Delivery Robots for Smart Rural Development

Икономика и управление на селското стопанство, 63, 4/2018 Delivery Robots for Smart Rural Development

GUNNAR PRAUSE, Prof. PhD* IVAN BOEVSKY, Assoc. Prof. PhD** *TalTech University – Tallinn, Estonia *Wismar University – Wismar, Germany *Business School University **New Bulgarian University – Sofia, Bulgaria *E-mail: [email protected] **E-mail: [email protected]

Abstract

Rural areas in Europe suffer under demographic change and migration to urban areas which caused problems in supply, mobility and medical care for remaining population. Thus, new solutions are required for rural areas to solve shortcoming in retailing, waste disposal, postal and administrational issues since all related services become more and more inefficient from the perspective of service providers. Here, the concept of “smart rural areas” can contribute to solutions since it targets on non-urban areas and tries to improve the development perspectives of rural areas by using digitalization and smart approaches to overcome all mentioned shortcomings in rural areas. Delivery robots represent smart logistics systems and they are able to solve important logistics problems in rural areas. Originally, autonomously driving delivery robots were constructed for last-mile deliveries of packages with a focus on urban environments but recent research also highlights the possibility of their application in rural areas. Since the use of autonomous delivery robots represents a neglected research topic until now, this paper analyses tentative applications of delivery robots in rural environments and develops concepts to overcome shortcomings in logistics with these robots. Delivery robots can be considered as cyber- physical systems in the sense of Industry 4.0 so that this research also contributes to the field of smart rural development. The underlying research question focuses on how autonomous delivery robots might facilitate smart rural development. The empirical measures of the paper are based on semi-structured expert interviews, research group meetings, secondary data, and results from case studies from Estonia and Bulgaria.

Key words: delivery robots; autonomous transport; smart rural development; digitalization, rural areas

1. Introduction nificantly the development perspectives of rural areas by applying digitalization approaches to Smart concepts are mainly associated with overcome rural shortcomings in logistics, mobil- manufacturing activities and logistics in urban ity and supply. Such concepts are of high impor- environments and they are often neglecting the tance since rural areas suffer more than urban ar- context of rural areas. One reason for that is re- eas from brain drain, an increasing share of el- lated to fact that approaches like “Industry 4.0” derly population and shrinking work-force which aiming to integrate digitally value networks of are accompanied by mobility, supply and health manufacturing and supply chain systems and care problems on the countryside. These develop- which to big extent are touching urban areas ments can be mitigated and even partly reversed (Prause, 2015; Prause & Atari, 2017). Otherwise, by applying smart rural concepts which has been Prause and Boevsky (2015) showcased that there discussed and showcased by Prause and Boevsky exist powerful concepts like “smart specialisa- (2015, 2016). tion” and “smart rural areas” targeting on non- A closer look to the ongoing research on urban areas and which are able to improve sig- “Smart Rural Areas” reveals that rural develop-

