Deloitte’s steps to scaling sustainable drone delivery operations in Africa

It seems like there is trouble in paradise for most drone delivery projects in Africa.

Not for Zipline though.

Zipline’s operations in Rwanda, Ghana and lately, Nigeria, are fine; and they will only soar further into the skies as things stand. The reason being, the American medical drone logistics company worked out an arrangement in which the concerned governments set aside a permanent budget for delivery drones in their healthcare operations.

And it seems to be working too, given all the over one million deliveries Zipline made across the three countries to date. And there is one more crucial statistic, according to a report by Deloitte, which they made in collaboration the World Economic Forum – did you know that Zipline distributed its portion of COVID-19 vaccines in Ghana in just three days?

But that is just where the thing when it comes to drone technology – the problem is not the technology itself – the tangible benefits of delivery drones have been dramatic in Africa, where industry and governments have recognised their enormous potential to do good and have invested in a number of early-stage technologies and programs.

Or more to the point, it is only Ghana, Nigerian and Rwanda that have invested in delivery drones; in other countries, governments have allowed the donor community to fund pilot delivery operations, many of which run the danger of not seeing life past the donor coffers running dry.

The challenge is for the beneficiaries to keep the operations running beyond the pilots – and that is where Deloitte and the WEF have found a problem.

“Many drone programs are financially challenged, as they rely on funding from outside donors, such as International Development Organisations (IDOs), or are otherwise supported by the government of the country where the program occurs,” said Deloitte. “While enough to establish a pilot program, this amount will not sustain the program long-term. Where funding is limited or no longer available, drone programs look to governments, commercial partners, IDOs, donors, and venture capital firms as potential sources of funding.

“However, these sources also illustrate that the true path to a sustainable program is the establishment of a cost-effective program where benefits exceed costs. The industry has struggled to identify cost-effective programs due to the lack of available data, the scope of components affecting total cost, and the difficulty of quantifying health and societal benefits.” And to help explore these costs and benefits, the Deloitte side of the report developed a model to provide more insight in these areas and provide clear metrics on drone feasibility.

Deloitte’s Cost-Benefit Analysis model. Picture: Deloitte

The cost analysis simulation model calculates key metrics including cost per trip, patient population reached, cost per life saved, and number of trips required to break even.

“These metrics are driven by a logistics engine that simulates the requirements, including how many drones are needed, how many operators are required, and amount of ground infrastructure needed to support a program of a given size. This is done by gathering user inputs on the number of potential delivery destinations, the distance to each destination, population covered, and estimates on the per capita demand for each good being delivered, and more.

“These parameters and estimated data points are used as an input for a Monte Carlo simulation to forecast the number of active drones needed so that a patient would never have to wait for emergency, on demand medical delivery. By crafting the logistics engine in a way that drones are available to immediately respond to time critical deliveries, delays and stockouts can be almost entirely eliminated, assuming that the medical goods can be supplied from a medical supply depot in the region.

“The model then extrapolates the forecasted values to estimate the logistical requirements (number of drones needed, trips flown, miles to be travelled) over the course of a year.”

The report also covered other factors that have to work for delivery drone operations to scale. As an aside, we believe the absence of good infrastructure alone will be enough to call in for drone as the medical deliverer in chief in most parts of rural Africa, but Deloitte were kind enough to list two of the most important aspects:

Ground transportation cost

Ground transportation costs must be high enough in the area that savings can be realised by using drones rather than delivering via existing available methods. In some regions, medical workers will deliver supplies using public transportation for free, since it is seen as a civic duty to provide aid given the nature of their work. In this instance, no matter how affordable a drone is, the use of free ground transportation would yield greater savings. On the other hand, if ground transportation is expensive, there is more potential for overall savings by using drones. In addition, the nominal price of ground transportation is not the only factor to consider. Drones may still be desirable in regions with inexpensive ground transportation if they can help combat other logistical and infrastructural challenges. In many areas of Africa, there are significant infrastructure challenges, and many remote areas are inaccessible during the rainy season due to flooding on roads. In these instances, drones can help ensure that supplies can still be delivered.

Deloitte

Deloitte have a point; there are countries with noble public transport operators who will help their local health care workers with transport for their supplies of medicine. But those countries are not many, and as the consulting company rightly pointed out the problem is usually the absence of said infrastructure. Of course, Zipline now covers 100 percent of Rwanda, but in many countries, drones have been needed to deliver medical supplies urgently, in remote rural areas where the roads are not so good.

In the absence of such infrastructure, have come in to fill the gap, especially with their vertical off and landing convenience that will eradicate the need for sophisticated delivery stations. If only governments and public health providers could work out this cost analysis and be convinced to invest in drone technology…

Scaling, population, and demand

To yield the best return on investment, drone programs must be executed at a large enough scale that small, per-trip savings add up over time. The marginal cost of sending a drone out on one more delivery is low in comparison to the cost of setting up a drone program from scratch. As a result, deploying drones at scale allows for lower per trip costs when averaged out over the total number of trips.

Key factors in determining whether a drone program will scale are the population of the proposed service area and demand in the form of the number of people served. The analysis shows that positive returns on investment only occur if the program is large enough to scale. Therefore, evaluating the financial performance of a small drone pilot project will show less than desirable results, when the issue may only be that the drone program has not reached a large enough scale for savings to add up enough to offset costs.

Savings add faster than costs when drones are used in appropriate environments that benefit the most people. This is due to the low marginal cost of a drone trip compared to a trip by ground transportation. Note that a positive return does not occur until a large-scale program is reached, since it takes many trips before small single-trip savings offset the large upfront costs.

Deloitte

Which are really important points to consider, but the fact of the matter is, whether the continent is prepared or not, drone technology will change logistics as the world knows it and Africa had the great advantage of hosting a lot of pilot projects. It would be a real shame to lose out on a technology in which we had a substantial hand in developing.

Which easier said than done. The WEF helped organise the African Drone Forum last year, in which they brought together government officials, regulators, international development experts, drone vendors and thought leaders from around the world to help facilitate a knowledge exchange among members of the international drone community; to demonstrate the widespread applications and benefits of using drones, while advocating for the promotion of drone operations landscape through holistic advancement of the regulatory landscape on drones.

Deloitte concluded; “In the last decade African governments and international development organizations have made substantial investment in using drone technology to improve access to healthcare. As a result, Africa has emerged as the leader in drone use for medical technology starting with blood delivery programs in the mid-2010s and expanding into other applications such as medicine, test kit, and personal protective equipment delivery.

“While these are very encouraging trends, it is critical to recognise that the next leap forward for the development of drones for healthcare will require government and industry working together across a range of issues and to develop business models that provide a more realistic economic foundation for drone operators.

“While the establishment of a drone program can come with significant costs, the benefits in lives saved can outweigh the costs in circumstances where drones can reduce delivery times and enable access to previously inaccessible areas. A sustainable program can be achieved if drone use occurs in appropriate circumstances and will provide long-term lifesaving benefits.”

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