I am off today to Transplace’s Shipper Symposium in Dallas, where tomorrow I will lead a panel discussion on 3-D Printing, Drones & Driverless Trucks – Creating a Futuristic Supply Chain. Joining me on the panel will be Dan McCarthy, VP of Operations at Solidscape, and Brent Hankins, Advanced Concepts Engineer at Peterbilt Motors. The goal of the panel is to separate hype from current reality, and to discuss/debate the potential impact these emerging technologies will have on supply chain and logistics processes in the years ahead. I look forward to learning from these experts, as well as members of the audience whom I’m sure will raise some excellent questions and share their own perspectives on the topic. Stay tuned for my takeaways in a future post.
In the meantime, as I prepared for this session, I came across a couple of news items that caught my attention. First, as reported by CNBC last Wednesday, a Lowe’s Orchard Supply Hardware store in Mountain View, California introduced “3-D printing and scanning services that let shoppers customize their home accents and fixtures.” According to the article:
With the help of one of three 3-D printing specialists, shoppers will be able to choose the color, shape and materials to build door handles, cabinet knobs and other products that match their home’s aesthetic, either at the Mountain View store or on Osh.com.
In what Lowe’s calls a first for a retail store, visitors to the California shop can also scan out-of-production antiques, or even fragments of a broken object that can be pieced back together, to create 3-D models for printing…Though prices vary depending on the size of the object printed and the material used, projects printed in basic plastic can range between $5 and $20. These costs predictably rise if shoppers choose pricier materials such as stainless steel, titanium or gold.
Timing also varies based on the complexity of the project, [Kyle Nel, executive director of Lowe’s Innovation Labs] said, adding that a simple plastic project could be completed in as little as five hours.
This is another data point in support of what I wrote back in March in Amazon’s 3D Printing Trucks: A Quixotic Quest for Zero Delivery Time?:
3D printing — whether in our homes and offices, retail stores and distribution centers, or on trucks — will play a growing role in e-commerce and order fulfillment in the years ahead. In many cases, especially as the capabilities of consumer 3D printers improve and their costs decrease, we will completely bypass distribution centers, stores, and trucks and manufacture the products we order ourselves.
The other news item that caught my attention was a press release issued by ARK Invest, a financial research firm based in New York, announcing the results of a study it conducted which concluded that Amazon drones could deliver a package in under 30 minutes for $1. Here are some of the assumptions that ARK Invest made:
We believe that there are at least 400mm annual shipments from Amazon to US customers that would be eligible for drone delivery. The drones are relatively inexpensive so an investment of less than $100mm could prove sufficient for the cost of the drones and support infrastructure. Combined with service, maintenance and fueling of the drones we believe that Amazon would have to spend roughly $300mm annually to support the drone delivery program at full penetration. 400 million packages delivered for $300 million in operating expenses and with a $100 million capital investment implies that Amazon could earn a healthy return on capital pricing the service at $1 per delivery.
You can read the press release for more details, but the model and assumptions ARK makes seem too high-level and simplistic to me. Does the model take into account, for example, the up-time for the drone fleet? Or how many drones will be stolen, lost, or vandalized per year?
Nonetheless, the study exercise raises an important point: any company that plans to operate a drone fleet ultimately has to develop a detailed financial model of their operations, just like they do for their other transportation assets, such as trucks, trains, and airplanes, in order to manage it effectively. The problem, of course, is that when it comes to drone delivery operations, all that exists today are big assumptions.
I’m off to the airport now, but I wouldn’t be surprised if another article or two gets published about 3-D printing, drones, or driverless trucks by the time I land in Dallas — the pace of development in all these areas is moving that quickly!