The Most Expensive Mile in the Delivery Chain

The Most Expensive Mile in the Delivery Chain

The “last mile” is the last piece in delivery, and it is the most expensive one.

This last piece can account for 50% of the delivery cost because it is labor-intensive, and the trend toward ever faster home deliveries by truck can have a substantial impact on the environment. As competition in the delivery business intensifies, shippers are trying to cut the costs of the last mile. Flirtey, a delivery drone startup, is poised to rival Amazon in its quest to dominate the airborne delivery business.

Video Spotlight: Delivery Drones

This post is based on the CBS News article, Delivering the Goods: Drones and Robots Are Making Their Way to Your Door, by CBS News, December 15, 2019, and the YouTube video, Can Delivery Drones and Robots Make It in the Last Mile?by CBS Sunday Morning, December 15, 2019. Image source: Shutterstock/Phoenixns.

Discussion Questions:

1. Why did Amazon decide to lose a billion dollars on free, one-day shipping during the holiday season?

Guidance: Amazon is involved in the retail and delivery businesses. It bet that the appeal of free, one-day shipping would incentivize customers to buy their holiday gifts on the Amazon Web site. Amazon must have predicted that the resulting gains in its retail business would more than offset its planned losses on shipping. In other words, the free, one-day shipping is a “loss leader.”

2. For Flirtey, what are the external threats and opportunities?

Guidance: The threats include competition from giants like Amazon and other startups (e.g. Kiwibots), FAA regulations, technologies that are still being tested, and the potential for “crowded” skies. The opportunities include a trend toward on-demand, fast home deliveries, negative attitudes toward air pollution caused by emissions, shippers’ desires to cut or eliminate the last mile costs, and fast advances in drone technologies.

3. For consumers, what are the advantages and disadvantages of airborne deliveries?

Guidance: The main advantage is on-demand, fast delivery, with no need for tipping. Other advantages include the potential decrease in thefts of packages left on porches and less air pollution with fewer trucks on the roads. The disadvantages include the disposal of packaging materials which may not be reusable or recyclable, increased traffic on sidewalks and in the skies, and loss of interactions with delivery people.


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