Drones take to the sky, potentially disrupting last-mile delivery

Drones could become an important part of the delivery supply chain. In early 2022, more than 2,000 commercial drone deliveries were occurring every day worldwide, and that number has only grown since. While this number is still small relative to the total number of commercial deliveries, it indicates that current activity involves more than just test-flights. Drone technology has the potential to meet a range of last-mile consumer use cases, such as prepared food, convenience products, and other small packages, as well as B2B needs, such as moving medical samples to labs.

As the industry steps out of its infancy, drones may become cost competitive at a direct operating cost level. In fact, under certain conditions—such as in regions with poor road infrastructure or when pooling deliveries does not make sense—drones may already be the most cost-effective mode of delivery. They are also environmentally friendly, with CO2 emissions typically lower than those of electric cars and vans making a single delivery, and significantly lower than those of gasoline-powered vehicles (exhibit). In the same spirit as our discussion on eliminating carbon emissions for commercial fleets, companies will be much more likely to reach their emissions goals if they do not have to deliver a one-pound burrito with a two-ton vehicle.

Drones could become cost competitive with other transport modes.

Overall, the findings from our modeling, using reasonable assumptions for cost drivers, underscore the importance of labor costs associated with drone delivery. Currently, regulations in most countries and regions state that people can only operate and monitor one drone at a time; a visual observer must simultaneously monitor the airspace in which the drone operates.1 As a result, labor represents up to 95 percent of the total cost of drone delivery—our bottom-up model estimates that a single-package drone delivery has a direct operating cost of approximately $13.50. These costs are not yet competitive with electric cars and vans, or with internal combustion engine (ICE) vans doing a single delivery, or any type of vehicle doing multiple deliveries in a single run.

For drones to become truly cost competitive across the board, operators will need to be able to shift their focus from observing airspace to operating drones, and the number of drones per operator will need to increase significantly. That, in turn, will require technology and regulation to advance sufficiently for a single operator to manage as many as 20 drones in a densely used airspace. These advances would include autonomous drone flight in which drones fly with limited human intervention, unmanned traffic management systems, and sense-and-avoid solutions.

Once those innovations are in place, regulations will need to evolve, enabling larger numbers of drones per operator. As those shifts begin to happen, the potential cost advantage of drone delivery will begin to grow.

If drone operators can eventually manage 20 drones simultaneously, our analysis, using reasonable assumptions, suggests that a single package delivery will cost about $1.50 to $2. That is lower than the per-package cost for an electric car delivering five packages, and in line with any type of van delivering 100 packages in a milk-run format when a driver delivers all packages in a single trip—a process which is not always feasible. Deliveries provided through current food delivery apps and services cost more than our estimates for future drone deliveries in which drone operators will be able to operate multiple drones simultaneously. However, it is important to note that their fees also cover additional expenses, such as managing the ordering platform and coordinating delivery drivers, which makes direct comparisons difficult. With Uber Eats, Wolt, Foodpanda, and Grubhub, for example, fees to customers can range from $0.49 to $7.99 and fees for restaurants can be anywhere from 10 percent to 30 percent of the order. Customers may also pay a gratuity on top of that.

Developing a drone strategy

Given the potential cost and sustainability benefits of drone deliveries, retail chains, restaurant groups, and supermarket chains would do well to build a clear strategy for their use. As companies develop their strategy, they will need to balance the difficulties of drone operations with the potential benefits. When doing so, they could benefit from considering several questions:

  1. What products can feasibly be delivered by drone and how receptive will customers be to this option?
  2. What regions will have the greatest demand for drone delivery?
  3. Can existing stores and warehouses be modified to accommodate drone deliveries, and will additional infrastructure or facilities be required?
  4. How well can drone operations be integrated into broader delivery operations using other modes?
  5. Are there any natural partners for drone delivery operations?
  6. How can drones help contribute to the company’s sustainability goals?

As companies consider these questions, it is important to recognize that developing drone delivery capabilities will not be simple, especially at a smaller scale. However, there are an emerging set of cases where drone delivery can bring value for companies. And as companies reach full drone delivery capabilities, they will begin to see expanded benefits in their delivery strategies.

The economic and environmental advantages suggest that drone delivery could become an important part of the delivery ecosystem. Forward-thinking companies will plan today for a drone-enabled future. As they do so, they should prepare to evolve their drone strategy over time, in line with regulatory changes, technological advancements, shifts in customer preference, and their own capabilities.

Andrea Cornell is a consultant in McKinsey’s Denver office, Benedikt Kloss is an associate partner in the Frankfurt office, DJ Presser is a consultant in the New York office, and Robin Riedel is a partner in the San Francisco office.

The authors would like to thank Adam Seifert for his contributions to this article.

1 In some cases, the visual observer may also serve as the drone operator.

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