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As originally published in ISM's Inside Supply Management
By: IBISWorld Analyst, Sean Windle
Sales of commercial drones totaled US$600,000 in 2016, according to the Federal Aviation Administration (FAA). The agency expects this figure to surge to $2.7 million by 2020. Aiding this soaring growth is the FAA’s long-awaited release of commercial drone regulations last year, which officially opened the door for a market that was boiling beneath the regulatory surface.
These flying robots aren’t just a passing fad; they are valuable tools that businesses can use to lower costs, improve safety and collect data. For example, it costs several thousand dollars or more per hour for a helicopter to inspect an oil pipeline. At IBISWorld’s benchmark price of $16,901 per unit, a drone could do the same work and would pay for itself after just a few hours.
Cost and Time Savings
The cost advantages for drones will continue improving as technological advancements and competition drive down prices. From 2014-17, the average price of a commercial drone has declined at an estimated annualized rate of 9.2%. This trend is expected to continue, with prices falling at an annualized rate of 8.5% by 2020.
Time savings are also substantial. An oil company needs about two months to fully inspect an offshore rig with a crew. A drone can do the same job in less than a week, without the hazards of workers dangling from wires and dodging flare stacks. Additionally, the data captured by drones can provide 3-D models of infrastructure that can be used to map abnormalities and predict when equipment will need repair or replacing.
While falling prices and cost efficiencies are alluring, businesses should exercise caution before jumping into a drone program. Even with rapidly falling prices, these machines still represent a significant up-front expense, and they have high ownership costs that include ground-control equipment, software, batteries, maintenance, staff training and insurance.
Implementation Process Critical
Drones are heavily regulated by the FAA, and more regulatory changes are expected during the next three years as technology advances and concerns about air-traffic safety and privacy drive government oversight.
However, these factors shouldn’t deter buyers. Drones can save businesses a lot of time and money, and will eventually be crucial to competing in the future economy. Although initiating a drone program takes time, a company can ensure a successful implementation by having a clear understanding of the market and its individual needs. After all, a business tool is only as good as its implementation.
Sean Windle is a lead business research analyst for IBISWorld’s procurement division in Los Angeles.