40 HỘI THẢO KHOA HỌC QUỐC GIA VỀ LOGISTICS VÀ QUẢN LÝ CHUỖI CUNG ỨNG VIỆT NAM LẦN THỨ 4 (CLSCM-2024) THE APPLICATION OF DRONES IN LAST-MILE DELIVERY: THE CASE OF WALMART AND IMPLICATIONS FOR VIETNAMESE ENTERPRISES ỨNG DỤNG CỦA DRONES TRONG GIAO HÀNG CHẶNG CUỐI: NGHIÊN CỨU TRƯỜNG HỢP CỦA WALMART VÀ KHUYẾN NGHỊ CHO DOANH NGHIỆP BÁN LẺ VIỆT NAM NGUYỄN THỊ MINH TÂM* , CHU THỊ MAI ANH, HÀ ĐAN THẢO, LÊ KHỊ KHÁNH HÒA, NGUYỄN THỊ YẾN Viện Kinh tế và Kinh doanh Quốc tế, Trường Đại học Ngoại Thương *Email liên hệ:
[email protected] Abstract As e-commerce continues to grow rapidly, the demand for efficient and timely delivery solutions has become increasingly critical. Drones present a promising alternative for last- mile delivery, offering potential benefits such as faster delivery times, reduced costs, and increased flexibility. Through a case study of Walmart's drone delivery initiatives, this paper examines the challenges, opportunities, and implications of integrating drones into the last- mile delivery process. Additionally, it analyzes the specific context of Vietnamese retail enterprises and discusses the potential implications, opportunities, and challenges they may face in adopting drone technology for last- mile delivery. Keywords: Drones, last-mile delivery, Walmart, retail enterprises. Tóm tắt Trong bối cảnh thương mại điện tử phát triển nhanh chóng, việc đáp ứng nhu cầu giao hàng hiệu quả ngày càng trở nên cấp thiết. Máy bay không người lái hiện đang nổi lên như một giải pháp tiềm năng cho việc giao hàng cuối cùng, hứa hẹn mang lại những lợi ích như tăng tốc độ giao hàng, giảm chi phí và tăng tính linh hoạt. Bằng việc điểm qua những nghiên cứu tiêu biểu về việc áp dụng máy bay không người lái trong giao hàng cuối cùng của Walmart, bài viết này cung cấp cái nhìn sâu sắc về các thách thức, cơ hội và ý nghĩa của việc tích hợp công nghệ này vào quy trình giao hàng chặng cuối. Ngoài ra, bài viết cũng phân tích ngữ cảnh cụ thể của các doanh nghiệp bán lẻ tại Việt Nam và thảo luận về các tác động, cơ hội và thách thức tiềm ẩn mà họ có thể phải đối mặt khi áp dụng máy bay không người lái trong việc giao hàng cuối cùng. Từ khóa: Drones, giao hàng chặng cuối, Walmart, doanh nghiệp bán lẻ. 1. Introduction E-commerce growth has surged demand for efficient last-mile delivery, which faces challenges like congestion, high costs, and environmental concerns. Drones have emerged as a promising solution, with Walmart leading in their adoption for last-mile delivery to improve customer experience and supply chain efficiency. Viet Nam, with its growing tech scene and retail sector, offers potential for applying lessons from Walmart’s drone deployment. Several studies emphasize the benefits of drones for last-mile delivery, including reduced delivery times, energy efficiency, lower emissions, and cost savings, particularly in remote areas (Murray & Chu, 2015; Goodchild & Toy, 2018; Otto et al., 2018). However, challenges remain, such as limited battery life, safety in adverse conditions, and the need for advanced navigation systems (Stolaroff et al., 2018; Dorling et al., 2016; Kumar & Kumar, 2019). Public perception is mixed, with concerns about privacy and safety, though there is interest in the speed and convenience drones offer, especially for urgent deliveries (Cohn et al., 2017; Chowdhury et al., 2020). Current research reveals two significant gaps: first, there is a lack of detailed analysis of drone operations within specific companies, which limits the ability to draw practical lessons for other businesses, especially in last-mile delivery. Second, the application of drone technology in Vietnam remains underexplored, with minimal academic and industry research, leading to a scarcity of practical insights for the local retail sector. To address these gaps, this paper will focus on Walmart's drone operations as a detailed case study,
41 HỘI THẢO KHOA HỌC QUỐC GIA VỀ LOGISTICS VÀ QUẢN LÝ CHUỖI CUNG ỨNG VIỆT NAM LẦN THỨ 4 (CLSCM-2024) providing actionable insights. It will also contextualize these findings within the Vietnamese logistics landscape, offering tailored recommendations for local businesses to adopt drone technology effectively. 2. Theoretical framewrork 2.1. Definition of drones According to the International Civil Aviation Organization (ICAO, 2011), a drone, also known as an unmanned aerial vehicle (UAV), is an aircraft operated without a human pilot on board. Another term, Unmanned Aircraft System (UAS), refers to a set of components that include a drone, a ground- based controller, and a communication mechanism between the two. Until now, drones have been widely applied in the medical, e-commerce, military, and agricultural sectors, especially for urban deliveries. 