Driven by security concerns, recent headlines have been focused on what’s most needed to cultivate a stronger and more resilient supply chain for drones in the United States. The biggest American drone companies can’t yet produce the technology at the pace, scope, or cost of DJI, as domestic drone production and supply chain capabilities are currently limited. What does it mean to both understand and change this dynamic? How can we enable a more resilient, adaptable, and scalable drone manufacturing sector?
There are few people who can better answer those questions than Professor Clinton Purtell, Assistant Clinical Professor of Supply Chain Management and Aviation Logistics at the University of North Texas. In support of a number of funded research initiatives, including collaboration with NASA, he and his team have conducted dozens of structured interviews across the drone industry to assess the industry forces impacting current drone production, component sourcing, and supply chain resilience. He's focused on defining the essential elements of drone market competitiveness and understanding the potential impact of the upcoming BVLOS commercial flight age.
Our plans to fully explore this topic at Commercial UAV Expo didn’t materialize as envisioned, so we connected with Professor Purtell to provide a baseline around how this topic will impact conversations at the event and beyond. We talked with him about the forces shaping the domestic drone industry, what it will take for manufacturers supporting other industries to pivot to the drone industry, what needs to change to enable domestic industry competitiveness, and much more.
Jeremiah Karpowicz: Before coming to academia, you spent more than a decade in the aviation industry, where you became especially familiar with commercial aircraft systems that were being utilized. How has that experience impacted your current work and focus with the drone industry?
Professor Clinton Purtell: After managing MRO at American Airlines, I was involved with the Titan program at Southwest Airlines, which was an initiative tasked with revisiting and upgrading numerous flight operations systems. Many of the industry’s flight planning and airline management systems are complementary to the envisioned needs of UTM, as were the aircraft communication systems such as ADSB and flight management computers.
That was also at the time when Uber Elevate was making a lot of noise, and that combination got me to recognize the disruptive potential of unmanned aviation. I could see its potential to emerge as a rather disruptive threat to both traditional aviation as well as a potential long-term disruptive threat to traditional ground transport, which includes not only last-mile deliveries but also middle-mile logistics when considering the transport of cargo and people and many other use cases.
It’s those various use cases and logistics supply chain challenges of this rapidly emerging industry that particularly intrigue me. That's what drew me in and made me curious to learn more.
Which you’ve done in a big way as part of those structured interviews across the drone industry. But let’s start as broadly as possible: what can you tell us about the drone manufacturing market as a whole?
Globally, drone production is interestingly strong. But when you look at it country by country, it’s very different, depending on what kind of drones we're talking about.
When most people say “drone,” we immediately think of the stereotypical DJI drone, and globally—particularly outside of the United States and Europe, there's no problem producing those small UAVs at low-cost scale. They are produced in high volume, but that’s in certain countries that have been able to establish a scale of economy. DJI and their component suppliers can produce a lot of things in a low-cost economic environment, and they have established a competitive advantage in that regard. It is a strategic advantage that the rest of the world won’t be able to easily challenge until certain things change or enable industrial cost competitiveness. For example, what are the actual drone systems that are operating at scale that need drone parts to continue to fly? That relates to a global challenge this industry faces, which is largely about cost, quality, and standards. However, when I look at the United States domestically, the challenge is even more pronounced.
And is that related to supply chain challenges that we saw years ago with companies like 3DR, which I assume have only gotten that much more difficult post-pandemic?
Traditionally when we have discussed supply chains we discussed “goods or services.” However, in a new world of “Supply Chain 4.0,” especially in the UAV industry, we have to think about another supply chain—the digital supply chain. Smart components, such as those that incorporate data management or processing, have elements of a physical supply chain—the physical part itself—and the digital supply chain, or the data it supports, such as semiconductors, memory cards, or communications technologies. The physical supply chain has those, what I call “dumb” commodity components. Examples of these would be wiring harnesses, fasteners, connectors, etc. And honestly, do we care where they come from, as long as quality standards are met and total cost meets expectations? That's not exactly where the threat is. The threat is in the “smart” or digital components, like the UAV flight control computers or communications modules, the ground control technologies, and the infrastructure that may exist to support communication between them. It’s in anything that contains, creates, or stores data or communicates or processes something somewhere to the cloud or to some other device over an unsecured network.
