Autonomous Vehicles — Last Mile Delivery
Autonomous vehicles will be driving massive changes in the near future, I discussed key drivers here. Majority of the discussion in the industry has been around personal mobility and to some extent fleets (trucks primarily). There is rarely a day when there isn’t a news on a development in personal mobility. For example, Waymo’s announcement last week to begin customer trials in Phoenix, industry behemoths forging partnerships, and an ever evolving ecosystem.
However, same sensor and technology stack has applicability to two other segments, public transit and last mile delivery, which aren’t talked about much but are also making good progress. Marc Amblard had a nice article recently on the developments in public transit space. Here I’ll focus on last mile delivery. Why?
- Pain points for service providers: Several on-demand service providers have unstainable cost structure and rely on flex labor. These services include groceries, food, or any personal items. These service providers have exorbitant cost structure, up to 30% of revenue that’s tied to commission and delivery charges. Additionally, primarily all of these models rely on flex and temporary workforce. This increases the likelihood of inconsistent customer experience (e.g. wrong item, high delivery time) and also issues with workforce retention. This has resulted in several on-demand service companies testing Personal Delivery Devices (PDDs), aka last mile automation, options with emerging players. Yelp / Eat24 did a trial recently with Marble, Postmates and DoorDash are doing experiments with Starship, and Dispatch doing experiments on university campus. Regulations, though expected to be lenient compared to cars because PDDs are deployed on sidewalks, are still evolving and Starship appears to be leading the charge. Still early, but the regulations being framed now (e.g. total weight needs be less than 50 lbs, speed needs to less than 10 mph) will potentially limit the use cases. Plus some of these early trials will be telling for customer experience and human intervention — e.g. will be it same tech for delivering pizza vs. Thai food? what will be the differences in packing, cargo space design, and expected costs? Kudos to all the players on these early trials, and I think we’ll be learning a lot about the solutions that can be scaled up.
- Better Customer Convenience: Imagine a situation when you realize early morning that you’re out of milk and need to get kids ready for school. You can’t afford to make a run to a local store. Wouldn’t it be nice that you can place an order on your cell phone and a PDD will deliver it less than 30 mins. This is one extreme example, but an illustration of how this service will fit into customer’s life so that they can have their time back and continue doing what’s important. And between cost savings associated with not driving and pass-through savings from service providers (from 1 above), it’s not unrealistic to have this convenience at a nominal cost.
- Healthier Cities and Local Businesses: Fewer people making a run for errands, is fewer vehicles on the road, fewer accidents, and healthy air. Assuming 5 mile roundtrip, 30 deliveries per day by PDDs, can result in ~17,500 kg of CO2 reduction per year. With rapid declines of solar and lithium ion batteries, these PDDs can be charged sustainably at significant lower costs. Our cities become more liveable. We have become used to 2-day, no hassle returns, and shopping online. As a result, the corner stores are feeling a pain and are not able to match costs and provide same customer experience. And it’s not just corner stores, even major brick and mortar retailers are shutting down at an unprecedented pace — expected to close 8,600 locations this year alone. Last mile deliveries by PDDs, with enabling solutions in supply-chain (topic for other post) for end-to-end solutions, will provide more vibrancy to local businesses and more choices to the customers. It’s not a surprise that Amazon is reported to be exploring options for automated deliveries to keep leading the industry.
It’s extensively discussed that automation will drive unprecedented changes in the economy. Autonomous vehicles will not only change how we move, but also how goods get delivered to our doorsteps. Get ready for those friendly knocks (nah, notifications on your phone)!