2.2. Characteristics of drones Short flight time Since a standard drone is propelled by a storage battery, the battle duration is claimed to be roughly 20 minutes. (Satoshi Ito et al., 2021). To operate the drone safely, it is important to extend the flight time. Nowadays, many researchers have developed the top drones with a longer flight time of up to 55 minutes (AutoPylot Team, 2023). Low payload capacity In terms of payload, current drones can carry packages of reduced weights and sizes (Euchi, 2020). A drone may weigh up to 15kg and carry packages weighing up to 2kg and the flight range is limited (about 15 kilometers with load). According to Amazon, 86% of e-commerce packages weighed less than 5 pounds (Rose, 2013). In terms of distance, Walmart states that 70% of the consumers were situated within 5 miles of a center (Layne, 2015). Precise movement with Camera and GPS: The movements of the drone must be very precise. In addition to being steady, it must be able to fly to the desired height and communicate successfully. Many drones carry modest cargo, such as a camera, and are employed for terrestrial studies with flight times of up to 50 minutes. Low power consumption Most modern mainstream drones are battery - powered, therefore they need to fly with limited power. (MLIT, 2015). UAVs will become lighter and lighter, therefore ensuring ultra-low power consumption to reduce battery size is critical. 3. The application of drones in last-mile delivery for Walmart 3.1. Drone application in distribution network While some industry giants like Amazon have opted for in-house development of drone technologies, others have pursued strategic partnerships to harness this potential. Walmart has embarked on a journey of collaboration with three major players in the drone industry: DroneUp, Wing, and Zipline. a. In partnership with DroneUp In 2021, Walmart invested in DroneUp to launch multi-site commercial drone delivery operations across the U.S. DroneUp now runs Walmart delivery hubs in several states, with most hubs built from shipping containers or tents. The hubs, positioned outside Walmart stores, handle video monitoring and drone operations, with drones capable of delivering to customers' yards for a $3.99 fee. (DroneUp, 2021). The majority of the hubs are built of shipping containers, however there are a few tents. The permanent ones are three stories tall and have stairs and air conditioning. All of the hubs are located outside Walmart stores. The three-story hubs accommodate video monitoring and BVLOS-compliant visual observation. Some hubs include a movable control tower with visual monitors along the route. All packaging and drone attachment takes place at the hub. Process of last-mile delivery by drones (Neesa Sweet, 2023): Step 1: Order from the customer Customers place orders, and DroneUp staff at the delivery hub, all cross-trained and operating under FAA regulations, retrieve the items from the Walmart store. Source: DroneUp Figure 1. A three-story DroneUp fulfillment hub outside a Walmart facility
42 HỘI THẢO KHOA HỌC QUỐC GIA VỀ LOGISTICS VÀ QUẢN LÝ CHUỖI CUNG ỨNG VIỆT NAM LẦN THỨ 4 (CLSCM-2024) Step 2: Packing and attaching to the drone Hub personnel pack and load the items onto a drone, which uses a cable to gently lower the package into the customer’s yard within 30 minutes. Step 3: Taking off with remote control and management from the hub Once safety is confirmed, the pilot initiates the flight. The drone calculates its GPS location and delivers the package, then returns to the hub. Step 4: Receiving goods The drone flies to 250-300 feet, notifies the customer via text or email, descends to 80 feet, and delivers the package. It can also avoid obstacles like children or animals. The service now extends to multifamily housing with designated drop sites. b. In partnership with Wing and Zipline The first Walmart Supercenter to launch Wing App is in Frisco, Texas, expanding the network of 11 drone hubs in the Dallas area. Customers can use the Wing app to see if they are within the 6-mile delivery range and select a landing spot for their order, which is gently lowered from 25 feet. Wing's drones carry packages up to 3 pounds. In 2021, Walmart partnered with Zipline to introduce an instant delivery service in Pea Ridge, Arkansas, focusing on on-demand deliveries of health and wellness products. In general, DroneUp distinguishes itself as Walmart’s most versatile drone partner, providing extensive coverage across 32 locations in six states and operating daily. It boasts the highest payload capacity of up to 10 pounds, enabling the transport of a broader range of items, and delivers with an impressive average time of 17 minutes. 3.2. Evaluation of Walmart's approach 3.2.1. Economic impact a. Efficiency in lowing cost A 2020 Rand study proposed a logistics model for Walmart integrating electric drones with traditional trucks. Drones could manage 20% of deliveries, reducing the need for 13 trucks and cutting fuel consumption by 5.7%. Gartner attributed 70% of these savings to decreased labor and vehicle maintenance costs, emphasizing the efficiency of delivery consolidation. This approach could reduce the average delivery cost from $5-$10 in 2021 to under $1 (Maini, 2024). NASA projects up to 500 million drone deliveries annually by 2030, with last- mile deliveries accounting for 85% of the drone delivery market in 2022. b. Improved safety of goods Walmart's drone supplier, DroneUp, uses a multi- carrier strategy with an Elsight platform for stable 4G/5G connectivity, enhancing the safety and reliability of drone operations (Kesteloo, 2023). DroneUp's acquisition of AirMap, an airspace