We’ve seen the risks associated with this from stories in Ukraine and the Middle East, where certain drone pilots with unsecured networks would reportedly turn on their system and be immediately targeted by artillery. In those cases, the data told somebody where that drone was, and then all of a sudden they're under threat. Therefore, control over that digital supply chain, which represents the security of that data and other elements like data infrastructure and communication infrastructure, is essential. Who has the ability to access it? Where does the data go and what are the standards around it? How do we identify and secure that?
Much of this is connected to the “no China” policy in America, which means everything needs to be manufactured in the USA or sourced from countries that are government-approved trade partners. While there are a number of different timelines and limitations associated with these policies being implemented, the rest of the world doesn't necessarily have those policies, so if you need to buy drones, are you going to go to a high-cost country that makes drones like the United States, or are you going to go where it makes most financial sense, assuming the customer’s baseline quality requirements are met? All of that is without speaking to concerns about data and security, but it’s very costly to manufacture things here, which even includes those “dumb” commodity components. We don't have the same manufacturing cost that China does for those sorts of components that are produced in a high-volume manufacturing environment.
I would submit the United States has the “capability” to build all of the components needed in a UAV or UAS bill of materials, we just need companies to pivot to this industry to support that production. They have to want to do it, which means it has to make financial business sense to pivot to this industry. They can make drone parts, but if it's extremely high-cost or not profitable, or the rest of the world doesn't want to buy high-cost items when there are lower-cost alternatives, that's a challenge for the US to manufacture parts. So, I think we need to revisit some of the policies. We need to revisit some strategy and some common sense around the global drone industry to understand exactly how and where we want to play. Does everything need to be manufactured in the US, or are their other global partners such as those that are NATO partners, so we avoid the “Not invented here syndrome.”
That type of common sense is what’s needed to enable standardization and sustainable practices that will allow companies to thrive, but is the policy you’re talking about connected to the market or actual drone operations that are currently defined by regulation?
Both, because the two are inexorably linked.
Clearly, within the NAS of the United States under FAA regulation and European airspace operating under EASA, we’re seeing very strong regulation. A significant challenge we see from our interviews aren’t only the limitations of the regulations themselves, but that many proposed regulations are “moving goalposts.” This is very challenging for entrepreneurs seeking to enter a regulated industry, or established companies that must decide whether or not to invest in an uncertain regulatory environment. You can put in the work and investement to comply with regulations as they exists today, but by the time you are able to get off the ground, the regulation may very well change. This requires reinvestment and potential financial loss for companies in this environment. This can be devastating for entrepreneurs. Some of the greatest ideas may “die on the vine” due to these elements of market uncertainty.
There’s also a policy challenge for the emerging drone industry because we’ve got a lot of square pegs being forced into round holes. For example, requiring a drone company to get a type certificate similar to that of a commercial aircraft and follow the same lengthy process. To be able to perform their potential cargo delivery operations, Matternet was required to get a type-certificate similar to what Boeing would be required to produce a 737, or Cessna would be required to produce a 172, which is extremely expensive and an extremely long process through the FAA. The drone that they had specified in 2017 (or prior) started a process that allows them to now be type-certificated, but in this industry, with technology that changes so quickly, that’s a real issue for technology competitiveness. Several years later they are now certified to fly the 2017 specified drone, but it is not as current as drone technology in development now, and they are still restricted from scaling the drone in BVLOS missions where it will be able to drive revenue and profits. The process needs to be more efficient and more tailored for emerging UAV systems.
It's an issue I’ve seen discussed on industry panels, where representatives from companies like Wing or Zipline have questioned whether or not the justifiability stringent certification process for a 737 that weighs thousands of pounds should be the same as one for something that is a small a fraction of the size. An airplane and a drone are both aircraft that need to be able to enter and utilize the airspace in a safe manner, but does it really make sense to treat them as if they’re the same thing?
It comes down to there being a lack of standards, ranging from manufacturing to rules of operating BVLOS in low-altitude controlled and uncontrolled airspace. What are those standards? What are those requirements? That uncertainty is driving what I see as the greatest challenge for this industry, which is the demand for commercial drone systems.
The only way you're going to have demand for these aircraft is if they're allowed to fly safely in volume in various BVLOS use cases. Without that ability, it’s like Henry Ford making a bunch of cars without roads. Without anywhere to drive them, there’s going to be no demand for those cars, and no ability to determine the various ways cars can be used—leading to even further demand from unanticipated areas.
