University of Texas
Can Drone Delivery Change Logistic Networks for Retailers?
Can Drone Delivery Change Logistic Networks for Retailers?
Can Drone Delivery Change Logistic Networks for Retailers?
Can Drone Delivery Change Logistic Networks for Retailers?
Can Drone Delivery Change Logistic Networks for Retailers?

Can Drone Delivery Change Logistics Networks for Retailers?

Aug. 27, 2020
Retailers can capture a sizeable portion of the profit of drone delivery by partitioning their market into a few zones.

To better understand whether drone technology can become a game-changer in retail, researchers at The University of Texas at Dallas recently issued a paper on the subject.

Three faculty members from the Naveen Jindal School of Management focused on on the use of customer-facing delivery centers, also known as last-mile warehouses.

As reported by Brittany Magelssen on the University of Texas website, the study shows that while perfect customization of delivery-time guarantees is more profitable, retailers can capture a sizeable portion of the profit by partitioning their market into a few zones and offering the best-possible delivery-time guarantee for each zone.

 “If a retailer promises each customer a different delivery time based on the customer’s location, that would be perfect customization,” says Milind Dawnde, professor of operations management and one of the paper’s co-authors.

“For example, a retailer could give any customer who is 1 mile away from a delivery-time guarantee of five minutes and a customer 1.5 miles away from a delivery-time guarantee of seven minutes. While perfect customization is theoretically best for the retailer, it is impractical. Instead, the retailer might offer all customers less than 5 miles away a guaranteed delivery time of 15 minutes. “In other words, limited customization is good enough.”

Dawande also predicts that a commercial rollout of drone technology will be rolled out on a larger scale fairly soon. This of course depends on how the industry deals with the issue of privacy and safety.

To view the complete study click here

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