57 Delivery Robots for Smart Rural Development ment is closely linked to a number of challenges communication and interaction (Kagermann et that have to be overcome in order to make coun- al., 2013). try life more attractive compared to urban areas. Recent developments in smart logistics dis- Fraunhofer-Institute for Experimental Software close an existing hype concerning flying and Engineering (IESE) in Kaiserslautern highlighted land-based drones but it seems that current focus that the countryside has to be proactive to coun- of R&D activities is shifting towards land-based teract depopulation by supporting the creation of delivery robots, being the most suitable technol- workplaces as well as the rural economy. Typi- ogy to solve the last-mile problem. A large num- cally, rural challenges are related to supply, re- ber of scholars centered their research on the last- tailing, waste disposal, postal and other logistics mile problem in the context of retailing and e- services and for their solution there are formulat- commerce but mainly in the context of urban ed already some specific ideas (IESE, 2015): environment (Lee & Whang, 2001; Song et al., • “Postbus“, i.e. to use regional bus transport 2009; Boyer et al., 2009). When it comes to the for people and for packages and cargo delivery practical part of last-mile delivery, the key play- between fixed stations. The related cargo streams ers comprise the established traditional logis- can be controlled by mobile IT solutions. tics service providers as DHL, UPS, and others, • Sensors for medical care in houses of risk but during the last years more and more start-up patients and older people. from all around the world were attracted by the • Digitalization of agriculture to improve ru- research field. First serious business applications ral entrepreneurs through remote consulting, of delivery robots are already tested in the con- coaching and training from central competence text of urban areas for the delivery of perishable centres. goods as food and flowers and other applications • Remote work places in rural areas as well as in retailing and warehousing sector (Hoffmann access of rural SMEs to high qualified workforce & Prause, 2018). A literature review shows that through digitalization. the research for delivery robot use in rural areas • E-governmental solutions to improve ad- has been neglected until even if benefits can be ministrational tasks including application of ag- expected. ricultural subventions or taxation. Thus, the paper highlights the current status of • Mobile IT systems to improve the coopera- autonomous delivery robots for distribution and in- tion among rural entrepreneurs and farmers by vestigates tentative applications of self-driving de- organizing the use of shared resources (i.e. ma- livery robots in rural areas for smart rural develop- chines), shared transportation and common prod- ment. Besides that, the authors evaluate the benefits uct marketing. and usability of possible applications of delivery ro- • Renewable energy sources can be used, bots in rural areas and investigate the role such ro- managed and shared more efficiently. bots can play in the concept of smart rural areas. E-governmental solutions for rural areas have The research uses an empirical analysis based on been discussed already be Prause and Boevsky semi-structured expert interviews, research group (2016), but a deeper view to the formulated ideas meetings, secondary data, and results from case reveals that delivery services, mobile solutions studies from Estonia and Bulgaria. and internet-based applications play the same key role in the list of smart rural approaches like in 2. Theoretical background the world of smart manufacturing, smart logistics and Industry 4.0 Avramov (2017). Thus, these The still growing e-commerce market vol- ideas for smart rural development are based on umes raise the question of efficient product deliv- the same pillars like Industry 4.0, i.e. the fusion ery to the client. The last-mile delivery includes of the virtual and the real world in form of cy- three stakeholders, namely the seller, an interme- ber-physical systems (CPS) that work in dynam- diary and the client. Punakivi et al. (2001) dis- ic networks using machine-to-machine (M2M) cussed the last mile-issue in the traditional con-

58 Икономика и управление на селското стопанство, 63, 4/2018 text of B2C and e-commerce; they proposed an cause during about 10% of the time they are re- unattended reception of goods which could remote-controlled from a command centre, which duce home delivery costs by up to 60%. The un- is linked via Wi-Fi and telecommunication net- attended delivery approach is based on the two works to the robot. Thus, the technical realisa- main concepts of a reception box or a delivery tion of such robots can be placed in the context box. The reception box is installed at the custom- of Industry 4.0, since they represent cyber-physi- er’s home, whereas the delivery box is an insu- cal systems (CPS), which requires internet–based lated secured box that is equipped with a dock- linked machine-to-machine (M2M) communi- ing mechanism. Based on simulation, the authors cation and interaction. Existing M2M concepts came to the result that home delivery solutions are mainly researched by technical scholars so enabling secure unattended reception are oper- far. Cha et al. (2009) discuss different use cas- ationally the most cost-efficient model for last- es for M2M communication together with com- mile distribution. They also confirmed that a se- mon security requirements to clarify the security cured delivery box solution potentially enables a requirements on M2M systems. Their business faster growth rate and higher flexibility of the in- cases include logistics-related M2M applications vestments because of a smaller investment being and come to the conclusion that information se- required per customer. curity and trustworthiness of the operations in- A new approach for solving the last-mile- volved grows from the predictability and observ- problem represents an autonomously driving de- ability of the behaviour of the devices. Wu et al. livery robot. The background idea is linked to the (2011) investigated M2M systems in the context research of Punakivi et al. (2001) in that sense of embedded internet and identified low cost/high that the delivery robot can be considered as an performance devices, scalable connectivity, and autonomously moving delivery box finding his cloud-based device management and services as way from the supplier to the client. Realisations vision for the Internet of Things (IoT). By con- of these delivery robots exist already in form of sidering M2M cases for mobility support, they prototypes and they are tested in several coun- investigated frame conditions for standards and tries around the world for the last-mile delivery M2M networks. Zhang et al. (2011) highlight- of packages, mainly in urban areas. Estonia plays ed, besides security issues, self-organization and a leading role in this field with start-up Starship quality of service support as important factors Technologies, which operates not only in Esto- for M2M-communication. Self-organization was nia but also in foreign countries like Germany, stressed due to low human intervention as a ma- Great Britain, and the United States of America jor requirement for M2M systems, which for that (USA), where it seems to provide a promising so- aim ought to comprise self-configuration, self- lution of the last-mile problem (Starship, 2018). A management, and self-healing, which are rec- competitive advantage of the use of these autono- ognised as being characteristic for Industry 4.0 mous delivery robots, compared to other delivery systems as well as for organisational structures modes, is a cost advantage for the last-mile deliv- in the context of smart specialisation (Olaniyi & ery that is estimated to be up to 15 times cheap- Reidolf, 2015). er than the current delivery costs and yield costs of less than 1€ per delivery (Hoffmann & Prause, 3. Delivery robots: A case study 2018). For the customer, additional convenience is gained since the robot delivery provides a 15- Starship Technologies Ltd. is a Tallinn based to-20 min delivery window as standard, which is startup, founded in 2014 by two of the Skype much more precise than traditional home deliver- founders with the aim to tackle the last-mile ies that currently are only able to provide a calen- problem by developing autonomous delivery ro- dar day for the delivery. bots. Today, Starship Technologies is a Europe- Despite the term “autonomous delivery ro- an technology startup with subsidiaries in Esto- bot” these vehicles are not fully self-driving be- nia, the UK and the USA. The credo of Starship