management software, further boosts the safety of unmanned vehicles and aids in product delivery, addressing labor shortages. c. Time-saving DroneUp has a competitive edge with its Safety - Table 1. Comparison among 3 partners of Walmart DroneUp Wing Zipline Operation time 7 days/week 8:00 a.m - 8:00 p.m 6 days/week 10:30 a.m - 6:30 p.m 7 days/week 8:00 a.m - 8:00 p.m Number of Hubs 3 full-time airport hubs 11 drone hubs in the Dallas region One 25-foot drone launch station Flight range 10 miles 6 miles 50 miles Drone type Up to 10-pound capacity, 60mph 65 mph, under 3 pounds 60 mph, about 4-pound capacity Coverage area 32 locations in six states Specific regions Initial launch in Pea Ridge, Arkansas Common delivery types Various items Frozen delicacies, home supplies,, fragile commodities Health and wellness, consumable products Delivery time 30 minutes, an average of 17 minutes 30 minutes Less than 1 hour Source: Synthesized by authors
43 HỘI THẢO KHOA HỌC QUỐC GIA VỀ LOGISTICS VÀ QUẢN LÝ CHUỖI CUNG ỨNG VIỆT NAM LẦN THỨ 4 (CLSCM-2024) Multi-carrier strategy. Walmart's fast-increasing drone program is not dependent on a single carrier, such as Verizon or T-Mobile. Instead, DroneUp, Walmart's drone supplier, is using an Elsight platform that can connect to the most beneficial 4G or 5G network whenever and wherever it is required, ensuring rock-solid connectivity for drone operations (Haye Kesteloo 2023). Walmart's delivery drones can connect to numerous 5G carriers at once, making them considerably safer and more dependable. DroneUp has also recently acquired AirMap, which is a global airspace management software. The move will improve the safety of unmanned vehicles, as well as improve companies' ability to deliver products, assisting in the labor shortage. 3.2.2. Environmental impact Walmart, aiming for zero emissions by 2040, is upgrading its last-mile delivery fleet with electric self- driving vehicles, electric delivery vans, and drones (Birch, 2024). Drones, being fuel-free and lightweight, reduce carbon emissions, ease traffic congestion, and navigate areas inaccessible to traditional vehicles. They consume up to 94% less energy per package than conventional vehicles, with some drones producing up to 97% fewer emissions than gas-powered alternatives (Yuhan Ma, 2023). Additionally, drones can plant trees and restore habitats, further offsetting emissions. 3.2.3. Social impact Walmart reported that after two years of trialing drone delivery, it has completed over 20,000 deliveries, with customers using the service for forgotten ingredients, over-the-counter medicines, or simply for convenience. Wing CEO Adam Woodworth stated that demand for drone delivery is genuine, with daily orders reflecting the strong partnership between Wing and Walmart. Since launching with Walmart in August, Wing has seen an "overwhelmingly positive" response, with customers using drones for quick meals, groceries, and household essentials. Globally, Wing has completed over 350,000 residential drone deliveries, with 85% of Walmart's drone delivery users rating their experience as "very satisfactory" or "satisfactory." 4. Recommendations for Vietnamese enterprises to the implementation of drones in delivery 4.1. Current trends in last-mile delivery within the Vietnam’s context The expansion of E-commerce platforms Since the COVID-19 pandemic, E-commerce in Vietnam is projected to grow by over 25% compared to 2022, reaching $25 billion or about 10% of overall retail revenues (Vneconomy, 2024). This growth far surpasses Vietnam's GDP increase of 5.05% for 2023. Major cities like Hanoi and Ho Chi Minh City account for over 70% of e-commerce sales, with significant year-on-year growth in both cities. Lightspeed delivery to replace same-day delivery A study by UPS found that delivery speed is a critical factor for online shoppers, with nearly 40% selecting marketplaces based on delivery speed. Lightspeed delivery, which promises delivery within 2 to 3 hours of order placement, is gaining traction among Vietnamese consumers. Major platforms like Shopee, Tiki, and Lazada have already introduced lightspeed delivery options, meeting the growing demand for rapid service. The shift towards autonomous vehicles The adoption of autonomous vehicles (AVs) in last-mile delivery has the potential to revolutionize Vietnam's retail landscape. Last-mile delivery costs can account for up to 53% of total shipping costs, but removing drivers could reduce these costs by 50% to 60% (FM Logistics, 2020). Businesses are exploring driverless vehicles, robots, and drones to replace traditional couriers. Companies like FPT, Phenikaa-X, and VinFast are conducting initial tests of driverless Table 2. Environmental Impacts by Walmart Drones application Year Statistics Source Energy Efficiency Drones consume up to 94% less energy per package than conventional vehicles. Yuhan Ma, 2023 Emission Reduction Drones produce up to 97% fewer emissions than gas-powered alternatives. Yuhan Ma, 2023 Other environmental impact Certain drones can plant trees and restore habitats, absorbing carbon dioxide. Birch, 2024 Source: Synthesized by authors
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