That’s partly why a lot of people point to the FAA and say they’re slow, or the problem, but I submit the FAA is doing its job. They're a risk-averse agency, and that’s the way it’s supposed to be. They’re serving more than 45,000 flights every day, and it’s incredibly safe and standardized. But they operate predominantly in controlled airspace. They deal with all categories of aviation but their focus in this space is identifying hazards and mitigating risks.
That’s where your question about whether or not it makes sense to treat all of these aircraft as the same thing comes in, because their worry is particularly around what happens if that controlled airspace gets crowded. Since drones are an inherently different model and technology, it might require a different approach.
In what way? What could that look like?
While attending a recent discussion with members of the Department of Defense, an intriguing idea emerged. What we recently saw with the Space Force being formed out of Air Force is one way it could go. And remember, the Air Force itself came out of the Army. Those are examples of what it can look like when you get to a point where a new domain is outside the bandwidth of the original agency or organization.
Does it make sense to have a UAV-specific department or agency? Perhaps one that reports to the FAA, or is aligned with the Department of Transportation? It's a rapidly emerging technology that has a production cycle very different from the much longer design, test and build process associated with manned aircraft. Whatever the adjustment, it’s one that would need to be designed to allow the FAA to be more agile but not lose track of their primary focus.
That kind of agility is what the manufacturers and UAV service companies need to see, because otherwise, it’s Henry Ford making a bunch of cars without roads, or trains operating without railroads. The supply chain sector for drones is not going to be competitive if they’re not allowed to fly. As soon as that occurs, it’ll be like the gold rush. Until then, I think the United States is at a significant disadvantage compared to countries that open their airspace to scaled commercial drone operations. The simple reality is that unless UAV technologies are able to operate commercially at scale, we will not see demand for larger and more robust UAVs. It is also strange to ask companies to manufacture drone parts without having an order or knowing what drones they are building parts for.
So what does it look like to create a better baseline for those types of changes?
I think there’s an incredible opportunity in uncontrolled airspace, or Class G airspace. The FAA is very focused on controlled airspace, especially around airports, and rightly so. To me, the biggest opportunity is for the drone industry to focus on uncontrolled airspace, especially where it goes up to 1,200 feet above ground as typically defined. In addition to urban air mobility opportunities, I believe there is significant opportunity in rural air mobility, where there is less hazard to objects on the ground.
There's a lot of excitement about air taxis and Advanced Air Mobility, carrying people and doing it in big cities. That will happen eventually. But right now, we need to focus on the opportunities for increasing UAV operating volume, to get aircraft in the air, carrying and delivering cargo payloads over longer distances. And then we cycle up the risk tolerance based on learning. Our economy is so incredible, but we need to think beyond the last mile. We need to look at the middle mile in a business-to-business context.
But those sorts of package deliveries are finally happening in a real way.
Yes, we’ve seen the success that drone companies like Zipline and DroneUp are enabling for clients like Walmart. The FAA is letting them fly in certain areas to perform those last-mile deliveries. But the real opportunity is with unmanned aircraft capable of flying 1,000 miles, carrying 1,000+ pounds. There's a marginal scale of profit when you’re delivering a hamburger to an individual a few blocks or miles away, but there's significant profit when you’re talking about pallet-sized loads that are going from city to city or state to state or further. Enabling drones to be an alternative to ground logistics has great potential. However, we have to look beyond the eVTOL design “only” to UAV systems that incorporate fixed-wing, short take-off and landing designs and capabilities. We need to remember that drones are more than just multi-copter designs. Other designs offer different, and sometimes more robust, capabilities for logistics purposes.
That priority around profit is such an important distinction, which is why medical deliveries were always talked about as being an enabler for the model. The value was assessed in a totally different way, which many believed could then be a blueprint that other delivery operations could be built upon.
That's absolutely right, but we can think about any industry having that sort of unlockable value with the right application of drone technology.
Why is medical important? Because it's high profit, high value, and high urgency. But every industry has that. Think about something like offshore oil rigs. The failure of a single part can take down an oil rig, and if that part isn’t on location you need to get a helicopter out there with it ASAP, or wait for the next delivery barge, and the costs of those options are astronomical. A drone could perform that same task at a fraction of the cost. Consider any company with a critical part need, a just in-time supply chain, or any expedited supply chain requirement. Drones offer the potential for new mode of logistics, especially when considering roadway congestion or other constraints of traditional modes of logistics.