59 Delivery Robots for Smart Rural Development

(2018) is to build the first commercially available robot and the control centre via public telecom- autonomous delivery robots in order to “revolu- munication networks and internet links. tionize the local delivery industry”. This target In order to create a smart solution for bridging shall be achieved environment-friendly, since longer distances of delivery, the company started

Starship robots do not emit C02. It also claims collaboration with Daimler in order to develop the that their robots contribute to reduction of on- “RoboVan”, which forms a mobile robot hub on road traffic and congestions, and that Starship the base of a MB Sprinter mini truck and would provides a solution for retailers and logistics considerably extend the range of the robots. This firms to increase supply chain efficiencies by re- approach for delivery realizes a “hub and spoke” ducing costs. Starship’s small self-driving vehi- concept, which is a well-known standard model cles with a weight of less than 20 kg are electric- in logistics (Seeck, 2010). A RoboVan-Mercedes- powered and are designed for driving on side- Benz Sprinter is to that aim equipped with a stor- walks with a speed of maximal 6 km/h, being ca- age system for 54 delivery boxes and eight Star- pable to locally deliver their goods within 15–30 ship robots. The Sprinter performs the long dis- min and within a radius of up to 5 km for a price tance elements of transport as a mobile hub and it of under 1 Euro per delivery. The robots are able brings the robots together with the delivery box- to deliver freight of up to 10 kg for a shipment es right into an area were a multitude of individu- price, which is up to 15 times lower than the nor- al deliveries has to be performed. From this spot, mal price for last-mile deliveries in high-salary the robots disembark from the RoboVan autono- level economies, which makes the delivery ro- mously and cover the last-mile to the client in or- bots interesting for e-commerce applications as der to individually deliver the goods to the clients well as for food deliveries or postal services. In and return to the Sprinter afterwards. The ap- practice, Starship delivery robots have been test- proach realizes a “hub and spoke” concept with ed already by online food ordering service pro- robot delivery for the last short distance. viders in Tallinn (Volt), as well as by Domino’s Starship Technologies considers its deliv- pizza delivery services to use them as “person- ery robots as a supplemental form of shipment, al delivery devices”. Until now all known tests not as a replacement, i.e., the logistical models have been executed in urban areas showing the that can be used with robots are different than main focus of such robots. those models of traditional delivery methods. To safeguard safe circulation, the robots are Ahti Heinla, the co-founder of Starship Tech- equipped with a couple of sensors and tracking nologies, illustrated in an interview the differ- systems comprising nine cameras, GPS, and an ent areas of complementing delivery with bicy- inertial measurement unit (IMU) for special ori- cle couriers operating in very dense urban envi- entation. They are also equipped with micro- ronments, since they are able to overcome grid- phones and speakers enabling them to commu- locks and traffic jams, whereas autonomous ve- nicate with humans. Even if the robots are called hicle is predestinated for the delivery in suburbs autonomous vehicles, they, at present, are only with low traffic (Heinla, 2017). Access to the self-driving around 90% of the time. The rest cargo in the robots is arranged by a smartphone of the time, mainly around complex road cross- app, which enables the client to unlock the robot ings and the final meters to the receiver, the ro- cover lid and retrieve the goods. If someone tries bot will be remote-controlled from a command to steal the robot, the cameras will take a photo- centre, which is linked via Wi-Fi and telecom- graph of the thief, and alarm will sound. Addi- munication networks. While their entire journey, tionally, multiple tracking devices can track the the robots are continuously supervised by a re- robot’s location via GPS, and the remote opera- sponsible, natural person in the command cen- tor is able to speak through two-way speakers tre. This remote-control means that the operation with the thief; and, obviously, the robot will stop of a delivery robot implies a permanent exchange working and will not open the cargo unit unless of data, including life-video transfer between the re-programmed by Starship.

