UPDATE: Nov. 5, 2019: UPS and CVS completed two drone deliveries to consumers' homes on Nov. 1. Both carried prescription drugs and launched from a CVS store in Cary, North Carolina.
Dive Brief:
- UPS Flight Forward, the logistics provider's drone subsidiary, has sealed partnerships with CVS Pharmacy, AmerisourceBergen and Kaiser Permanente to deliver healthcare supplies via drone. The series of announcements came ahead of UPS' earnings call Tuesday.
- Under the partnerships with AmerisourceBergen and Kaiser Permanente, UPS drones will transport pharmaceuticals and medical supplies between campuses. UPS named benefits such as decreased delays due to road congestion, increased efficiency and lower costs for the healthcare providers.
- "We started with a hospital campus environment and are now expanding scale and use-cases," UPS Chief Strategy and Transformation Officer Scott Price said in a statement. The agreement with CVS Pharmacy will explore B2C applications, including prescription and retail product delivery to consumers' homes.
Dive Insight:
UPS' drone subsidiary has taken off since the Federal Aviation Administration (FAA) granted the company Standard Part 135 certification, meaning it can fly drones for commercial operations beyond the operator's line of sight.
UPS is one of only two companies in the U.S. to receive Part 135 certification. The other is Alphabet's Wing Aviation, which completed a residential drone delivery of a FedEx Express package last week. FedEx said it was "the first scheduled, commercial residential drone delivery service and the first scheduled e-commerce delivery via drone delivery trial in the United States."
Speed is a key differentiator for logistics providers (in part because it's a key differentiator for retailers) and drones offer some of the fastest methods of transport. Amazon, which has also applied for Part 135 certification but not yet received clearance, said it believes drones could allow it to deliver packages in just 30 minutes.
Although UPS and Wing Aviation have Part 135 clearance, the certifications differ. The FAA granted Wing Aviation a single pilot certificate, while UPS' standard certification enables it to expand its drone subsidiary at scale.
"When we launched UPS Flight Forward, we said we would move quickly to scale this business ... and that’s exactly what we are doing," Price said. He alluded to future partnerships across industries outside of healthcare to tackle last-mile delivery challenges but did not specify what types of industries or customers may be involved.
Many early test cases of drones have focused on the healthcare space, transporting everything from medical supplies to blood, particularly in parts of the world where poor infrastructure can prevent road transport from moving efficiently. UPS has tested out its delivery system at the WakeMed campus in North Carolina where it has delivered blood samples. This includes 1,500 "revenue-generating" deliveries at the hospital facility, UPS said.
Healthcare transports are also an attractive business for logistics providers, as they tend to offer higher margins than e-commerce deliveries or parcels. In fact, UPS has now grouped all of its healthcare and life sciences businesses under one unit.
The partnership with CVS Pharmacy takes healthcare deliveries a step further, as the transports are no longer restricted to B2B transactions across medical campuses. The expansion to B2C will serve as a test case for future residential e-commerce deliveries and an indicator of how quickly UPS Flight Forward can expand.
