Amazon.com Inc. (AMZN) has upset the retail space and driven many brick-and-mortar stores to completely revamp their business plans. Now, the e-commerce giant is making inroads in the logistics industry with new delivery options and its own fleet of trucks.
However, perhaps the biggest potential upset for competitors such as United Parcel Service, Inc. (UPS) and FedEx Corporation (FDX) is Amazon’s work to develop delivery drones, something many believe could shape the future of the industry.
Amazon has been working to develop delivery drones for some time now, but with drone regulations still hazy in the U.S., UPS is hoping to get in the game from another angle by investing in a startup that is using the technology to deliver blood to thousands in Rwanda.
Rwandan Drone Project
UPS has provided an $800,000 grant to fund a collaboration between Gavi, which supplies poor countries with vaccines, and Zipline International, a robotics firm. The two will create a system that will deliver blood and vaccines using unmanned aircraft throughout Rwanda. The project is expected to increase the speed of deliveries by about 20%.
The First Step Toward UPS Drones
While the project certainly offers humanitarian benefits, UPS’ interest extends far beyond just that. At the moment, companies like AMZN are working around complicated drone regulations imposed by the FAA to get their unmanned aircraft up and running. To gain approval and push for softer drone regulations, drone delivery companies will need a great deal of flight data to show that the devices are safe for use in densely populated areas.
Data Rich
UPS’ involvement in the Rwandan drone project is likely to provide the vast data it will need, should the company decide to add drone deliveries to its list of services. The project will generate tens of thousands of flight hours as there are far fewer regulatory hurdles to overcome in Rwanda.
Tight Regulations
Drone deliveries in the U.S. are far from becoming a reality as FAA officials have insisted that the organization err on the side of caution to avoid problems between commercial aircraft and drones that end up in the same airspace. At the moment, drones must remain in sight of their pilots, making them an unrealistic delivery option. However, most expect that as companies like Amazon and UPS generate more data, drone rules may begin to relax.
Keeping Up
With Amazon working on several self-sufficient delivery services, logistics firms are wise to find ways to remain relevant in the future.
Many analysts expect Amazon to continue expanding its services to deliver all of its own products and, eventually, extend its logistics arm to offer deliveries to outside companies. With this in mind, UPS drones could be a good way for the company to remain competitive in the future.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