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In January 2017, Starship Technologies an- er et al., 2015: pp. 151–173). Basu et al. (2018) re- nounced $17.2 million in seed funding for build- cently researched the legal framework for small ing autonomous robots that are designed to de- autonomous agricultural robots with the restric- liver goods locally. The funding round was led tion that “agribots” roam usually only on private by Daimler AG and included a couple of other land, the unresolved traffic law dimension has venture capital funds, among which were Shas- not been covered by their paper. In this paper the ta Ventures, Matrix Partners, ZX Ventures, Mor- authors continue with the conviction that deliv- pheus Ventures, Grishin Robotics, Playfair Cap- ery robots are part of the Industry 4.0 environ- ital, and others (Starship, 2018). This amount of ment so that their regulatory framework path be- seed funding makes Starship Technologies rank longs to the context of Industry 4.0 by perceiv- among the worldwide leading companies of de- ing. Consequently, all issues related to liability, livery robots for the last-mile. data protection, privacy, and legal developments around delivery robots belong to the sphere of In- 4. Delivery robots in Smart Rural Areas dustry 4.0 (Hoffmann & Prause). The paper of Hoffmann and Prause (2018) The Starship case study underlines the impor- shed light on legal issues arising from liabili- tance of internet and access to broadband net- ty for accidents that are caused by delivery ro- works for smart rural development. This obser- bots under traffic law and on violations of pri- vation was already pointed out by Prause and vacy regulations, i.e. the General Data Protec- Boevsky (2015, 2016). And the Starship case tion Regulation (GDPR) requirements which en- further shows that a bridging of missing inter- tered into force on 25. May 2018 and replaces the net links cannot be safeguarded by smartphones Data Protection Directive of 1995 of the Europe- since the exchanged data volumes in the case an Commission. The consideration of the GDPR of delivery robots are too huge due to video se- rules is important due to the delivery robots’ data quences. But this need for access to fast internet collection and transmission mechanisms, repre- and broadband networks is not new, since it has senting severe risks for the entrepreneur decid- been already by Prause and Boevsky (2015) in ing of making use of delivery robots. Another, the context of smart rural solutions for interna- aspect that may impede the future success of de- tional operating SME from rural areas. One im- livery robots as business model is the question portant reason for that are research results show- how much society – and municipal governments ing that those companies that make greater use – will indeed welcome an excessive use of pedes- of the Internet for their business processes are trian walkways by delivery robots. The related indeed those that have greater and sustainable legal framework, which evolves around the sec- growth (Amoros et al., 2007). tor of delivery robots, represents a patchwork of Beside the technical requirement for the use different rules on national, regional and munici- of delivery robots in rural areas, also a regulato- pality level, making it complicated to realize the ry framework is necessary but the discussion is competitive advantage of the business model of still open. On one hand, it is possible to build on the delivery robots for the last-mile. the steps towards a regulatory framework for In- When it comes to possible applications of de- dustry 4.0; on the other hand, it is also possible livery robots on the context of smart rural devel- to follow the discussions that are taking place in opment, it makes sense to remember to the al- the context of autonomous mobility (Hoffmann ready identified main topics, which have to be & Prause, 2018). Scheurs and Stewer worked on solved in order to overcome the obstacles in ru- a regulatory framework of autonomous driving ral development comprising rural retailing, and analysed the political, legal, social, and sus- waste disposal, postal and other logistics servic- tainability dimensions of mobility. Their investi- es. Since the distance between housings in rural gations highlighted competitiveness, innovation, areas is usually large, the use of a delivery robot safety, harmonization, and coordination (Maur- only makes sense, together with a “RoboVan”, to