Again, it’s a good example of the industrial business-to-business middle mile segment. Last mile is really consumer-related and necessary for increasing ecommerce opportunities and demand, but for B2B, there's high value. Regardless, we have to find ways to safely enable drones to fly heavier payloads further and in far more all-encompassing ways.
The proving grounds for those types of operations are happening in drone corridors, which outline flight paths designated for the safe and legal operation of drones of all types and sizes. What is the importance of these types of tests?
You don't typically get a commercial aircraft flight without a flight plan, right? That flight plan is drawn with given altitudes from takeoff to landing, taking in numerous variables from meteorology to other anticipated concerns. There are alternate airports in the event of an emergency, but effectively, that’s the corridor that a given commercial aircraft flies within, and to deviate from that flight plan, you have to get permission.
I would submit that drone corridors make a ton of sense, especially if they're on the side of highway easements or on easements of railroads or utility power lines, or following river and inland waterway navigation routes. They’re places that can establish the same types of rules and standards that we have with regular roads and manageable risks. When corridors incorporate both command and control (C2) and detect and avoid (DAA) technology capabilities, they enable more organized and lower risk UAV traffic environment. I often envision corridors as drone highways in the sky that can help to manage and regulate increased traffic and complexity.
When you get on a highway, you don't drive on any side of the highway or as fast as you want. You drive in your dedicated lane and at the speed limit. We can establish the same type of setup in the sky for UAVs, particularly in lower altitudes, but that’s going to take policy and infrastructure investment. For example, our government invested in roads and other traditional logistics routing. Maybe that means some type of toll or tax structure, and we’re all familiar with that model. Regardless of the initial or eventual structure, I think we have to organize traffic in this way because commerce is only going to increase where there are roads or enabling modes of logistics. If I build a corridor that allows for cargo drones to fly BVLOS between two areas at a fraction of the cost of manned aviation, and it scales at a cost or value comparable to or better than ground transport, we’re likely going to see new commerce evolve.
Once that happens, we take congestion off the roadways. We find ways of getting things to people quicker and faster within the corridor. As long as it's within the corridor, including “arteries” or branches to and from the corridor, we have lots of stops in small cities or suburbs and all of a sudden, we've got the ability for the drone to make an emergency medical delivery, allow for immediate views of a first-responder situations, or whatever else within the corridor. Once we have that, industry will figure out the uses. But most supply chain questions are very dodgy until we enable drones to fly at increased scale.
So what’s next for that kind of vision in terms of making in terms of making it a reality?
My crystal ball doesn't work, but I think from an entrepreneurial opportunity perspective, we may see corporate acquisition come into play. Many mature companies appear to be taking a “wait and see” approach to find out what happens with regulation and how those goalposts continue to move.
There is likely some form of regulation for everything from small drones all the way up to ones that are big enough to carry people, but until we can carry, say, a few hundred pounds of cargo via a drone, we're likely not putting people in air taxis. In the United States, we're quite a way away from moving heavy cargo BVLOS, and that’s something this industry needs to realize.
The folks that we've talked to are from companies located across the world, and the number one thing we've heard relative to the United States is that it's not making economic sense for them to operate here. As they emerge outside the United States to fly these heavier drones and payloads longer distances, they will file their patents outside the United States. Intellectual property will emerge outside the United States. If all of that fully emerges elsewhere, we lose our competitive global position in commercial drone technologies unless we are able to catch up quickly.
I think it's going to be too late for many US companies to try to get started as drone logistics trailblazers if the technologies and logistical uses of drones with heavy payload and cargo capabilities emerge early elsewhere. Perhaps many companies will try to catch up to it through acquisitions.
There are just so many assumptions that come into the “we'll just buy it” type of thinking though. Not to say that isn’t a proven strategy, but this landscape changes so quickly.
How many UAV and UAS companies have closed in the last 24 months? Or shed their divisions? We could list them out if we wanted, but all of it is related to being able to solve the problem by allowing larger drones to fly longer distances with payloads greater than 55 pounds in total, and that size is key, because the hobbyists or Part 107 operators can fly all day long. We're talking about the larger aircraft.
If we can do that, the industry will emerge in the USA—or in whichever airspace allows it to occur at scale. But we have to do it safely to allow the normative forces to catch up. We need to get those heavier payload drones in the air safely, at scale, sooner than others. Otherwise, who exactly is the drone supply chain supporting—and specifically what—are we manufacturing parts for?
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