of the pilot projects. UPS’s role in the WakeMed pilot project was not disclosed at the time. FedEx had one of the 10 winning applications too.

Now that this project has succeeded, at least on a small scale, we can get a sense of what commercial drone operations might actually mean for delivery. In a joint statement, UPS and WakeMed said using UAVs for deliveries on the medical campus could cut delivery times by dozens of minutes, potentially saving lives. Unmanned aerial vehicles also cost less than human couriers, saving the institution money on package delivery.

The partners think their work could inspire other hospitals to implement drone delivery systems. Now that they’ve proven the concept, UPS and Matternet should be able to replicate it elsewhere.

What does this mean for the future?

Dozens of tech and e-commerce companies have talked about making drones part of their growth strategies. The applications are seemingly endless.

Drones already give marketing firms a whole new suite of photo and video options to offer customers. They could deliver first aid supplies to remote areas or to people stuck in heavy traffic. USAA has used drones to survey damage claims after natural disasters. Walmart has tested UAVs in its warehouses. Mark Zuckerberg even proposed using drones to deliver Internet connectivity in remote parts of the world, although Facebook abandoned that project in 2018.

Drone delivery is coming, no matter what. The UPS-Matternet-WakeMed partnership was just first to successfully implement it. The project had a lot of advantages. First, it had the FAA’s blessing and involved the state Department of Transportation as a partner. Second, its application — moving medical supplies, with potentially life-saving results — was hard to argue against. And third, WakeMed’s campus offered a limited amount of controlled space, rather than a city with people constantly coming and going, unaware of objects flying above them.

FedEx was also selected for the FAA public-private partnership program, working with the Memphis-Shelby County Airport Authority on package delivery by drone. Results of that project have not been announced.

Amazon Prime Air has been in private trials in the United Kingdom for several years, promising delivery times in urban centers of 30 minutes or less. Gur Kimchi, Vice President of Prime Air, told Popular Science in 2015 that the company believes drones can handle “80 to 90 percent” of the items Amazon sells, in. But Amazon has not yet been able to offer drone delivery on a commercial basis, even in one or two metro areas.

UPS was the first major third-party shipping carrier to generate revenue from drone delivery. But it won’t be the last. As drone technology evolves — and as regulations evolve to keep up with it — more and more parcels may be delivered by UAVs.

Commercial drone delivery is so new that, for now, every successful pilot is groundbreaking. The UPS project was. The FedEx experiment will be. And Amazon, if and when it commercializes Prime Air, will be.

No competitor is out of this race. Drone delivery is just getting started — and with the continuous growth of e-commerce, it’s only going to get more exciting.


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