61 Delivery Robots for Smart Rural Development extend the range of the robots and to bridge the ees operating from the Bulgarian countryside all distances and to act as mobile robot hub. Thus, over the world. Comparable results were present- the RoboVan is placed in the centre of the spokes ed by Prause (2016) in the context of e-services that will have a length of maximal 5 km, i.e. the for rural areas. A closer look to the Digital Econ- RoboVan then has to be routed so that the place- omy and Society Index (DESI) reveals that the ments cover most of the destinations within a ra- reality concerning smart development, especial- dius of 5 km and with up to maximal 54 service ly in Bulgaria, still shows a delayed and underde- destinations, since each RoboVan is equipped velopment situation (DESI, 2018) (Fig. 1). with a storage system for 54 delivery boxes and But DESI-index only sheds light to digital in- eight Starship robots. The cargo of the delivery frastructural situation among the EU countries. A robots can include all types of goods up to 10 kg more interesting question is related to the readi- that fit into the delivery box of the robot, includ- ness of the EU countries concerning Industry 4.0, ing retail goods, food, medicine, mail or packag- which has been investigated by Roland Berger es that are delivered directly to the home of the Strategy Consultants. In this study, the Industry client, which is a significant advantage for elder- 4.0 Readiness Index is bundling production pro- ly or ill people. On the way back to the RoboVan cess sophistication, degree of automation, work- the delivery robot can take again mail or packag- force readiness and innovation intensity into a es but also waste and return goods that have to be category called “industrial excellence” (Dujin et treated specially like old batteries, expired med- al., 2014). Furthermore, the study combined high icine or other hazardous goods from the house- value added, industry openness, innovation net- holds that have to be transported to central col- work and Internet sophistication into a catego- lection points. In this sense a delivery robot can ry labelled “value network”. Each category was contribute remarkable to the logistics and distri- measured using a 5-point scale, with “5” indicat- bution problems in rural areas. Since the Robo- ing that a country is excellently prepared for the Van requires only one driver and the related ship- Industry 4.0 landscape. The combination of these ment costs are up to 15 times cheaper than the two categories determines a country’s position in normal price for last-mile deliveries, the rural ro- the Readiness Index. The horizontal axis repre- bot delivery service turns out to be additionally sents the traditional industry measure – the man- more efficient than the classical solutions. ufacturing share, i.e. it is possible to depict the results of the study in the following chart (Dujin et 5. Implications and Discussions al., 2014) (Fig. 2). By analysing the chart, it turns out that con- The case study of the application of delivery cerning Industry 4.0 readiness Bulgaria is placed robots in rural areas stresses the importance of at the end of the ranking, i.e. Bulgaria is worst internet and broadband networks to overcome the considered EU country when it comes to inter- rural development obstacles like low accessibili- net-based linked machine-to-machine communi- ty, remote location to market and public and pri- cation and interaction, as well as the ability to get vate service providers, availability of high-qual- integrated into cross-company processes, safe- ified work-force and reduced mobility of goods guarding the capability to operate in a networked and personnel. This applies especially for Bulgar- supply chain environment. But the chart also ex- ia due to large rural areas, underdeveloped infra- presses that all issues placed in the sphere of au- structure and to high importance of agricultur- tonomous delivery robots are complicated to im- al sector for national economy. In this sense the plement in Bulgaria. case of delivery robots stresses again the findings Another important aspect of the use of auton- of Prause and Boevsky (2015, 2016) who pointed omous delivery robots is to which degree the so- out the importance of a smart rural infrastructure ciety is willing to accept an excessive use of de- by discussing success stories of Bulgarian SME livery robots, since this means a shared use of from different branches with up to 200 employ- sidewalks and streets between delivery robots

