Walmart just filed a patent application to equip floating warehouses with package-delivering drones1. Each mothership2 would hover 500′ above a city stocked with in-demand products. When someone makes an order, the unmanned blimp would robotically pick the item and deploy a drone suitable to handle the payload. Moments later, the drone delivers the package to your door, then dutifully returns to repeat the process. While it might seem far-fetched, conceptually, it’s not that much different than the system most retailers currently use: In overly simplified terms, when someone makes an online order, a worker will pick the item from the warehouse, then a courier service (such as FedEx) will deliver it. Walmart wants to keep the same steps, only the delivery vans will be drones and the warehouse will be floating in the air.
While one may wonder why a company would go to such extremes, they don’t need to look further than customer demands. Long passed are the mail-order days when your item arrived 4 – 6 weeks after you ordered it. Instead, there has been unrelenting pressure – if not an outright expectation – that your order arrives damn near immediately.
Modern supply chain is a remarkable accomplishment. Edward Hume, the Pulitzer Prize winning author, describes the global logistics industry as follows:
“The grand ballet in which we move ourselves and our stuff from door to door is equivalent to building the Great Pyramid, the Hoover Dam, and the Empire State Building all in a day.”
And Hume isn’t exaggerating. Consider a product made at a factory in Shanghai. The product gets put into a large metal container (often called a TEU3), which in turn is stacked with thousands4 of other TEU’s on a ship bound for North America. After trekking across the Pacific Ocean5, the ship docks at either the Port of Vancouver or further north at the Port of Prince Rupert. CN has a mainline from both ports so either would move the TEU’s to an intermodal yard at the west of Edmonton. CP has a mainline at the Port of Vancouver, and the goods destined for Edmonton would end up at CP’s intermodal yard in south Edmonton6. Semi-trailers then haul the TEU’s to either a store or a warehouse facility. Customers, at least historically, would then physically visit the store to make the purchase.
Challenging the traditional shopping paradigm, customers are making increasingly more purchases online. This has popularized a term known as the “last mile”, which applies to the intricacies of getting a product to the customer. Traditionally, the “last mile” applied to an arbitrarily short distance of getting a product from a warehouse or to the store7. Now it applies to getting the product from the warehouse or store directly to the customers house.
It’s not just Walmart with their floating warehouse concept that is looking to maximize efficiencies within the “last mile”. Amazon has been experimenting with drone deliveries and even Dominoes recently delivered a pizza via a drone. On the ground, self-driving vehicle technology will also have a significant impact on both long-haul trucking and local deliveries. As an illustration, Uber recently made a 120 mile shipment through Colorado, entirely without a driver.
E-commerce has grown at an exponential rate and retailers are still looking to maximize their supply chain networks. In the short term, we’ll likely see more large distribution centres, particularly in the larger markets. As retailers look to speed up deliveries in rural areas, this might drive demand for more warehouse space across the province. For example, it wouldn’t surprise us if a large distribution facility got built in northern Alberta. This would allow retailers to quickly get products to Fort McMurray and other towns in the surrounding area.
Long term, retailers like Amazon and Walmart will continue pushing for quicker delivery times while maximizing cost efficiencies. Drone deliveries are almost a certainty, so it will only be a matter of whether a drone takes off from a floating warehouse or something else altogether. With the current trajectory of the self-driving vehicle industry, we suspect it will be easier for a retailer to deploy “mobile warehouses”, resembling something akin to a semi-trailer8. We also wouldn’t underestimate Walmart and their desire to maintain market share. Perhaps one day we will indeed see a floating warehouse holding toothpaste and underwear and fresh apples that can arrive on your doorstep within minutes.
One thing is for certain: we are on the cusp of a logistics and retail transformation.
1 It is described in Walmart’s application abstract as follows:
“In some embodiments, apparatuses and methods are provided herein useful to transport unmanned aircraft systems to delivery products. In some embodiments, gas-filled aerial transport and launch system, comprises: a transport aircraft comprising: a gas chamber; and a carrier compartment where the gas chamber induces a lifting force on the carrier compartment; at least one propulsion system; and a navigation control system that controls the direction of travel of the transport aircraft; wherein the carrier compartment comprises: an unmanned aircraft system (UAS) storage area configured to receive multiple UASs; and an UAS launching bay that enables the UAS to be launched while the transport aircraft is in flight and while the UAS is carrying a package to be delivered.”
2 We couldn’t resist using a term that conjures up eerie UFO images.
3 A TEU is a 20′ box, 20′ long, 8’6″ high and 8′ wide. In practice, more boxes are now forty-foot equivalent units, but the acronym TEU has stuck.
4 Container ships are getting larger and larger. The OOCL Hong Kong can handle 21,413 TEU’s. Many ships go to eastern ports, which path is made quicker by the Panama Canal. Interestingly, the Panama Canal was also forced to upgrade the infrastructure as the original developed was ill-equipped to handle modern container ships. The multi-billion dollar upgrade was finished last year.
5 “Shipping is so cheap that it makes more financial sense for Scottish cod to be sent 10,000 miles to China to be filleted, then sent back to Scottish shops and restaurants, than to pay Scottish filleters.”
6 CP will eventually be moving their intermodal yard to Nisku.
7 At least compared to moving it across the ocean or the county.
8 This could still act as a deployment centre for the drones, with the added benefits that this technology is closer to commercialization. Furthermore, retailers could avoid the aviation protocol and the red tape that would be sure to surround a floating warehouse.
George, R. (2014). Ninety Percent of Everything: Inside Shipping, the Invisible Industry That Puts Clothes on Your Back, Gas in Your Car, and Food on Your Plate. New York: Picador.
Humes, E. (2017). Door to door: the magnificent, maddening, mysterious world of transportation. New York: Harper Perrenial.
Rodrigue, J., Comtois, C., & Slack, B. (2013). The geography of transport systems. London: Routledge.
Chad GriffithsPartner, SIOR, CCIM
Chad is a partner with NAI Commercial Real Estate and focuses on the Greater Edmonton area. Chad entered the industry in 2004 and has completed over 400 commercial transactions with clients ranging from small, local companies to large institutional owners. Chad has been a top 15 producer with NAI Canada-wide since 2013.
Ryan BrownPartner, BCom, SIOR
Ryan is a partner with NAI Commercial Real Estate in Edmonton and is currently ranked nationally as one of NAI's top advisors. Having executed in excess of $100 Million worth of sales transactions and over 2 Million square feet of lease transactions, Ryan has developed a firm understanding of asset evaluation and an aptitude for building design, functionality, and long-term practicality.
Darcie is a licensed Commercial Real Estate Agent in the Province of Alberta with a focus on the Edmonton market and its surrounding areas. Darcie accomplishes custom solutions for her clients through her personable nature and results driven attitude. Darcie can help if you are looking to invest in commercial real estate or are looking for representation for a sale or lease transactions.
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