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Fig 1 Digital Economy and Society Index (DESI, 2018) Source: INDUSTRY 4.0: The new industrial revolution, RB Strategy Consultants (Dujin et al, 2014)

FIG. 2. INDUSTRY 4.0: The new industrial revolution, RB Strategy Consultants (Dujin et al, 2014) Source: Digital Economy and Society Index (DESI, 2018)

63 Delivery Robots for Smart Rural Development and pedestrians, causing already today consider- Conclusions able acceptance problems in some places, which are expressed in different legal frame conditions, Smart approaches are often neglect rural ar- depending on the location. Some of them can se- eas, since smart concepts like Industry 4.0 are of- riously endanger the business model of delivery ten attributed to smart manufacturing, smart lo- robots. Estonia for example has already adapt- gistics or smart cities. Common to all smart ap- ed its traffic laws for the shared use of space for proaches is the necessity of access to internet and humans and robots (see reform act on Estonian broadband networks and the use the Internet of traffic act from 14 June 2017 on amendments of things and services. In recent years these smart sec. 2 of the same act), but other countries are concepts are extended to rural areas in order to still hesitating (Hoffmann & Prause, 2018). In the use these new technologies for rural development USA, as another example, not all parts of society aiming to make the country life more attractive. welcome sharing sidewalks with robots by na- Case studies from Bulgaria, Estonia and Germa- ture, i.e. currently, a number of US States allow ny point out how effective the development of robots to participate in the traffic and adapted ac- “smart rural area” concepts are linked to compa- cordingly their state traffic laws, whereas some ny success, especially for small and medium ru- other States cities or municipalities formulated ral companies. In this context, autonomous deliv- their own traffic law concerning robot use in the ery robots seem to be another technical solution public, making the USA to a legal patchwork for to overcome logistics-related shortcomings in ru- robot operations in traffic. Recently, the case of ral areas. San Francisco’s anti-robot laws gained extensive Delivery robots by design aim to provide the media coverage when they banned autonomous “missing link” between supply logistics and the delivery devices from most sidewalks entirely consumer on the countryside equipped with ad- and permitted them only in low-foot traffic zones ditional service options. The use of delivery ro- (Hoffmann & Prause, 2018). Thus, now robot op- bots in rural area can solve the last-mile-problem erations will only be allowed in certain industrial in the cooperation with “RoboVans” in near fu- neighbourhoods or in suburbs under special con- ture and several problems appearing in urban ar- ditions. Finally, the new EU data protection reg- eas like sharing sidewalks with pedestrians are ulation formulates new challenges for the devel- of less importance in low populated areas. The opment and operation of delivery robots (EUGD- current technical solutions for delivery robots are PR, 2018). The considered cases disclose that, un- based on Industry 4.0 concepts so they need to til now, data protection issues are not ranging in get access to internet and other broadband net- the top of agenda of the delivery robot world. But, works to deploy their full potential. Here coun- since the new European General Data Protection tries like Bulgaria have to invest more in the IT Regulation took effect on 25 May 2018, a huge infrastructure in rural areas to be able to benefit set of data, necessary to operate a delivery ro- from the new technologies. But besides techni- bot, have to be considered as personal data that cal infrastructure requirements the use of deliv- are not only locally processed in the robot, but ery robots has to be accompanied by correspond- are also transferred and stored via internet links. ing regulatory framework which is currently un- Consequently, the applicable new data protec- der development and which must be implement- tion rules have to be taken into account in the de- ed in each country. sign of the robots. But interviews with the management and developers of robot companies have References shown that there is little to no awareness concern- Amorós, J. E., Planellas, M., & Batista-Foguet, ing the new privacy rules so that more dissemi- J. M. (2007). Does Internet technology improve perfor- nation of GDPR framework is necessary to safe- mance in small and medium enterprises? Evidence from guard compliance by delivery robots collecting selected Mexican firms. Academia. Revista Latinoameri- these information (Hoffmann & Prause, 2018). cana de Administración, (39): 71-91.

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